Firm performance and economic crisis: Family versus Non-Family Businesses in Italy

This study investigates the performance of medium-sized family businesses – hereafter MSFBs – during the economic recession by comparing family and non-family firms, and correlating the organisational performance to the family ownership and firms’ solvency. An empirical research study was carried out on a sample of 128 Italian medium-sized businesses – hereafter MSBs - (76 family and 52 non-family businesses). We used the AIDA – Bureau van Dijk database to collect data referring to three years 2007, 2009 and 2014, respectively corresponding to the pre-crisis phase – 2007, the great recession – 2009, and the post-crisis phase – 2014. STATA software was used for analysing data and the analysis was organised into three steps. First, we collected the descriptive statistics. Then, we used a t-test to determine if businesses’ performance and solvency significantly differ in family and non- family businesses subgroups. In the last step, we performed a regression analysis to examine the relationship between firms’ profitability (dependent variable) and family ownership and solvency (independent variables). Contrary to previous research, we found that MSFBs performed worse at each stage of the crisis, especially during the harshest phase of the crisis. Results also show that family ownership negatively affected businesses’ profitability. On the contrary, solvency positively affected firms’ profitability at each stage of the crisis. Finally, we analysed and discussed a model case study, to better understand financial and economic dynamics of family firms during the analysed period. Although family firms’ performance during the recession period has been widely studied, they generally referred to large companies. Analyses haven’t considered MSBs, even if in recent years they have played an important role in several economic systems and show some distinctive features that can significantly differentiate them from large companies. The main contribution this study brings to the literature is investigating family business performance during a downturn, paying attention to MSBs.