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Family
Strategic entrepreneurship and businesses
performance: an institutional
perspective on Indian
family businesses
Suveera Gill Received 18 January 2020
Revised 18 June 2020
University Business School, Panjab University, Sector-14, Chandigarh, India 3 September 2020
Accepted 23 September 2020

Abstract
Purpose – There is a growing consensus that entrepreneurial activity is essentially a collective family
endeavour, with some configuration of family involvement in business (FIB) working better than others. This
paper aims to examine the effects of FIB on strategy and financial performance (FP), drawing from the
institutional theory for the Indian family businesses.
Design/methodology/approach – The sample comprises of 105 pharmaceutical companies listed on the
Bombay Stock Exchange for FY2013–2017. A two-way random effects panel model was invoked to examine
the relationship between FIB and strategy, as well as the intermediating effect that strategy has on the FIB-FP
link.
Findings – On average, the family has a high ownership concentration, with the founders predominantly
holding the chief executive officer (CEO) and chair positions. The econometric results highlight that the
founder’s descendants adopt a conservative strategy. A significant positive moderating effect of strategy on
FIB-FP link was observed for the descendants as the largest owners, CEO and board chair. The presence of a
professional CEO and independent chair, however, leads to an intervening adverse impact on FP. The
ownership-management-governance configurations highlight that some combinations of family and non-FIB
leads to better performance than others.
Originality/value – The study provides a plausible explanation for the conflicting evidence on the direct
FIB-FP relationship through the strategy intermediation. The institutional perspective emphasizing the
identity and role family members play in terms of strategy provides an unconventional epistemological
underpinning to the present research.
Keywords India, Strategy, Institutional theory, Financial performance,
Family involvement in business
Paper type Research paper

1. Introduction
Family businesses are usually considered incongruous with the spirit of entrepreneurship,
as they are tradition-bound (Iyer, 1999) and multi-generational (Basco and Pérez, 2009).
However, most entrepreneurial activity is essentially a collective endeavour with family
groups performing a significant role in both creating a business venture (Chua et al., 1999)
and formulating corporate strategy (Brumana et al., 2017). Further, it is the long-term
orientation of family firms that encourages them to innovate (O’Brien, 2003; Block et al.,
2011; Lumpkin et al., 2011; Lodh et al., 2014) and take risks (Barbera et al., 2018). Although
evidence is sometimes mixed, there are indicators to show that family businesses
outperform their peers and possess unique resources that give them a strategic edge Journal of Entrepreneurship in
Emerging Economies
(Viswanathan, 2014; Mukhopadhyay and Chakraborty, 2017), especially for large publicly © Emerald Publishing Limited
2053-4604
listed firms at the founder stage (Machek et al., 2013; Carney et al., 2013; Wagner et al., 2015). DOI 10.1108/JEEE-01-2020-0013
JEEE Family involvement in business (FIB, hereafter) is the quintessence for the family
business (Chua et al., 1999; Chrisman et al., 2012). Family business scholars have used both
mono-criterion and configurational approach in capturing heterogeneous combinations of
various components of FIB (O’Boyle et al., 2012). The interactions between the founder,
family members, generations of the family and the business is of vital importance as it
determines the commitment of the family to the business and its strategic flexibility (Zahra
et al., 2008). The mainstream theories capturing family businesses are relevant only if the
involvement of the family leads to materially different behaviour and outcomes (Chrisman
et al., 2003). Finally, scholars have increasingly applied the institutional theory in
unravelling the institutions’ effect on family firm behaviour and outcomes (Jiang and Peng,
2011; Gedajlovic et al., 2012), as well as firms’ influence on institutional contexts (Craig and
Moores, 2010). However, based on a study of three decades of review on the application of
the institutional framework in family-based studies, Soleimanof et al. (2018) observed there
exists bias as less focus has been on emerging market family firms.
The family as an institution holds considerable legitimacy both within and outside the
firm in India (Gupta and Gupta, 2017). The institutional context in India is important in
three ways. Firstly, family control is common in listed Indian companies. As per the most
recent data, 90% of the publicly listed companies in India are family-owned (Bang et al.,
2018), with significant involvement of family members in management and board
(Rajagopalan and Zhang, 2008; Purkayastha et al., 2018), with 73% coming from the next
generation (PwC, 2019). Secondly, anthropological studies emphasise the contingent role
played by the society and social organisation in fostering entrepreneurship in India
(Brimmer, 1955; Ito, 1966; Timberg, 1973). Recognising the influence of religion and culture
in Indian society, which encourages consensus and mutuality (Audretsch et al., 2007), the
notion of family “managing partners” seems to be compatible [1]. Thirdly, large family
businesses in the past consolidated their positions as near-monopolies under the protective
environment of the “licence raj”[2]. Over the past two decades, as the economic and
institutional environment has remarkedly evolved, the family businesses are facing
increased pressure from local and global competitors (Bhaumik and Zhou, 2014; Corrigan
and Battista, 2015). Thus, because of the present pro-business and pro-growth stance of the
government of India, many family businesses face strategic challenges. The Indian
corporate background, therefore, provides a unique yet underexplored research platform to
examine the effects of family involvement on strategy and performance.
Founding families wield substantial influence and control over several publicly traded
companies in India (Jackling and Johl, 2009). In the past decade, prominent family business
studies (Manikutty, 2000; Saravanan, 2009; Pandey et al., 2011; Ashwin et al., 2015; Singla
et al., 2017) have restricted on applying the conventional theories of the firm to determine the
relationship between family involvement and financial performance (FP, hereafter). In a
pioneering study, in the context of Indian family ventures, Lampel et al. (2017) explored the
inter-institutional approach to strategy upholding the familial logic in resource allocation
decisions. Accordingly, based on the current state of research, two questions remain
unanswered in the context of Indian family businesses. Firstly, does the FIB effect on
strategy differ for the family founders vis-à-vis their descendants? Secondly, is the FIB-FP
relationship moderated by the strategy adopted by the family founders vis-à-vis their
descendants? The present paper attempts to address these questions invoking the
institutional approach for a sample of pharmaceutical companies listed on the BSE (formerly
Bombay Stock Exchange) using a panel data set between FY2013 and FY2017.
As the present paper takes an institutional perspective, it is expected that with the
influence of familial logic on strategic decisions and performance, family involvement will
be more pronounced within a business with more family owners, executives and directors Family
with family-centric priorities. The paper endeavours to contribute to the extant literature in businesses
four ways. Firstly, the paper adopts a configurational approach to FIB-FP relationship. A
plausible explanation to the conflicting evidence on the direct FIB-FP link is offered through
the interaction term, i.e. the FIB with company-specific strategy. Secondly, an attempt has
been made to explore the institutional perspective of family involvement, in particular, the
identity and role of family members in the business across three generations. Thirdly, a
composite strategy measure better captures the entrepreneurial strategic intent amongst the
sample companies. Finally, the context of Indian pharmaceutical, which is the 3rd and 13th
largest, respectively, in terms of volume and value (IBEF, 2020), provides an interesting
backdrop. In India, companies in the pharmaceutical industry are predominantly family-
owned with significant control and business group affiliations (Ashwin et al., 2015). Results
posited by the study will expectedly provide researchers and practitioners with an added
insight into the strategic perspective and performance in the context of Indian family
businesses.
The paper is organised as follows. Section 2 provides the theory and hypotheses
development of the study. Section 3 describes the sample and research methods used in the
analysis. Section 4 lays out the results and discussion. Finally, Section 5 concludes the
analysis.

2. Theory and hypotheses development

2.1 Theoretical foundations
The prevalence of a particular type of organisational structure (DiMaggio and Powell, 1983,
1991; Scott, 1995), its behaviour in an institutional context (Scott and Meyer, 1983; Hodgson,
1998; Aldrich and Ruef, 2006; Soleimanof et al., 2018) and its organisational development
(Granovetter, 1985; Foster, 1986; Lewin et al., 1999; Hodgson, 2006) are a reflection of both
the formal (laws and regulations) and informal (societal values, beliefs and norms)
institutional environment (North, 1990; Scott, 1995). While institutions can influence firms to
behave in a particular manner and produce outcomes most desired (DiMaggio and Powell,
1983; Hira and Hira, 2000), firms can too strategically work towards influencing such
institutions by creating an impetus to tap favourable opportunities (Battilana et al., 2009;
O’Boyle et al., 2012).
Within the realm of institutional theory and research, the significance of the family as an
institution and its manifestations in organisations has drawn little attention (Fairclough and
Micelotta, 2013). Family business decisions, though, are influenced by several institutional
logics (Peng et al., 2018), with the influence of the entrepreneurial and family logic assuming
significant importance. In particular, studies have looked at the role of the family as a non-
market institution with its separate institutional logic with emphasis on serving family
members (Thornton et al., 2012; Reay et al., 2015), thus shaping the role identities, sources of
authority and values of each member of the family (Greenwood et al., 2010). Furthermore,
family being an institution in itself, both entrepreneurial logics and family logics affects
family business goal selection (Reay et al., 2015; Jaskiewicz et al., 2016; Williams et al., 2018).
The focus on securing family vision and socio-emotional wealth (SEW) are dominant goals
as a family is unwilling to cede control (Classen et al., 2012). Goal prioritisation in family
firms’ strategic decision-making is a complex process (Habbershon et al., 2003; Chrisman
et al., 2013; Kotlar and De Massis, 2013; Memili et al., 2013), though the extent of influence of
a family may vary depending on the level of involvement in business across generations
(Klein et al., 2005). For instance, founders are in a unique position to translate family values
JEEE through their vision, and goals into action across their firms (Tagiuri and Davis, 1992;
Riordan and Riordan, 1993; Kelly et al., 2000, 2008; Gagné et al., 2014).
The family firms in most of the developed countries are based on the structural
separation between the family and the firm, where family members formulate and execute
strategy through their presence in the top management team and board (Yoshikawa and
Rasheed, 2009). On the other hand, in most emerging countries, strategic decision-making is
shaped through a continuous interaction between the family as an institution, rooted in the
local socio-cultural environment and the firm as an institution that evolves in response to
market exigencies (Alesina and Giuliano, 2015). Literature from emerging markets further
corroborates that the superior performance of business groups is because of the institutional
void resulting from regulatory deficiencies, weak intermediation structures, inadequate
protection of property rights and tardy enforcement of contracts (Khanna and Palepu, 2000;
Peng and Delios, 2006; Dinh and Calabrò, 2019). The inter-institutional system that binds the
family to the firm ensures a smooth transition typically from the founders to their
descendants. All strategic decisions are evaluated, considering its likely impact on
intergenerational family cohesion and ties (Lampel, 2017). Thus, the national institutional
context is significantly vital in analysing the performance of family firms (Jiang and Peng,
2011; Gedajlovic et al., 2012).
An evolving institutional environment poses challenges for family firms, forcing them to
reconsider their strategy to appear legitimate to their stakeholders and protect their SEW
(Kabbach de Castro et al., 2017). A country’s pro-reform initiatives, for example, may drive a
family firm to professionalise in the face of competition (Lien et al., 2016). However, in
response to the likely threat to family control, family firms may resist institutional pressures
(Fogel, 2006) or use their connections to influence laws and public policy (Craig and Moores,
2010). In the present study, it is postulated that the strength of familial logics will impact
corporate strategic decision-making with a concomitant effect on FP. It is expected that the
inconspicuous intra-family and inter-family dynamics will be in play with the founder
fostering relation both within the firm and with the outside institutions.

