Cost behavior and profitability of family firms

This paper examines the impact of family ownership on firms’ asymmetric cost behavior and its implications for profitability. We find that family firms exhibit anti-sticky cost behavior, that is, they record a greater reduction in costs upon a sales decline than the increase in costs upon a similar sales upswing. In contrast, non-family firms demonstrate the prevalent pattern of cost stickiness. We posit that the greater cost reduction in family firms during downturns enhances the resilience of their profitability. Consistent with this notion, we find that family firms outperform non-family firms in periods of business contraction.