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Family firms, family generation and performance: evidence from an emerging economy
Mohammad Badrul Muttakin Arifur Khan Nava Subramaniam
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Family firms,
Family firms, family generation family generation
and performance: evidence from and performance
an emerging economy
Mohammad Badrul Muttakin, Arifur Khan and 197
Nava Subramaniam
School of Accounting, Economics and Finance, Deakin University,

Burwood, Australia
Abstract
Purpose The purpose of this paper is to examine the impact of family ownership on firm
performance. In particular the authors investigate whether family firms outperform non-family firms
and whether first generation family firms perform better than second generation family firms in an
emerging economy using Bangladesh as a case.
Design/methodology/approach This study uses a data set of 141 listed Bangladeshi non-financial
companies for the period 2005-2009. The methodology is based on multivariate regression analysis.
Findings The result shows that family firms perform better than their non-family counterparts.
The authors also find that family ownership has a positive impact on firm performance. The analysis
further reveals intergenerational differences where family firms and performance are associated
positively only when founder members act as CEOs or chairmen. However, when descendents serve as
CEOs or chairmen family firms are associated with poorer firm performance.
Originality/value The authors extend the findings of previous studies that investigate the family
ownership and firm performance relationship in developed economy settings, but neglected emerging
economies. The study also informs the literature about the intergenerational impact of family firms on
performance in an emerging market.
Keywords Bangladesh, Firm performance, Family firms
Paper type Research paper
1. Introduction
We investigate whether family firms outperform non-family firms and inter-generational
effect on family firm performance using data from listed non-financial companies in
Bangladesh. During the last decade different matters relating to family business and
ownership have been well researched (e.g. Anderson et al., 2003; Chrisman et al., 2004,
2007, 2009; Schulze et al., 2003a, b; Dyer, 2006; Sharma, 2004). The issue of family
ownership and performance is one of the most prominent areas of such research. The
findings[1] of the studies under this area of research suggest mixed evidence.
Family firms play an important role in the economic activities of Asian countries
(Chang, 2003; Joh, 2003). A significant proportion of public-listed firms in South-East
Asian countries are family-owned, thus, the performance of such family firms has
direct relevance for financial market efficiency. Recent studies suggest that the
proportion of listed firms owned by families are as high as 68 per cent in Indonesia,
and around 57 per cent in Thailand and Malaysia (Claessens et al., 2000; Chau and
Leung, 2006). However, limited research focusing on the link between family ownership Journal of Accounting in Emerging
and performance has been addressed in studies of developing economies (see e.g. Economies
Vol. 4 No. 2, 2014
Filatotchev et al., 2005; Yammeesri and Lodh, 2004; Gursoy and Aydogan, 2002; pp. 197-219
r Emerald Group Publishing Limited
Nam, 2002; Miller et al., 2009; Piesse et al., 2007; Chu, 2011; Kula and Tatoglu, 2006). 2042-1168
All these studies investigated the effect of family ownership on family firm DOI 10.1108/JAEE-02-2012-0010
JAEE performance but ignored the important issues such as generational impact on firm
4,2 performance.
Furthermore although in South Asia family owned businesses dominate the
corporate landscape (Sarkar and Sarkar, 2009) only a few studies explore the issue of
family ownership and performance of countries in this region (Javid and Iqbal, 2008;
Abdullah et al., 2011; Pandey et al., 2011). Bangladesh as a South Asian country is
198 clearly different from other countries in terms of national economic environment in the
region while it shares similar culture, social, political, legal, business ownership and
institutional structure with India and Pakistan (Ali and Ahmed, 2007). A single model
of corporate governance for these countries is unlikely and to what extent it varies
across individual countries is unclear. Therefore, our study aims to add to this research
strand by investigating whether family firms are better performers than non-family
firms and whether first generation family businesses outperform the second
generation counterparts in Bangladesh during the period 2005-2009. The findings of
this study may be useful to make a comparison with family firms of other South and
South-East Asian countries.
Bangladesh is an emerging economy striving for economic growth. The institutional
environment in Bangladesh differs from that in many developed western economies in
several important respects, including a weak market for corporate control and more
concentrated ownership (Farooque et al., 2007). The regulatory environment is also very
poor. Although Bangladesh inherited Common-law from British colonial rule, it is
characterised by weak and relatively unsophisticated legal and regulatory frameworks.
The poor enforcement of relevant regulations often fails to protect minority shareholders
rights. Thus the Bangladesh regulatory environment results in a less effective corporate
governance system.
Bangladeshi capital market is dominated by high level of family ownership
and management or foreign owners (Imam and Malik, 2007). The prevalence of
family-owned businesses plays a significant role in the economy. Farooque et al. (2007)
find that about 78 per cent of CEOs are shareholders of the firms, either as founder
shareholders or as descendants of founding families. The study also finds that five
largest shareholders hold more than 50 per cent of shares in Bangladeshi companies.
In Bangladesh, controlling families hold their shares independently in a particular
company or group of companies. This ownership structure is, however, by no means
similar to the pyramidal structure found in Western Europe and some other South-East
Asian countries (Farooque et al., 2007). The dominance of family members in firm
management leads to a tendency for important decisions to be made in family
meetings which are then regularised in formal board meetings, making such meetings
largely symbolic (Ahmed and Siddiqui, 2011). Therefore, there is risk of expropriation
of minority shareholders wealth by controlling families. It is commonly perceived that
families are there to protect their own interests capitalising the poor market, legal and
institutional set up at the expense of minority investors interests. However, there is no
empirical support in regards to this contention.
Our results, based on recent data from Bangladeshi public-listed firms, indicate
that family firms perform better than non-family firms. We also document a positive
relationship between family ownership and firm performance. Given that family
wealth is closely related to the welfare of the family businesses, family members have
incentives to increase their wealth by improving firm performance. Previous studies
(Morck et al., 1988; Perez-Gonzalez, 2006) suggest that generations of family firms may
have different impacts on firm performance. Accordingly, we further investigate the
intergenerational impact of family firms on performance. We document that first Family firms,
generation family firms perform better than second generation family firms. This is family generation
consistent with the argument that first generation family members are more concerned
about the performance of family firms because it might affect their reputation. and performance
Moreover, family wealth is closely related to the welfare of the family businesses, and
thus first generation family members have incentives to increase their wealth by
improving firm performance. Further, founders tend to pass their wealth to their 199
descendents rather than consuming the assets only for their generations.
We contribute to the literature in a number of ways. First, this study looks at

the effect of family ownership on firm performance in an emerging market which is
characterised by family ownership and management. Second, we also examine the
intergenerational impact of family firms on performance. Overall this study helps to
increase our level of understanding with regards to family firms in an emerging
economy. Particularly, we use a sample of Bangladeshi public listed firms and
the findings of this study may be useful to make a comparison with family firms in
other countries.
The rest of the paper is structured as follows. Section 2 describes institutional
background of Bangladesh, Section 3 reviews related literature and develops two
hypotheses. Section 4 describes research methodology, followed by the presentation of
the hypotheses testing in Section 5, and the results of several robustness tests in
Section 6. Section 7 provides conclusions and limitations of the study.
2. Institutional background of Bangladesh

