Family business and value-added distribution: a socioemotional wealth approach

Abstract

Purpose Research has demonstrated that family businesses limit the goal of maximizing profits in exchange for maintaining control of the company and passing control to future generations. However, these decisions are not always shared by the stakeholders who are outside the family context, making tensions arise within the company that may affect profitability and the share prices of the family business. The purpose of this paper is to analyse the internal tensions in family businesses in the value-added (VA) distribution, and whether these tensions harm their performance as a result of the restrictions under which these companies operate. Design/methodology/approach A factor analysis has been used to measure the tension that results from VA distribution of a sample of 105 Spanish listed firms for the 2005-2012 period. A regression analysis has been used to study the impact of this tension on their share prices. Findings Results show that being a family business has a positive effect on the business tension factor and that returns and share prices are inversely related to tension factors. Thus, the authors conclude that the decision to maintain control over the family business threatens profitability and share prices. Social implications An analysis of distribution of VA in family businesses sheds light on whether or not the management in its decisions preserves its socioemotional wealth (SEW) generating tensions among its economic agents, affecting its profitability and continuity. This knowledge is important for company stakeholders and future investors. Originality/value This is the first study in which the value-added statement is used to analyse how the management style of firms, and especially family businesses, are seeking to preserve their SEW and internal tensions generated by them.

The influence of the CEO in listed family businesses

“…These results suggest that family CEOs prefer self-financing, a preference that is justified by their greater apparent risk aversion and prioritizing maintaining control over the company. This behavior by family CEOs is in line with behavior that is traditionally associated with family businesses, i.e., they prefer to finance with their own family money (Gallizo, Mar-Molinero, Moreno & Salvador, 2017b;Hamilton & Fox, 1998;Romano, Tanewski, & Smyrnios, 2000) or with undistributed profits (Hamilton & Fox, 1998;Barton & Matthews, 1989) instead of using debt or bringing on new shareholders. On the contrary, the results obtained for non-family CEOs show evidence of their preference for taking on debt, a practice that is more in line with non-family businesses.…”

The Survival of Family Farms: Socioemotional Wealth (SEW) and Factors Affecting Intention to Continue the Business

“…Research has found that "family businesses limit the goal of maximizing profits in exchange for maintaining control of the business and passing that control on to future generations" [46]. In addition to economic ownership, FFs have affective values that influence the succession process; these family business values have been grouped under the concept of socioemotional wealth.…”

Technological innovation and socioemotional wealth in family firm research

“…Although different articles have been recently developed linking the SEW approach with diverse areas of knowledge, such as business management (Gallizo et al , 2017; Schulze, 2016), diversification (Gómez-Mejía et al , 2007; Gómez-Mejia et al , 2010), business valuation (Zellweger and Dehlen, 2012), performance (Cruz et al , 2012; Martínez-Romero and Rojo-Ramírez, 2017; Rojo-Ramírez and Martínez-Romero, 2018) and innovation (Filser et al , 2018; Gast et al , 2018; Hauck and Prügl, 2015), more research is needed regarding the role SEW plays in family firms’ TI.…”