Downsizing in Family Firms during the Financial Crisis

This book investigates multiple factors affecting the socioemotional wealth (SEW) preservation aspirations of family firms and their respective relationship to downsizing. More specifically, a sample of 196 firms including both family firms (117) and non-family firms (79) that comply with German prime standard regulations was analyzed throughout the timeframe from 2008 to 2010. It is found that family firm status alone is not statistically significant to effect downsizing choices, which the work argues is caused by family firm heterogeneity. However, it is found that lone founder firm status and a family CEO in office have a repressive effect on downsizing. Further practical implications include firm size as a moderating effect on downsizing, which can be partially explained by German co-determination laws. Additionally, this work should encourage families to profoundly discuss the possible selection of a non-family CEO because if the non-family CEO’s value system differs from the one of the family, SEW preservation is not necessarily secured. Thus, family firms may have to contractually retain the right to make the final decision regarding SEW affecting choices.