2.2 Family involvement in business and strategy

The notion that family logics influence the corporate strategy and organisational practices
are well accepted in the family business literature (Burt, 1997; Granovetter, 1985; Chua et al.,
2003; Hoffman et al., 2006; Chrisman et al., 2012). In particular, family firms attempt to
preserve SEW (Berrone et al., 2012; Razzak et al., 2019) across generations (Murphy et al.,
2019), especially in the face of economic concerns (Arregle et al., 2007; Miller et al., 2009;
Debicki et al., 2016; Machek et al., 2019) resulting in business resilience (Gupta and
Bhattacharya, 2016). Further, these firms have a cohesive clan culture (Miller and Breton-
Miller, 2005; Bertrand and Schoar, 2006) and portray a high degree of altruistic behaviour
(Schulze et al., 2003; Zellweger et al., 2016). Family businesses are also known to build social
relationships and engage with stakeholder (Cennamo et al., 2012), by a generous treatment of
employees (Hekman et al., 2009; Jaskiewicz et al., 2017), a good relationship with customers
(Tokarczyk et al., 2007), though giving precedence to interests of family members (Levring
and Moskowitz, 1993; Bertrand and Schoar, 2006).
As outlined in the literature, family businesses generally adopt a conservative
investment and financial stance (Landes, 2006). In its quest to sustain their socio-emotional
endowment, the family firm may limit competition and innovation, thus impeding growth
(Berrone et al., 2012; Zellweger et al., 2016). Miller et al. (2011), in a study of Fortune 1000
companies, observed that family firms preserve familial control by securing incomes and
careers, leading to the adoption of a conservative strategy. Similarly, family firms sparingly
undertake practices such as downsizing, mergers, diversification and internationalisation, Family
which could put at risk valuable familial relationships (Greenwood et al., 2010; Fairclough businesses
and Micelotta, 2013; Mu~noz-Bullon et al., 2018). In a study of Indian family ventures, Lampel
(2017) established that resource allocation to new businesses was influenced by the family
seeking to endorse its family logic.
Familiness is a unique resource sustaining the strategic entrepreneurship process in
family businesses (Irava and Moores, 2010; Chrisman et al., 2012; Dalpiaz et al., 2014).
According to Brockhaus (1994), the defining characteristic of family-owned and controlled
firm is the intertwining of the issue of succession and the firm’s strategy. The inter-
generational succession process has an impact on the strategy of the firm (Handler, 1994),
with the descendants of the family implementing their agenda (Ibrahim et al., 2004). It is
expected that companies controlled by family founder possibly will associate with
entrepreneurial and family roles, envisaging themselves as business creators and family
nurturers (Pham et al., 2019). Without the founder, the family role identities, priorities and
logics are determined by the long-term close relationship between the family members in the
business (Zahra et al., 2008). Sustained firm control helps secure, productive long-term
orientation (Miller and Breton-Miller, 2007; Joshi and Srivastava, 2015) and ongoing
entrepreneurialism (Eddleston et al., 2012; Singh and Kota, 2017). The results for studies of
European family business show consistency in the strategy across generations (Poutziouris
et al., 2015) contrary to those for businesses in the USA (Block et al., 2011; Villalonga and
Amit, 2006), Japan (Saito, 2008) and China (Zheng and Wong, 2016). While the strategy
adopted by the founder vis-à-vis their descendants would hinge on the institutional context,
evidence from amongst the Asian countries show that the family founders are mainly driven
by goals to grow the firm, to ensure the likelihood of firm survival across generations,
leading to the following hypothesis:

H1. In India, the founder-led (owner, chief executive officer (CEO) or chairman) family
businesses will more likely adopt a growth strategy than those led by their
descendants.

2.3 Strategy and the family involvement in business-financial performance relationship

The role of family members in the firm’s business and their impact on performance is
intricate and mixed (Anderson and Reeb, 2003; Allouche et al., 2008; Chu, 2009; Gupta and
Nashier, 2017). Studies establish that founding family controlled and managed firms are
superior in terms of value and operating efficiency (Villalonga and Amit, 2006; Gonzàlez
et al., 2012). Bloom and Van Reenen (2007) observed that in France, Germany, the UK and
the USA, substandard management practices are more pervasive in family firms managed
by a founder’s descendant. Similar results have been reported in Canada (Morck et al., 2000),
Spain (Navarro and Anson, 2006), Japan (Saito, 2008) and India (Pandey et al., 2011). The
impact on the performance of a non-founder CEO is mostly non-significant (Anderson and
Reeb, 2003; Sacristan-Navarro et al., 2011), while those of family directors significant with
associated benefits to minority shareholders (Andres, 2008).
While several explanations are put forth for such divergences in results, the institutional
context has been less methodically explored in family business performance (Miller et al.,
2017). It is observed that the impact of family on firm performance varies with the strength
of the prevailing family logics of the region in which the company operates (Zattoni et al.,
2015; Soleimanof et al., 2018). The strength and predominance of family-related identities
and values usually determine whether family-oriented firm governance mechanisms reflect
positive or negative priorities with associated implications on firm performance. Positive
JEEE priorities include stewardship, personal commitment and the long-term good of its
stakeholders and reputation in the community (Miller and Breton-Miller, 2005; Berrone et al.,
2012; Powell and Eddleston, 2017; Kraus et al., 2018) while negative being partisanship,
family conflict and entrenchment, human capital inadequacies (Morck and Yeung, 2005;
Chung and Luo, 2008; Gomez-Mejia et al., 2011; Mehrotra et al., 2013).
The relationship between the components of FIB and FP are affected by complementary
observable and unobservable factors. In a study of Fortune 500 firms, Villalonga and Amit
(2006) observed that family ownership creates value at best when the founder serves as a
CEO or is a chairman with a hired CEO. Braun and Sharma (2007) found complementarities
between family ownership and firm size, the legal system, board composition and dual
boards. Miller et al. (2007), in an analysis of US firms, observed that superior performance
could not be attributed to a single governance variable. The family firm is distinct and
differs regarding their strategic choices and firm performance (Schulze et al., 2003; Miller
et al., 2011). Recently studies have explored the relationship between family management
and research and development (R&D) intensity (Nieto et al., 2015; Duran et al., 2016) and the
moderating role that innovation strategy exerts on the family management-firm
performance relationship (Diéguez-Soto et al., 2019). While the direct effect of FIB on FP has
put forth inconclusive results, there is preliminary evidence that a firm’s strategy can
significantly moderate this link (Carney et al., 2011). Family founders, who are
entrepreneurs, are not only business creators but also family nurturers. It is expected that
the strategic choices of family firms will manifest familial priorities, especially at the
founder stage, thereby experiencing some performance discounts. It can thus, be construed
that the firm-level strategy will have a moderating effect on the FIB-FP link depending on
who leads the family business, resulting in the following eminently exploratory hypothesis:

H2. In India, the moderating effect of strategy on the FIB-FP relation will be diverse for
the founder-led (owner, CEO or chairman) family businesses than those led by their
descendants.
Overall, the existing research confirms that some configuration of involvement of the family
in business seems to work better than others suggesting a more nuanced analysis of the
institutional context in studying the effect of FIB on strategy and corporate performance.
When multiple members of the family are involved in the business, it is imperative to take
into account the strategic priorities of each generation actively engaged in significant
positions. Further, the strategy adopted by the firm may have an indirect, i.e. a moderating
effect on the FIB-FP relationship. In this regard, taking the institutional context, the
strategic imperatives of the family may improve or worsen the influence of FIB on FP.
The results presented in this paper addresses these gaps in the literature. Figure 1 shows the
theoretical model with the hypotheses derived in the present study.

3. Research methods
3.1 Sample selection and data sources
The premeditated objective of the study required a representative sample, comprising of
companies with high FIB and a robust, innovative environment. In contrast to a broad
definition of family firms used in the western literature, the present paper defines family
business to include companies where the founding family is the largest shareholder with
multiple members of the same family involved in ownership, management and governance
across generations with the family owning a minimum shareholding of 25%. In India, an
initial threshold limit of 25% of the voting rights in the target company is required for
making an open offer under the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011, thus, translating to de facto control. Further, lone founder companies Family
have been excluded as established postulations applicable to family firms differ for lone- businesses
founder firms as put forth in the literature (Le Breton-Miller et al., 2011; Lopez-Delgado and
Diéguez-Soto, 2015).
As of 31 March 2017, there were 159 pharmaceutical companies (Division 21, National
Industrial Classification Code) listed on the BSE. The sample includes a subset of
pharmaceutical companies for five financial years from 2013 to 2017. The sample selection
criteria, as shown in Panel A of Table 1, resulted in a final sample of 105 pharmaceutical
companies, which accounts for 66% of all the BSE listed pharmaceutical companies, and 525
company-year observations. Panel B presents the sample characteristics by FIB. On
average, the founders’ family held a stake of around 53% of the total outstanding shares,
with a high family ownership concentration. It is apparent that in addition to individual
holding, the bulk of control vests through intercompany cross-holding and holding
companies. An average of 87% of CEOs and 86% of the chair are members of the founding
family. The family has a significant presence on the board, with 53% of family members
being directors and 59% holding a dual position of chairman and the CEO. A total of 34
companies are affiliated to a business group, representing around 32% of the sample [3]. On
average, 52% of companies simultaneously involve two generations in business, with the
youngest active being the second generation (46%). Overall, the sample companies have a
significant, consistent institutional environment as publicly listed family firms conform
more to industry practices in their strategies as put forth by Miller et al. (2013).
The primary sources of data included the annual reports of companies and corporate
database (ProwessIQ) maintained by the Centre for Monitoring the Indian Economy.
Furthermore, information about the extent of FIB was accessed from the individual
corporate website and other related sources.