After its independence in 1971, the Government of Bangladesh adopted a socialist
policy and took all the industries under government control. However, as the public
sector industries started performing poorly, and donor agencies promoting a free
market economy started applying pressure on the government, the public sector was
opened up for private investment. Uddin and Hopper (2003) report that although a few
privatised firms were large, it was the small firms that got privatised as these were
easier to privatise. The study also reports that many of the privatised state owned
industries were purchased by single owners, who preferred to keep the ownership of
the business with their families. A survey conducted by Sobhan and Werner (2003)
find that an overwhelming majority (73 per cent) of the boards of non-bank listed
companies are heavily dominated by sponsor shareholders who generally belong
to a single family- the father as the chairman and the son as the managing director is
the norm (Sobhan and Werner, 2003, p. 34).
The microstructure of corporate governance institutions in Bangladesh comprises
both government and non-government bodies including the Securities and Exchange
Commission (SEC), Ministry of Finance, Central Bank (Bangladesh Bank), Registrar
of Joint Stock Companies (RJSC), Dhaka Stock Exchange (DSE), Chittagong Stock
Exchange (CSE), and the Institute of Chartered Accountant of Bangladesh. Some of the
major legislative and regulatory requirements mandating Bangladeshi companies
include: the Companies Act 1994, SEC Act 1993, Bangladesh Bank Order 1972, Banking
Companies Act 1991, Financial Institutions Act 1993, Bankruptcy Act 1997, Insurance
Act 1938 and Regulation 1958, Income Tax Ordinance 1984, DSE and CSE listing rules,
Bangladesh Accounting Standards, and Bangladesh Standards on Auditing.
Like many other emerging economies[2], some of the institutional features of
Bangladesh include a less developed capital market (World Bank, 2009), a least
weak-form of efficient stock market (Islam and Khaled, 2005), absence of an active
JAEE market for corporate control, a passive managerial labour market, and poor incentive
4,2 contracts for management (Farooque et al., 2007). Siddiqui (2010) in his recent review
of corporate governance within the Bangladesh corporate sector is critical of high
ownership concentration, family dominance, shareholder activism and poor enforcement
and monitoring of regulations. The poor legal and regulatory framework and its
enforcement also hinder the markets potential growth. In the absence of market-based
200 monitoring and control measures, ownership based monitoring and control is expected
to function as a core governance mechanism.
3. Literature review and hypotheses development

The family shareholders are widely perceived as the owners who control the firms
largely belonging to them and their own families. Therefore, they have more incentives
to monitor the management and maximise firm performance. There are several studies
that suggest the benefits of family firms. Demsetz and Lehn (1985) argue that family
members with large equity ownership might have substantial economic incentives
to diminish agency conflict and increase firm performance. James (1999) note that
families have longer investment horizons, resulting in greater investment efficiency.
Stein (1988) argue that firms with a longer investment horizons suffer less from
managerial myopia and will not sacrifice good investment in order to boost current
earnings. The long-term nature of family ownership helps to build family reputation
that might influence their relationship with customers and external suppliers
(Anderson et al., 2003).
Previous research finds that family firms outperform their non-family counterparts
(Anderson and Reeb, 2003; Lee, 2006; Villalonga and Amit, 2006; Chrisman et al., 2007
in USA, Kowalewski et al., 2010 in Poland; Mishra et al., 2001 in Norway, Yammeesri
and Lodh, 2004 in Thailand; Piesse et al., 2007; and Chu, 2011 in Taiwan). Collectively,
the findings of these studies suggest that family owners have motivations to perform
better monitoring which in turn results in better firm performance.
There can be several potential costs associated with family ownership. Some
managerial actions in family controlled firms may benefit themselves at the expense
of firm performance because of their substantial ownership of cash flow rights
(Anderson and Reeb, 2003). The combination of management and control might lead to
sub-optimal investment decisions since the interests of the family members may not
necessarily be in line with those of minority shareholders (Fama and Jensen, 1985).
They may get entrenched and their entrenchment in a firm may provide them
incentives to exchange profits for private rents, instead of maximising firm value
(Faccio et al., 2001). Sometimes their influence in selecting managers and directors
provide greater managerial entrenchment, which leads to poor performance since
external parties can hardly capture control over the firm. Moreover, families often tend
to favour family members in filling executive management positions and hence, restrict
the labour pool to a very small group from which to obtain qualified and capable talent,
which potentially leads to competitive disadvantages for family firms (Anderson
and Reeb, 2003).
Accordingly, previous studies also find that family ownership has a negative impact
on performance and family firms perform worse than their non-family counterparts
(Gursoy and Aydogan, 2002 in Turkey, Cronqvist and Nilsson, 2003 and Oreland, 2007
in Sweden). Collectively, the findings of these studies suggest that entrenched family
owners have lack of motivations to perform monitoring and thus expropriate minority
shareholders (Type 2 agency problem) which in turn results in poor firm performance.
Given that controlling families have strong motivations to undertake a long-term Family firms,
view and see their firms to succeed, family owners would be better able to utilise their family generation
power, networks and connections to advantage their family businesses economic
benefits and improve performance. It can also be argued that in the case of non-family and performance
firms, however, ownership tends to be more diverse and the risk of agency problems
related to the separation of owners and management (Type 1 agency problem) tend
to be higher. Consequently, relative to family firms, the personal connections and 201
motivations to safeguard the firm among non-family firm management would be
low with stronger focus on shorter-term goals and a higher risk of managerial
entrenchment. We therefore propose that:
H1. Family firms perform better than their non-family counterparts.
It is argued that family succession may not guarantee firm success. Empirical
evidence as provided by Morck et al. (1988) and Perez-Gonzalez (2006) suggest that
family succession can have negative impacts on firm performance. In general,
founders as pioneers in the business bring innovation and entrepreneurial skills to
their firms (Morck et al., 1988). Villalonga and Amit (2006) find that family ownership
creates value for all shareholders only when the founder is active in the firm (either
as CEO or as Chairman with a hired CEO). Similarly, Anderson and Reeb (2003)
suggest that founders tend to have greater amount of emotional investment in
the business, resulting in long-term vision and investment horizons for the firm.
As such, founders have many incentives to increase their wealth by improving firm
performance.
By contrast, it is contended that descendants are often appointed on the board just
to continue inheritances, and thus may lack the requisite skills and motivations to
adequately manage the firms (Bennedsen et al., 2007). Another argument is that
descendent managers may lack the same values and aspirations as founder managers,
and thus managerial succession risks poorer firm performance with an increase in
work routine disruptions, unclear command protocols and employee insecurity
(Haveman and Khaire, 2004; Molly et al., 2010). Molly et al. (2010) using a sample of
small to medium sized US firms fail to find that family firm succession affects
firm profitability. However, Perez-Gonzalez (2006) investigates the impact of inherited
CEO positions on the performance of publically traded US firms and find that
firms that appoint family CEOs who did not attend selective undergraduate
institutions (e.g. those institutions which considered applicants who ranked in the top
50 per cent of their graduating class) show poorer performance compared to
succeeding family CEOs with such qualifications. They further assert that an
unrivalled family heir in the management tends to use a firms resources to serve
his/her own needs.
The findings from western economies provide evidence of the importance of
generational effect on family firm performance. However, no prior studies investigate
this issue in the context of a developing economy. This study therefore attempts to
investigate whether founding family firms in Bangladesh outperform second
generation family firms.
On the basis of above discussion we propose the following hypothesis:
H2. First generation family firms perform better than second generation family
firms.
JAEE 4. Research design
4,2 4.1 Sample
This study considers 141 non-financial companies listed with DSE in Bangladesh
from 2005 to 2009, producing a total sample of 705 firm-year observations. The DSE
was formed in 1954 and registered as a limited liability company. Due to missing
information, we then had to exclude 114 firm year observations, yielding a final sample
202 of 591 firm-year observations. The data for our analysis comes from multiple sources
of secondary data. Financial data is collected from the annual reports of the sample
companies listed on the stock exchange. Stock price data is obtained from the
DataStream database. The family ownership and corporate governance data were
hand collected from the corporate governance disclosures, shareholding information
and directors report contained in annual reports.
4.2 Measuring family firms

