A study conducted by the Handelsblatt Research Institute (HRI) on behalf of BLI - Banque de Luxembourg Investments has suggested that family owned companies can achieve better total shareholder returns than non-family owned companies over the longer term.
The study used balance sheet and financial market metrics to research how family owned businesses have performed over time. This included looking at 40 listed family owned companies compared to a peer group of listed non-family owned companies; and with a focus on the past 17 years of performance in the auto/transport, consumer products/services, manufacturing and property services/construction sectors.
The study looked to metrics including total shareholder return, working capital ratio, equity ratio, and return on equity. It found that family owned companies tend to have a more solid capital basis and are more focused on future growth. With a much higher overall equity ratio than non-family owned companies, family-owned companies were found to have achieved a similarly high and, moreover, a more stable return on equity.
In conclusion, family owned companies outperformed non-family owned companies as investments considerably between 2002 and 2019, the research suggests.
Jan Kleibrink, head of economic analysis at HRI and co-author of the study, said: "Total shareholder return of family owned companies has outperformed their benchmark index. By maintaining higher equity ratios and avoiding outsized debt ratios, family owned companies have a more solid capital basis, which allows them to better withstand crises. Return on equity is even more appreciable in an environment of shrinking debt capital and higher equity capital cushions, which is rather counterproductive for enhancing returns."
Copies of the research report can be found here: https://www.banquedeluxembourg.com/en/bank/bl/form?formId=370