Family-owned businesses. Tendency to perform the market?

Family businesses are the backbone of the social and economic fabric of most countries in the world. They contribute between 50 percent and 70 percent to the GDP of individual nations, employing the majority of the workforce and operate globally in all sectors with different sizes: large, medium and small capitalization.

Numerous studies have shown that publicly traded family businesses have tended historically to outperform the market.

A large academic literature has measured the greatest performance achieved in past crises. According to a comparative study by Pictet (a famous Swiss investment bank) on the markets of the U.S., Uk, Germany and Italy, this category of family businesses returned up to 18 percent more in terms of return on assets. Pictet itself falls within this exclusive circle, being a family company founded more than 200 years ago.

Conservative and longer-term approach.

In general, family businesses “have a conservative, longer-term approach” and “generate higher revenue growth in all geographies and higher levels of profitability,” the report says. This leads them to be less dependent on external debt financing, so stock returns are not affected as much by quarterly performance.

This is also the reason why family companies in Italy, Germany, India, and China performed best over 3, 5, and 10 years. In addition, the study shows that many of the companies surveyed have been in business for a long time now and have always maintained a family-run business, especially as far as the market in the Old Continent is concerned. In fact, it goes on to say, “30 percent of European companies are headed by members of the controlling family belonging to at least the fifth generation.” Hence the confidence of investors and also that of the markets more generally.

What are the family businesses?

A family business is said to be family-owned when an individual or family holds at least 30 percent of the voting rights of the business.

Sixty percent of the Italian Stock Exchange list sees family-owned enterprises.
Some examples of Italian stocks of “family” companies: Amplifon, Ferrari, EXor (Agnelli family holding company), Diasorin, Recordati, Brembo, Campari (to name just a few famous ones). Internationally we have plenty of other examples-Walmart, Samsung, Hermes, Louis Vuitton, Meituan Dianping,

What are the success drivers of family businesses?

Numerous studies have shown that family businesses tend to outperform the market because they are driven by human values and active family management.

Families own and are involved in running it. These drivers include entrepreneurship, management, socio-economic well-being, and a long-term vision.

Success also stems from the fact that its founder had a vision that was sometimes suggestive or otherwise an innovator and forerunner of the times, bringing to market ideas and thus products or services that would later prove to be wheat successful.

Much of the family’s wealth is tied up in their businesses, and as a result there is a great deal of variation in how they act and invest. They tend to be high-quality, profitable, highly liquid companies that reinvest most of their profits into the business. Studies find that they do this very effectively, with higher than average returns on investment, managing to maintain strict financial discipline with low levels of debt.

After all, running one’s own business inherited from one’s grandparents or parents, and knowing that one’s family’s present and future depends on the business and its profits, somehow leads to greater focus and a higher sense of responsibility. You are not a manager paid to make one company do well today and who knows what other company tomorrow. No. This family business is the center of everything. The very welfare of your family and your descendants.

What, on the other hand, are the risks to investing in family businesses?

First, it is very important to be able to select the right culture and values. It takes careful and well-considered analysis. We need to understand how minority shareholders have a voice in the company and whether the family is open to listening. It is not enough to be a family business to be successful. It depends on the history of each one. But if properly analyzed, it can pay off.

Altri articoli che potrebbero interessarti


Hai bisogno di aiuto?

Utilizza il modulo di contatto per inviarci subito una richiesta di supporto.
Rispondiamo entro 1 ora a tutte le richieste.

Inserisci la tua migliore email per accedere al gruppo Telegram, ti invieremo le nostre analisi gratuitamente ogni domenica