Skip to main content

Advertisement

SpringerLink
Log in

Non-linearity between family control and firm financial sustainability: moderating effects of CEO tenure and education

  • Regular Article
  • Published:
Eurasian Business Review Aims and scope Submit manuscript

Abstract

We investigate the non-linearity between family control and firm financial sustainability and the manner in which CEO tenure and education moderate the non-linear relationship. We apply fixed-effects panel regression and several alternative tests, including two-stage least squares, in studying 2844 firm-year observations of Malaysian publicly listed firms during the period 2009–2019. We find a non-linear U-shaped relationship between family control and firm financial sustainability. Specifically, once levels of family control exceed a certain threshold, the relationship between family control and firm financial sustainability becomes positive. Moreover, CEO tenure and education moderate this non-linearity. That is, when family control is at a low (high) level, both moderators lessen (increase) the negative (positive) effects of family control on firm financial sustainability.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. Source: https://d306pr3pise04h.cloudfront.net/docs/news_events%2F8.1%2FUNGC_Accenture_CEO_Study_2013.pdf.

  2. Bursa Malaysia (previously known as the Kuala Lumpur Stock Exchange) is the stock exchange of Malaysia.

  3. The threshold level indicates that family ownership brings benefits to firm sustainability up to the optimal level at 53%. After the critical point at 53%, family ownership brings disadvantages to firm sustainability.

  4. It is a database that provides key data sets from developed and emerging markets — equities, market indices, company accounts, macroeconomics, bonds, foreign exchange, interest rates, commodities and derivatives.

References

  • Aguilera, R. V., & Crespi-Cladera, R. (2012). Firm family firms: Current debates of corporate governance in family firms. Journal of Family Business Strategy, 3(2), 66–69.

    Article  Google Scholar 

  • Aksoy, M., Yilmaz, M. K., Tatoglu, E., & Basar, M. (2020). Antecedents of corporate sustainability performance in Turkey: The effects of ownership structure and board attributes on non-financial companies. Journal of Cleaner Production, 276, 124284.

    Article  Google Scholar 

  • Aldrich, H. E., & Cliff, J. E. (2003). The pervasive effects of family on entrepreneurship: Toward a family embeddedness perspective. Journal of Business Venturing, 18(5), 573–596.

    Article  Google Scholar 

  • Alfraih, M. M. (2016). The effectiveness of board of directors’ characteristics in mandatory disclosure compliance. Journal of Financial Regulation and Compliance, 24(2), 1–33.

    Article  Google Scholar 

  • Amran, N. A., & Ahmad, A. C. (2009). Family business, board dynamics and firm value: Evidence from Malaysia. Journal of Financial Reporting Accounting, 7(1), 53–74.

    Article  Google Scholar 

  • Anderson, R. C., & Reeb, D. M. (2003). Founding-family ownership and firm performance: Evidence from the S&P 500. The Journal of Finance, 58(3), 1301–1328.

    Article  Google Scholar 

  • Bartolacci, F., Paolini, A., Quaranta, A. G., & Soverchia, M. (2018). Assessing factors that influence waste management financial sustainability. Waste Management, 79, 571–579.

    Article  Google Scholar 

  • Bauweraerts, J. (2020). The effect of CEO attributes on the internationalization-performance relationship in private family firms. Entrepreneurship and family business vitality (pp. 233–253). Springer.

    Chapter  Google Scholar 

  • Boivie, S., Lange, D., McDonald, M. L., & Westphal, J. D. (2011). Me or we: The effects of CEO organizational identification on agency costs. Academy of Management Journal, 54(3), 551–576.

    Article  Google Scholar 

  • Boling, J. R., Pieper, T. M., & Covin, J. G. (2016). CEO tenure and entrepreneurial orientation within family and nonfamily firms. Entrepreneurship Theory and Practice, 40(4), 891–913.

    Article  Google Scholar 

  • Branco, M. C., Delgado, C., Gomes, S. F., & Eugénio, T. C. P. (2014). Factors influencing the assurance of sustainability reports in the context of the economic crisis in Portugal. Managerial Auditing Journal, 29(3), 237–252.

