Abstract
Family businesses are the oldest form of business ownership. Family businesses distinguish themselves from other forms of business ownership in several ways. The ownership structure of a business affects its corporate governance configurations and has financial performance implications. Determining the relationship between corporate governance and business financial performance goes back for many decades and is still a relevant field of study to this day. Despite the ubiquity of family businesses, very few developing country studies exist that investigate the determinants of family business financial performance. The main purpose of this study is to examine the relationship between ownership concentration, corporate governance characteristics and financial performance of family and non-family businesses. Panel regression analysis was used with ownership concentration, board size, board gender diversity, board independence and executive board compensation as independent variables; and Return on Assets (ROA) and Tobin’s Q ratio as the dependent variables. Quantitative data was collected across six family and nine non-family property sector businesses listed on the JSE from 2015 to 2019. The results indicate that family ownership, board size and board gender diversity impact family business ROA. All the independent variables do not impact family business Tobin’s Q ratio. Family businesses should maintain family control of the businesses and pay specific attention to board size and board diversity going forward, to reap financial performance advantages. The results further indicate that board size impacts nonfamily business Tobin’s Q ratio. All the independent variables do not impact non-family business ROA. Non-family businesses should pay specific attention to board size going forward, to reap financial performance advantages. Additionally, the results indicate that when measured for ROA, the financial outperformance of family businesses in relation to non-family businesses is inconclusive. The results further indicate that when measured for Tobin’s Q ratio, non-family businesses outperform family businesses.
M.Com. (Finance)