Family Business Institutionalisation: Impact on binancial Performance in an emerging Economy

Abstract

Despite institutionalisation having a potential impact on the financial performance of public family businesses in an emerging economy, attempts to measure it at the organisational level have been rare. In this context, drawing on old institutional theory, in this study, institutionalisation is addressed as a multidimensional construct that comprises formalisation, professionalisation, transparency, accountability, fairness and responsibility. Moreover, the impact of institutionalisation on financial performance is examined based on profitability ratios. Applying data obtained from 150 public family businesses in the 2011-2015 period, the results demonstrate that the institutionalisation level and board size have a positive significant effect on return on equity (ROE), while the firm size, board size and the percentage of independent members of the board have a positive significant effect on the return on assets (ROA).