Family Ownership and Business Survival: Kirkcaldy, 1870-1970

Abstract

This article uses a study of industrial firms in the Scottish burgh of Kirkcaldy to demonstrate high and rising survival rates among family firms during the first half of the twentieth century. Survival rates, however, were not constant and trends are linked to the evolving relationship between family and firm. In particular, it is argued that the adoption of limited liability increased the chances of firm survival, but also altered the character of family-owned firms. Finally, the article considers the reasons for a rise in exits in the 1950s and 1960s.

Family ownership and business expansion of small- and medium-sized Chinese family businesses: The mediating role of financing preference

“…It is inconsistent with the findings of Lee's (2006) research on the family-owned firms in the Standard & Poor's 500, which show that there is a positive effect of family ownership on business expansion (also, see similar findings in Sraer & Thesmar, 2007). This finding is also inconsistent with the findings from Donckels and Frohlich (1991), Taiguiri and Davis (1992), Grassby (2000), Mackie (2001), and Gallo et al (2004) and reveals a non-linear relationship between family ownership and firm's expansion. Before the threshold level is reached, the positive relationship could be attributed to the benefits of family ownership that are strong enough to make the annual expansion rate grow as ownership increases from 0% to 68%.…”

“…However, according to generally accepted principles of financial management, the ultimate objective of the financial function is to maximise the value of the company's stock rather than solely to protect the family ownership. As a result, family businesses do not have the same access to capital as other businesses because in their desire to hold on to family ownership, they can be expected to put the interests of the family before those of the business, retarding its development and expansion (Grassby, 2000;Mackie, 2001). All the above discussions lead to the following hypothesis:…”

Founding family leadership and industry profitability

“…Ideally, the board is structured to ensure that the family directors' interests are balanced by the independent directors' objectivity (Anderson and Reeb 2004). Founding family leadership often transcends generations as family shareholders tend to have their wealth invested, and serve as executives, in the firm (Mackie 2001). Conflicts arise when the power wielded by the influencing family enables them to pursue the family's interest to the detriment of the firm or other shareholders (Allen and Panian 1982;Demsetz and Lehn 1985).…”

Controlling shareholders and the composition of the board: special focus on family firms

“…Villalonga and Amit (2006) suggest that in situations in which the major shareholder is an individual or a family, there will be greater incentives both for monitoring the manager and for expropriating minority shareholders, which can result in a type II agency problem being superimposed on a type I agency problem. Unlike other large shareholders, family investors tend to maintain their ownership stakes for several generations, have a majority of their wealth invested in a single firm and are often senior executives in that firm (Mackie 2001). At the same time, families are in exceptional positions of control to pursue their private interests in detriment to outside shareholders (Anderson and Reeb 2004;Schulze et al 2001;Gómez-Mejía et al 2003;Braun and Sharma 2007).…”