Hong Kong News

Nonpartisan, Noncommercial, unconstrained.
Thursday, Feb 29, 2024

Family-owned firms more profitable, innovative, Credit Suisse says

Family-owned firms more profitable, innovative, Credit Suisse says

Asia’s representation in the survey by Switzerland’s second-largest bank shows the region’s significance to the wealth management business, especially the financial services for family office and ultra wealthy clients.
Family-owned business outperformed their non-family peers by 3 per cent since 2006, Credit Suisse said in its survey of 1,000 family-owned companies.

Among the 1,000 family-owned businesses, 517 are from the Asia-Pacific region with US$4.2 trillion of value. The Asian families, excluding the ones in Japan, ran their businesses with excess returns of 3.3 per cent per annum over the period, according to the survey released on Tuesday.

“Family-company returns on capital have consistently reflected a premium in each region over their non-family counterparts of between 1.5 per cent and 2 per cent, showing a sustained track record of superior value creation by family businesses”, said Nannette Hechler-Fayd’herbe, Chief Investment Officer for the EMEA region and Global Head Economics & Research.

Asia’s representation in the survey by Switzerland’s second-largest bank underscores the region’s significance to the wealth management business, especially the financial services for family office and ultra wealthy clients.

Early-generation companies perform better, reflecting their early entrepreneurial life cycles and stronger growth that accompany them, according to the survey. On the contrary, the later generations may be facing impediments to growth as issues related to succession become more prevalent.

In 2022, family-business performance reversed sharply around 7 per cent in 2022. Companies with a high cash-flow return on investment model, which is in line with the family-business model, performed better in 2022 amid a world of rising bond yields.

By looking into the proportion of sales associated with the newly introduced product, the number of patents that the firm has been granted, and the ratio of patents granted to a firm to the amount of R&D investment, the survey found that family-owned businesses did better than their non-family peers in turning an innovative idea into something profitable.

Credit Suisse explained that because of higher company-specific human capital generated from longer employee tenures, stronger social capital and a more efficient operating model, family-owned companies can generate a higher innovative output.

For example, 40 per cent of 20 largest family-owned businesses have a CEO with a tenure exceeding 10 years, compared to only 15 per cent of non-family-owned businesses, which helps make internal collaboration stronger and barriers lower when entering into projects.

The survey also explained that company and industry knowledge, as well as close relationships, also formed stronger social capital that help drive innovation. And when CEOs in family companies are more driven by prudence and the desire to closely control the firm’s deployment of resources, it results in lower governance costs and stronger ability to monitor top managers closely to make the use of resources for innovation more efficient.

“Family-owned businesses generate a higher conversion rate of innovation inputs into innovation outcomes, despite more conservative spending on research and development”, said Richard Kersley, Managing Director, EMEA Securities Research and Head of Global Product Management at Credit Suisse. “Looking ahead, we see decarbonisation as a common thread across the unicorn landscape that will only grow in importance going forward”.

Half of the 1,000 family-owned businesses surveyed are from 13 markets in the Asia-Pacific region, with China, India and Hong Kong making up 63 per cent, with US$2.28 trillion in combined market value.

The 151 family-owned companies in mainland China had a combined value of US$1.03 trillion of value, while 66 Hong Kong companies accounted for US$397 billion.

Some of the biggest companies in the Asia-Pacific region include South Korea’s Samsung Electronics with US$280 billion, India’s Reliance Industries with US$193 billion and TCS with US$152 billion. Tech giants from China, such as JD.com, NetEase and Baidu, are also among some of the biggest.

