The appeal of family firms

A new index tracks the performance of Canadian companies where a family or individual owns a controlling interest.

Yan Barcelo 5 October, 2018 | 5:00PM
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According to management theories of the 1990s, family-controlled publicly listed firms were dodo birds, heading toward extinction. Yet, they survive -- and thrive, as a recent study by National Bank of Canada shows. In fact, they exhibit such outstanding long-term performance that NBC has launched in August an index tracking the group.

Out of the nearly 250 companies included in S&P/TSX Composite Index, the NBC study identifies 43 family-controlled businesses. Their outperformance is plain to see: from June 2005 to June 2018, the S&P/TSX Composite Index shows a total cumulative return of 132.7%, or 6.7% annualized; the NBC Canadian Family Index exhibits over the same period a total cumulative return of 206.2%, or 9.0% annualized.

"Until recently, there was a broad consensus that family companies were better suited to past eras," writes the report. In a modern rules-based economy, claimed proponents, "family-controlled businesses would be pushed to the margins by the rise of public corporations owned by diverse shareholders and run by professional managers," benefiting from a greater capacity to raise capital, attract highly qualified workers and earn higher profits.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Rogers Communications Inc61.95 CAD2.26
Rogers Communications Inc Class B60.68 CAD1.07Rating
Shaw Communications Inc Class A38.25 CAD0.55
Shaw Communications Inc Class B36.33 CAD-0.38Rating

About Author

Yan Barcelo  is a veteran financial and economic journalist with more than 30 years of experience, writing for many publications in Toronto and in Montreal, including CPA MagazineLes Affaires and Commerce.

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