Peculiarities of Financial Management in Family Firms

The majority of firms in market-oriented countries are family-owned. Despite their significant economic importance for these countries, research focusing on family firms is a rather young field within business research, having intensified starting only in the late 1980s. Research regarding the peculiarities of financial management in family firms is especially scarce. Hence, this paper seeks to synthesize existing research and to theoretically analyze the finance and accounting practices and resources of, as well as the role of financial managers in family firms. Using agency theory, stewardship theory, and the resource-based view of the firm, this paper suggests that finance and accounting practices should be adapted to the controlling family's needs. The paper further suggests that family firms are likely to use fewer short-term-oriented financial-management practices than non-family firms. Moreover, compared to non-family firms, financial managers should play a more traditional role in family firms, focusing on core financial management tasks and on advising the controlling family, while not themselves holding strategic decision-making power. The paper concludes with concrete avenues for further research.