Family-owned businesses outperform non-family peers across every region and sector, recording stronger revenue growth, higher EBITDA margins, and better cash flow returns, according to a report by the Credit Suisse Research Institute (CSRI).
Family-owned businesses were found to have a strong preference for conservative growth, with less reliance on debt funding compared to non-family-owned firms, and focus on longer-term investment.
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According to Credit Suisse, the longer-term focus offers family-owned firms the flexibility to focus on through-cycle growth and returns instead of quarter-to-quarter earnings.
The study also revealed higher risk-adjusted returns generated by first and second generation family-owned businesses compared to their older counterparts in the last decade. Credit Suisse believes business maturity to be the key driver in this case.
The study also found a “negligible” difference in total shareholder returns of family-owned firms with ordinary shares compared to those with special voting rights.
Credit Suisse head analyst of thematic investments Eugène Klerk said: “This year we find family-owned businesses are continuing to outperform their peers in every region, every sector, whatever their size. We believe this is down to the longer term outlook of family-owned businesses relying less on external funding and investing more in research and development.
“Our research on a global scale also suggests family-owned companies with special voting right structures perform relatively in line with those with ordinary shares, contrary to the fears expressed by many investors.”
