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Financial Performance & Family Firms. Studies show that family firms outperform their industry groups and their non-family counterparts Family business's.

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Presentation on theme: "Financial Performance & Family Firms. Studies show that family firms outperform their industry groups and their non-family counterparts Family business's."— Presentation transcript:

1 Financial Performance & Family Firms

2 Studies show that family firms outperform their industry groups and their non-family counterparts Family business's net income to net worth ratio was 75% higher than manager-controlled firms; Family firms provide a greater return on investment, have a better-managed capital structure and more efficient allocation of resources (1969, Monsen). A 1986 study by US News and World Report found that of the 47 largest family firms, 31 outperformed the Dow-Jones index.

3 family firms tendency toward long term strategies rather than a need for quarterly results; an aversion to debt; and their inclination to reinvest dividends (Gallo, 1994). A number of studies have shown that family firms outperform their industry groups and their non-family counterparts. In 1969, Monsen found that family business's net income to net worth ratio was 75% higher than manager-controlled firms. He concluded that family firms provide a greater return on investment, have a better-managed capital structure and more efficient allocation of resources. Jaffe (1990) states that a 1986 study by US News and Word Report found that of the 47 largest family firms, 31 outperformed the Dow- Jones index.

4 1989 Survey of Consumer Finances (SCF), have forecast bequests from 1990 to 2040 to be $10.4 trillion (Avery & Rendall, 1993). From the data in Table 1 we see that annual bequests rise from $84 billion in 1995 to $143 billion in 2000 to a high of $335.9 in 2015.

5 Failure to plan for transfer of business to next generation Without planning, heirs often have to sell the business in order to provide for for retirements and estate taxes.

6 Forecasted Bequests by Year Year Total ($Bill.) Number ('000) Mean ($) , ,506 55, , ,846 76, ,255 87, ,389 99, , , , , , , ,090 97, ,636 Total 10, ,953 90,167


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