Family ownership in the Helsinki stock exchange

Abstract

This thesis investigates the implications of family ownership in Finnish firms listed in the Helsinki stock exchange between the years 2014 and 2023. Using agency theory and stewardship theory as a theoretical framework, this thesis studies if family-owned firms (defined as firms where a family holds more than 10% of shares or voting rights) perform better than non-family firms. Agency theory suggests that family businesses should benefit from reduced agency costs. At the same time potential drawbacks of family ownership such as nepotism, entrenchment and the underperformance of new generations are also considered.

The analysis uses an unbalanced panel dataset of 112 non-financial Finnish firms with random effects and pooled OLS regression models to estimate the relationship between family ownership and firm profitability (ROA). The analysis controls for variables such as firm size, financial leverage and revenue growth in addition to industry variables. The findings of the empirical analysis suggest that family ownership of 10-50% is positively associated with firm performance, while ownerships above the 50% limit and below the 10% limit had weaker or even negative effects on firm performance. When the analysis was concentrated on the years during the COVID-19 financial crisis (2019-2023), the positive impact of family ownership on ROA was found to be stronger and more statistically significant. The findings of this thesis are mostly in line with the findings of prior studies.

Additionally, this thesis highlights the importance and prevalence of family ownership in Finland as a surprisingly high percentage of publicly listed firms in Finland are categorized as at least partly family owned. Family firms are found to be most common in highly competitive environments such as the industrial sector, suggesting that family owners tend to have a competitive and entrepreneurial mindset. This mindset is speculated to be an important factor behind the success of family firms, especially during financially difficult times such as the years surrounding the COVID-19 pandemic.

Ultimately, this thesis contributes to the discussion surrounding the strengths and weaknesses of family ownership in corporate governance and provides empirical evidence from the Finnish market. Future research topics suggested by this thesis on family ownership are the stock returns and other metrics based on market performance of family firms, especially during COVID-19.