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What drives family firms?

Find out what drives Asia’s family firms to succeed and how they pass on the baton.

What drives family firms?

Around the world, family firms do better than non-family firms. The same is true in Asia, based on firms listed on the Singapore Exchange (SGX)—making up the majority at 60.8%. The data has implications beyond Singapore, as many firms from China, Malaysia, Indonesia and elsewhere have opted to list on the Singapore Exchange.

Note: We calculate return of assets using income (or loss) before tax, divided by total assets. The results are based on a sample of 533 firms whose performance details were available, after removing outliers.

Why this outperformance? This is because founders wish to keep the business within the family for multiple generations. Family members have their eye on the longer term. And they tend to take a more hands-on approach.

Passing on the Baton

Many businesses in Asia start out family owned. As they grow, we see them grapple with succession and longevity.

A Chinese proverb says, "Wealth does not last beyond three generations". And with many of the third generation starting to enter their family business, succession has become even more important

As Jeanette Wong, Group Executive of the Institutional Banking Group at DBS Bank says, "Succession planning is always a challenge especially when it involves the family. It can be fraught with emotion and misunderstanding, so it is important that family-owned businesses focus on what it takes to sustain longevity and growth".

Ending note: All findings are based on the report "Success and Succession", published last year by the Centre for Governance, Institutions and Organisations at the National University of Singapore Business School, in collaboration with DBS Bank.

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