3.2 Variable description

3.2.1 Dependent variables. The use of composite index as advocated by authors in the
measurement of constructs in strategic management (Montgomery et al., 1989; Snow and
Thomas, 1994; Hitt et al., 2004; Boyd et al., 2013) has been made in the present study. As
posited in the literature, a growth or conservative strategy of a firm is closely related to both
the long-term investment and financing activity (Ansoff, 1965; Miller, 1983; Hitt et al., 2011;
Guo et al., 2018). A strategy index in the present paper is based on the composite
entrepreneurial strategy variable, as proposed by Miller et al. (2011). The strategy index is
assessed as the sum of standardised scores, including R&D intensity, investment as a

Figure 1.
Theoretical model
and hypotheses
JEEE Panel A: Sample selection
Criteria No. of companies
All BSE listed pharmaceutical companies as on 31 March 2017 159
Less: Widely-held, public sector and foreign promoted companies (17)
Companies not listed during the entire study period (8)
Companies whose promoters diluted their stake in favour of the new owner(s) (2)
Companies for which there were deficient or missing data over the study period (19)
Companies with lone founder (5)
Companies with family share ownership <25% (3)
Usable sample 105
Panel B: Sample by family involvement in business
Mean Min Max
Panel B.1: Family ownership
Family control in ownership (%) 53.1 25.0 84.8
Family ownership concentration (%):
Family shares (25%–50%) 38.9 25.0 49.9
Family shares (50%–75%) 60.5 50.0 69.9
Family shares (>75%) 00.6 77.2 84.8
Family shareholding pattern:
Individual and Hindu undivided family (%) 29.3 00.0 74.8
Indian corporate bodies (%) 18.3 00.0 74.4
Other Indian promoters (%) 3.8 00.0 74.8
Foreign promoters (%) 1.7 00.0 61.5
Panel B.2: Family in management
Family CEO (%) 86.9 00.0 100.0
CEO age (years) 56 29 87
CEO tenure (years) 19 1 49
Panel B.3: Family on the board
Family chairman (%) 85.5 00.0 100.0
Family members on the board (%) 53.1 00.0 88.0
Family member holds the title of both the board chair and CEO (%) 59.1 00.0 100.0
Panel B.4: Family configurations
Business group affiliation (%) 32.4 00.0 100.0
Business group age (years) 26 13 216
Number of actively involved generations (%): 2 1 3
One 47.0 00.0 100.0
Two 52.0 00.0 100.0
Three 1.0 00.0 100.0
Youngest actively involved generation (%):
First 44.4 00.0 100.0
Second 46.1 00.0 100.0
Third 9.5 00.0 100.0
Table 1.
Sample Note: The sample distribution is of 525 company-year observations over FY2013–2017

percentage of capital expenditure to property, plant and equipment and leverage as a

percentage of long-term debt to total assets [4]. All the three variables were standardised
before their inclusion in the index. Further, the composite reliability and average variance
extracted for the strategy index was 0.75 and 0.51, respectively, which is above the threshold
recommended by Hair et al. (1998) [5]. Evidence suggests that privileged access to debt
(Keister, 2001), and the co-insurance of familial affiliation (Lincoln et al., 1996) leads family
firms to make long-term investments, including R&D. Family businesses prefer financing Family
through debt than equity to avoid dilution in their effective control (Berglöf and Perotti, businesses
1994). An overall high index (growth) would signify a relatively high R&D intensity with
increased investments and financial leverage (Miller et al., 2011). As proposed in the
literature (O’Brien, 2003; Diéguez-Soto et al., 2016), the relation between FIB-FP is contingent
upon the corporate growth strategy. Therefore, the moderating (direct and indirect) effect of
the strategy index was tested in the performance models.
The accounting performance variable included earnings before interest, tax, depreciation
and amortisation (EBITDA) measure of return on assets (ROA). The ROA avoids the
potential distortions created by financial strategies to hide deteriorating performance in
business fundamentals (Hagel et al., 2010) and is one of the most widely used corporate
performance metrics (Sacristan-Navarro et al., 2011; Machek et al., 2013; Guo et al., 2018).
The ROA is computed as EBITDA divided by the book value of total assets to represent
operating returns. The market performance measures comprising total shareholder return
(TSR), which is the appreciation in share price and dividends paid expressed as an
annualised percentage. When measured over time, TSR is the single best indicator of
corporate success as it reflects the long-term value created in highly competitive capital,
labour and product markets (Favaro and Rotz, 2011).
3.2.2 Independent variables. As discussed in Section 3.1, the family business has been
defined with reference to the involvement approach. For determining family shareholding,
both direct (individual or Hindu Undivided Family (HUF)) and indirect (trust, intercompany
cross-holding and holding companies or others) ownership have been considered.
Companies were segregated in terms of the presence of the founder or their descendant(s).
As in Villalonga and Amit (2006, 2009), descendant preceding the founder is a single
generation (e.g. child of the founder) relative distance one [RD1] to the founder while
descendants’ descendant is two generations (e.g. grandchild of the founder) relative distance
two [RD2] to the founder.
The family ownership models consider the largest direct individual percentage of
shareholding in the company from the family, which may be the founder or the descendant
as posited by Anderson and Reeb (2003). The definitions considered for family management
and governance models are constructed as dummy variables that take the value one when
the company meets the definition and zero otherwise. A similar exposition of the family firm
definition has been given and tested by Villalonga and Amit (2006, 2009) and Miller et al.
(2007, 2011, 2013, 2018). The presence of the family CEO has been measured in the family
management models, which may be the founder or the descendant. There is sufficient
evidence to show that there is a close relationship between owner families and non-family
managers, who get embedded with the family ways and values (Pinhack and Waldkirch,
2013). Consequently, the role of hired professional CEOs has been examined to determine the
influence of family on business. Villalonga and Amit (2006) found that family ownership
creates value when a family member serves as the chairman of the corporate board.
Accordingly, the family governance models consider as to who holds the board chair of the
company – the founder, the descendant or an independent non-family director. As a typical
family firm is heterogenous involving multiple family members at various business levels
(Nordqvist et al., 2014; Dibrell and Memili, 2019), a configuration of family members in the
role of largest shareholders, CEO and chair of the board has also been examined.
3.2.3 Control variables. Two sets of control variables, namely, company-specific and
corporate governance were used in the study through a review of relevant prior literature
(Miller et al., 2007, 2011; Ashwin et al., 2015; Gill and Kaur, 2015) [6]. The company-specific
variables included company size determined as the natural logarithm of the book value of
JEEE total assets; age measured as the natural logarithm of the number of years since the
company’s inception; and risk measured as stock’s volatility relative to the market (i.e. beta)
as each of these variables are likely to affect strategy and performance (Miller and Breton-
Miller, 2011; Miller et al., 2013). Proxies for corporate governance as put forth in the
literature (Miller et al., 2007; Chirico et al., 2011) comprising unaffiliated blockholdings
computed as the proportion of equity shareholding of non-affiliated owners holding at least
5% of the company’s outstanding shares, and family directors ascertained as the proportion
of family directors to the total number of directors on the board. Prior to the regression
analysis, all extreme outliers were eliminated by winsorising the variables at the 1st and
99th percentiles.
A panel data set over a reasonably sized sample provided an opportunity to test the
persistence of the relationship between variables. Table 2 presents the summary, description
and literature citations of dependent, independent and control variables.
Table 3 presents two panels of descriptive information for the sample companies using
time-series averages. Panel A provides means, standard deviations and a simple correlation
matrix for the key variables in the sample. It can be observed that there is a significant
negative correlation between the family’s largest shareholder and the strategy index. None
of the correlations amongst the independent variables raised serious multi-collinearity
concerns. Panel B shows the results of the difference of means tests on FIB. The mean tests
are based on time-series averages for each company in the sample. As can be observed, the
mean strategy index is significantly higher and positive for founder vis-à-vis descendant
largest owners. The measures of performance were higher and significant for the
descendant largest owners [RD1]. Professional CEOs and descendant CEOs [RD1] do
markedly better in terms of ROA and TSR, respectively. There is a significant difference in
mean scores for company-specific (size and age) and governance-specific (unaffiliated
blockholdings) variables. Finally, on average, family founders (promoters) are the largest
shareholders (59.62%), holding the position of CEO (59.81%) and the chair of the board of
directors (68.38%) in sample companies

3.3 Econometric models

Multi-variate analysis to examine the cross-sectional time-series relationship of FIB with
strategy and FP included a two-way random effects panel model, representing models for
ownership, management and governance. The Hausman specification test was invoked,
wherein the P-value of chi-square was insignificant, and therefore, the random effect model
was accepted. The robust regression Modified M (MM)-estimators was applied to deal with
the presence of outliers. Serial correlation and heteroskedasticity have been controlled by
using the Huber/White/Sandwich Estimator (clustered) for a variance to the random effect
model. The P-values were adjusted in all models using the Benjamini and Hochberg (1995)
procedure to deal with multiple inference problem, as proposed by Anderson (2008).
The regression equation used for the multivariate analysis examining the relationship of
FIB with strategy is in the form:

Strategy index ¼ d0 þ d1 ðFIBÞ þ d2 ðControlsÞ þ d3 ðYear dummyÞ þ «

where:
Strategy index = Sum of R&D intensity, investment and leverage;
FIB = Founder largest owner, descendant largest owner, founder CEO,
descendant CEO, professional CEO, founder chair, descendant chair
and independent chair;
Measure Variable name Description Previous researcha

