Best Among the Worst or Worst Among the Best? Socioemotional Wealth and Risk-Performance Returns for Family and Non-family Firms Under Financial Distress

Luis R. Gómez-Mejia, Francesco Chirico, Geoffrey Martin, Massimo Baù

Research output: Contribution to journalArticlepeer-review

Abstract

A firm’s proactive engagement in risk, which has been deeply intertwined with the entrepreneurship literature, is essential to sustaining a firm’s long-term competitive advantage. Drawing on BAM’s mixed gamble logic in a family firm context, the present study offers a theoretical framework examining how firm risk returns differ in the contexts of distressed (the worst) and nondistressed (the best) family and nonfamily firms. We predict that family control moderates the risk taking-performance relationship. That is, compared with nonfamily firms, a mixed gamble featuring the prospect of socioemotional and financial losses leads family firms to extract higher financial returns from risk taking when in financial distress, but lower financial returns when they are not in financial distress. Our theoretical expectations are supported using a matched sample of Swedish firms.

Original languageEnglish (US)
JournalEntrepreneurship: Theory and Practice
DOIs
StateAccepted/In press - 2022

Keywords

  • family firm
  • financial distress
  • firm performance
  • risk taking

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics

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