Analysing the risk-return relationship in privately held firms: the contingent effect of being a family firm

Abstract

PurposeThe relationship between risk and return has been widely analysed in the scope of listed companies. However the present literature leaves uncovered an important study area with regards to privately held firms. In order to cover this gap, this study analyses the risk-return trade-off in the context of private enterprises. Furthermore, the authors incorporate the contingent effect of being a family firm on the abovementioned relationship.Design/methodology/approachUsing information from the SABI (Sistema de Análisis de Balances Ibéricos) database, a sample of 2,297 private manufacturing firms were analysed for the period of 2009–2016. So as to ascertain the proposed hypotheses, dynamic panel data methodology was applied. Specifically, the authors estimated the two-step general method of moments (GMM).FindingsThe obtained findings reveal that, according to prospect theory arguments, privately held firms adopt a conservative attitude toward risk when results are higher than a target level, while becoming risk seeking when results are lower than a target level. Moreover, the fact of being a family firm softens the risk-return relationship both when performance is above the target level and also when firms find themselves in the lowest performing case.Originality/valueThis article is, to the best of the authors' knowledge, one of the first studies dealing with the risk-return relationship in a privately held firm context. Moreover, the inclusion of being a family firm as a contingent factor in the abovementioned link is a complete novelty.

Gobierno corporativo en las empresas familiares: Revisión de literatura del periodo 2015 al 2022

“…Los estudios han demostrado que las empresas familiares de primera generación y posteriores presentaron grandes diferencias en gestión y productividad; las diferencias significativas se hallaron en la gestión empresarial como el nivel de responsabilidad (Santiago et al, 2019), distribución de funciones (De Groot et al, 2022) y que pueden afectar a la rentabilidad (Rojo-Ramírez et al, 2022). Los propietarios de empresas familiares deben tener en cuenta estas diferencias para mejorar sus resultados (D'Allura, 2019).…”

“…Además, la pertenencia dentro de la empresa familiar puede dar lugar a comportamientos beneficiosos para la empresa que son difíciles de replicar en la empresa no familiar. La alineación de los empleados con los valores de la familia se traduce en comportamientos positivos para la empresa familiar (Rojo-Ramírez et al, 2022)…”