Differential Corporate Risk－Taking Behavior of Family Firms under Product Market Competition

[Purpose] This study investigates the different impact of product market competition over the corporate risk－taking behavior between family firms and non－family firms. We expect that differentiated agency conflicts of family firms would affect their managerial risk aversion attitude under greater product market competition. To confirm this, we examine their differential corporate risk－taking behavior and the impact on their long－term performance under the product market competition, compared to non－family firms. [Methodology] We use sample firms listed in the Korea Exchange as of 2015 and measure the product market competition with the Four－firm concentration ratio and the Herfindahl －Hirschman Index of an industry. Then, we estimate its effect on corporate risk－taking and long－term profitability for family firms and non－family firm by OLS regression. [Findings] Our results show that the negative impacts of product market competition on corporate risk－taking and long－term performance are weaker for family firms. [Implications] This study sheds light on the role of unique governance of family firms on corporate risk－taking and long－term performance under greater competition.