Corporate Governance and Financial Performance: Family Firms vs. Non-Family Firms

The essence of a family business captures the distinguishing factors differentiating them from non-family businesses. Among these factors, the constructs of family firms’ managing and governance elements are perceived differently by non-family firms. This is especially important in a developing country such as South Africa (SA) with many governance challenges. The objectives of this study were, first, to identify relationships among financial performance, corporate governance, and ownership concentrations of listed family and non-family businesses in SA. Next, a comparison was made between the different ownership structures. Secondary data were collected using purposive sampling from 2015 to 2019. These data were analysed using panel data analysis and descriptive statistics. The results show that family firms place a greater emphasis on ownership concentration, board size, and board gender diversity, which have a significant relationship with financial performance. Only board size was significant to financial performance for non-family firms. The results indicate that family businesses should appoint female family members as directors on their boards, given the significance of gender-diverse boards for financial performance. Non-family businesses should also consider having smaller boards. Theoretically, this study expands on the literature regarding family businesses in SA. However, the findings cannot be generalised due to a single industry being selected. This study should be replicated in different industries to compare the results.