Family-Managed Businesses and the Quality of Management Practices

Asif Islam and Roberta V. Gatti

No 10684, Policy Research Working Paper Series from The World Bank

Abstract: Better-managed firms consistently outperform their peers, yet family-managed firms tend to exhibit weaker management practices This study examines this relationship using data from approximately 9,000 medium and large firms across 41 developing and advanced economies. Entirely family-managed firms show a negative association with management quality; however, the relationship between the share of family managers and management quality is non-linear, suggesting that a mixed family and non-family management structure can improve practices relative to full family management. Several internal and external factors moderate the relationship between entirely family-managed firms and the quality of management practices, with corruption and political connections emerging as particularly influential. Results are robust to alternative estimation strategies, including Propensity Score Matching.

Date: 2024-01-29
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