DP5786 The Performance of Italian Family Firms

Author(s): Carlo A. Favero, Stefano W Giglio, Maddalena Honorati, Fausto Panunzi
Publication Date: August 2006
Keyword(s): corporate performance, family firms, management style
JEL(s): G32
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5786

In this paper, we study the performance of Italian listed family firms in the period 1998-2003. We measure their performance by using both accounting and market data. We first study the relative performance of family firms compared to widely held firms. Then we investigate whether performance is affected by the type of family firm (i.e., whether the CEO is a member of the family or is an outsider). We find that the data and the methodology used to measure performance strongly affect the results. When performance is measured by accounting data (ROA), using a static model, we find evidence in favour of a superior performance of family firms. Such evidence is not confirmed by the application of the same model to market measures of performance. However, we report statistical evidence that the correct econometric specification for market data is a dynamic model. The results of estimation of the dynamic model for the market measures of performance are more consistent with those based on the static model for the accounting measures of performance.