Following prior studies we identify family firms as being firms in which 20 per cent of
a firms share or voting rights (either direct or indirect) are held by family block
holders; and at least one member of a controlling family holds a managerial position
such as board member, CEO or chairman (Bartholomeusz and Tanewski, 2006;
Setia-Atmaja et al., 2009; Cascino et al., 2010). Family relationships and shareholdings
pattern were collected from prospectus of the listed companies, annual reports
and company web sites. We use a dummy variable and set equal to 1 if the firm is
considered to be a family firm and 0 otherwise.
From Table I, it is observed that family firms are present in 60.74 per cent of the
total sample. The family firms are prevalent in various sectors such as cement (17),
ceramics (13), engineering (52), food (58), information technology (11), jute (nine),
paper and printing (ten), miscellaneous (22), pharmaceuticals (52), service and real
estate (12), tannery (nine) and textile (94). This study controls industry affiliations
for empirical analysis.
4.3 Model specification

The following OLS[3] model is used to test H1 and H2:
Performance a b1 Family firm b2 Board independence b3 Firm size

b4 Firm age b5 Leverage b6 Risk b7 Board ownershipless family
b8 Growth b9 Block b10 Industry dummies b11 Year dummies e
The dependent variable measuring firm performance is return on assets (ROA) and
Tobins Q. ROA is measured as earnings before interest and taxes to book value of total
assets (Jackling and Johl, 2009), and it represents how profitable a company is relative
to its total assets. In general, ROA is directly related to the managements ability to
efficiently utilise corporate assets, which ultimately belong to shareholders. Tobins Q
is defined as the market value of equity plus the book value of total debt divided by
book value of total assets (Setia-Atmaja et al., 2009). Tobins Q is popularly adopted
as a measure of firm performance because it reflects the market expectations of
future earnings.
We control for a number of standard variables that may affect firm performance such
as board independence, firm size, firm age, risk, leverage, board ownership, growth.
Family Non-family % family firms in
Family firms,
Sector (firm-year) (firm-year) Total (firm-year) industry (firm-year) family generation
Cement 17 20 37 45.95 and performance
Ceramics 13 6 19 68.42
Engineering 52 40 92 56.52
Food 58 43 101 57.43
IT 11 17 28 39.29
Jute 9 5 14 64.29
203
Paper and
printing 10 0 10 100.00
Miscellaneous 22 30 52 42.31
Pharmaceuticals 52 29 81 64.20
Service and real
estate 12 14 26 46.15
Tannery 9 16 25 36.00
Textile 94 12 106 88.68
Total 359 232 591
Year wise sample description
Number of firm Observed firm
Year in the sample years
2005 141 114
2006 141 113
2007 141 116
2008 141 126
2009 141 122 Table I.
Total Sample by family and
observations non-family firms
(Firm years) 705 591 in sectors
We define board independence as the proportion of independent directors on the board,

