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Family Ownership and Firm Performance: A Cross-Regional Analysis of the USA and Europe
Weenink, Maurits (2025) Family Ownership and Firm Performance: A Cross-Regional Analysis of the USA and Europe.
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| Abstract: | Family firms dominate both developed and emerging economies, accounting for a significant share of GDP and employment. Their unique ownership structure often fosters long-term commitment, relational capital, and intergenerational vision. However, the academic literature remains divided on whether family ownership enhances or hinders firm performance. On one hand, family involvement may reduce agency costs and foster stewardship, on the other, it may lead to nepotism, underinvestment in innovation, or misalignment with minority shareholders. This complexity is further amplified by regional institutional contexts. In Europe, family firms are embedded in stakeholder-oriented governance systems that emphasize long-term relationships, employee involvement, and collective decision-making. In contrast, the United States features a more market-driven governance model characterized by dispersed ownership, shareholder primacy, and performance-based incentives. These contrasting environments could either amplify or constrain the benefits of family ownership, yet direct cross-regional comparisons remain scarce. This thesis addresses that gap by asking: Are there significant differences in the relationship between performance of family versus non-family firms between the USA and Europe? To answer this, a structured analysis is conducted using a dataset of 4,026 publicly listed firms from Orbis, covering the period 2021–2024. Firm performance is measured using both Return on Assets (ROA) and Tobin’s Q, capturing internal profitability and market valuation, respectively. To identify family firms, a multi-step classification method is employed were firms are first flagged if one or more named individuals or families hold a certain amount of direct or total ownership, additional classification is applied based on either a name match between shareholders and board members or the presence of family-related keywords in shareholder names. Performance differences are analyzed using ordinary least squares (OLS) regressions, incorporating robust standard errors and control variables for firm size, age, industry, growth, and leverage. The findings show that family ownership is positively and significantly associated with accounting-based performance (ROA) in both regions, but the effect is notably stronger in the United States. No significant association is found between family ownership and Tobin’s Q in either region, suggesting that the internal profitability advantages of family firms are not consistently priced into market valuations. These results challenge the widespread assumption that Europe’s stakeholder-oriented institutions naturally enhance family firm performance. While European governance frameworks emphasize long-term stakeholder relationships, employee involvement, and social responsibility, these features may not always translate into enhanced financial outcomes. Instead, U.S. family firms appear more capable of leveraging their unique resources such as tacit knowledge, reputational capital, and long-term commitment into measurable profitability. This may be attributed to stronger competitive pressures, more transparent financial systems, clearer alignment between ownership and management, and a greater tendency to professionalize leadership structures. In the U.S. context, these factors seem to create an environment in which the advantages of family ownership are more effectively leveraged. These findings imply that family firm performance is not solely shaped by ownership structure, but by how effectively that structure interacts with regional institutions. Policymakers and investors should therefore avoid assuming universal benefits or risks of family control, and family firm leaders should focus on converting internal strengths into externally visible performance through strategic governance and communication practices. |
| Item Type: | Essay (Master) |
| Faculty: | BMS: Behavioural, Management and Social Sciences |
| Subject: | 85 business administration, organizational science |
| Programme: | Business Administration MSc (60644) |
| Link to this item: | https://purl.utwente.nl/essays/106738 |
| Export this item as: | BibTeX EndNote HTML Citation Reference Manager |
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