Families as active monitors of firm performance

• This study combines findings on family business performance and monitoring by families.
• Monitoring by family members is an efficient device of management control.
• Family investors face comparative advantages in monitoring: ‘familiness’ cannot be bought.
• Family monitoring is a robust indicator of firm performance.
• Monitoring by families might be the missing link in FB performance research.

The role of owner-family members as internal monitors of firm performance has been largely neglected in family business studies so far. While family management of firms does not lead to clear performance improvements, accounting research has shown that families are better monitors. In this article we combine these findings and hypothesize that family monitoring leads to better firm performance. We test that hypothesis on a dataset of 386 German corporations as well as distinct subsamples for family businesses and SMEs. Using simultaneous quantile regressions we find consistent proof for our hypothesis over different quantiles of firm performance. We suspect family monitoring to be the missing link in the ownership, control and performance debate on family firms.