    Article  Google Scholar 

  • Brigham, K. H., Lumpkin, G. T., Payne, G. T., & Zachary, M. A. (2014). Researching long-term orientation: A validation study and recommendations for future research. Family Business Review, 27(1), 72–88.

    Article  Google Scholar 

  • Buyl, T., Boone, C., Hendriks, W., & Matthyssens, P. (2011). Top management team functional diversity and firm performance: The moderating role of CEO characteristics. Journal of Management Studies, 48(1), 151–177. https://doi.org/10.1111/j.1467-6486.2010.00932.x

    Article  Google Scholar 

  • Cain, M. D., & McKeon, S. B. (2016). CEO personal risk-taking and corporate policies. Journal of Financial Quantitative Analysis, 51(1), 139–164.

    Article  Google Scholar 

  • Calabrò, A., Campopiano, G., & Basco, R. (2017). Principal-principal conflicts and family firm growth: The moderating role of business family identity. Journal of Family Business Management, 7(3), 291–308.

    Article  Google Scholar 

  • Campopiano, G., Calabrò, A., & Basco, R. (2020). The “most wanted”: The role of family strategic resources and family involvement in CEO succession intention. Family Business Review, 3(2), 284.

    Article  Google Scholar 

  • Carlos, D. L. H. R., & Herrera, J. (2020). Family firms and sustainability. A longitudinal analysis. Sustainability, 12(13), 5477.

    Article  Google Scholar 

  • Chen, Y.-M., Liu, H.-H., Yang, Y.-K., & Chen, W.-H. (2016). CEO succession in family firms: Stewardship perspective in the pre-succession context. Journal of Business Research, 69(11), 5111–5116.

    Article  Google Scholar 

  • Chu, E.-Y., Lai, T.-S., & Song, S.-I. (2016). Corporate governance and financial constraints in family controlled firms: Evidence from Malaysia. International Journal of Business Society, 17(3), 1–15.

    Google Scholar 

  • Chua, J. H., Chrisman, J. J., & Sharma, P. (1999). Defining the family business by behavior. Entrepreneurship Theory and Practice, 23(4), 19–39.

    Article  Google Scholar 

  • Chua, M., Ab Razak, N. H., Nassir, A. M., & Yahya, M. H. (2020). Does Ceo education influence the target leverage and speed of adjustment? Journal of Critical Reviews, 7(12), 59–68. https://doi.org/10.31838/jcr.07.12.10

    Article  Google Scholar 

  • Claessens, S., Djankov, S., & Lang, L. H. J. J. O. F. E. (2000). The separation of ownership and control in East Asian corporations. Journal of Financial Economics, 58(1–2), 81–112.

    Article  Google Scholar 

  • Davis, J. H., Allen, M. R., & Hayes, H. D. (2010). Is blood thicker than water? A study of stewardship perceptions in family business. Entrepreneurship Theory and Practice, 34(6), 1093–1116.

    Article  Google Scholar 

  • de Andres, P., Garcia-Rodriguez, I., Romero-Merino, M. E., & Santamaria-Mariscal, M. (2021). Politicians in disguise and financial experts on the board: Evidence from Spanish cajas. BRQ Business Research Quarterly, 24(2), 174–191.

    Article  Google Scholar 

  • de Lange, D. E., Busch, T., & Delgado-Ceballos, J. (2012). Sustaining sustainability in organizations. Journal of Business Ethics, 110(2), 151–156.

    Article  Google Scholar 

  • de las Heras-Rosas, C., & Herrera, J. (2020). Family firms and sustainability. A longitudinal analysis. Sustainability. https://doi.org/10.3390/su12135477

    Article  Google Scholar 

  • De Massis, A., Kotlar, J., Campopiano, G., & Cassia, L. (2015). The impact of family involvement on SMEs’ performance: Theory and evidence. Journal of Small Business Management, 53(4), 924–948.

    Article  Google Scholar 

  • Díez-Esteban, J. M., García-Gómez, C. D., López-Iturriaga, F. J., & Santamaría-Mariscal, M. (2017). Corporate risk-taking, returns and the nature of major shareholders: Evidence from prospect theory. Research in International Business and Finance, 42, 900–911.

