These entities account for half of corporate hirings; contribute significantly to investments.
Released on Thursday, the report defines family businesses as those where a family or any of its members holds at least 20 per cent of the cash flow rights in the firm, either directly or indirectly, through holdings in private or public entities.
The report says India, with 67 per cent share of family businesses, ranks first among the 10 Asian countries studied. The survey also covered China, South Korea, Taiwan, Singapore, Thailand, Hong Kong, Indonesia, Malaysia and Philippines.
“India has the highest percentage (67 per cent) of family businesses among the 10 countries studied and its family businesses contribute significantly to investments and employment,” says the report. Further, 663 of the 983 listed Indian companies are family businesses and account for half of corporate hirings, concentrated in the consumer discretionary, consumer staples and consumer healthcare sectors, it adds.
South Asian economies such as Philippines (66 per cent), Thailand (66 per cent), Singapore (63 per cent), Malaysia (62 per cent) and Indonesia (61 per cent) also boast of a high share of family businesses. This is in contrast to North Asian countries such as China (13 per cent) and Taiwan (35 per cent), says the report.
Meanwhile, on the profitability aspect, Indian family businesses returned an impressive 15.8 per cent compounded annual growth rate (CAGR) during 2000-2010, but still underperformed the broader market, which delivered 19.3 per cent CAGR during the same period. "Since 2006, fixed-asset investment from family businesses has consistently grown stronger compared to non-family businesses. This has, in turn, weighed on profitability, which has declined since 2007 and is now below the broader market," explains the report. The underperformance has been more pronounced since the 2008 global financial crisis, it adds.
More From This Section
According to the report, family businesses outperformed their local benchmarks in seven of the 10 Asian markets, with the exception of India, Indonesia and Philippines. Family firms in China, Malaysia, Singapore and South Korea achieved the strongest relative outperformance against their local benchmarks in terms of CAGR in total returns during 2000-2010.
A key finding of the study is that Asian family businesses are mainly at an early stage of their life cycles, as 38 per cent of such entities reviewed were listed only after 2000. Most Asian family businesses are first-generation firms, in contrast with Europe and USA, where they are already in their fourth or fifth generation.
The study also says that family businesses remain the backbone of the Asian economy, contributing to half of the total number of listed companies, 32 per cent of the total market capitalisation and 57 per cent and 32 per cent of all hirings by listed companies in South Asia and North Asia, respectively.