Financial Performance Metrics in Family vs Non-Family CEOs of Family-Owned Firms

Authors

  • Eren Huseyin Department Business Administration, Okan University, Istanbul, Turkey Author

Keywords:

Family-Owned Businesses, Financial Performance, CEO Leadership

Abstract

This paper examines the impact of family control on the financial performance of family-owned businesses by analyzing key financial data from 20 firms registered with the Gebze Chamber of Commerce. In this study, the financial performance of family businesses is assessed using Return on Assets (ROA), Return on Sales (ROS), and the Total Debt to Total Assets (TD/TA) ratios. The findings indicate that, while CEOs from family members outperform in terms of ROA, they are less effective compared to non-family member CEOs when considering the TD/TA ratio. In other words, non-family member CEOs tend to outperform family member CEOs when it comes to managing the Total Debt to Total Assets (TD/TA) ratio, indicating stronger performance in maintaining a healthier balance between debt and assets. However, when it comes to Return on Assets (ROA), family member CEOs demonstrate better financial efficiency in generating returns from the company's assets. This suggests that family member CEOs may be more effective in optimizing the use of company resources, while non-family member CEOs exhibit a more cautious approach in managing debt. Furthermore, the analysis reveals that in terms of the Return on Sales (ROS) ratio, there is no significant performance difference between family member and non-family member CEOs. This finding implies that both types of CEOs, regardless of their affiliation with the family, manage profitability relative to sales in a comparable manner. The results are consistent with the hypotheses proposed in this study. There is a clear distinction between the performance of family member CEOs and non-family member CEOs, particularly in terms of ROA and TD/TA ratios. Family member CEOs tend to excel in maximizing asset returns, while non-family member CEOs show stronger performance in managing debt levels. The lack of a significant difference in ROS indicates that both CEO types are equally capable when it comes to maintaining profitability from sales. These findings suggest that the leadership structure in family businesses can influence financial outcomes differently, depending on the specific financial metric being evaluated.

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Published

2023-06-01

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Section

Articles

How to Cite

Huseyin, E. (2023). Financial Performance Metrics in Family vs Non-Family CEOs of Family-Owned Firms. Journal of Policy Options, 6(2), 1-8. https://resdojournals.com/index.php/jpo/article/view/310