A recently published study from Deutsche Bank’s International Private Bank (IPB) found that many German family-owned businesses fare better in complex crises like the Covid pandemic.
Why is that and what can other companies learn from them?
The analysis, conducted by the IPB’s Head of Investment Banking Solutions (IBS), Dr. Markus Eckey, and IBS Product Specialist, Sebastian Memmel, concluded that listed family businesses have advantages over businesses without a family as an anchor investor that make them more resilient in times of crisis.
"Our research shows that family businesses are better able to cope with complex crises," says Dr. Eckey. While the share prices of family-owned businesses slumped by 23.7 percent during the first phase of Covid, companies without a family shareholder saw their share prices drop even more – by 30.7 percent. "In the case of family-owned businesses, the slump is on average smaller in a crisis, and the recovery usually comes much faster," Dr. Eckey explains.
The study found that family-owned businesses’ share prices returned to pre-Covid levels three weeks earlier. Dr. Eckey and Memmel identified three factors that provide higher resilience in crises:
1. Emotional anchoring
As anchor investors, families or founders are often more emotionally attached to the company than other major investors. Their focus is on long-term business success. At times of crisis especially, this can give a company more stability.
2. Short decision-making channels
Family businesses are often managed centrally and decision-making is fast. This enables them to react quickly in crisis situations and adapt quickly to changing conditions. In addition, members of the family often occupy managerial positions.
3. Financial stability
"Family businesses often have a more conservative capital base, which gives them more stability in a sudden crisis," Dr. Eckey explains. This usually shows in higher equity ratios. Therefore, family businesses usually have an easier time securing their liquidity in tough market conditions.
Another striking finding from the study is that listed family businesses are more profitable. According to the study, their return on equity (RoE) averaged seven percent in 2020. For companies without a family shareholder, average RoE was minus 11 percent.
A role model for others
Dr. Markus Eckey and Sebastian Memmel believe that the way family businesses have shown their resilience during the Covid crisis can serve as a role model for other companies: "Other companies can certainly learn from the combination of long-term orientation, short decision-making processes and financial stability to better prepare themselves for future crises," Dr. Eckey added.
Dr. Markus Eckey and Sebastian Memmel
Further information on the methodology and the results of the English-language study as well as the full version (paywall) "Impact of COVID-19 on family business performance: evidence from listed companies in Germany" are available on Emerald Insight.
About Deutsche Bank
Deutsche Bank provides retail and private banking, corporate and transaction banking, lending, asset and wealth management products and services as well as focused investment banking to private individuals, small and medium-sized companies, corporations, governments and institutional investors. Deutsche Bank is the leading bank in Germany with strong European roots and a global network.
This release contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently available to the management of Deutsche Bank. Forward-looking statements therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.
By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement.
Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our revenues and in which we hold a substantial portion of our assets, the development of asset prices and market volatility, potential defaults of borrowers or trading counterparties, the implementation of our strategic initiatives, the reliability of our risk management policies, procedures and methods, and other risks referenced in our filings with the U.S. Securities and Exchange Commission.
Such factors are described in detail in our SEC Form 20-F of 12 March 2021 under the heading “Risk Factors”. Copies of this document are readily available upon request or can be downloaded from www.db.com/ir.
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A recently published study from Deutsche Bank’s International Private Bank (IPB) found that many German family-owned businesses fare better in complex crises like the Covid pandemic.
Why is that and what can other companies learn from them?
The analysis, conducted by the IPB’s Head of Investment Banking Solutions (IBS), Dr. Markus Eckey, and IBS Product Specialist, Sebastian Memmel, concluded that listed family businesses have advantages over businesses without a family as an anchor investor that make them more resilient in times of crisis.
"Our research shows that family businesses are better able to cope with complex crises," says Dr. Eckey. While the share prices of family-owned businesses slumped by 23.7 percent during the first phase of Covid, companies without a family shareholder saw their share prices drop even more – by 30.7 percent. "In the case of family-owned businesses, the slump is on average smaller in a crisis, and the recovery usually comes much faster," Dr. Eckey explains.
The study found that family-owned businesses’ share prices returned to pre-Covid levels three weeks earlier. Dr. Eckey and Memmel identified three factors that provide higher resilience in crises:
1. Emotional anchoring
As anchor investors, families or founders are often more emotionally attached to the company than other major investors. Their focus is on long-term business success. At times of crisis especially, this can give a company more stability.
2. Short decision-making channels
Family businesses are often managed centrally and decision-making is fast. This enables them to react quickly in crisis situations and adapt quickly to changing conditions. In addition, members of the family often occupy managerial positions.
3. Financial stability
"Family businesses often have a more conservative capital base, which gives them more stability in a sudden crisis," Dr. Eckey explains. This usually shows in higher equity ratios. Therefore, family businesses usually have an easier time securing their liquidity in tough market conditions.
Another striking finding from the study is that listed family businesses are more profitable. According to the study, their return on equity (RoE) averaged seven percent in 2020. For companies without a family shareholder, average RoE was minus 11 percent.
A role model for others
Dr. Markus Eckey and Sebastian Memmel believe that the way family businesses have shown their resilience during the Covid crisis can serve as a role model for other companies: "Other companies can certainly learn from the combination of long-term orientation, short decision-making processes and financial stability to better prepare themselves for future crises," Dr. Eckey added.
Dr. Markus Eckey and Sebastian Memmel
Further information on the methodology and the results of the English-language study as well as the full version (paywall) "Impact of COVID-19 on family business performance: evidence from listed companies in Germany" are available on Emerald Insight.
About Deutsche Bank
Deutsche Bank provides retail and private banking, corporate and transaction banking, lending, asset and wealth management products and services as well as focused investment banking to private individuals, small and medium-sized companies, corporations, governments and institutional investors. Deutsche Bank is the leading bank in Germany with strong European roots and a global network.
This release contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently available to the management of Deutsche Bank. Forward-looking statements therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.
By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement.
Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our revenues and in which we hold a substantial portion of our assets, the development of asset prices and market volatility, potential defaults of borrowers or trading counterparties, the implementation of our strategic initiatives, the reliability of our risk management policies, procedures and methods, and other risks referenced in our filings with the U.S. Securities and Exchange Commission.
Such factors are described in detail in our SEC Form 20-F of 12 March 2021 under the heading “Risk Factors”. Copies of this document are readily available upon request or can be downloaded from www.db.com/ir.
Further links on the topic
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