Panel A: Strategy
Strategy Strategy index Sum of standardised scores for research and development, Ansoff (1965), Hofer and Schendel (1978), Porter
investment and leverage (1980), Miller (1983), Berglöf and Perotti (1994),
R&D intensity Research and development (R&D) expenses divided by total sales Lincoln et al. (1996), Davidsson et al. (2002), Hitt et al.
Investment Capital expenditures divided by property, plant and equipment (2011), Miller et al. (2011), Guo et al. (2018), Miller
Leverage Long-term borrowings divided by the total asset et al. (2018)
Panel B: Financial performance
Accounting Return on assets Earnings before interest, tax, depreciation and amortisation Zahra et al. (2000), Hagel et al. (2010), Sacristan-
(EBITDA) divided by the book value of total assets Navarro et al. (2011), Machek et al. (2013), Lopez-
Delgado and Diéguez-Soto (2015), Guo et al. (2018),
Miller et al. (2018)
Market Total The total return of a stock (capital gain plus dividend) expressed Miller (1983), Favaro and Rotz (2011), Hitt et al.
shareholder as an annualised percentage (2011), Miller et al. (2011)
return
Panel C: Family involvement in business
Ownershipb Founder largest The proportion of shares held directly by the founder (promoter) Anderson and Reeb (2003), Villalonga and Amit
owner as the largest direct individual family holder in the company and (2006, 2009), Chrisman et al. (2007), Miller et al. (2007,
0 otherwise 2011, 2013), Amore et al. (2011, 2014), Garcia-Castro
Descendant The proportion of shares held directly by the descendant as the and Aguilera (2014), Gill and Kaur (2015), Lopez-
largest owner largest direct individual family holder in the company and 0 Delgado and Diéguez-Soto (2015), Miller et al. (2018)
otherwise. Descendant largest owner [RD1] and [RD2] if the
descendant is a single generation (e.g. child of the founder) and
two generations (e.g. grandchild of the founder) relative distance
(younger) to the founder, respectively, and 0 otherwise
Management Founder CEO A binary variable that equals 1 if the founder (promoter) holds the Anderson and Reeb (2003), Miller et al. (2007, 2011,
title of the chief executive officer (CEO) of the company and 0 2013), Adams et al. (2009), Minichilli et al. (2010),
otherwise Goel et al. (2011), Pinhack and Waldkirch (2013),
Descendant CEO A binary variable that equals 1 if the descendant holds the title of Amore et al. (2014), Garcia-Castro and Aguilera
the CEO of the company and 0 otherwise. Descendant CEO [RD1] (2014), Gill and Kaur (2015), Lopez-Delgado and
and [RD2] if the descendant is a single generation (e.g. child of the Diéguez-Soto (2015), Miller et al. (2018)
founder) and two generations (e.g. grandchild of the founder)
relative distance (younger) to the founder, respectively, and 0
otherwise
(continued)

Table 2.
Family
businesses

Variable description
 JEEE

Table 2.
Measure Variable name Description Previous researcha

Professional CEO A binary variable that equals 1 if a non-family professional holds

the title of the CEO of the company
Governance Founder chair A binary variable that equals 1 if the founder (promoter) holds the Maury (2006), Miller et al. (2007), Villalonga and
title of the board chair of the company and 0 otherwise Amit (2006, 2009), Miller et al. (2011), Amore et al.
Descendant chair A binary variable that equals 1 if the descendant holds the title of (2014), Garcia-Castro and Aguilera (2014), Gill and
the board chair of the company and 0 otherwise. Descendant chair Kaur (2015), Lopez-Delgado and Diéguez-Soto (2015),
[RD1] and [RD2] if the descendant is a single generation (e.g. child Miller et al. (2018)
of the founder) and two generations (e.g. grandchild of the
founder) relative distance (younger) to the founder, respectively,
and 0 otherwise
Independent A binary variable that equals 1 if a non-family independent
chair director holds the title of chair of the board of directors of the
company
Panel D: Control
Company- Size Natural log of annual sales Miller (1983), Miller and Breton-Miller (2011), Miller
specific et al. (2013), Ashwin et al. (2015), Gill and Kaur
(2015), Lopez-Delgado and Diéguez-Soto (2015),
Miller et al. (2018)
Age Natural log of the number of years since the company’s inception Miller (1983), Balasubramanian and Lee (2008),
Miller and Breton-Miller (2011), Miller et al. (2013),
Ashwin et al. (2015), Lopez-Delgado and Diéguez-
Soto (2015), Miller et al. (2018)
Risk Stock’s volatility relative to the market Anderson and Reeb (2003), Villalonga and Amit
(2006), Miller and Breton-Miller (2011), Miller et al.
(2013), Gill and Kaur (2015)
Governance Unaffiliated Share ownership of non-affiliated owners holding at least 5% of Shleifer and Vishny (1997), Miller et al. (2007, 2011),
blockholdings the company’s outstanding shares Chirico et al. (2011), Gill and Kaur (2015)
Family board The proportion of family directors to total number of directors Miller et al. (2007), Chirico et al. (2011), Miller et al.
members (2011)

Notes: aLiterature citations are from prominent family business studies and are not meant to be exhaustive or all-inclusive. bFamily ownership includes direct
(individual or HUF) and indirect (intercompany cross-holding and holding companies or others) ownership
Panel A: Summary statistics and correlation data
Variables Mean SD (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
(1) Family largest 0.117 0.107 1
owner
(2) Strategy index 0.067 2.101 0.149*** 1
(3) R&D intensity 0.028 1.104 0.114*** 0.733*** 1
(4) Investment 0.012 1.011 0.030 0.611*** 0.139*** 1
(5) Leverage 0.014 1.021 0.161*** 0.728*** 0.380*** 0.128** 1
(6) Return on asset 0.129 0.107 0.028 0.127*** 0.116*** 0.056 0.091** 1
* **
(7) Total shareholder 0.830 3.405 0.013 0.076 0.102 0.003 0.052 0.042 1
return
*** *** *** *** *** ***
(8) Size 7.324 2.204 0.116 0.502 0.471 0.173 0.503 0.325 0.059 1
(9) Age 3.346 0.467 0.036 0.063 0.009 0.017 0.156*** 0.116*** 0.007 0.219*** 1
*** * *** **
(10) Risk 0.839 0.469 0.022 0.124 0.078 0.022 0.201 0.013 0.109 0.324*** 0.052 1
(11) Unaffiliated 0.037 0.064 0.013 0.100* 0.023 0.012 0.196*** 0.032 0.039 0.024 0.034 0.014 1
blockholdings
(12) Family board 0.531 0.115 0.088** 0.132*** 0.201*** 0.010 0.063 0.046 0.048 0.196*** 0.025 0.101** 0.048 1
members
Panel B: Difference of mean tests on family involvement in business
Variables Ownership† Management Governance
Founder largest Descendant largest Descendant largest FStatistics Founder Descendant Descendant Professional Fstatistics Founder Descendant Descendant Independent Fstatistics
owner owner [RD1] owner [RD2] chair CEO CEO CEO chair chair chair chair
[RD1] [RD2] [RD1] [RD2]
Strategy index 0.128 0.067 0.650 2.868* 0.090 0.360 0.111 0.083 1.341 0.008 0.023 0.293 0.020 0.074
R&D intensity 0.038 0.124 0.202 2.435* 0.115 0.280 0.079 0.047 4.364*** 0.028 0.235 0.608 0.021 2.769**
Investment 0.053 0.045 0.203 1.512 0.003 0.094 0.075 0.092 0.561 0.012 0.060 0.037 0.009 0.114
***
Leverage 0.113 0.146 0.245 5.207 0.029 0.013 0.114 0.038 0.324 0.024 0.152 0.351 0.008 1.072
Return on asset 0.118 0.148 0.141 4.635*** 0.119 0.139 0.148 0.151 2.480* 0.131 0.137 0.184 0.107 2.279*
*
Total shareholder 0.730 1.001 0.891 0.351 0.687 1.330 1.245 1.246 2.151 0.698 0.509 1.628 1.630 2.071
return
*** ***
Size 7.067 7.730 7.604 5.416 7.027 7.693 7.684 7.765 5.057 7.197 8.163 7.276 7.104 4.426***
Age 3.204 3.408 4.124 108.843*** 3.204 3.505 3.790 3.466 34.929*** 3.264 3.695 4.524 3.237 52.497***
Risk 0.831 0.860 0.826 0.216 0.837 0.847 0.800 0.868 0.195 0.844 0.651 1.190 0.952 7.768***
Unaffiliated 0.046 0.024 0.028 6.581*** 0.042 0.027 0.018 0.042 2.946** 0.036 0.020 0.050 0.058 4.890***
blockholdings
Family board 0.535 0.529 0.517 0.517 0.522 0.545 0.526 0.558 2.247* 0.530 0.592 0.519 0.478 13.776***
members
Companies (%) 59.62 32.00 8.380 59.810 20.190 8.952 11.048 68.381 14.476 1.905 15.238

Notes: *, **, ***indicate significance at the 10%, 5% and 1% levels, respectively. All variables are winsorised at the 1st and 99th percentiles to remove outliers.
†
indicates nine company-year observations where the family largest shareholder has indirect ownership. The sample distribution is of 525 company-year
observations over FY2013–2017

companies
Table 3.
Family

the sample
businesses

Descriptive data for

JEEE Controls = Size, age, risk, unaffiliated blockholdings and family board members;
and
Year dummy = 1 for each year of the sample period.
The specific econometric regression to study the moderating role of strategy on the
relationship of FIB with performance is in the form:

FP ¼ d 0 þ d 1 ðFIBÞ þ d 2 ðStrategy indext1 Þ

þ d 3 ðStrategy indext1  FIBÞ þ d 4 ðControlsÞ þ d 6 ðYear dummyÞ þ «

where:
FP = ROA and TSR;
FIB = Founder largest owner, descendant largest owner, founder CEO,
descendant CEO, professional CEO, founder chair, descendant chair and
independent chair;
Controls = Size, age, risk, unaffiliated blockholdings and family board members;
and
Year dummy = 1 for each year of the sample period.
A one-way analysis of variance (ANOVA) test was invoked to examine the
pervasiveness of multiple generational FIB (ownership, management and governance) in the
presence of non-family members and its likely effect on strategy and performance. Further, a
multi-variate regression of the impact on strategy index and FP for the family firm
configurations was carried out with the same set of controls.

