Dr. Llanos-Contreras, Orlando

This article makes progress in understanding how the heterogeneity of governance factors, and changes in the political/economic landscape influence family firms’ risk taking. Using a sample of 133 Chilean listed firms, this article studies the risk taking behavior of family firms from 2009 to 2016. Using several informational sources, an unbalanced panel data set is built to make estimations employing the two-way fixed effects OLS data panel regressions. GMM is also employed for robustness. Chilean family firms’ risk-taking, measured through z-score and ROA volatility, is higher than in non-family firms. This would be a response to take advantage of business opportunities that enhance their long-term position in financial and socioemotional wealth. Results also indicate that founders’ leadership (on the board of directors) aligns with higher levels of corporate risk, while the influence of founders’ descendants within the board is in the opposite direction. Finally, political uncertainty has a negative and statistically significant influence on Chilean family firms’ risk taking. Context (defined as point of reference) is a critical factor in explaining family firms’ strategic behavior through socioemotional wealth. Performance above/below expectation, the danger of bankruptcy and the global financial crises have been used as points of reference (context) to explain family firms’ risk taking, but political and economic landscapes have not been included before as explanatory variables.