Impact of family succession on financial performance: empirical evidence from Bangladesh
Journal of Family Business Management
ISSN: 2043-6238
Article publication date: 2 February 2021
Issue publication date: 20 April 2022
Abstract
Purpose
Academic research on the transgenerational performance differences among family firms in Bangladesh is still in its infancy. This paper delves into this issue to answer whether the financial performance of family firms run by second-generation family members is different from their predecessors and nonfamily firms.
Design/methodology/approach
The study employs panel data analysis that attempts to conceptualize the performance difference, quantified in terms of profitability and return, between founder- and second-generation-run public companies in Bangladesh. Moreover, cross-sectional regressions extend the research paradigm to investigate and validate whether heir-controlled family firms perform differently than nonfamily firms or firms that are yet to experience ownership succession within a family.
Findings
The study indicates that family firms perform better when founding family members are in control compared to second-generation-run family firms. Moreover, further analysis suggests that heir-controlled family firms do not show a significant difference in performance compared to firms that never had a family succession in its managerial positions. The implications are that there could be nonfinancial family-centric motivations for family business ownership transition.
Practical implications
Family succession of firm ownership is venerated without necessarily a validation of its financial merit. In Bangladesh, this is too often a de facto transfer of leadership within family firms. This study can act as a reference point to understand that family succession of firm ownership in Bangladesh may not necessarily be in the best financial interest of a firm.
Originality/value
The literature on family firms propounds a plethora of vacillating conclusions and opinions. This paper adds this body of empirical literature into an exercise of formal logic. Such an empirical investigation into the financial performance of Bangladeshi family firms, visualized through the lens of leadership transfer to a second-generation family member, has not been extensively studied in contemporary literature.
Keywords
Acknowledgements
The authors express their sincere gratitude and thank Cinderella Dhrupodi Munshi and Najib Alam, undergraduate students at the Department of Business Administration, University of Liberal Arts Bangladesh. The authors appreciate their help with data collection and tabulation during their tenure as research assistants. The authors also thank the Editor in Chief Dr. Claire Seaman and the anonymous reviewers for their insightful feedback and suggestions. The authors gratefully acknowledge the generous financial support provided by the Office of Faculty Research, University of Liberal Arts Bangladesh.Funding: This study was funded by the Office of Faculty Research, University of Liberal Arts Bangladesh (ULAB).
Citation
Sunon, K.H., Islam, M.T. and Kabir, M.A. (2022), "Impact of family succession on financial performance: empirical evidence from Bangladesh", Journal of Family Business Management, Vol. 12 No. 2, pp. 337-354. https://doi.org/10.1108/JFBM-06-2020-0058
Publisher
:Emerald Publishing Limited
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