Family Ownership and Firm Performance: Further Evidence from Sri Lanka and Japan

Pradeep Dharmadasa
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Pradeep Dharmadasa: Faculty of Management and Finance, University of Colombo, Colombo, Sri Lanka

International Journal of Asian Business and Information Management (IJABIM), 2014, vol. 5, issue 4, 34-47

Abstract: Numerous studies have focused on ownership structure and firm performance. In recent years a growing amount of research has recognized the importance of family-controlled firms (FCFs) where ownership concentrates on single individual or family. Despite many important insights, however, significant gaps in the literature remain. Studies have produced divergent findings about the performance of FCFs, leading to calls for further research. Utilizing 151 and 753 firm-years of FCFs drawn from the Colombo Stock Exchange, Sri Lanka, and the Tokyo Stock Exchange, Japan, respectively during 2011-2013, this study examines the relationship between family ownership and firm performance. Regression results show conflicting findings in that family ownership has a positive relationship with firm performance in Japan whereas a negative relationship is found in Sri Lanka. In sum, finding supports that view of the extant studies that family ownership and firm performance have a curvilinear relationship meaning that ownership concentration beyond a certain point likely creates entrenchment and consequently negative effects on performance.

Date: 2014
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