The entrepreneurial orientation–performance relationship in private family firms: the moderating role of socioemotional wealth

Drawing on socioemotional wealth (SEW) literature, this paper revisits the established entrepreneurial orientation (EO)–performance relationship in a family business context. The main idea in entrepreneurship literature is that EO leads to increased firm performance. We question this logic in a family business context because family related non-financial goals, like SEW, may prevent the firm to reap the fruits of their entrepreneurial efforts. Specifically, we argue that SEW engenders inefficiencies that place constraints on the realization of the benefits of entrepreneurship. Therefore, we propose that a high level of SEW preservation hinders the transmission of the family firm’s EO into positive performance effects. To test this hypothesis, an empirical study was developed using a sample of 232 Belgian private family firms. Robust linear regression analysis reveals that the positive effect of EO on financial performance decreases as the level of SEW preservation increases.     

Socio‐Emotional Wealth Separation and Decision‐Making Quality in Family Firm TMTs: The Moderating Role of Psychological Safety

Socio‐emotional wealth (SEW), defined as the firm's non‐financial aspects meeting the family's affective needs, has become the dominant paradigm in family firm research. Recent debate acknowledges potential SEW heterogeneity within family firms. This study considers the effect of polarizing opinions on SEW preservation among TMT members as a source of separation in the TMT. More concretely, we study the effect of SEW separation on TMT decision‐making quality, while taking into consideration behavioural integration as a team process and psychological safety as a team context. Based on a unique multiple respondent sample of 300 managers from 55 Belgian private family firms, we find that behavioural integration mediates the negative effect of SEW separation on TMT decision‐making quality. In addition, we find that the negative effect of SEW separation on behavioural integration is mitigated by psychological safety and even turns into a positive effect at high levels of psychological safety.     

Collateral,relationship lending and family firms

Prior research suggested that relationship lending could play a role in solving asymmetric information problems between borrower and lender. Other studies suggest a relationship between family ownership and the shareholder–bondholder agency conflict. The present paper investigates the impact of relationship characteristics, family ownership and their interaction effects upon the use of collateral in SME lending. We examine the determinants of collateral as well as the determinants of the choice between business and personal collateral using decision tree analysis. The results reveal that relationship characteristics have a significant influence, but not always in the direction as expected. Moreover, they do not seem to be the primary determinants in our classification models. The most important determinants in both classification models seem to be the loan amount, total assets and the family versus non-family firm distinction. In addition, we differentiate between line-of-credit and non-line-of-credit loans and find significant differences between these decision trees.     

Using the Return on Sustainability Investment (ROSI) Framework to Value Accelerated Decarbonization

A major barrier to companies' more effective integration of sustainability into their corporate strategies is finding ways to estimate and communicate the full value of their business cases. In the authors' experience in working with or for companies, they find that most do not track the value sustainability delivers for an organization. And when companies do track and measure their returns on investments in sustainability, the estimates tend to be focused almost exclusively on those benefits that are most direct and tangible, and show up on the corporate P&L, as opposed to other benefits like employee commitment and regulatory forbearance, which are more likely to show up in a lower cost of capital. To help companies quantify the expected value of their sustainability programs, the authors have developed a Return on Sustainability Investment (ROSI?) framework. The study presented here describes the outcomes of a recent analysis in which the NYU Stern Center for Sustainable Business in collaboration with ALO Advisors worked with Capital Power Corporation, a North American power producer, to estimate the value likely to be created by accelerating its transition to clean energy. Through their work with the Chief Sustainability Officer, Chief Financial Officer, and senior managers from several key business functions, the authors identified seven major sources of benefits, and quantified the expected effects on value of four of them, to produce an estimated contribution to the value of the company of about $30 million. The ROSI? framework and methodology has since been incorporated into CPX's investment decision‐making process, and played an important role in management's decision to commit to the operating changes required to accelerate the company's transition away from coal‐generated electricity.     