who do not have any material interest into the firm (denoted as board independence)
(Anderson and Reeb, 2003). Firm size larger firms may have fewer growth
opportunities (Morck et al., 1988) and more coordination problem which may
negatively influence its performance. On the other hand, larger firms tend to make
hefty investments and often receive preferential treatment which may enhance
firm performance (Boeker, 1997). Firm size is measured as a natural logarithm of
total assets (Yermack, 1996). Firm age Boone et al. (2007) argue that complexity
increases with the firm age. Therefore, an uncertain relationship of firm age on board
characteristics as well as firm performance is expected. Age of the firm is calculated by
taking the natural log of the number of year since the firms inception (Anderson and
Reeb, 2003). Risk Demsetz and Lehn (1985) argue that the greater the level of risk in
the business environment, the greater the impact of board structure on firm value.
Therefore, we expect a negative sign for the coefficient of risk. Consistent with
previous literature this study measures firm risk as the standard deviation of a firms
daily stock return over the prior 12-month period (Boone et al., 2007). Leverage the
leverage of a firm could lead to external corporate control (Chen and Jaggi, 2000). Debt
holder would actively monitor the capital structure of a firm to protect their own
interests (Hutchinson and Gul, 2004). Therefore leverage influences firm performance
through monitoring activities by debt holders. On the other hand, a negative relation
could be expected between leverage and performance according to the pecking order
theory whereby, a firm prefers to fund operations through retained earnings rather
JAEE than debt and equity (Myers, 1984). Leverage is measured by taking the ratio of book
4,2 value of total debt and book value of total assets (Anderson and Reeb, 2003). Board
ownership consistent with prior studies we use the board ownership variable as the
percentage of directors total shareholdings (excluding family directors ownership) on
the board (Anderson and Reeb, 2003). Growth faster growth is more likely to be
positively correlated with financial performance. On the other hand, growth may lead
204 to a range of internal challenges and difficulties and therefore may have detrimental
effects on performance (Kazanjian, 1988). The growth of a firm is measured as the
difference between the operating revenue of prior year and current year divided by
prior year operating revenue. Block a dummy variable equals 1 if there is the presence
of large shareholders other than family shareholders who own at least 10 per cent share
ownership and otherwise 0. We use year and industry dummies in our regression[4]
model. We apply Whites (1980) heteroskedasticity consistent standard errors for all
regression analyses performed in this study. Furthermore, we apply the firm clustering
technique for all the analyses because multiple observations from the same firm (but
from different years) are included in our data set.
5. Results
5.1 Descriptive statistics
Panel A of Table II shows that the average ROA and Tobins Q of our sample firms
are 0.080 and 1.589, respectively. With regards to ownership structure, board of
directors (excluding family directors) and family members hold an average of 9.00 and
28 per cent of shares, respectively. Further, the average growth of firms is 24 per cent
and average blockholder is about 65 per cent. The average firm age is nearly 23 years
and the average firm size is 8.70 (natural logarithm of total assets).
Panel B of Table II presents the difference of mean tests for key variables between
family and non-family firms. Family firms represent 60.74 per cent of the sample.
Family firms have a significantly lower proportion of independent directors (6.7 vs 7.77
per cent). On average, family firms exhibit better performance than non-family firms
(ROA: 0.088; Tobins Q: 1.682 vs ROA: 0.068; Tobins Q: 1.445). The average share
ownership of board of directors (excluding family members) also significantly differs
between family (3.3 per cent) and non-family firms (17.9 per cent). Non-family firms
have a significantly higher proportion of foreign and government ownership than
family firms. There are significant differences in growth and blockholder ownership
between family and non-family firms. The univariate analysis also shows that several
variables such as risk, firm age and firm size differ significantly between family and
non-family firms.
Table III provides a simple correlation matrix for the key variables in the analysis.
Family firm has a positive correlation with ROA and Tobins Q. In addition, consistent
with previous studies, this study finds that family firm is negatively correlated with
firm size; firm age and risk (see Anderson and Reeb, 2003). The proportion of
independent directors is positive and significantly correlated with ROA.
5.2 Hypothesis test results

The main focus of our analysis is to examine whether family firms outperform their
non-family counterparts. The results are reported in Panel A of Table IV. First we run
an OLS regression taking ROA as a dependent variable. In model 1 we find that
coefficient of family firm variable is positive and significant (b 0.017, po0.05).
In other words we document that family firms perform better than their non-family
Panel A: descriptive statistics for the full sample
Family firms,
Variable Mean Median SD Max. Min. n family generation
Firm size 8.712 8.697 0.668 10.219 7.030 591 and performance
ROA 0.080 0.077 0.087 0.315 1.376 591
Tobins Q 1.589 1.194 1.237 6.481 0.387 591
Leverage 0.740 0.622 0.644 0.925 0.067 591
Firm age (in years) 22.989 23.000 10.940 33.000 4.000 591
Board ownership 0.090 0.010 0.146 0.232 0.000 591
205
Growth 0.235 0.098 0.397 2.056 0.991 591
Block 0.649 1.000 0.478 1.000 0.000 591

Risk 0.027 0.027 0.013 0.061 0.001 591
Family ownership 0.281 0.317 0.224 0.835 0.200 591
Board independence 0.071 0.000 0.083 0.500 0.000 591
Panel B: difference of means tests
Variable Family Non-family p-value
Board ownership 0.033 0.179 0.000
Foreign ownership 0.017 0.147 0.000
Government ownership 0.000 0.138 0.000
Institutional ownership 0.157 0.149 0.453
Risk 0.026 0.030 0.001
Tobins Q 1.682 1.445 0.023
ROA 0.088 0.068 0.006
Leverage 0.731 0.754 0.683
Growth 0.762 0.358 0.000
Block 0.426 0.693 0.000
Firm age 1.287 1.356 0.000
Firm size 8.666 8.783 0.037
Board independence 0.067 0.077 0.146
n 359 232
Notes: Panels A and B provide summary statistics for the data of our analysis. The data is consisting
of 591 firms year observations from 2005 to 2009 listed at Dhaka Stock Exchange. Family firms are
those where the family members holds at least 20 per cent equity ownership and at least one member
of controlling family hold a managerial position otherwise firms are considered as non-family firms.
Firm size is the natural log of book value of assets. Panel A provides summary statistics for full
sample. ROA is the ratio of profit after tax and book value of total assets. Tobins Q is the market value
of equity plus the book value of total debt divided by book value of total assets. Leverage is calculated
as the ratio of book value of total debt to book value of total assets. Firm age is the log of number of years
since firm inception. Board ownership is the percentage of directors total shareholdings (excluding
family directors ownership) on the board. Foreign ownership is the percentage of total foreign
shareholdings. Government ownership is the percentage of total government shareholdings. Institutional
ownership is the percentage of total institutional shareholdings. Growth of a firm is the growth rate in
operating revenue is calculated as the difference between the operating revenue of prior year and current
year divided by prior year operating revenue. Block is a dummy variable equals 1 if there is presence of
large shareholders other than family shareholders who own at least 10 per cent share ownership and
otherwise 0. Risk is the standard deviation of the firms daily stock return over the prior 12-month period.
Board independence calculated as the number of independent directors scaled by the size of the board. Table II.
Panel B provides difference of means tests between family and non-family firms Summary statistics
counterparts. This supports H1. This is consistent with the findings of Piesse
et al. (2007), Filatotchev et al. (2005) and Anderson and Reeb (2003) and suggests that
family firms in Bangladesh have motivation to perform more effective monitoring
functions which in turn results in better firm performance. With respect to the control
variables, we find that board independence, firm size and growth have significantly
4,2
206
JAEE
Table III.
Correlation matrix
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
(1) ROA 1.000

