Mixing Family with Business: A Study of Thai Business Groups and the Families behind Them

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Abstract
A large fraction of business groups around the world are run by families. In this paper, we analyze how the structure of the families behind these business groups affects the groups' organization, governance and performance. To address this question, we constructed a unique data set of the family trees and the business groups they run for 70 of the largest business families in Thailand. We show that the group head and his brothers hold the majority of family positions within each group. However, we also find a positive relationship between family size and involvement of family members in the business group, especially when the ultimate control has passed from the founder to one of his descendants. Interestingly, groups that are run by larger families (more male siblings of the group head) tend to have lower performance. This negative performance effect coincides with a larger number of small firms in these group, more fragmented internal capital markets and possibly more tunneling along the pyramidal structure of the groups. These performance and within-group resource allocation effects are again especially pronounced in groups where the founder is no longer active and ultimate control has been passed to one of his descendant. One hypothesis that emerges from our analysis is that part of the decay of family-run groups over time may be due to in-fighting for group resources as control becomes more diluted among different family members.