COLLATERAL AND CREDIT RATIONING: A REVIEW OF RECENT EMPIRICAL STUDIES AS A GUIDE FOR FUTURE RESEARCH

Abstract.  The relationship between firms and banks often suffers from informational opacity that may result in credit rationing. In theory, providing collateral to the bank can have a mitigating effect on these informational asymmetries and thus solve the credit-rationing problem. Even though collateral is already a widespread debt contract feature, recent trends predict that, in the future, collateral will become even more important for informationally opaque firms. The aim of this paper is twofold. First, we provide a review of the recently growing empirical research on collateral as a remedy for credit rationing. Second, we would like to pinpoint gaps and limitations in current empirical research. Most studies contend with a flawed research design by not distinguishing between business and personal collateral and excluding other information opaqueness reducing tools such as the strength of the relationship between borrower and lender, loan maturity and covenants. We also discuss the limitations of using a single equation estimation method and the usefulness of incorporating interaction effects into the estimation models. Finally, we provide suggestions for fruitful research avenues that would fill these gaps and enrich the empirical knowledge in this research domain.     

The determinants of cash holdings in private family firms

We present empirical evidence on traditional and family firm–specific determinants of cash holdings in the under‐researched context of private family firms. We examine, from an agency theoretic perspective, how and to what extent the relation between family firm management and cash holdings is moderated by the ownership structure. Results reveal that descendant CEOs appear to maintain higher cash holdings than founder CEOs. This effect seems to be stronger if there is a low ownership dispersion. Moreover, outside CEOs maintain higher cash holdings than family CEOs if the family firm is owned by a single owner.     

The influence of the CEO's value perception towards auditing on audit demand in private firms

Audit demand is generally considered to be a direct reflection of the level of agency conflicts. This study examines the CEO's value perception towards auditing as additional driver for both auditor reputation demand (appointing a Big 4 auditor or not) and audit effort demand in private firms. Examining the CEO's value perception in a multidimensional way, the regression results indicate that the CEO's functional value perception towards auditing positively affects the demand for audit effort, while the CEO's social value perception towards auditing negatively affects the demand for audit effort but positively affects the demand for auditor reputation.     

Embedding Sustainability Performance and Long‐Term Strategy in the Earnings Call

The practice of disclosing corporate Environmental, Social and Governance performance information continues to evolve, and the frequency of ESG disclosures in investor‐facing discussions, including Investor Day presentations and non‐deal roadshows, continues to grow. But even with these developments, the corporate‐investor dialogue about ESG and long‐term strategy, and their expected effects on long‐run profitability and value, has continued to lag. This seems particularly evident in the quarterly earnings call. In this article, the authors review the work of NYU's Center for Sustainable Business, in collaboration with Chief Executives for Corporate Purpose (CECP), in encouraging companies to work ESG themes and performance into their quarterly earnings calls. After discussing the reasons for the relatively slow progress in this important disclosure venue, including interviews with sell‐side analysts, the authors propose practical approaches that can guide companies, regardless of industry or market cap, in delivering this content in a way that is valuable to both buy‐side and sell‐side equity analysts.     

MANAGEMENT CONTROL SYSTEMS IN FAMILY FIRMS: A REVIEW OF THE LITERATURE AND DIRECTIONS FOR THE FUTURE

Family firms play a significant role in the global economy. Although family firm literature has devoted much time and effort to investigating topics concerning corporate governance, leadership, ownership and succession, accounting issues have received relatively scant attention. In this paper, we assemble and critically review extant literature on the choice of management controls. This is an essential topic for firms as management control systems (MCS) are used to make sure subordinates behave in function of the goals of the firm. Family firms, however, have distinct features, such as differences in governance structures and goals, which can have a significant impact on whether and how MCS are used. We conclude this review paper by providing avenues for future research that can advance our understanding of both the determinants and the outcomes of the choice of MCS.