Single Family Offices as firm owners: Comparative performance effects

Single Family Offices (SFOs) have become an important vehicle for transgenerational wealth management. They address succession issues in family-owned firms, act as an investment vehicle for the business-owning family, and provide administrative services. Yet, we know little about the role of SFOs as firm owners, particularly how they influence the performance of the firms they own. Our study addresses this question and investigates the performance of SFO-owned firms. Arguing from an agency and monitoring perspective, we propose that SFO-owned firms will underperform firms directly owned by families. We further postulate that this underperformance will be mitigated when members of the owning family are involved in the management or supervisory board of the SFO-owned firm, and when the SFO-owned firm is publicly listed. Our results partially support these hypotheses and show that SFO-owned firms do indeed exhibit weaker financial performance than family-owned firms. This effect is diminished when a family member is directly involved in the management or supervisory board of the SFO-owned firm. Significant performance differences were not found between private versus listed SFO-owned firms. Our study contributes to the corporate governance and family business literatures on the performance effects of firm owners and blockholders. It also extends the nascent but growing literature on family offices. Practical implications are drawn for business owning families seeking to set up a family office as vehicles for succession and transgenerational wealth management.