    Article  Google Scholar 

  • Dou, J., Jacoby, G., Li, J., Su, Y., & Wu, Z. (2019). Family involvement and family firm internationalization: The moderating effects of board experience and geographical distance. Journal of International Financial Markets, Institutions Money, 59, 250–261.

    Article  Google Scholar 

  • Eddleston, K. A., Jaskiewicz, P., & Wright, M. (2020). Family firms and internationalization in the Asia-Pacific: The need for multi-levelperspectives. Asia Pacific Journal of Management, 37(2), 345–361.

    Article  Google Scholar 

  • El Ghoul, S., Guedhami, O., Wang, H., & Kwok, C. C. J. J. O. B. (2016). Family control and corporate social responsibility. Journal of Banking Finance, 73, 131–146.

    Article  Google Scholar 

  • Gardini, S., & Grossi, G. (2018). What is known and what should be known about factors affecting financial sustainability in the public sector: A literature review. In I. G. I. Global (Ed.), Financial sustainability and intergenerational equity in local governments (pp. 179–205). Pennsylvania.

    Chapter  Google Scholar 

  • Gavana, G., Gottardo, P., & Moisello, A. M. J. S. (2017). Sustainability reporting in family firms: A panel data analysis. Sustainability, 9(1), 38–55.

    Article  Google Scholar 

  • Glowka, G., Kallmünzer, A., & Zehrer, A. (2021). Enterprise risk management in small and medium family enterprises: The role of family involvement and CEO tenure. International Entrepreneurship Management Journal, 17(3), 1213–1231.

    Article  Google Scholar 

  • Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9(2), 193–206.

    Article  Google Scholar 

  • Hernández-Perlines, F., & Ibarra Cisneros, M. A. (2018). The role of environment in sustainable entrepreneurial orientation. The Case of Family Firms. Sustainability, 10(6), 20–37.

    Article  Google Scholar 

  • Hur-Yagba, A., Okeji, I. F., & Ayuba, B. (2015). Analyzing financial health of manufacturing companies in Nigeria using multiple discriminate analysis. International Journal of Managerial Studies and Research, 3(7), 72–81.

    Google Scholar 

  • Huybrechts, J., Voordeckers, W., & Lybaert, N. (2013). Entrepreneurial risk taking of private family firms: The influence of a nonfamily CEO and the moderating effect of CEO tenure. Family Business Review, 26(2), 161–179.

    Article  Google Scholar 

  • Ibrahim, H., & Samad, F. A. (2011). Corporate governance mechanisms and performance of public-listed family-ownership in Malaysia. International Journal of Economics Finance, 3(1), 105–115.

    Article  Google Scholar 

  • Kalm, M., & Gomez-Mejia, L. R. (2016). Socioemotional wealth preservation in family firms. Revista De Administração, 51(4), 409–411.

    Article  Google Scholar 

  • Karaman, A. S., Kilic, M., & Uyar, A. (2018). Sustainability reporting in the aviation industry: Worldwide evidence. Sustainability Accounting, Management Policy Journal, 9(4), 362–391.

    Article  Google Scholar 

  • KPMG. (2020). The time has come. The KPMG Survey of Sustainability Report 2020. https://home.kpmg/xx/en/home/insights/2020/11/the-time-has-come-survey-of-sustainability-reporting.html.

  • Le Breton-Miller, I., & Miller, D. (2016). Family firms and practices of sustainability: A contingency view. Journal of Family Business Strategy, 7(1), 26–33.

    Article  Google Scholar 

  • Lean, H. H., Ting, I. W. K., & Kweh, Q. L. (2015). Ownership concentration, family ownership and leverage: Evidence from Malaysia. Malaysian Journal of Economic Studies, 52(2), 117–133.

    Google Scholar 

  • LeCounte, J. F. (2020). Founder-CEOs: Succession planning for the success, growth, and legacy of family firms. Journal of Small Business Management, 1–18.

