The World Federation of Exchanges (“The WFE”), the global industry group for exchanges and CCPs, today published a report into family businesses, investigating the opportunities and challenges for family firms when considering public equity as a source of funding.  The report – entitled Family Firms and Listing: Opportunities for Public Capital Markets – also includes a set of recommendations for stock exchanges to consider if they wish to attract more family firms to list.


  • Family firms are unique, with several characteristics that make them different from other types of companies. The research identifies several important attributes that define and influence the way family firms do business, including:
    • The fact that a family business is more than just an investment, with family owners deriving significant non-financial benefits from their firm (such as the influence that can come with owning and controlling a firm that bears their name);
    • How strongly family values shape the organisation’s strategic direction and stakeholder relationships (58% of listed and 53% of unlisted firms agree that the controlling family and business shared the same values); and
    • How family owners develop a deep emotional state of belonging, with over 50% of both listed and unlisted respondents agreeing on the interconnectedness of family and business.
  • These attributes impact the management of family businesses; for example, family firms may operate in a way that deviates from traditional expectations of profit maximisation, focusing instead on creating a long-term balance between family welfare and financial performance (78% of unlisted firms, and 58% of listed firms).  This focus could even result in family managers overlooking short-term opportunities, or accepting lower profits or slower growth, to ensure the survival of the company.
  • Family firms may approach corporate governance differently; for example, family owners prefer employing other family members (51% of unlisted firms agreed that they preferred to hire a family candidate with the same skills as a non-family candidate); or the business may lack formal governance structures or boards, with family members dominating the management team (90% of unlisted firms had a family member as CEO).
  • The desire for long-term control can lead to family businesses being reluctant to bring in outside shareholders through listing. Indeed, the report concludes that family firms may fear that going public might threaten the family’s authority, and challenge their identity, values and independence (31% of unlisted respondents stated that fear of losing control of their company was the primary reason for not listing). Listed firms surveyed as part of the research did not agree, however, that listing had a negative impact on their long-term outlook, and concluded that going public was a strategic choice that allowed the company to achieve its goals.

The unique attributes of family firms, coupled with a potential disconnect between unlisted firms’ perceptions, and listed firms’ experiences, of going public means that stock exchanges have an opportunity to increase the attractiveness of listing for family firms.  The WFE sets out recommendations for exchanges to consider, including:

  1. Develop a family business competence, demonstrating an understanding of the unique attributes of family firms and their specific concerns;
  2. Create opportunities for family firms to engage with listed family businesses;
  3. Showcase listed family firms, emphasising their positive experience and performance. This might include the creation of a dedicated index; and
  4. Assess opportunities to address concerns about listing.

Nandini Sukumar, CEO, The WFE commented: “Family-owned businesses are a key component of all thriving equity markets, but interestingly, the WFE’s research into family-owned businesses demonstrates there is an awareness gap between the reality and perception of listing for family firms.  The WFE’s recommendations, based on research and analysis, are a foundation for improving an exchange’s own capabilities in this increasingly important market segment, to enhance the listing experience for family firms.”

Siobhan Cleary, Head of Research & Public Policy, The WFE added: “The WFE believes that understanding the specific characteristics and attributes of family firms is an important first step for exchange operators who wish to attract more family firms to their markets, as these firms require a discrete approach when considering an IPO.”

The report was compiled by the WFE’s SME’s Working Group (SMEWG) using desktop research, interviews, and a survey of 50 listed and 76 unlisted family businesses from around the world (20 countries).  The WFE’s SMEWG has 21 member exchanges from across all WFE geographies. Its ongoing mandate is to identify critical success factors for SME markets. Other research from the WFE’s SMEWG includes a joint report with Milken Institute on SME exchanges and another paper on exchange-based financing of SMEs.

Today’s report is being launched at the WFE’s SME Conference in Valletta, hosted by Malta Stock Exchange.  The conference, which is being attended by the Prime Minister of Malta,  Dr Joseph Muscat, includes panel debates on global perspectives and solutions for SME markets; and new models for SME market-based financing.

You can read the full report here.