1. Introduction
Playing an important role in the economy and occupying a huge proportion in the whole market, family firms have been paid special attentions by scholars with a long time. However, it is scarce to find the related studies about the family impact on corporate performance especially during hard times despite its prevalence around the world. Now, many scholars have realized the importance about family firms due to their reciprocal impact (Sharma, 2004). Previous researches mainly concentrate on two topics including the strategic behavior and family influence of family firms. For example, it is easy to find that more centralized structure can be seen in family firms (Bartholomeusz and Tanewski, 2006). And as a factor that influences the performance of family firm, family business governance can be seen as one of the most important determinant of family firm success.

It is more easily to test the performance of the firm during the hard time which provides an extreme environment to clearly show the differences between the performance of family firms and non-family firms. And the latest global financial crisis in 2008 provides such an ideal setting investigating such a topic due to its magnitude and global scale (Haoyong Zhou, 2012). In this paper, whether family firms performs better during hard time especially in a financial crisis will be critically discussed based on Haoyong Zhou’s recent work. He provided that to be specific, family firms do not perform better in the crisis while it is the companies with founder presence do outperform non-family firm due to different agency cost, investment strategy and access to credit market.
Generally, in order to give a critical review to the assertion that family firms are better performers in a financial crisis, zhou’s evidence will be reviewed in the second part followed by some more discussion about this assertion which refers to family firm’s performance in accounting performance (Operating Retunes on Assets) and market performance (Tobin’s Q); and the reasons for the different performances. And a conclusion will be presented to prove whether it is a right assertion.
2. Review of evidence and the relevance of Tobin’s Q in predicting performance
In Zhou’s paper, he mainly used empirical study by using statistical tool including multivariate regressions and fixed effect regressions to analyze a data set broadly from the main economic entities containing 658 firms from US, UK, Germany, France and Italy with data from 2006 to 2010. Several dummy variables representing independent variables to show the main characters influencing firm’s performance and dependent variables representing the market and accounting performance are introduced for the regression analysis. 4 types of family firms are identified for analyzing the topic specifically containing founder firms, heir firms, family-owned firms, Leader/owner firms to give a more accurate conclusion.
The measure of firm performance are divided into accounting performance and market performance separately by using Operating Retunes on Assets (OROA) and Tobin’s Q. Operating Retunes on Assets (OROA) is used for measuring firm’s accounting performance while Tobin’s Q is used for measuring firm’s market performance. The results from OROA and Tobin’s Q were discussed by Zhou and he proved that Tobin’s Q is not suitable for measuring firm’s performance in a financial crisis.
2.1 Family firms and non-family firms
The table below shows firms’ performance before crisis (2006-2007) by comparing results from performance measure (Tobin’s Q and OROA). The differences in mean between family firms and non-family firms are not significant, which means family firms do not significantly perform better than non-family firms whether by using accounting performance measure(OROA) or market performance measure (Tobin’s Q). There are not big differences in both accounting and market performance for mean of OROA and Tobin's Q before the crisis.

Descriptive statistics of family firms, founder firms in 2008 Non-family firms All family firms Founder firms Difference in Mean
OROA 425 0.110 0.080 229 0.110 0.082 85 0.110 0.094 0.000 -0.001
Tobin's Q 419 1.632 1.000 222 1.713 1.088 83 1.886 1.238 -0.081 -0.254

Then the evidence of univariate difference is the comparison of the difference test of OROA, and Tobin’s Q. The performance measures data of family firms, non-family firms and founder firms before and during the crisis to give an additional illustration. It can be seen that before the crisis, the mean of Non-family firm’s OROA is 0.111 compared with 0.096 while the performance change is similar to family firms with 0.113 before crisis and 0.100 during crisis. And the performance change is -0.016 compared with -0.014. On the other hand, the result from Tobin’s Q is similar with the change of non-family firms is -0.449 compared with -0.541 of family firms. The results support that family firm does not outperform non-family firms during financial crisis. The third evidence is the results of firm performance around the financial crisis by using firm fixed effect model regression. The coefficients show the significance of firms’ performance. It can be seen that the coefficients between family firms and non-family firm are similar with a slight difference of 0.003 by OROA and 0.005 by Tobin’s Q, which implies that family firms do not significantly perform better than non-family firms during the financial crisis. 2.2 Founder firms and non-family firms.
The comparison between non-family firms and founder firms are then given to provide a specific conclusion. And mean of OROA before crisis of founder firms is 0.116 compared with 0.111 during the crisis, meaning that the OROA of the founder firms does not drop dramatically during the crisis. On the contrary, it is 0.096 and 0.111 which drops 0.016. Additionally, the performance change is also significantly different with -0.055 compared with -0.016, indicating that founder firms outperformance non-family firms during the financial crisis.
However, the results from Tobin’s Q are different. For non-family firms, it is 2.205 before crisis and 1.756 during crisis with a difference of -0449. And for founder firms, it drops dramatically from 2.811 to 2.148 with a -0.664 difference. Further illustration for this phenomenon will be given in the next part. It indicates that a disparate effect on market value based performance and cash flow based performance might be due to the financial crisis.