  • Lo, F.-Y., Wong, W.-K., & Geovani, J. (2021). Optimal combinations of factors influencing the sustainability of Taiwanese firms. International Journal of Emerging Markets. https://doi.org/10.1108/IJOEM-02-2020-0205

    Article  Google Scholar 

  • Marwa, N., & Aziakpono, M. (2015). Financial sustainability of Tanzanian saving and credit cooperatives. International Journal of Social Economics, 42(10), 870–887. https://doi.org/10.1108/IJSE-06-2014-0127

    Article  Google Scholar 

  • Memili, E., Fang, H. C., Koc, B., Yildirim-Öktem, Ö., & Sonmez, S. (2018). Sustainability practices of family firms: The interplay between family ownership and long-term orientation. Journal of Sustainable Tourism, 26(1), 9–28.

    Article  Google Scholar 

  • Miller, D., Minichilli, A., & Corbetta, G. (2013). Is family leadership always beneficial? Strategic Management Journal, 34(5), 553–571. https://doi.org/10.1002/smj.2024

    Article  Google Scholar 

  • Morck, R., Shleifer, A., & Vishny, R. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20, 293–315. https://doi.org/10.1016/0304-405X(88)90048-7

    Article  Google Scholar 

  • Naldi, L., Nordqvist, M., Sjöberg, K., & Wiklund, J. (2007). Entrepreneurial orientation, risk taking, and performance in family firms. Family Business Review, 20(1), 33–47.

    Article  Google Scholar 

  • O’brien, R. M. (2007). A caution regarding rules of thumb for variance inflation factors. Quality and Quantity, 41(5), 673–690.

    Article  Google Scholar 

  • Pérez-González, F. (2006). Inherited control and firm performance. American Economic Review, 96(5), 1559–1588.

    Article  Google Scholar 

  • Ren, Q., Xu, Y., Zhou, R., & Liu, J. (2020). Can CEO’s humble leadership behavior really improve enterprise performance and sustainability? A case study of Chinese start-up companies. Sustainability, 12(8), 3168.

    Article  Google Scholar 

  • Robert, M. (1988). The strategist CEO: How visionary executives build organizations: Greenwood Publishing Group.

  • Rondi, E., Überbacher, R., von Schlenk-Barnsdorf, L., De Massis, A., & Hülsbeck, M. (2021). One for all, all for one: A mutual gains perspective on HRM and innovation management practices in family firms. Journal of Family Business Strategy. https://doi.org/10.1016/j.jfbs.2020.100394

    Article  Google Scholar 

  • Rosman, M., Suffian, M. A., Marha, Y. N., Sakinah, M., & Mariam, R. R. (2018). Moderating effect of innovation on human capital and small firm performance in construction industry: The Malaysia case. Journal of Fundamental and Applied Sciences, 10(1S), 772–792.

    Google Scholar 

  • Saidat, Z., Bani-Khalid, T. O., Al-Haddad, L., & Marashdeh, Z. (2020). Does family CEO enhance corporate performance? The case of Jordan. Economics and Sociology, 13(2), 43–52.

    Article  Google Scholar 

  • Salvioni, D. M., & Gennari, F. (2016). Corporate governance, ownership and sustainability. Corporate Ownership and Control, 13(2), 604–612.

    Article  Google Scholar 

  • Sannino, G., Di Carlo, F., & Lucchese, M. (2020). CEO characteristics and sustainability business model in financial technologies firms. Management Decision, 58(8), 1779–1799.

    Article  Google Scholar 

  • Sciascia, S., & Mazzola, P. (2009). Exploring non-linear effects of family ownership and involvement on profitability: A longitudinal study on non-listed companies. Frontiers of Entrepreneurship Research, 29(14), 1.

    Google Scholar 

  • Sirsly, C.-A.T., & Sur, S. (2013). Strategies for sustainability initiatives: Why ownership matters. Corporate Governance: International Journal of Business in Society, 13(5), 541–550.

    Article  Google Scholar 

  • Srivastava, A., & Bhatia, S. (2020). Influence of family ownership and governance on performance: Evidence from India. Global Business Review, 2020, 0972150919880711.

    Google Scholar 

  • Steier, L. (2003). Variants of agency contracts in family-financed ventures as a continuum of familial altruistic and market rationalities. Journal of Business Venturing, 18(5), 597–618.

    Article  Google Scholar 

  • Ting, I. W. K., Lean, H. H., Kweh, Q. L., & Azizan, N. A. (2016). Managerial overconfidence, government intervention and corporate financing decision. International Journal of Managerial Finance, 12(1), 4–24.

