A Study on Valuation of Family Businesses - MBA Finance

A Study on Valuation of Family Businesses - MBA Finance

Abstract

Existing literature on family companies emphasizes their worldwide importance. The predominance of family companies is a universal phenomena seen in most nations throughout the globe, but their proportional influence on economies varies. This article examines articles in the accounting and finance literature on family companies from across the globe, demonstrating that family members' participation in the company may have a good, negative, or no effect on its financial success. 

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The literature study in the Indian context shows that India's rich and ancient past seems to be intertwined with family-run enterprises as the primary method of company organization. The article provides an overview of the state of family companies in India since independence, as well as the distinctive features of Indian family enterprises.


Introduction

Family controlled companies are those that are owned and, in most instances, managed by a single founder–owner or family, that is, close relatives. Family enterprises are an important part of many countries across the globe (Miller & Le Breton-Miller, 2005). According to Flören (1998), family companies account for between 65 and 80 percent of all businesses in the globe. Existing research on family companies shows that this organisational structure and ownership model is very common across the globe, including North America, Europe, and Asia. Globally, family companies contribute significantly to GDP, stock market value, and employment. Depending on the nation of origin, family firms may account for 20–70% of the world's largest corporations (La Porta et al., 1999).

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Conclusion

The prevalence of family companies among the world's commercial organizations is considerable. The available literature presents a range of perspectives on the performance of family-run companies in contrast to their competitors. These range from family companies outperforming their non-family counterparts to the inverse, with family enterprises underperforming and experiencing difficulties.

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