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4.1 Aim of Chapter
The main objective of this chapter is to provide a discussion regarding the empirical results of this study which have been obtained from the data, and then through the implementation of the research methodology, as discussed in the previous chapter. Firstly, descriptive statistics for the sample will be provided, which will be followed by a discussion regarding the regression analysis which was employed in order to determine differences between both ownership types. Panel data analysis will follow in order to ensure robustness. Finally, this chapter will conclude by presenting a summary of the results, with regards to the sub-questions asked in the previous chapter.
4.2 Descriptive Statistics
In Table 8, the descriptive statistics for the variables used within this study are presented, as per individual market . The table is split into four panels: Panels A and B presents the descriptive statistics for the emerging markets, Egypt and Thailand respectively. Panels C and D presents the descriptive statistics for the developed markets, Brazil and Germany respectively. For each variable, the mean and standard deviation results are presented. Evidently, the sample does not result in a huge proportion of family firms per market - the highest percentage of family firms is in Brazil (almost 35%) whereas the lowest is in Egypt (25%). The total number of family firms, across all four markets is 70, or 29%. The lack of family firms being found is the result of placing a requirement that family firms are those in which the founding-family maintains a key-role in the business.
The key finding reported in table 8 is that family firms are not superior performers in every market: results are perfectly split - whereas family firms outperform non-family firms (based on all 3 performance measures - the exception is ROA for Brazil, but the difference is less than 0.04%) in developed markets, the same is not found in the emerging markets. Taking Egypt, non-family firms outperform family firms based on all three performance measures. Although the difference is sometimes minimal - i.e. a difference of 0.30% in ROA, under other measures (i.e. TQ), the difference is almost 33% . Furthermore, ROE results in a difference of 2.13%, thereby suggesting that, in Egypt, family controlled companies make poor resource allocation decisions, which affects the markets perceptions regarding the family firms.
Although the market views family firms in Thailand with more positivity than non-family firms, accounting-based performance measures do not suggest superior performance by family firms. ROA and ROE for non-family firms outstrip that of family firms: a difference of approximately 2.2% and 3.2% respectively. From the descriptive statistics regarding the emerging market alone, it appears as though family firms do not outperform non-family firms.
Moving onto the developed markets, findings differ: TQ and ROE is higher for family firms in both Brazil and Germany. For Brazil, the TQ ratio is approximately 15% higher, whereas ROE is approximately 1.25% higher. This suggests that family firms make better use of shareholders funds, as is suggested by the superior market valuation and ROE. On the other hand, Germany reports a TQ ratio that is approximately 22% higher for the family firm, and a ROE ratio that is approximately 12% higher. Much of this difference in ROE is due to one non-family firm reporting a huge reduction in net income. When this is set to 0, the ROE for family firms still outstrips non-family firms by approximately 7% . The final performance measure, ROA, is higher for family firms in Germany (by exactly 4%) whereas, the ROA is marginally higher for non-family firms in Brazil (6.63% for family firms, and 6.67% for non-family firms).
The brief discussion above, as based on table 8, is in line with the findings of Ibrahim and Samad (2011) - apparent superior performance can be the result of the choice of performance measure - in this sample, only Germany (for family firms) and Egypt (for non-family firms) shows superior (or inferior) performance based on all three measures. Further, due to past research having mainly focussed on the developed markets, my descriptive statistics are in agreement with the work of Villalonga and Amit (2006), Maury (2006), Anderson and Reeb (2003), amongst others prolific family-firm researchers .
Turning my attention to the independent variables, it is evident that the independent variables do not behave in the same way. Whereas Egypt and Germany show higher growth rates for non-family firms, Thailand and Brazil show higher growth rates for family firms. Where Egyptian and German non-family firms show superior growth rates of 19% and 9%, respectively, Thailand and Brazil show increases in growth of 38% and 130%, respectively, for family firms, thereby suggesting that family firms are better at exploiting the opportunities that are available to them.
In the emerging markets, family firms are younger than their non-family counterparts. The reverse is found for the developed market, where it is found that family firms are more mature. This impacts on the overall performance in that family firms in the emerging market are found to underperform non-family firms (at least based on 2 out of three measures), whereas family-firms are older in the developed market, in which they are found to outperform the non-family market.
The board size in Germany is smaller for family firms as compared to non-family firms. In the remaining markets, the board size is found to be larger for family firms. For the majority of markets it is found that, as the size of the board rises, performance declines. However, for Brazil the opposite is found; non-family firms have a smaller board, but inferior performance. Considering board composition, family firms in the emerging market have a lower proportion of independent directors, which could potentially explain the lower performance. However, board composition is also lower (for family firms) in Germany, where family firms perform better. Evidently, this may be suggestive of the notion that too many independent directors are equality destructive, given Germany's dual-board system. On the contrary, family firms in Brazil employ more independent directors, potentially explaining the superior performance.
Inconsistent with original beliefs, I fail to find that family firms employ lower levels of debt across all four markets - the only market which shows lower debt for family firms is Germany. What is worth noting is that family firms in Germany report superior performance across all three performance measures, whereas the rest of the sample does not. Therefore, it can be suggested that markets in which family firms outperform non-family firms do employ lower levels of debt. This was cited as a potential reason for the difference in performance between family and non-family firms by Kachaner et al. (2012).
Finally, firm size, suggests equal findings across all four markets - consistent with Anderson and Reeb (2003), I find that family firms are generally smaller than their non-family counterparts. This leads to suggestions that firm size is irrelevant to performance.
Descriptive statistics for individual Markets
Variable All Firms Family Firms Non-Family Firms
Panel A. Egypt
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