The fixed effect estimation also gives evidence to show that founder firms outperform non-family firms with accounting performance. The founder firms show significantly good performance in OROA during crisis. On the contrary, they do not show as significant value premium as OROA measured by Tobin’s Q during the crisis, which means that founder firms accounting performance premium still exits while their market value premium disappears. In the table below, the results form the first-stage regression indicate the coefficient between founder firms and Old firms is -0.885 which is negative while it is 0.332 to US and 0.177 to Ln cash firms which are positive. And the founder firms’ coefficient is 0.047 compared with -0.001 of heir firms, 0.003 of family owned firms and -0.004 of leader/owner firms, implying that founder firms do outperform other family firms in the crisis.

2.3 Tobin’s Q in predicting performance
Some results above are significant different between OROA and Tobin’s Q. The reason for this might due to their different algorithms. OROA is calculated as a period cash flow divided by the book value of total assets at the end of a fiscal year. And Tobin’s Q is computed as market value over book value of total assets. Therefore, Tobin’s Q is mainly driven by market price of stocks while OROA is driven by some firm level characteristics as operating efficiency, business strategy and expense control etc.
From the table below, volatility of monthly return is significantly high through different times. The problem by using Tobin’s Q is that the stock prices are high volatility during crisis. Meanwhile, investors tend to overreact and be irrational during this period (Glode et al., 2010). However, investors’ overreaction and high volatility makes Tobin’s Q hard to predict exactly as it is driven by market price of stocks. From the table above, volatility of monthly return is significantly high through different times.
3. Critical review of the assertion that family firms outperform in hard times (900)

3.1 Agency cost
OROA= EBIT/total assets=Sales/total assets – Costs of goods/total assets – Admin expense/total assets – Depreciation and Amortization/total assets.
[Insert Table 9 here] I use firm fixed effect model similar to model (2) to examine which component(s) contribute(s) the accounting performance premium of founder firms during the crisis. The results in Table 9 show that among 4 components, only expense/total assets of founder firms is significantly lower during the crisis at 5 percent level. This suggests that founder firms do a better job in administrative expense control in the crisis, which results in a net profit premium.
Previous studies (Morck et al., 1988, 2000; Fahlenbrach, 2009, etc.) argue that founders bring differentially valuable skills to firms. “Founders may be inspiring leaders, great visionaries, or exceptionally talented scientists.” (Villalonga and Amit, 2006). My findings suggest that in additional to above mentioned skills, founders serve as good expense controllers, leading firms to survive recession ages.

3.2 Investment I find that founder firms invest significantly less (at 5 percent level) relative to non-family firms in the crisis. At the same time, however, founder firms have gained more short term loan and aggregate level of debt is higher than non-family firms. The coefficients of
Founder*crisis_acc in both regressions mean (column 2 and 3) that on average, founder firms during the crisis have a bigger increment of short term debt by 431 mil US dollars relative to non-family firms and their capital structure is more leveraged by 0.8 relative to non-family firms. Recall that in Table 3 descriptive statistics, before crisis
14 founder firms are less leveraged and invest more relative to non-family firms.

The coefficients indicate that founder firms substantially change their investment and financial strategy during the crisis.

If I assume that more short term debt means better access to credit market, the fact that founder firms raise their debt level during the crisis suggests that founders firms have more financing resources than non-family firms in bad time, when financial institutions tighten credit granting. It is widely documented that non-family firm mangers are myopic and have more incentive to take risky projects to boost current earnings (Andersen and Reeb, 2003). The incentive is even more under the pressure of managerial dismissal in harsh economic conditions. In contrast, founder firms are more long-term oriented and take a conservative investment strategy during the crisis. Risky

In summary, the results show that during the financial crisis, founder firms have a better control of expense and make a more conservative investment strategy even though they may get better access to credit market than their counterparts. Less incentive of founder firms to over-invest in risky projects to boost current earnings in the crisis explain their outperformance. On the other hand, because market performance are mainly driven by stock prices, high volatility of stock returns and investors’ overreaction to bad market conditions during the crisis may dilute market value premium of founder firms.