(2) Tobins Q 0.009 1.000
(3) Family firm 0.113*** 0.094** 1.000
(4) Board independence 0.177*** 0.010 0.060 1.000
(5) Risk 0.180*** 0.068** 0.133** 0.118*** 1.000
(6) Firm age 0.007 0.044 0.149*** 0.047* 0.096* 1.000
(7) Firm size 0.171*** 0.095** 0.086* 0.085*** 0.029 0.007 1.000
(8) Growth 0.033 0.008 0.037 0.008 0.065* 0.027 0.036 1.000
(9) Leverage 0.382** 0.268* 0.017 0.152** 0.006 0.290** 0.216 0.021 1.000
(10) Board ownership 0.145* 0.133 0.487* 0.072* 0.076** 0.132* 0.163 0.023 0.011 1.000
(11) Block 0.077** 0.049* 0.074* 0.049 0.126*** 0.008 0.003 0.033 0.029 0.159** 1.000
Notes: Table provides the correlation data for variables used in our analysis. The data is consisting of 591 firms year observations from 2005 to 2009 listed at
Dhaka Stock Exchange. Family firms are those where the family members holds at least 20 per cent equity ownership and at least one member of controlling
family hold a managerial position otherwise firms are considered as non-family firms. ROA is the ratio of profit after tax and book value of total assets. Tobins
Q is the market value of equity plus the book value of total debt divided by book value of total assets. Board independence calculated as the number of
independent directors scaled by the size of the board. Board ownership is the percentage of directors total shareholdings (excluding family directors
ownership) on the board. Firm age is the natural log of number of years since firm inception. Leverage is calculated as the ratio of book value of total debt to
book value of total assets. Risk is the standard deviation of the firms daily stock return over the prior 12-month period. Firm size is the natural log of book
value of assets. Growth of a firm is the growth rate in operating revenue is calculated as the difference between the operating revenue of prior year and current
year divided by prior year operating revenue. Block is a dummy variable equals 1 if there is presence of large shareholders other than family shareholders who
own at least 10 per cent share ownership and otherwise 0. *** po0.01; ** po0.05; * po0.1
Model 1 Model 2 Model 3
Family firms,
Coefficient Prob. Coefficient Prob. Coefficient Prob. family generation
and performance
Panel A (ROA)
Intercept 0.004 0.939 0.015 0.796 0.011 0.840
Family firms 0.017 0.039
Family ownership 0.022 0.042 207
First generation 0.019 0.032
Second generation 0.008 0.436

Firm size 0.016 0.003 0.015 0.006 0.014 0.007
Growth 0.002 0.026 0.002 0.023 0.003 0.029
Risk 1.238 0.000 1.255 0.000 1.253 0.000
Leverage 0.044 0.000 0.044 0.000 0.043 0.000
Firm age 0.001 0.575 0.001 0.773 0.001 0.549
Board independence 0.153 0.001 0.147 0.001 0.150 0.001
Board ownership 0.044 0.197 0.058 0.075 0.046 0.170
Block 0.011 0.094 0.012 0.077 0.012 0.082
Year dummies Yes Yes Yes
Industry dummies Yes Yes Yes
Adjusted R2 0.286 0.282 0.284
F statistic 12.775 12.562 12.171
Panel B (Tobins Q)
Intercept 3.051 0.000 3.441 0.000 3.361 0.000
Family ownership 0.225 0.034
Firm size 0.072 0.249 0.095 0.132 0.107 0.197
Growth 0.001 0.555 0.001 0.517 0.001 0.670
Risk 15.785 0.004 16.353 0.003 15.982 0.003
Leverage 0.616 0.000 0.611 0.000 0.629 0.000
Firm age 0.009 0.179 0.011 0.132 0.008 0.112
Board ownership 0.955 0.004 1.209 0.000 0.913 0.004
Block 0.045 0.650 0.065 0.502 0.064 0.513
Adjusted R2 0.151 0.152 0.154
F statistic 6.892 6.291 6.132
Notes: The table reports the regression results relating to family firms, family generation and
performance. ROA is the ratio of profit after tax and book value of total assets. Tobins Q is the market
value of equity plus the book value of total debt divided by book value of total assets. Family firms are
those where the family members holds at least 20 per cent equity ownership and at least one member of
controlling family hold a managerial position otherwise firms are considered as non-family firms. Firm
size is the natural log of book value of assets. Growth of a firm is the growth rate in operating revenue is
calculated as the difference between the operating revenue of prior year and current year divided by
prior year operating revenue. Risk is the standard deviation of the firms daily stock return over the prior
12-month period. Leverage is calculated as the ratio of book value of total debt to book value of total
assets. Board independence calculated as the number of independent directors scaled by the size of the
board. Board ownership is the percentage of directors total shareholdings (excluding family directors
ownership) on the board. Firm age is the natural log of number of years since firm inception. Block is a Table IV.
dummy variable equals 1 if there is presence of large shareholders other than family shareholders who Regression results: family
own at least 10 per cent share ownership and otherwise 0. Number of observation is 591. The reported firms and performance
results are heteroskedasticity and autocorrelation consistent (ROA and Tobins Q)
JAEE positive impacts on performance. A positive significant coefficient of board
4,2 independence implies better monitoring by the outside directors documented in the
previous study (Jackling and Johl, 2009). This study also notes negative and significant
impacts of risk, leverage and block (less family) dummy variables on firm
performance. This is consistent with the findings of Anderson and Reeb (2003).
A negative significant coefficient of block dummy variable implies that large share
208 holder (other than family) tends to expropriate minority shareholders which worsens
firm performance.
In model 2 we explore the relationship between family ownership and firm

