Title: Family involvement and financial performance in SMEs: evidence from Italy

Authors: Paolo Roffia

Addresses: Department of Business Administration, University of Verona, Via Cantarane 24, 37129 Verona, Italy

Abstract: The aim of this study is to provide new evidence on the relationship between family involvement and financial performance in small and medium-sized enterprises (SMEs). We analysed the effects of family involvement in ownership and in the board of directors (BoD) for 214 Italian SMEs. Using an ordinary least squares (OLS) regression model with time-period and industry-fixed effects and lagged financial data over a four-year period (2014-2017), we found a statistically significant U-shaped relationship between family ownership and return on assets (ROA). Contrary to our expectations, the relationship between family involvement in the BoD and profitability was negative. These results suggest that family involvement in firms may have both positive and negative effects on financial performance depending on the thresholds considered. We also found a few other contextual variables related to company structure that influenced SME financial performance.

Keywords: small and medium-sized enterprises; SMEs; family firms; family involvement; generational change; ROA ratio; financial performance; Italy.

DOI: 10.1504/IJESB.2021.115313

International Journal of Entrepreneurship and Small Business, 2021 Vol.43 No.1, pp.39 - 60

Received: 03 Jul 2019
Accepted: 22 Oct 2019
Published online: 28 May 2021 *

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