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Working Paper

The fundamental question addressed is to see how, across the different national and legal contexts of the US, UK, France and Germany, family firms have performed when compared with non-family firms.

The authors look at three different performance angles: Return on Assets, Tobin's Q, and Total Shareholder Return. Exploring the third criterion further, we also ask whether investors look at these firms as different, and if so, how?

The authors find a remarkably robust result: family firms over the period 1993-2002 in France, Germany, the UK and US never fare worse on these three performance measures relative to non-family firms, and in fact fare better on several of them.

In addition, they find that stock returns of the family firms are well explained by classic four-factor pricing models which indicate how returns derive from risks assumed by particular firms.

These models confirm that family firm portfolios present different risk exposures when compared across countries and also when compared with non-family firm portfolios in their respective countries. These differences indicate that both geography and ownership structure ought to matter for investors.

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