performance. We find a positive significant coefficient (b 0.022, po0.05) of family
ownership variable. In other words, it implies that higher family ownership results
in better firm performance. Our result is consistent with the findings of Piesse
et al. (2007) and Anderson and Reeb (2003). The results in regards to the coefficients
of control variables are consistent with the results of control variables reported
in model 1.
In model 3 we investigate the intergenerational impact of family firms on
performance. For this purpose we identify the generation of our family firms first
generation family firm when a founder occupies the position of CEO or chairman of the
board and second generation family firm when a descendent occupies the position of
CEO or chairman of the board. Thereafter we introduce two dummy variables in our
original model. The dummy variables are first (second) generation dummy variable
equals 1 if an observation is a first (second) generation family firm observation and 0
otherwise. We find a positive significant coefficient (b 0.019, po0.05) of first
generation dummy variable. This supports H2. It implies that first generation family
firms improve firm performance. This is also consistent with the findings of Morck et
al. (1988) and Villalonga and Amit (2006) who argue that founders bring more skills
and knowledge to the business which helps to improve performance. We also
document a negative insignificant coefficient of second generation family firms, which
suggests that second generation family firms deteriorate firm performance. These
results are also aligned with the argument by Perez-Gonzalez, (2006) who contends that
in family firms most of the time management and control is transferred to the
descendents to continue family inheritances regardless of skill, expertise and education
of family members. With respect to the control variables, we find that board
independence, firm size and growth have significantly positive impacts on
performance. However, risk, leverage and block (less family) dummy variables have
negative significant impacts on firm performance.
When we consider Tobins Q as a performance measure in panel B of Table IV we
find that in model 1 family firms outperform their non-family counterparts. In model 2
we find a positive significant relationship between family ownership and performance.
Once again in model 3, we find that first generation family firms perform better than
second generation family firms. Overall, these results are similar to our findings
in panel A.
6. Further analysis
6.1 Alternative definition of family firms
We use alternative definitions of family firms as a part of robustness of our results. The
results are presented in Table V. In panel A performance is measured by ROA. First, in
model 1 we define a firm as a family firm where family members hold at least 50 per cent
of a firms share (voting rights) (Ang et al., 2000; Van den Berghe and Carchon, 2002).
Family firms,
and performance
Panel A (ROA)
Intercept 0.028 0.605 0.040 0.463 0.042 0.457
Family involvement 0.001 0.250 209
Lone founder 0.002 0.275
Firm size 0.014 0.010 0.013 0.015 0.013 0.015

Growth 0.001 0.007 0.001 0.037 0.001 0.032
Risk 1.228 0.000 1.296 0.000 1.294 0.000
Leverage 0.044 0.000 0.044 0.000 0.044 0.000
Firm age 0.002 0.777 0.006 0.973 0.003 0.970
Board ownership 0.060 0.038 0.074 0.010 0.075 0.011
Block 0.014 0.047 0.013 0.057 0.014 0.054
Adjusted R2 0.285 0.280 0.282
F statistic 12.737 12.477 11.962
Panel B (Tobins Q)
Intercept 3.125 0.000 3.187 0.000 3.137 0.000
Family involvement 0.071 0.479
Lone founder 0.084 0.562
Firm size 0.078 0.200 0.086 0.173 0.076 0.209
Growth 0.001 0.591 0.001 0.569 0.001 0.542
Risk 15.698 0.005 15.892 0.003 15.998 0.003
Leverage 0.615 0.000 0.608 0.000 0.614 0.000
Firm age 0.009 0.071 0.010 0.074 0.010 0.074
Board ownership 0.986 0.000 1.058 0.000 1.009 0.000
Block 0.054 0.564 0.059 0.529 0.048 0.618
Adjusted R2 0.151 0.157 0.151
F statistic 6.261 6.392 6.127
controlling family hold a managerial position otherwise firms are considered as non-family firms. Family
involvement is binary variable equal to one if the founding family involved in the management and 0
otherwise. Lone founder is binary variables that equals one if an individual is one of the companys
founders with no other family members involved and 0 otherwise. Firm size is the natural log of book value
of assets. Growth of a firm is the growth rate in operating revenue is calculated as the difference between
the operating revenue of prior year and current year divided by prior year operating revenue. Risk is the
standard deviation of the firms daily stock return over the prior 12-month period. Leverage is calculated as
the ratio of book value of total debt to book value of total assets. Board independence calculated as the
number of independent directors scaled by the size of the board. Board ownership is the percentage of Table V.
directors total shareholdings (excluding family directors ownership) on the board. Firm age is the natural Regression results:
log of number of years since firm inception. Block is a dummy variable equals 1 if there is presence of large alternative definitions
shareholders other than family shareholders who own at least 10 per cent share ownership and otherwise 0. of family firms and
Number of observation is 591. The reported results are heteroskedasticity and autocorrelation consistent performance
JAEE Furthermore, we require that at least one member of the controlling family holds a
4,2 managerial position (i.e. board member, CEO or chairman). We use a dummy variable to
identify the family firms and set equal to 1 if the firm is considered to be family firm and 0
otherwise. When we use this alternative definition, the number of family firms comes
down to 171. Thereafter we run our model. We once again find that family firms perform
better than their non-family counterparts.
210 In model 2 we define a family firm based on family involvement in the managerial
position (Chua et al., 1999 and Chrisman et al., 2005) and rerun our model. We use
a dummy variable to identify the family firms and set equal to 1 if the firm is
considered to be family firm and 0 otherwise. We document a positive insignificant
coefficient of family firm. In other words we fail to document that family firms
outperform non-family firms. One possible reason of such an insignificant finding is
that in the context of Bangladesh family involvement alone is not enough to influence
performance.
In the next model (model 3) we examine whether family firms run by the lone
founder shows better performance (Miller et al., 2007). We use a dummy variable to
identify the family firms run by the lone founder and set equal to 1 and 0 otherwise.
We document a positive insignificant coefficient of lone founder variable. In other
words the lone founder does not have any significance in our data set. Our result is in
contrast to the findings of Miller et al. (2007).
When we consider Tobins Q as a performance measure in panel B of Table V we
find that in model 1 family firms outperform their non-family counterparts using first
alternative definition of family firms. In model 2 we fail to find a significant coefficient
using the second alternative definition of family firms. In model 3 we do not document
any significant impact of lone founder on firm performance. Overall these results are
similar to our findings in panel A.
6.2 Alternative measure of performance

One can easily argue that earnings can be influenced by earnings management
and therefore, ROA as a measure of performance could be biased. Therefore motivated
by the findings of Khan et al. (2014) we also use discretionary accruals adjusted
performance measure and rerun our model. Our discretionary accruals adjusted measure
of performance (AROA) is calculated by taking the difference between ROA and the level
of discretionary accruals. We use cross-sectional version of the modified-Jones model
(Dechow et al., 1995) to estimate discretionary accruals. Under this model, the level of
discretionary accruals for a particular firm is calculated as the difference between
the firms total accruals and its non-discretionary accruals (NDAC), as estimated with the
following equation:
1 DREVt DARt PPEt
NDACt a0 a1 a2
TAt1 TAt1 TAt1
where NDACt is the non-discretionary accruals in year t; TAt1 the total assets in year
t1; DREVt the change in revenue of firm i in year t; DARt the change of accounts
receivable of firm i in year t; PPEt the property plant and equipment of firm i in year t.
The results are reported in Table VI. In model 1 we find that family firms perform
better than non-family firms. In model 2 we document that family ownership has a
positive significant impact on performance. In model 3 our results marginally support
that first generation firms perform better than second generation firms. Overall,
these findings are consistent with our main findings.
Family firms,
and performance
AROA
Intercept 0.075 0.762 0.020 0.937 0.018 0.943
Family ownership 0.034 0.053 211

