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Profitability of Foreign Family-Controlled Firms: The Case of American Depository Receipts

We analyze the relative operating performance of Family Business’ list of the largest family-controlled firms versus non-family-controlled firms listed in the S&P 500. Our cross-sectional data includes over 400 firms and eleven years of data. We provide empirical evidence to demonstrate that family-controlled firms are more profitable than non-family-controlled firms. However, this is limited to family-firms trading as American Depository Receipts (ADR). We show that foreign family-controlled firms that trade as ADRs outperform U.S. family-controlled firms. It appears that family-owned firms have taken advantage of the reduction in capital barriers when they access U.S. stock exchanges. We conclude that foreign family-controlled firms are better able to exploit their growth opportunities compared with a sample of large U.S. firms.