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Ethics and Family Commitment: A Study of Their Relationship to Family Firm Performance

Abstract

Do family commitment and ethical behavior come at a cost to the family firm's performance? Do those constructs enhance the family firm's performance? Unlike large public companies, whose prime objective is to maximize shaeholders wealth, not all family businesses share this belief. Some literature suggests that family firms have nonfinancial objectives, like providing employment to family members as a main objective. Others suggest that wealth management is not always the number one objective. Often the goal is just to sustain the business in order to pass it from generation to generation. The purpose of this paper is to study the effect that ethical behavior and family commitment have on firm performance. Using a 2007 MassMutual survey of US family businesses, I show that, indeed, having more ethical behavior and family commitment do come at a cost to family businesses.

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