The Resilient Family Firm: Stakeholder Outcomes and Institutional Effects

Research Question/Issue: Our study seeks to explain the relationship between publicly listed family-controlled firms (FCFs) and investor and employee outcomes before and during the global financial crisis. Theoretically, we develop
hypotheses suggesting that FCF resilience is beneficial to both investor and employees. Employing a large firm-level data set of 2,949 firms across 27 European countries, we test the hypotheses that FCFs' long-term orientation makes them resilient to the effects of economic shocks. In addition, using hierarchical linear modeling we evaluate family firm investor and employee outcomes, and the moderating impact of legal institutions protecting minority investors and employees. Research Findings/Insights: We find that FCFs financially outperform non-FCFs during the financial crisis, beginning in
2007 and reaching its lowest point in 2009, but show no significant differences during the stable-growth period between 2004 and 2006. We evaluate two employee outcomes: downsizing and wage decreases. We find that FCFs are less likely to downsize their workforce or cut wages in both pre-crisis and crisis conditions. Based upon hypotheses founded in the comparative capitalisms logic, we find significant institutional effects that are contrary to our predictions. Our findings suggest that investors and employees of FCFs achieve more favorable outcomes for their interests when the rules pertaining to investor protection and their enforcement are poorly developed.