Family cumulative knowledge and firm’s financial performance: An empirical investigation of the wine companies’ governance

Abstract

Family business is one of the most common governance systems worldwide and it is very successful in industries with strong cultural traditions, as the wine business. The literature still disagrees on whether the familiar corporate structure increases performance or not. Our empirical paper aims to investigate the effect of a long-term company culture in terms of economic performance and firm value. Is it possible to track the cumulative knowledge (passed from father to son) into firm economic returns? Using a qualitative and a quantitative research approach, the survey tests the hypothesis that the more experienced companies (higher firm age) will perform better than the others considering a set of performance indicators on a four years pattern (from firm value to EVA and VAIC). Comparing firm longevity with the performance indicators, but also monitoring many other corporate governance or ownership indicators, on a panel dataset of the top Italian wine companies, developing the statistical models of regression and correlation to verify the relationship between performance indicators and a set of corporate governance/ownership variables. This methodology results in a deep analysis of the Italian wine business, that also describes the family buy-out strategy and the cooperative ownership structure (which could be considered somehow a micro-families aggregative model). Proper family firms represent 42% of the panel, with more than 200 years of experience, a larger presence of women on board, a higher average age of the directors and a higher propensity to the production of grapes. Moreover, they have the greatest longevity and perform better than the other two groups, non-family firms and cooperatives.

Corporate governance, firm performance and executive pay: A comparison of defense and non-defense firms

“…Rau, Werner, and Schell (2018) based on their study of firms in Germany find that innovation output decreases over the generations, but if the third and later generation owner-managers are not only legal owners but also have high levels of psychological ownership, then they are highly successful and innovative as their earlier generation of owners. A study of Italian wine companies by Marsigalia, Giovannini, and Palumbo (2019) shows that a long history of generational successions is likely to exert a positive influence on the firm's returns and also in terms of brand image, reputation and cumulative know-how. Thus, if family ownership improves firm's performance, then shareholdings of the family in the firm is expected to be positively related to executive pay.…”