The oldest businesses can be dated back to the 19th century, such as the Bank of Philippine Islands, India-based BBTCL, and The Hongkong and Shanghai Hotels in Hong Kong.
Newsletter

Related Articles

Hong Kong News
0:00
0:00
Close
It's always the people with the dirty hands pointing their fingers
Paper straws found to contain long-lasting and potentially toxic chemicals - study
FTX's Bankman-Fried headed for jail after judge revokes bail
Blackrock gets half a trillion dollar deal to rebuild Ukraine
Steve Jobs' Son Launches Venture Capital Firm With $200 Million For Cancer Treatments
Google reshuffles Assistant unit, lays off some staffers, to 'supercharge' products with A.I.
End of Viagra? FDA approved a gel against erectile dysfunction
UK sanctions Russians judges over dual British national Kara-Murza's trial
US restricts visa-free travel for Hungarian passport holders because of security concerns
America's First New Nuclear Reactor in Nearly Seven Years Begins Operations
Southeast Asia moves closer to economic unity with new regional payments system
Political leader from South Africa, Julius Malema, led violent racist chants at a massive rally on Saturday
Today Hunter Biden’s best friend and business associate, Devon Archer, testified that Joe Biden met in Georgetown with Russian Moscow Mayor's Wife Yelena Baturina who later paid Hunter Biden $3.5 million in so called “consulting fees”
'I am not your servant': IndiGo crew member, passenger get into row over airline meal
Singapore Carries Out First Execution of a Woman in Two Decades Amid Capital Punishment Debate
Spanish Citizenship Granted to Iranian chess player who removed hijab
US Senate Republican Mitch McConnell freezes up, leaves press conference
Speaker McCarthy says the United States House of Representatives is getting ready to impeach Joe Biden.
San Francisco car crash
This camera man is a genius
3D ad in front of Burj Khalifa
Next level gaming
BMW driver…
Google testing journalism AI. We are doing it already 2 years, and without Google biased propoganda and manipulated censorship
Unlike illegal imigrants coming by boats - US Citizens Will Need Visa To Travel To Europe in 2024
Musk announces Twitter name and logo change to X.com
The politician and the journalist lost control and started fighting on live broadcast.
The future of sports
Unveiling the Black Hole: The Mysterious Fate of EU's Aid to Ukraine
Farewell to a Music Titan: Tony Bennett, Renowned Jazz and Pop Vocalist, Passes Away at 96
Alarming Behavior Among Florida's Sharks Raises Concerns Over Possible Cocaine Exposure
Transgender Exclusion in Miss Italy Stirs Controversy Amidst Changing Global Beauty Pageant Landscape
Joe Biden admitted, in his own words, that he delivered what he promised in exchange for the $10 million bribe he received from the Ukraine Oil Company.
TikTok Takes On Spotify And Apple, Launches Own Music Service
Global Trend: Using Anti-Fake News Laws as Censorship Tools - A Deep Dive into Tunisia's Scenario
Arresting Putin During South African Visit Would Equate to War Declaration, Asserts President Ramaphosa
Hacktivist Collective Anonymous Launches 'Project Disclosure' to Unearth Information on UFOs and ETIs
Typo sends millions of US military emails to Russian ally Mali
Server Arrested For Theft After Refusing To Pay A Table's $100 Restaurant Bill When They Dined & Dashed
The Changing Face of Europe: How Mass Migration is Reshaping the Political Landscape
China Urges EU to Clarify Strategic Partnership Amid Trade Tensions
The Last Pour: Anchor Brewing, America's Pioneer Craft Brewer, Closes After 127 Years
Democracy not: EU's Digital Commissioner Considers Shutting Down Social Media Platforms Amid Social Unrest
Sarah Silverman and Renowned Authors Lodge Copyright Infringement Case Against OpenAI and Meta
Why Do Tech Executives Support Kennedy Jr.?
The New York Times Announces Closure of its Sports Section in Favor of The Athletic
BBC Anchor Huw Edwards Hospitalized Amid Child Sex Abuse Allegations, Family Confirms
Florida Attorney General requests Meta CEO's testimony on company's platforms' alleged facilitation of illicit activities
The Distorted Mirror of actual approval ratings: Examining the True Threat to Democracy Beyond the Persona of Putin
40,000 child slaves in Congo are forced to work in cobalt mines so we can drive electric cars.
×