    Article  Google Scholar 

  • Tonelli, F., Fadiran, G., Raberto, M., & Cincotti, S. (2016). Approaching industrial sustainability investments in resource efficiency through agent-based simulation. Service orientation in holonic and multi-agent manufacturing (pp. 145–155). Springer.

    Chapter  Google Scholar 

  • Umobong, A. A. (2015). Assessing the impact of liquidity and profitability ratios on growth of profits in pharmaceutical firms in Nigeria. European Journal of Accounting, Auditing and Finance Research, 3(10), 97–114.

    Google Scholar 

  • Umrani, A. I., Johl, S. K., & Ibrahim, M. Y. (2017). Ownership structure attributes, outside board members and SMEs firm performance with mediating effect of innovation in Malaysia. Global Business and Management Research, 9, 393.

    Google Scholar 

  • Wällstedt, N., Grossi, G., & Almqvist, R. (2014). Organizational solutions for financial sustainability: A comparative case study from The Swedish municipalities. Journal of Public Budgeting, Accounting & Financial Management, 26(1), 181.

    Google Scholar 

  • Wang, K. T., & Shailer, G. (2017). Family ownership and financial performance relations in emerging markets. International Review of Economics Finance, 51, 82–98.

    Article  Google Scholar 

  • Wei, F., Lu, J., & Kong, Y. (2017). Research on sustainability financial performance of chinese listed companies. Sustainability, 9(5), 723–740.

    Article  Google Scholar 

  • Xiang, D., Zhang, Y., Worthington, A. C., & Liu, Y. (2020). Raising capital for the family firm for sustainability: Whence the advantage? Technological Forecasting and Social Change, 151, 119822.

    Article  Google Scholar 

  • Zaefarian, G., Kadile, V., Henneberg, S. C., & Leischnig, A. (2017). Endogeneity bias in marketing research: Problem, causes and remedies. Industrial Marketing Management, 65, 39–46.

    Article  Google Scholar 

  • Zahra, S. A., Hayton, J. C., Neubaum, D. O., Dibrell, C., & Craig, J. (2008). Culture of family commitment and strategic flexibility: The moderating effect of stewardship. Entrepreneurship Theory and Practice, 32(6), 1035–1054.

    Article  Google Scholar 

  • Zahra, S. A., & Pearce, J. A. (1989). Boards of directors and corporate financial performance: A review and integrative model. Journal of Management, 15(2), 291–334.

    Article  Google Scholar 

  • Zhang, J. J., Joglekar, N. R., & Verma, R. (2012). Exploring resource efficiency benchmarks for environmental sustainability in hotels. Cornell Hospitality Quarterly, 53(3), 229–241.

    Article  Google Scholar 

  • Zhao, J., Carney, M., Zhang, S., & Zhu, L. (2020). How does an intra-family succession effect strategic change and performance in China’s family firms? Asia Pacific Journal of Management, 37(2), 363–389.

    Article  Google Scholar 

  • Zheng, M., & Escalante, C. L. (2020). Banks’ sustainable growth challenge under economic recessionary pressure. Agricultural Finance Review, 80(3), 437–451.

    Article  Google Scholar 

Download references

Funding

This article was financially supported by Universiti Malaysia Pahang (University Grant Scheme RDU1903110).

Author information

Authors and Affiliations

  1. Faculty of Industrial Management, Universiti Malaysia Pahang, Pahang, Malaysia

    Norazlin Ahmad & Irene Wei Kiong Ting

  2. Faculty of Management, Canadian University Dubai, Dubai, United Arab Emirates

    Imen Tebourbi & Qian Long Kweh

Authors
  1. Norazlin Ahmad
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Irene Wei Kiong Ting
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Imen Tebourbi
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Qian Long Kweh
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Irene Wei Kiong Ting.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Ahmad, N., Ting, I.W.K., Tebourbi, I. et al. Non-linearity between family control and firm financial sustainability: moderating effects of CEO tenure and education. Eurasian Bus Rev 12, 719–741 (2022). https://doi.org/10.1007/s40821-021-00197-7

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s40821-021-00197-7

Keywords

JEL Classification

Search

Navigation