Performance of Family Firms During the Global Financial Crisis: Does Governance Matter? 

 

We investigate whether better corporate governance impacts the performance of family versus non-family firms during the Global Financial Crisis (GFC). If good governance matters then its impact should be amplified during times of exogenous financial shocks. Furthermore the impact of governance will be more pronounced for family firms as family firms are more resilient, have greater access to survival capital and have a longer term decision making focus. We find that the value of family firms is more sensitive to book value than earnings changes whereas better governance results in a higher earnings relationship with value during the GFC. We also find better governance, irrespective of whether the firm is family or non-family, is associated with better accounting and market performance during the GFC. Read More…