InvestorQ : I read a news report that family run businesses in India have done better than others in India? Is that a correct statement?
Riya Dwivedi made post

I read a news report that family run businesses in India have done better than others in India? Is that a correct statement?

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shrinidhi Rajan answered.
3 months ago
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You are absolutely correct. That was a report recently brought out by Credit Suisse, which has observed the trend in India. In fact, Credit Suisse has done a study of Indian companies since 2006 and this is an outcome of 14 years of data analysis.

According to the report by Credit Suisse, family run businesses have done a lot better than professional managed businesses since 2006. In fact, it has been statistically proven that the family owned businesses outperformed non-family owned universe by 370 basis points.

In India, Credit Suisse defines a family owned business as a company where at least 20% of the equity and voting rights are held by the promoter family. Thus business groups like the Reliance Group, Motherson Sumi and Wipro would fall in that category.

Family owned businesses offered, not only better stock holder returns, but also superior revenue growth and better cash flows. Even in periods of stress and crisis, family owned companies offered a better level of comfort to shareholders.

The report also observed that family businesses have been also more benevolent. It has been observed that family owned businesses are less prone to furloughing their staff. That could be more due to the old practice of life-time careers ingrained in the Indian psyche.

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