Bankruptcy at family and non-family firms: do they fail differently?

Abstract

Purpose

Family firms strive for transgenerational survivability. Thus, bankruptcy is a daunting event. Whether family firms fail for other causes than non-family firms has been scarcely researched and is investigated in this study.

Design/methodology/approach

The paper draws on a sample of 459 Austrian bankruptcy cases to examine the effects of the distinct characteristics of family firms on failure causes.

Findings

Our results indicate that family firm characteristics impact their failure, as bankruptcy causes differ from non-family firms. While family firms fail less often than non-family firms due to unqualified management and poor business-economic competencies, external bankruptcy causes, in particular bad debt and economic slowdown, are more widespread.

Practical implications

As our findings suggest that the close social bonds of family firms may become a burden in crisis situations and make them especially prone to external bankruptcy causes, owner-managers should pay more attention to the dependencies, deficiencies and risks that come with their binding social ties. Moreover, they should rely on external advice and appropriate management tools to better recognize and fend off the resulting risks.

Originality/value

To the best of our knowledge, this is the first study that quantitatively examines differences in bankruptcy causes between family and non-family firms.

Citation

Mitter, C., Walcher, M., Mayr, S. and Duller, C. (2022), "Bankruptcy at family and non-family firms: do they fail differently?", Journal of Family Business Management, Vol. 12 No. 4, pp. 1096-1112. https://doi.org/10.1108/JFBM-08-2021-0081