Annals of the University of Oradea: Economic Science (Jul 2018)

PERFORMANCE OF LEADING FAMILY BUSINESSES IN THE GROUP OF EMERGING COMPANIES IN HUNGARY

  • Andrea Rozsa,
  • Krisztina Nemeth,
  • Andrea Szirmai Madarasine,
  • Gergely Harsanyi

Journal volume & issue
Vol. 28, no. 1
pp. 214 – 226

Abstract

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The study was carried out with help of HAS-BBS Macroeconomic Sustainability Research Group and BBS Corporation Analysis Center. Abstract: The main purpose of the study is to analyze the significance of family businesses within the group of emerging companies. The research into the success factors, potential growth and internationalization of family businesses has recently come into the focus of international interest. This study analyzes family businesses that have been admitted to Hungary’s group of emerging companies in the past two years, on the basis of their official annual reports. The elements of the sample were taken from the specialized database of the Hungarian subsidiary of Bisnode, international data service company. On the one hand, we have studied if these businesses are able to produce risk premium over the risk-free rate (owner’s excess earnings). On the other hand, we are examining what capital structure they use to manage their successful business. Is it possible to conclude that family businesses with high return on equity (and positive risk premium) accomplish their successes with safe (relatively low risk) capital structure? Or does it work vice versa: the majority of leading family businesses with high return on equity are characterized by risk exposure related to their capital structure (rate of indebtedness over 60%, i.e. leverage over 1.5). Our studies have been conducted in the past 3 years, in the time period of 2014–2016, on the basis of publicly accessible and verifiable data of the annual report. In order to set the foundation for our analysis, we provide an overview on the major international literature focusing on the significance of family businesses, as well as the key Hungarian publications on this issue. For the selection of the sample and the justification of its relevance, we are providing an overview on Hungary’s leading company rankings. The analyses are concluded via the statistical study of the time sequence data of financial indicators.

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