4. Results and discussion

Table 4 highlights the impact of FIB measures on the strategy index. The results for Models
1–7 show that there is a significant positive impact of the founder CEO (Model 2: b = 0.358,
p < 0.05; Model 3: b = 0.448, p < 0.05) and the founder chair (Model 6: b = 0.544, p < 0.10)
on the strategy index. However, there is a negative and significant effect of the descendant
largest owner [RD1] (Model 1: b = 2.480, p < 0.05) on the strategy index. The results
imply that companies with the family founder vis-à-vis their descendant largest owners are
more likely to adopt a growth strategy. The presence of an independent chair has a negative
influence on a firm’s strategic decisions (Model 7: b = 0.382, p < 0.10) concerning the
control variables, it can be observed that the strategy index is at a significant level positively
related to size in Models 1–7, implying that a higher volume of sales fuel larger investments
and debt raising capacity
The effect of family ownership, management and governance in business on accounting
and market metrics of FP both before and after considering the intermediation effect of
strategy have been represented by the odd- and even-numbered models, correspondingly.
The results presented in Table 5 highlight that companies with descendants as the largest
owners have significantly higher performance, especially for the TSR models (Model 3: b =
3.208, p < 0.01; Model 4: b = 5.276, p < 0.01). Further, a significant positive effect of the
interaction of the lagged strategy index with the descendant largest owner [RD1] (Model 2:
b = 0.385, p < 0.05) and [RD2] (Model 4: b = 1.120, p < 0.05) can be observed on
performance, suggesting that the family largest owner and FP relationship were more
robust for the descendants. Risk has a significant negative effect on performance for all the
ownership models.
The results on the relationship between family management and market performance
show a significant negative effect of the founder CEO (Model 11: b = 0.177, p < 0.10;
 Ownership Management Governance
Dependent variableStrategy index Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7

Independent variables
Founder largest owner 0.444 (0.28)
Descendant largest owner [RD1] –2.480** (–2.46)
Descendant largest owner [RD2] –3.680 (–1.45)
Founder CEO 0.358** (2.31) 0.448**(2.73) 0.234 (1.32)
Descendant CEO [RD1] 0.188 (0.88) 0.275 (1.23)
Descendant CEO [RD2] –0.166 (–0.27) –0.267 (–0.82)
Professional CEO –0.131(–0.46) –0.094 (–0.36)
Founder chair 0.259 (0.71) 0.544*(1.96) 0.413 (1.76)
Descendant chair [RD1] 0.331 (1.72) 0.324 (1.05)
Descendant chair [RD2] –0.165 (–0.40) –0.187 (–0.42)
Independent chair 0.231 (1.11) 0.382*(1.85)
Controls
Size 0.508***(6.96) 0.514*** (5.57) 0.516*** (6.69) 0.515*** (5.58) 0.511*** (5.30) 0.511*** (5.34) 0.512*** (5.76)
Age 0.253 (0.78) 0.181 (0.50) 0.136 (0.48) 0.175 (0.49) 0.130 (0.36) 0.144 (0.51) 0.142 (0.46)
Risk –0.012 (–0.06) –0.003 (–0.01) –0.005 (–0.02) –0.001 (–0.00) 0.013 (0.04) 0.014 (0.05) 0.005 (0.02)
Unaffiliated blockholdings –0.466 (–0.34) –0.625 (–0.39) –0.584 (–0.44) –0.604 (–0.38) –0.535 (–0.30) –0.544 (–0.41) –0.542 (–0.35)
Family board members 0.038 (0.08) 0.031 (0.05) 0.048 (0.07) –0.001 (–0.00) –0.055 (–0.08) –0.037 (–0.06) –0.031 (–0.05)
Year dummy Included Included Included Included Included Included Included
Wald chi-sq 118.93*** 109.81*** 127.40*** 111.51*** 104.96*** 105.12*** 126.33***
No. of observations† 525 525 525 525 525 525 525

Notes: *, **, ***indicate Adjusted P < 10%, 5% and 1% levels, respectively. †indicates nine company-year observations where the family largest shareholder
has indirect ownership. The sample distribution is of 525 company-year observations over FY2013–2017. The t-statistics are in parentheses and are corrected for
serial correlation with the Huber White Sandwich Estimator for a variance. The P-values were adjusted to recompense for multiple tests using the Benjamini and
Hochberg (1995) procedure

involvement in
Family

business
Strategy on family
Table 4.
businesses
JEEE Dependent variables Return on assets Total shareholder return
Financial performance Model 1 Model 2 Model 3 Model 4

Independent variables
Founder largest owner 1.317 (1.28) 0.425 (0.53) 0.662 (0.66) 1.142 (1.37)
Descendant largest owner [RD1] 0.844 (0.73) 1.831*(1.73) 1.741 (0.93) 0.076 (0.04)
Descendant largest owner [RD2] 0.194 (0.52) 0.562 (1.09) 3.208***(9.98) 5.276*** (6.49)
Controls
Size 0.062 (1.23) 0.047 (0.74) 0.017 (0.75) 0.006 (0.28)
Age 0.048 (0.39) 0.052 (0.34) 0.080 (1.08) 0.069 (0.95)
Risk 0.203* (1.73)0.213**(2.18)0.259* (1.71)0.217** (1.98)
Unaffiliated blockholdings 0.125 (0.29) 0.165 (0.46) 0.330 (0.55) 0.168 (0.44)
Family board members 0.843 (1.28) 0.874 (1.60) 0.766 (1.05) 0.726 (1.32)
Main effect
Strategy indext–1 0.006 (0.10) 0.041 (0.79)
Moderating effect
Strategy indext–1* Founder largest 0.335 (1.03) 1.069 (1.38)
owner
Strategy indext–1* Descendant largest 0.385**(3.12) 0.296 (1.37)
owner [RD1]
Strategy indext–1 * Descendant largest 0.401 (1.87) 1.120** (2.19)
owner [RD2]
Year dummy Included Included Included Included
Table 5. Wald chi-sq 70.79*** 77.23*** 33.48*** 36.71***
Strategy on the No. of observations† 525 525 525 525
family involvement
in business Notes: *, **, ***indicate Adjusted P < 10%, 5% and 1% levels, respectively. †indicates nine company-year
observations where the family largest shareholder has indirect ownership. The sample distribution is of 525
(ownership)-financial company-year observations over FY2013–2017. The t-statistics are in parentheses and are corrected for
performance serial correlation with the Huber White Sandwich Estimator for a variance. The P-values were adjusted to
relationship recompense for multiple tests using the Benjamini and Hochberg (1995) procedure

Model 12: b = 0.183, p < 0.10), while a positive one for the descendant CEO [RD1] (Model
7: b = 0.153, p < 0.10; Model 8: b = 0.156, p < 0.10) (Appendix Table A1). Thus, the founder
CEOs pursuit for growth conceivably does not translate into shareholder value over the
short-term. The coefficients of intermediation are positive for the descendant CEO [RD1]
(Model 2: b = 0.095, p < 0.05), implying their decisive bearing on the shareholder return.
The results also show that there is a significant negative moderating effect for the founder
CEO (Model 2: b = 0.069, p < 0.10) and professional CEOs (Model 4: b = 0.072, p < 0.10;
Model 6: b = 0.079, p < 0.10; Model 10: b = 0.084, p < 0.10), thus suggesting the
ineffectual effect of their presence on strategy implication of performance. The relationship
between the board chair and performance with the insinuation of strategy depicts that the
interaction term of strategy with the descendant chair being positive for both the descendant
CEO [RD1] (Model 2: b = 0.096, p < 0.10) and [RD2] (Model 6: b = 0.114, p < 0.10, Model 12:
b = 0.154, p < 0.10) (Appendix Table A2). The results also show that there is a significant
negative intermediating effect of founder (Model 10: b = 0.299, p < 0.10) and independent
chair (Model 10: b = 0.192, p < 0.10) on TSR indicating that the founder and outside chair
do not act as a catalyst to market performance. Overall, the results for control variables are
in consonance with that of the family ownership models.
Table 6 provides the possible configurations with mean strategy index, ROA and TSR
scores for ownership-management (Panel A), ownership-governance (Panel B) and
management-governance (Panel C) combinations. The results of the one-way ANOVA test
 Mean Mean difference
FIB configurations with strategy and financial performance [a] [b] [c] [a][b] [a][c] [b][c]

Panel A: Ownership† and management

Founder CEO Descendant CEO Professional CEO
Founder largest owner Strategy index 0.263 0.124 0.354 0.387 0.091 0.478
Return on asset 0.114 0.117 0.139 0.003 0.024 0.022
Total shareholder return 0.515 1.764 1.288 1.249 0.773 0.475
N 248 35 24
Descendant largest owner Strategy index 0.152 0.539 0.035 0.387 0.117 0.504
Return on asset 0.135 0.148 0.162 0.013 0.026 0.014
Total shareholder return 0.556 1.171 1.203 0.615 0.647 0.032
N 69 107 33
Panel B: Ownership† and governance
Founder chair Descendant chair Independent chair
Founder largest owner Strategy index 0.149 0.360 0.422 0.509 0.501 1.010
Return on asset 0.116 0.178 0.111 0.062 0.005 0.067
Total shareholder return 0.635 1.357 1.010 0.772 0.375 0.347
N 246 7 54
Descendant largest owner Strategy index 0.105 0.520 0.809 0.415 0.705 0.289
Return on asset 0.163 0.136 0.098 0.026 0.065** 0.039
Total shareholder return 0.756 0.590 3.049 0.166 2.295** 0.592**
N 112 72 25
Panel C: Management and governance
Founder CEO Descendant CEO Professional CEO
Founder chair Strategy index 0.106 0.050 0.120 0.055 0.014 0.070
Return on asset 0.121 0.167 0.152 0.046** 0.031 0.015
Total shareholder return 0.460 1.128 1.354 0.778 0.894 0.116
N 256 60 38
Descendant chair Strategy index 0.772 0.634 0.205 1.406 0.567 0.838
Return on asset 0.050 0.133 0.205 0.083 0.155* 0.072
Total shareholder return 1.105 0.830 0.256 1.935 1.361 0.574
N 4 77 10
(continued)

involvement in
Family

business
Strategy, financial

multiple family
Table 6.

