Owner Identity and Firm Performance: Evidence from European Companies
Empirical evidence of the distribution of firms based on owner identity for a set of European countries reveals substantial differences. Using the sensitivity of a firm's sales to demand shocks as a measure of risk-taking behavior, the paper explores if owner identity affects the willingness of the firms to take risk in order to improve their current situation (venturing risk). Consistent with a hypothesis of risk-avoidance behavior, small- and medium-sized family-owned companies appear to under-react to changes in market demand, notably when ownership is highly concentrated and growth options are significant. However, they confirm their status of good performers when pure profitability measures are used. Conversely, industrial- and nonconcentrated family-owned firms appear more prone to deal with venturing risk, especially when the intensity of the risk is large as in the case of fast-growing companies or demand changes in nondomestic markets.
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