Family Firms Confirmed to Be More Resilient

DURING THE PANDEMIC, FAMILY BUSINESS SHARES HAD A PERFORMANCE EIGHT PERCENTAGE POINTS HIGHER, ACCORDING TO A STUDY BY AMORE, QUARATO AND PELUCCO

What can make a company more resilient to the Covid-19 shock that has upended financial markets? The question is recurrent among researchers and has prompted Mario Daniele Amore, professor in the Department of Management & Technology, to do a study to verify whether family ownership made a difference. The research, conducted with colleagues Fabio Quarato and Valerio Pelucco, examined the performance of 350 Italian listed companies by analyzing their daily stock prices from the beginning of January to the end of April 2020. "Controlling for differences in size and industry, the result is that, on average, family companies have a stock performance which is 8% higher than the others," explains Professor Amore.
 
The objective was then to find confirmation for potential interpretations of the data. To do this, data on stock performance was supplemented by data on corporate organization, i.e. the structure of command, internal organization, implementation or not of remote working, changes in work shifts, and more generally, changes in market strategy. "What is emerging is that the companies that have reacted best are those where the family is present both as controlling shareholder and corporate leader, typically as CEO," continues the Bocconi Professor. "In the eyes of investors, some characteristics of the vision of family entrepreneurs, for instance their long-term horizon and desire to give continuity to the firm, are guarantees of the ability that these companies have to implement organizational changes. They can leverage their superior knowledge of local conditions and the better relations they maintain with employees and stakeholders”.
 
As for the forms of governance, no dominant model was identified. “But the fact that the sample was made of listed companies, which are subject to greater transparency requirements and are typically more open to the external world, confirms what we have been saying for some time. Namely, that complementarity between the owning family and qualified external managers is decisive to deal successfully with even the most complicated situations."
 
Mario Daniele Amore, Fabio Quarato, Valerio Pelucco, “Family Ownership During the COVID-19 Pandemic”, available on SSRN, DOI: 10.2139/ssrn.3598256.
 

by Emanuele Elli