performance and
businesses
 JEEE

Table 6.
Mean Mean difference
FIB configurations with strategy and financial performance [a] [b] [c] [a][b] [a][c] [b][c]

Independent chair Strategy index 0.697 0.768 0.193 1.465* 0.890 0.575
Return on asset 0.117 0.081 0.105 0.036 0.012 0.024
Total shareholder return 1.457 2.062 1.646 0.604 0.189 0.415
N 42 16 22

Notes: C *, **, ***indicate Adjusted P < 10%, 5% and 1% levels, respectively. †indicates nine company-year observations where the family largest shareholder has
indirect ownership. The sample distribution is of 525 company-year observations over FY2013–2017. N is the number of companies for each ownership-
management, ownership-governance and management-governance combination. The P-values were adjusted to recompense for multiple tests using the Benjamini
and Hochberg (1995) procedure
 SI ROA TSR
Family
Dependent variables Model 1 Model 2 Model 3 Model 4 businesses
Independent variables
Founder CEO-independent chair 0.364*(1.84)
Descendant CEO-independent chair 0.295 (0.53)
Founder CEO-founder chair –0.474**(–2.84)
Descendant CEO- founder chair 0.138 (0.57)
Independent chair-descendant largest owner 0.472**(2.23)
Founder chair-descendant largest owner 0.045 (0.59)
Independent chair-descendant largest owner 0.456* (2.13)
Descendant chair-descendant largest owner –0.043 (–0.54)
Controls
Size 0.513***(5.60) 0.057 (1.24) 0.028 (1.14) 0.029 (1.23)
Age 0.074 (0.26) 0.026 (0.33) –0.026 (–0.38) –0.011 (–0.20)
Risk –0.021 (–0.09) –0.190*(–1.96) –0.195 (–1.63) –0.193 (–1.72)
Unaffiliated blockholdings –0.581 (–0.48) –0.187 (–0.62) 0.478 (1.16) 0.453 (1.18)
Family board members 0.025 (0.05) –0.459 (–1.19) 0.860 (1.42) 0.856 (1.64)
Year dummy Included Included Included Included
***
Wald chi-sq 99.58 48.93*** 40.82***
29.45** Table 7.
No. of observations† 525 525 525 525 Strategy and
financial
Notes: *, **, ***indicate Adjusted P < 10%, 5% and 1% levels, respectively. †indicates nine company-year performance on
observations where the family largest shareholder has indirect ownership. The sample distribution is of 525
company-year observations over FY2013–2017. The t-statistics are in parentheses and are corrected for multiple family
serial correlation with the Huber White Sandwich Estimator for a variance. The P-values were adjusted to involvement in
recompense for multiple tests using the Benjamini and Hochberg (1995) procedure business

show statistical differences for ownership-governance combinations at the 5% level of

significance on ROA and TSR. An examination of the means reveals a higher ROA for the
descendant largest owner with founder chair than an independent chair. The mean TSR
with the descendant largest owner was 3.049 with an independent chair; the mean value
dropped to 0.756 with the founder chair and 0.590 for the descendant chair. For the
management-governance combination, the mean ROA was significantly higher at a 5%
level when the position of the CEO was held by the descendant while chaired by the founder.
The mean scores were higher at 10% significance in the presence of professional CEO
(0.205) than founder CEO (0.050) with the descendant chair for ROA and presence of
descendant CEO (0.768) than founder CEO (0.697) with an independent chair for the
strategy index.
Multi-variate analysis for the significant family and non-family configurations on
strategy index, ROA and TSR are shown in Table 7. The results show a significant positive
effect of the founder CEO (Model 1: b = 0.364, p < 0.10) than the descendant CEO in the
presence of an independent chair on the strategy index, implying a growth strategy adopted
by the founder CEO when the board chair is independent. There is a significant negative
impact of the founder CEO (Model 2: b = 0.474, p < 0.05) than the descendant CEO on the
ROA when the founder is serving as the board chair, suggesting an erosion in the
performance when the founder holds both the CEO and the chair position. The analysis for
the TSR highlights a significant positive effect for the descendant largest owner with an
independent chair (Model 3: b = 0.472, p < 0.05; Model 4: b = 0.456, p < 0.10) than the
founder or descendant chair.
JEEE Overall, the results for FIB on strategy index suggest that the descendant effect is
associated with the adoption of a conservative strategy, especially as the largest owners.
The same holds good for an independent chair. The founder, as the CEO and board chair, on
the other hand, have a significant positive effect on strategy. The disaggregated analysis of
components of the strategy index shows that founders invest significantly more in R&D,
which is typical of the large-sized companies, thus supporting the law of proportionate effect
as propounded by Gibrat (1931) [7]. Besides, the lack of investment in the growth of the firm
is considered by such founders as a threat to their socio-emotional endowment (Gomez-Mejia
et al., 2011) and social capital (Dunn, 1996). Thus, the desire to preserve SEW leads to
adopting a long-term orientation entailing large investments with long-term payoffs,
atypical of entrepreneurial logics (Yang et al., 2020). Accordingly, for family firms, the
strategy adopted by the descendants varies from that of the founders, confirming the
evidence that the latter is more likely to foster growth strategies with increasing long-term
investments (Miller et al., 2007, 2011). The configuration analysis highlights that when
multiple family members are involved in the business, the founder vis-à-vis the descendant
CEO pursues an expansive strategy with an independent chair as predicated by Villalonga
and Amit (2006). The results, thus, support H1.
The intermediation of strategy in influencing FIB-FP link puts forth some notable
outcomes. The results for the direct influence of the lagged strategy index is insignificantly
associated with performance. However, a significant positive moderating effect on
performance was observed for the descendants for both the single and two generations
relative distance from the founder as the largest owners, CEO and board chair. The plausible
reason for the same could be that the founder’s heirs lack the entrepreneurial risk-taking
propensity or talent (Bertrand and Schoar, 2006) and are, thus, unwillingness to endanger
their affective endowment (Gomez-Mejia et al., 2011). Further, family businesses are also
known to quickly move out of unprofitable ventures because of aversion to potential losses
in terms of economic and non-economic family-centred goals (De Massis et al., 2015). In
contrast, the moderating effect of the family founder as the CEO and board chair impedes
performance indicating that firms adopting growth strategy underperform those businesses
that take a conservative strategic stance, thus proving that the Penrose (1995) effect exists in
family firms in the pharmaceutical sector [8]. Such an approach is compatible with the
innate qualities of family businesses of growing around the founder’s core (Zahra et al., 2008;
Salvato and Corbetta, 2013) with a focus on both current SEW endowment and future
financial wealth (Gomez-Mejia et al., 2018). Likewise, a significant negative influence of the
intermediation of the professional CEO and independent chair on strategy leads to an
adverse impact on the performance. It seems that external hires might struggle due to a lack
of knowledge about the family firm’s specific products, processes and the complex social
and family networks that provide much-needed support to perform effectively in prominent
positions (Kotter, 2007). The FIB taxonomies highlight that some combinations of family
and non-FIB lead to better performance than others – for instance, a descendant owner with
an independent chair. On the contrary, a relatively significant negative impact on ROA has
been reported for the founder holding both the position of CEO and board chair. Similar
results of wealth destruction are well documented in family business studies (Villalonga
and Amit, 2006; Braun and Sharma, 2007; Garcia-Castro and Aguilera, 2014). In line with
evidence (Chen, 2002; Ang et al., 2006), higher risk results in lower expected returns because
of increasing uncertainty of returns. In general, results for FIB-FP are suggestive of the fact
that the multiple family involvements of family members with differing strategic
imperatives in key corporate roles across generations have a varying impact on
performance, thus supporting H2.
 Several diagnostic tests were conducted to discern the robustness of results. Firstly, Family
multi-collinearity was checked in the various regression models. The mean variance businesses
inflation factor (VIF) in all the models was less than 4, indicating the lack of severe multi-
collinearity issue [9]. Secondly, the results of the time-series analyses were checked using
pooled, time-series average regressions leading to similar conjectures as in Tables 3 to 7.
Though endogeneity would be less of a concern for the sample companies, as family
ownership concentration is reasonably high, the generalised method of moments system
was applied to overcome heterogeneity and endogeneity in the models as proposed by
Blundell and Bond (1998, 2000). The estimators of these models were found to be efficient
and asymptotically robust [7]. Thirdly, a disaggregated analysis of the components of the
strategy index (R&D, investment and leverage) was run using the same set of control and
moderating variables with the results converging to the ones presented here. Fourthly, the
robustness of the multi-variate regression of strategy on the lagged FIB-FP, using the
moderating effect of a two-year lag of strategy index, show quantitatively and qualitatively
comparable results. Fifthly, the sensitivity of the outcomes using alternative accounting
(ROA-based on net income) and market (Tobin’s q) performance measures as the dependent
variable indicate analogous results, though less significant. Finally, the current set of control
variables were substituted with listing age in place of firm age, institutional shareholdings
instead of unaffiliated blockholdings, and the number of family generations on the board
rather than family board members. The results for such substitutions were significantly
lower for all the strategy and performance models.

