When More Is Better: Multifamily Firms and Firm Performance

Authors: Patricio Duran and Marcelo Ortiz

Entrepreneurship Theory and Practice, Vol. 44, No 4, 761-783, July, 2020

Does the presence of multiple and unrelated family controllers improve firm performance? Drawing on both agency and behavioral agency theories, we argue that multifamily firms outperform single-family firms since families in multifamily firms actively monitor owners’ socioemotional goals. Additionally, we suggest that a balanced distribution of control among the owning families facilitates the monitoring process. Finally, we argue that the focal relationship follows an inverted U-shaped pattern depending on the number of families controlling the firm. We test our hypotheses using a sample of Chilean publicly listed family firms. Our study extends current knowledge of the uniqueness of multifamily firms.