Do Family Firms Outperform Non-Family Firms in Japan? Further Evidence Using Foreign Ownership as a Moderator

We examine whether family firms in Japan outperform non-family firms. Also, we study the influence of foreign ownership on the performance of family firms. We use a sample of 1384 manufacturing firms, comprising 546 family and 838 non-family firms, listed on the Tokyo, Osaka, and Nagoya Stock Exchanges. We classify family firms based on the information available on the annual reports and retrieve necessary data from Bloomberg and Osiris databases covering the period 2014 to 2018. Using the pooled OLS regression model with two-way clustering, we obtain consistent estimates that family firms outperform non-family firms in Japan in terms of both accounting and market-based measures of financial performance, such as ROA and Tobin’s Q. Also, we find that foreign ownership positively and significantly promotes the performance of family firms compared to non-family firms. Our findings provide robust estimates of different levels of family ownership, suggesting that foreign shareholders can augment the performance of family firms by minimizing principal-principal conflicts and improving the monitoring functions of the management