5. Conclusion
Family businesses have a ubiquitous global presence with a distinctive contribution to the
development of national economies. Indian family businesses, too, have over the years made
significant contributions to the spirit of entrepreneurship (Dutta, 1997). Despite the vast
amount of resources, these family businesses administer, evidence on the strategic
imperatives of each generation and its concomitant effect on business performance has been
less investigated. Further, no attempt has been made to explore the institutional perspective
of family involvement, particularly the identity and role of family members in the business.
The present paper attempts to delineate the effect of FIB on strategy as well as the
moderated effect of strategy on the FIB-FP relationship drawing on the institutional logics
for a sample of pharmaceutical companies listed on the BSE between FY2013 and FY2017.
The descriptive analysis of the sample companies highlights that family businesses are a
predominant form in India. On average, the founders’ family held an ownership stake of
53%, besides holding the position of the CEO (87%) and serving as the chair of the board of
directors (87%). The shareholding pattern depicts a high family ownership concentration,
with family vesting control through inter-company cross-holdings, in addition to individual
ownership. Averagely, the family founders (promoters) are the largest shareholders in 60%
of the sample companies, performing as the CEOs and board chair in 60% and 68% of the
companies, correspondingly. Further, an emphasis on intergenerational succession is
apparent as the descendants are actively involved in the business.
The results of multivariate analysis highlight that the strategy adopted by family
founders varies from that of their descendants. The latter takes a more conservative view in
terms of the investments in R&D and capital assets with a lower propensity to go for higher
leverage. A significant positive intermediating effect of strategy on the FIB-FP link was
observed for the descendants for both the single and two generations relative distance from
the founder as the largest owners, CEO and board chair. However, a significant negative
influence of the intermediation of the professional CEO and independent chair on strategy
JEEE adversely impacted the performance. The ownership-management-governance
configurations highlight that some combinations of family and non-FIB leads to better
performance than others. Overall, founder-led companies are more decisive as they have a
long-term commitment to their business with a robust support network system and, above
all, shared family values and aspirations.
The study provides several contributions to existing literature. Firstly, the introduction
of the company-specific strategy factors to moderate offers a better explanation for the FIB-
FP link. Secondly, the configurational analysis brought to fore the implication of various
ownership-management-governance taxonomies on corporate performance. Such an
analysis is essential when multiple members across generations are actively involved in the
family business, holding concentrated ownership and decisive positions. Finally, there is a
limited number of studies applying the institutional context in family-based studies,
especially in the context of emerging nations. The institutional framework emphasising the
need to examine the identity and role family members engage in terms of strategy provides
an epistemological underpinning to the present empirical results. This paper, thus provides
a prelude to all future studies exploring the interaction of FIB and entrepreneurial strategic
decisions on FP in the context of familial logic.
The results of the study are pertinent to both family and non-family practitioners.
Notwithstanding the heterogeneity of family businesses, the practitioners should be mindful of the
fact that specific configurations in respect to family involvement, generation and size result in a
superior strategic fit with concomitant performance as posited in the study. Family founders should
engage and mentor future generations with apposite knowledge and experience to lead the
business. Inapt proactive long-term planning will not only be a drag on firm performance but
threaten their legacy and societal aspirations. As the benefit of kinship ties, shared values and
communication advantages get weakened across generations (Kimberly, 1976), the later generations
might show no intention of joining family business due to lucrative alternate work opportunities.
Further, as family businesses evolve to become more diverse, the ramifications associated with the
joining of non-family members needs to be reassessed, especially ones in the top management and
board positions. The SEW can affect how resources are deployed and the extent to which strategies
are pursued (Yang et al., 2020). A strong commitment to SEW preservation may impair the firm’s
ability to tap the right managerial and capital resources, thus restricting performance (Hernandez-
Linares et al., 2019). The Indian corporate sector is replete with cases where the hired CEOs had to
retreat in the face of strong opposition of the founder promoters or their families. Any ambiguity
about the relative importance of familial logic while making strategic decisions, in all likelihood,
would result in impaired or delayed decisions that may be detrimental to the interest of family and
the family firm. The findings also suggest that the next generation should consider taking over the
family business as an entrepreneurial career path and not as a generational privilege. For research-
intensive industries, practitioners and family business advisors should evolve best practices
considering the firm’s strategic physiognomy. As most family businesses do not survive past third-
generation (Ward, 2004), studying successful configurations would be beneficial, especially for
dynamic industry sectors that concomitantly need to be both entrepreneurial as well as strategic.
The findings of the present study should be interpreted with care due to certain
limitations. Firstly, the results of the study are relevant in the context of institutional
settings comparable to that of India and are not generalisable to the rest of the world. Any
work on the strategic imperatives of family businesses should consider the institutional
heterogeneity and its effect on firm performance. Secondly, the study has been carried out on
a sample of listed pharmaceutical companies, suggestive of the fact that the results may not
hold out to other sectors as the strategy is a function of the industry the firm is in (Porter,
1980). The sample companies are exposed to higher risks, typical of the highly-regulated
sector, with massive capital expenditure, R&D and long asset payoff periods. The results Family
can be better deduced with an expanded data set, including diverse sectors, in specific, the businesses
other top R&D industries, namely, automobiles and software. Thirdly, the measures
comprising the composite strategy index were constricted to three, which were primarily
assessed based on prior organisational and family firm literature. Other financial and non-
financial variables of strategy, as well as a triangulation between measures based on
archival data and surveys, can be considered to capture the strategic intent of the company
entirely. Further, the construct validity of the index can be improved by conducting a meta-
analysis. Fourthly, the study makes use of the lagged expression of strategy for one year.
Returns on investment in R&D and capital assets accrue over long-term, hence the lagged
expression for a two- or three-year can better represent the effect of strategy on the FIB-FP
relation. Fifthly, there are limitations to the use of proxy measures under study. Besides, no
attempt has been made to examine the direct relationship between strategy and
performance, evaluate family governance mechanisms, explore the pursuit of family-centred
non-economic goals or relate SEW with performance. Finally, the possibility of
nonlinearities between FIB and FP has not been tested.
Overall, the results suggest that the field’s status is complex, with numerous uncharted
challenges and opportunities. Future research can focus on invoking the institutional logics
to study the moderating effect of strategy on the FIB-FP relationship for other emerging
economies. A better strategy index can be created by taking cues from the established
methodological processes in this study domain. The use of alternative measures of
performance, e.g. a size-adjusted metric that better captures a firm’s deftness in managing
its core business activities (Garcés-Galdeano et al., 2017) or the calculation of return on
equity adjusted for the family effect to account for lower cost of equity (Machek et al., 2013)
can put forth some notable outcomes. Further, the impact on non-economic performance
measures of significant strategic implementation variables can be examined (Holt et al.,
2017). As family firms are heterogeneous, there is a need to identify governance mechanisms
that benefit family firms’ specific needs by taking regional, cultural and behavioural
context. Heterogeneity across CEO labour supply and its associated effect on the firm
performance opens up an underexplored domain of research, which can be tapped by
conducting CEO time use survey. An essential extension of the present study would be to
compare the change in firm performance around succession for the family with unrelated
CEO positions using a difference-in-differences analysis. Given the prevalence of
primogeniture inheritance in India, a compelling line of research would be to explore the
impact of family succession on performance by the gender of the incoming CEO as an
instrumental variable. Further, set-theoretic methods that allow exploration for conditions of
complementarity and substitutability amongst various FIB components can be adopted.
Given that SEW persists across generations, the analysis of its consequences on family firm
strategy and performance would be a good opportunity for future research discussion.
There exist several other research opportunities in the realm of entrepreneurial strategic
management, given the wide variation in firm performance, which can further research in
the field of family business studies.

Notes
1. The “family managing partners” relates to a family structure, which is deeply affected by the
HUF notion, wherein brothers, with parents and children, are very cohesive, often living together
as a family unit. A HUF is considered as an “individual person” under the Companies Act, 2013.
JEEE 2. The “licence raj” was an elaborate system of licences and regulations that were required to be
met to run businesses in India between 1947 and 1990.
3. Companies affiliated to business groups are controlled through cross-holding, pyramidal
ownership structures and director interlocking (Sarkar and Sarkar, 2000).
4. As suggested in the literature (Miller et al., 2011; Bentley et al., 2013), various other attributes
were considered while constructing a composite strategy index. However, the inclusion of these
variables was not made either due to lack of data access/disclosure or low inter-item correlations
resulting in weak internal consistency.
5. Hair et al. (1998) recommended thresholds above 0.70 for the composite reliability and 0.50 for an
extracted variance.
6. Alternatively, taking into the configuration approach to strategic entrepreneurship (Kraus et al.,
2011), the controls relate to resources (industry and size), organisational structure and
capabilities (age) and institutional environment (unaffiliated blockholdings, risk and family
board members).
7. The results are available with the author.
8. Penrose (1995) argued that a firm’s growth does not lead to an increase in future profits because
of the economy of growth inherent in the company’s growth process.
9. If the VIF result is lower than 10, multi-collinearity is not a serious problem (Gujarati, 2003).

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Practice, Vol. 32 No. 6, pp. 1035-1054.
Zattoni, A., Gnan, L. and Huse, M. (2015), “Does family involvement influence firm performance?
Exploring the mediating effects of board processes and tasks”, Journal of Management, Vol. 41
No. 4, pp. 1214-1243.
Zellweger, T., Richards, M., Sieger, P. and Patel, P.C. (2016), “How much am I expected to pay for my
parent’s firm? An institutional logics perspective on family discounts”, Entrepreneurship Theory
and Practice, Vol. 40 No. 5, pp. 1041-1069.
Zheng, V. and Wong, S.-L. (2016), “Competing for leadership and ownership: the Li and Fung group’s
legendary and strategy”, Journal of Entrepreneurship in Emerging Economies, Vol. 8 No. 3,
pp. 304-320.

Further reading
Bennedsen, M., Nielsen, K.M., Pérez-Gonzalez, F. and Wolfenzon, D. (2007), “Inside the family firm: the
role of families in succession decisions and performance”, The Quarterly Journal of Economics,
Vol. 122 No. 2, pp. 647-691.
Cameron, A.C. and Trivedi, P.K. (1998), Regression Analysis of Count Data, Cambridge University
Press, New York, NY.
Chung, K.H., Wright, P. and Kedia, B. (2002), “Corporate governance and market valuation of capital
and RD investments”, Review of Financial Economics, Vol. 12 No. 2, pp. 161-172.
Demsetz, H. and Lehn, K. (1985), “The structure of corporate ownership: causes and consequences”,
Journal of Political Economy, Vol. 93 No. 6, pp. 1155-1177.
Demsetz, H. and Villalonga, B. (2001), “Ownership structure and corporate performance”, Journal of
Corporate Finance, Vol. 7 No. 3, pp. 209-233.
Ehie, I.C. and Olibe, K. (2010), “The effect of RD investment on firm value: an examination of US
manufacturing and service industries”, International Journal of Production Economics, Vol. 128
No. 1, pp. 127-135.
Faccio, M. and Lang, L.H.P. (2002), “The ultimate ownership of Western European corporations”, Family
Journal of Financial Economics, Vol. 65 No. 3, pp. 365-395.
businesses
Maseda, A., Iturralde, T., Aparicio, G., Boulkeroua, L. and Cooper, S. (2019), “Family board ownership,
generational involvement and performance in family SMEs: a test of the S-shaped hypothesis”,
European Journal of Management and Business Economics, Vol. 28 No. 3, pp. 285-300.
Oonk, G. (2014), “The emergence of indigenous industrialists in Calcutta, Bombay, and Ahmedabad,
1850-1947”, Business History Review, Vol. 88 No. 1, pp. 43-71.
Roy, T. (2018), A Business History of India: Enterprise and the Emergence of Capitalism from 1700,
Cambridge University Press, Cambridge.
Tripathi, D. (2004), The Oxford History of Indian Business, Oxford University Press, New Delhi.