Firm size 0.015 0.037 0.010 0.097 0.004 0.070
Growth 0.001 0.000 0.001 0.000 0.001 0.004
Risk 1.535 0.161 1.405 0.201 1.478 0.175
Leverage 0.031 0.080 0.030 0.097 0.035 0.074
Firm age 0.001 0.708 0.000 0.905 0.001 0.602
Board ownership 0.116 0.248 0.178 0.062 0.100 0.304
Block 0.033 0.327 0.038 0.239 0.039 0.239
Adjusted R2 0.078 0.069 0.061
F statistic 4.787 4.127 3.994
performance. Discretional accruals adjusted measure of performance (AROA) is calculated by taking
the difference between ROA and the level of discretionary accruals. Family firms are those where
the family members holds at least 20 per cent equity ownership and at least one member of controlling
family hold a managerial position otherwise firms are considered as non-family firms. Firm size is
the natural log of book value of assets. Growth of a firm is the growth rate in operating revenue
is calculated as the difference between the operating revenue of prior year and current
year divided by prior year operating revenue. Risk is the standard deviation of the firms daily
stock return over the prior 12-month period. Leverage is calculated as the ratio of book value of total
debt to book value of total assets. Board independence calculated as the number of independent
directors scaled by the size of the board. Board ownership is the percentage of directors total
shareholdings (excluding family directors ownership) on the board. Firm age is the natural log of
number of years since firm inception. Block is a dummy variable equals 1 if there is presence of Table VI.
large shareholders other than family shareholders who own at least 10 per cent share ownership Regression results: family
and otherwise 0. Number of observation is 591. The reported results are heteroskedasticity and firms and alternative
autocorrelation consistent measure of performance
6.3 Lag independent variables

It may be argued that contemporaneous relationships are not appropriate to examine
a causal relationship we use in our study given the time family owners may need to
improve performance. Accordingly, we lag all the independent variables by one year
to allow for the effect of any change to show up in firm behaviour and performance.
Then we rerun our models. The results are reported in Table VII. Overall, we do not
find any qualitative differences to the results reported earlier.
6.4 Other
A series of tests were conducted to test the robustness of our results. While the results
are not tabulated to conserve space, they are available from the authors upon request.
First, the sample used in this study includes five years of observations. If the residuals
in our regressions are correlated, the coefficients on the test and control variables are
biased. To mitigate this concern, we adopt Fama-MacBeth regressions and alternative
JAEE Model 1 Model 2 Model 2
4,2 Coefficient Prob. Coefficient Prob. Coefficient Prob.
Panel A (ROA)
Intercept 0.017 0.762 0.035 0.527 0.037 0.504
Family firms(t1) 0.027 0.009
212 Family ownership(t1) 0.043 0.040
First generation(t1) 0.030 0.004
Second generation(t1) 0.015 0.179

