The Evolution of Ownership, Control, and Performance in German Family-owned Firms

In this study we analyze the evolution of ownership, control, and performance in German founding-family-owned firms over the last century. We begin by identifying German family-owned stock companies (Aktiengesellschaften) founded before World War I and still in existence in 2003 with sales turnover of more than 50 million Euro. We then construct a hand-collected matching sample of non-family-owned German stock companies. The resulting unique sample consists of 62 Family and 62 Non-Family Firms in 2003. We go back a century and identify all firms for which we are able to collect data for the whole period. Next, we compare family-owned and non-family-owned firms over the 100-year time-span, analyzing a variety of variables including ownership, control, industries, bank relationships and performance, as well as the impact of intergenerational control transfers. We find that families are slow to give up ownership , and control of family businesses remains strong even after several generations. Family businesses seem to outperform non-family firms in terms of operating (but not stock) performance, and performance declines over the generations.