Corresponding author
Suveera Gill can be contacted at: suveera@pu.ac.in
 JEEE

financial
in business
Table A1.

relationship
performance
(management)-
Strategy on the
family involvement
Appendix

Return on assets
Dependent variablesFinancial performance Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

Independent variables
Founder CEO 0.013 (0.12) 0.019 (0.17) 0.023 (0.15) 0.031 (0.24) 0.019 (0.17) 0.004 (0.04)
Descendant CEO [RD1] 0.021 (0.14) 0.002 (0.01) 0.055 (0.41) 0.048 (0.38)
Descendant CEO [RD2] 0.012 (0.07) 0.020 (0.10) 0.018 (0.11) 0.005 (0.01)
Professional CEO 0.055 (0.31) 0.076 (0.51) 0.014 (0.11) 0.042 (0.27)

Controls
Size 0.060 (1.31) 0.045 (0.71) 0.059 (1.32) 0.045 (0.64) 0.059 (1.29) 0.045 (0.12)
Age 0.027 (0.31) 0.050 (0.22) 0.033 (0.32) 0.055 (0.38) 0.028 (0.23) 0051 (1.86)
Risk 0.196* (2.08) 0.194* (2.28) 0.195* (2.02) 0.199* (2.12) 0.196* (1.96) 0.198* (1.99)
Unaffiliated blockholdings 0.131 (0.34) 0.171 (0.43) 0.148 (0.35) 0.192 (0.43) 0.139 (0.38) 0.183 (0.48)
Family board members 0.822 (1.89) 0.899 (1.67) 0.822 (1.55) 0.879 (1.34) 0.824 (1.47) 0.870 (1.58)

Main effect
Strategy indext–1 0.021 (0.40) 0.024 (0.41) 0.046 (0.75)
Moderating effect
*
Strategy indext–1* founder CEO 0.069 (1.96) 0.010 (0.20) 0.012 (0.30)
Strategy indext–1* descendant CEO [RD1] 0.095** (2.14) 0.026 (0.56) 0.011 (0.21)
Strategy indext–1* descendant CEO [RD2] 0.056 (1.13)
Strategy indext–1* professional CEO 0.072* (2.02) 0.079* (2.14)
Year dummy Included Included Included Included Included Included
Wald chi-sq 39.08*** 41.08*** 39.65*** 46.96*** 35.97*** 50.09***
No. of observations† 525 525 525 525 525 525

Notes: *, **, ***indicate Adjusted P < 10%, 5% and 1% levels, respectively. †indicates nine company-year observations where the family largest
shareholder has indirect ownership. The sample distribution is of 525 company-year observations over FY2013–2017. The t-statistics are in parentheses
and are corrected for serial correlation with the Huber White Sandwich Estimator for a variance. The P-values were adjusted to recompense for multiple
tests using the Benjamini and Hochberg (1995) procedure
(continued)
 Total shareholder return
Dependent variablesFinancial performance Model 7 Model 8 Model 9 Model 10 Model 11 Model 12

Independent variables
Founder CEO 0.093 (1.09) 0.094 (1.20) 0.088 (0.72) 0.095 (0.86) 0.177* (1.99) 0.183* (2.01)
Descendant CEO [RD1] 0.153* (1.72) 0.156* (1.80) 0.142 (1.50) 0.133 (1.33)
Descendant CEO [RD2] 0.114 (0.88) 0.120 (1.14) 0.029 (0.27) 0.036 (0.35)
Professional CEO 0.063 (0.55) 0.059 (0.55) 0.023 (0.27) 0.013 (0.16)

Controls
Size 0.019 (0.67) 0.003 (0.14) 0.018 (0.80) 0.003 (0.10) 0.019 (0.83) 0.003 (0.10)
Age 0. 860 (0.98) 0.066 (1.05) 0.059 (0.89) 0.033 (0.49) 0.086 (0.34) 0.061(0.95)
Risk 0.240*(2.08) 0.245* (2.32) 0.240* (1.92) 0.241*(2.07) 0.240* (2.05) 0.243*(2.30)
Unaffiliated blockholdings 0. 522 (1.09) 0.484 (1.17) 0.469 (1.0) 0.424 (0.97) 0.501 (1.18) 0.455(1.09)
Family board members 0.718 (1.25) 0.704 (1.34) 0.696 (1.35) 0.691 (1.41) 0.706 (1.39) 0.672(1.29)

Main effect
Strategy indext–1 0.023 (0.65) 0.066 (1.41) 0.009(0.27)
Moderating effect
Strategy indext–1* founder CEO 0.017 (0.34) 0.024 (0.33) 0.031(0.61)
Strategy indext–1* descendant CEO [RD1] 0.033 (0.82) 0.065 (1.23)
Strategy indext–1* descendant CEO [RD2] 0.025 (0.46) 0.041(0.89)
Strategy indext–1* professional CEO 0.084* (1.92) 0.007(0.18)
Year dummy Included Included Included Included Included Included
Wald chi-sq 50.64*** 67.37*** 41.08*** 56.26*** 37.73*** 48.97***
No. of observations† 525 525 525 525 525 525
Family

Table A1.
businesses
 JEEE

financial
in business
Table A2.

relationship
performance
(governance)-
Strategy on the
family involvement
Dependent variables Return on assets
Financial performance Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

Independent variables
Founder chair 0.161(1.20) 0.168(1.19) 0.028(0.11) 0.025(0.10) 0.117(1.25) 0.106(1.26)
Descendant chair [RD1] 0.074(0.45) 0.087(0.54) 0.070(0.28) 0.067(0.26)
Descendant chair [RD2] 0.409(1.57) 0.350(1.37) 0.357(1.15) 0.280(1.10)
Independent chair 0.113(0.39) 0.128(0.49) 0.023(0.15) 0.047(0.273)
Controls
Size 0.063(1.39) 0.042(0.64) 0.061(1.39) 0.041(0.60) 0.064(1.45) 0.043(0.64)
Age 0.011(0.12) 0.032(0.33) 0.044(0.47) 0.062(0.62) 0.019(0.18) 0.038(0.39)
Risk 0.206*(1.84) 0.180(1.98) 0.198(1.50) 0.172*(1.88) 0.212**(2.75) 0.184*(2.01)
Unaffiliated blockholdings 0.111(0.35) 0.116(0.37) 0.106(0.31) 0.111(0.35) 0.129(0.37) 0.130(0.41)
Family board members 0.851(1.57) 0.909(1.25) 0.832(1.63) 0.899(1.21) 0.823(1.24) 0.890(1.21)
Main effect
Strategy indext–1 0.040(0.67) 0.068(0.57) 0.060(0.93)
Moderating effect
Strategy indext–1* founder Chair 0.019(0.38) 0.004(0.05) 0.039(0.96)
Strategy indext–1* descendant chair [RD1] 0.096*(1.74) 0.137(1.10)
Strategy indext–1* descendant chair [RD2] 0.044(0.90) 0.114*(1.96)
Strategy indext–1* independent chair 0.047(0.39) 0.022(0.39)
Year dummy Included Included Included Included Included Included
Wald chi-sq 57.38*** 57.43*** 36.05*** 64.90*** 55.75*** 59.76***
No. of observations† 525 525 525 525 525 525

Notes: *, **, ***indicate Adjusted P < 10%, 5% and 1% levels, respectively. †indicates nine company-year observations where the family largest shareholder has
indirect ownership. The sample distribution is of 525 company-year observations over FY2013–2017. The t-statistics are in parentheses and are corrected for
serial correlation with the Huber White Sandwich Estimator for a variance. The P-values were adjusted to recompense for multiple tests using the Benjamini and
Hochberg (1995) procedure
(continued)
Dependent variables Total shareholder return
Financial performance Model 7 Model 8 Model 9 Model 10 Model 11 Model 12

Independent variables
Founder chair 0.010(0.04) 0.014(0.05) 0.092(0.39) 0.356(1.37) 0.034(0.53) 0.023 (0.35)
Descendant chair [RD1] 0.030(0.12) 0.018(0.08) 0.133(0.59) 0.384(1.51)
Descendant chair [RD2] 0.134(0.45) 0.205(0.95) 0.159(0.76) 0.214*(2.54)
Independent chair 0.106(0.32) 0.384(1.13) 0.020(0.09) 0.008 (0.03)
Controls
Size 0.023(0.93) 0.007(0.34) 0.023(0.85) 0.008(0.43) 0.023(1.10) 0.005 (0.28)
Age 0.019(0.38) 0.002(0.04) 0.016(0.26) 0.015(0.26) 0.021(0.31) 0.003 (0.05)
Risk 0.224(1.62) 0.239*(2.12) 0.224*(1.87) 0.235(1.75) 0.225(1.50) 0.242* (1.82)
Unaffiliated blockholdings 0.363(0.87) 0.371(0.71) 0.372(0.88) 0.370(0.76) 0.366(0.75) 0.389 (0.79)
Family board members 0.773(1.81) 0.775(1.92) 0.771(1.61) 0.776(1.75) 0.727(1.06) 0.749 (1.46)
Main effect
Strategy indext–1 0.118(0.90) 0.305*(2.04) 0.014 (0.49)
Moderating effect
Strategy indext–1* founder Chair 0.111(0.73) 0.299*(1.94) 0.007 (0.23)
Strategy indext–1* descendant chair [RD1] 0.112(0.73) 0.192(1.20)
Strategy indext–1* descendant chair [RD2] 0.050(0.28) 0.154*(1.81)
Strategy indext–1* independent chair 0.192*(1.83) 0.102 (0.62)
Year dummy Included Included Included Included Included Included
Wald chi-sq 36.42*** 55.41*** 21.45** 42.88*** 35.59*** 53.18***
No. of observations† 525† 525 525† 525 525† 525
Family

Table A2.
businesses