Firm size(t1) 0.007 0.209 0.006 0.284 0.005 0.386
Growth(t1) 0.000 0.299 0.000 0.280 0.000 0.483
Risk(t1) 0.872 0.008 0.880 0.008 0.890 0.007
Leverage(t1) 0.027 0.003 0.027 0.003 0.026 0.005
Firm age(t1) 0.002 0.490 0.001 0.693 0.001 0.439
Board independence(t1) 0.146 0.003 0.140 0.004 0.142 0.004
Board ownership(t1) 0.019 0.588 0.003 0.921 0.017 0.610
Block(t1) 0.004 0.640 0.006 0.437 0.006 0.492
Adjusted R2 0.150 0.145 0.148
F statistic 6.211 6.001 5.978
Panel B (Tobins Q)
Intercept 1.542 0.069 1.732 0.038 1.564 0.073
Family firms(t1) 0.160 0.069
Family ownership(t1) 0.188 0.030
First generation(t1) 0.139 0.085
Second generation(t1) 0.151 0.426
Firm size(t1) 0.015 0.843 0.026 0.740 0.015 0.845
Growth(t1) 0.001 0.034 0.001 0.025 0.001 0.025
Risk(t1) 8.193 0.141 8.366 0.132 8.256 0.139
Leverage(t1) 0.437 0.003 0.436 0.003 0.437 0.003
Firm age(t1) 0.004 0.587 0.003 0.690 0.003 0.603
Board independence(t1) 0.084 0.891 0.142 0.818 0.090 0.884
Board ownership(t1) 0.448 0.294 0.590 0.133 0.495 0.214
Block(t1) 0.137 0.186 0.154 0.134 0.142 0.168
Adjusted R2 0.095 0.094 0.090
F statistic 5.097 5.046 4.982
Notes: The following table reports the regression results relating to family firms, family generation and
controlling family hold a managerial position otherwise firms are considered as non-family firms. Firm
size is the natural log of book value of assets. Growth of a firm is the growth rate in operating revenue is
calculated as the difference between the operating revenue of prior year and current year divided by
prior year operating revenue. Risk is the standard deviation of the firms daily stock return over the prior
12-month period. Leverage is calculated as the ratio of book value of total debt to book value of total
assets. Board independence calculated as the number of independent directors scaled by the size of the
Table VII. board. Board ownership is the percentage of directors total shareholdings (excluding family directors
Regression results: ownership) on the board. Firm age is the natural log of number of years since firm inception. Block is a
family firms and dummy variable equals 1 if there is presence of large shareholders other than family shareholders who
performance-lagged own at least 10 per cent share ownership and otherwise 0. Number of observation is 591. The reported
independent variables results are heteroskedasticity and autocorrelation consistent
methods of computing significance levels (Barth, 1994). In Fama-MacBeth regressions, Family firms,
the mean estimate is the average of the coefficients in annual regressions, and the family generation
t-value is the t-statistic based on five estimated coefficients. Thereafter we estimate
the p-values accordingly. In our first model we document that family firms perform and performance
better than non-family firms. We also document that family ownership has a positive
significant impact on firm performance in the second model. In our last model we
document that first generation family firms perform better than second generation 213
family firms. Second, we test for a non-linear relationship between family ownership
and firm performance using both ROA and Tobins Q as measures of performance.
We use a quadratic specification of family ownership and rerun our model. For both
measures we find that family ownership has positive significant coefficients. However,
family ownership squared has negative and insignificant coefficients. Our results
suggest that quadratic specification of family ownership is not suitable for our data
set. Third, we use an alternative measure of firm performance. In particular we use
EBITDA (earnings before interest, taxes and depreciation scaled by the book value of
total assets) instead of ROA and rerun our regressions. We once again document that
family firms outperforms non-family firms, family ownership has a positive significant
impact on firm performance and first generation family firms are better performers
than their second generation counterparts. Fourth, we also address the issue of
potential missing observation bias by using a subset of 112 firms that are available for
the entire sample period. This study once again finds that family firms perform
better than non-family firms. Furthermore for a subsample of 70 family firms for
which data is available for the whole study period we document that first generation
family firms outperform their second generation counterparts. Finally, we introduce
a loss dummy variable equals 1 when a firm incurs a loss in a particular year and 0
otherwise in our model when performance is measured by Tobins Q. However, our
results with respect to family firm, family ownership and first generation variables
remain unchanged.
7. Conclusions
We argue that ownership in Bangladesh is largely concentrated in the hands of a
few people and that top shareholders belong mostly to controlling families. Given the
potential costs and benefits of family control, the issue of family dominance and
its impact on performance is an empirical matter. Accordingly, we examine whether
family ownership has a positive impact on firm performance and whether family firms
perform better than non-family firms in an emerging economy setting taking
Bangladesh as a case. We also investigate whether family firm generations have a
different impact on performance. This paper contains several interesting results.
First, using both profitability-based and market-based measures of firm performance
(ROA and Tobins Q) this study finds that Bangladeshi family firms perform better
than non-family firms. We also find that family ownership has a positive significant
impact on firm performance. Given that family wealth is closely related to the welfare
of the family businesses, family members have incentives to ensure more effective
monitoring and increase their wealth by improving firm performance. Further, we also
reveal that the better performance in family firms stems from those firms when
founder members serve as CEOs or chairmen (first generation family firms). One
interpretation is that founders tend to pass the assets of their businesses on to their
descendents rather than consuming the wealth only for their generations. Therefore,
they have the motivation to improve performance.
JAEE The overall findings of our study suggests that the socio-political characteristics of
4,2 Bangladesh such as weak capital market, poor legal environment, and inadequate level
of knowledge possessed by the minority shareholders, offer incentives for families to
continue their historical dominance. Given that family ownership has positive impact
on firm performance it may be instrumental for allowing family dominance to prevail
in the context of a developing country like Bangladesh.
214 Our study extends the findings of previous research that investigate the family
ownership and firm performance relationship in developing economy settings, but
neglected the issue of family generational impact. While our results are probably
dependent on Bangladeshs institutional environment, learning the extent to which the
results do generalise will help us better understand how institutional features matter
for family ownership and firm performance relationship. Thus, further studies in
different jurisdictions on the issues we raise in this study are warranted.
One of major limitation of this study is that family firms are very difficult to identify
and define. Previous study adopted multiple research approaches to identify and
define family firms which may also affect the validity of studies of family business
(Mroczkowski and Tanewski, 2007). For example, Villalonga and Amit (2006)
document that the definition of family firms affects the findings of their study.
Furthermore, we have not controlled for the level of expertise of family members who
work as board members in general. Several prior studies suggest that educational
background of the board of directors is an important determinant of board expertise
which may impact on performance (Smith et al., 2006). However, we could not test the
impact of educational background of family members due to lack of availability of
such data. Finally, our sample includes the companies listed on the DSE. Due to
unavailability of annual reports we could not consider the companies listed with the
other stock exchange of the country, i.e. the CSE . Therefore we acknowledge that the
findings of this study are subject to the bias of sample selection.
Notes
1. For example Mishra et al. (2001), Anderson and Reeb (2003), Yammeesri and Lodh (2004),
Lee (2006), Maury (2006), Villalonga and Amit (2006), Barontini and Caprio (2006), Martinez
et al. (2007), Chrisman et al. (2007), Adams et al. (2009) and Kowalewski et al. (2010) document
a positive impact on performance. Cronqvist and Nilsson (2003) and Oreland (2007)
document a negative impact on performance. Filatotchev et al. (2005), Castillo and Wakefield
(2006) and Sciascia and Mazzola (2008) do not find any significant effect between family
ownership and firm performance.
2. In terms of GDP, Bangladesh is the 44th largest economy in the world (IMF, 2010).
3. Prior research suggests that the level of family ownership can be endogenous (Villalonga
and Amit, 2006). This is consistent, for example, that family owners may change their level
of ownership based on the performance of the firms. Accordingly, we perform the Hausman
test proposed by Davidson and Mackinnon (1993), to test whether family ownership is
endogenously determined. This is done by regressing family ownership on the explanatory
and control variables used to explain our dependent variable as well as instrumental
variables (natural log market value of equity and first lag of family ownership) that are
correlated with family ownership in our first OLS regression. Then using the residual from
this first regression, it is used as an additional regressor for the performance regression.
The results of the second regression suggest that residual obtained in the first regression
is not significantly different from zero. This suggests that family ownership is not
endogenously determined in our setting. Hence an OLS regression is an appropriate model
for our study.
4. There are a number of tests available to evaluate the specification of our model (see Greene, Family firms,
2003, pp. 283-333). Accordingly, we perform a test to evaluate the adequacy of our model
specification. Our simple pooled model will outperform the fixed effect model if the null family generation
hypothesis of homogeneity of individual effects, which can be tested with an F-test, is and performance
rejected.
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Corresponding author
Dr Mohammad Badrul Muttakin can be contacted at: m.muttakin@deakin.edu.au
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School of Accounting, Economics and Finance, Deakin University,

We contribute to the literature in a number of ways. First, this study looks at

2. Institutional background of Bangladesh

3. Literature review and hypotheses development

H1. Family firms perform better than their non-family counterparts.

4.2 Measuring family firms

4.3 Model specification

Performance a b1 Family firm b2 Board independence b3 Firm size

We define board independence as the proportion of independent directors on the board,

5.2 Hypothesis test results

Block 0.649 1.000 0.478 1.000 0.000 591

(1) ROA 1.000

Second generation 0.008 0.436

In model 2 we explore the relationship between family ownership and firm

Firm size 0.014 0.010 0.013 0.015 0.013 0.015

6.2 Alternative measure of performance

Second generation 0.035 0.472

6.3 Lag independent variables

Second generation(t1) 0.015 0.179

ownership on firm performance: empirical evidence from Pakistan, International Review

Practice, Vol. 28 No. 4, pp. 335-354.

Ownership and Control, Vol. 8 No. 3, pp. 108-123.

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