Dividend payout decisions under uncertainty: the ownership influence in the early days of the COVID-19 pandemic in Finland

PurposeThis paper examines whether ownership type has a moderating influence on dividend payouts during the COVID-19 pandemic crisis with respect to changes in profits. Future uncertainties because of the pandemic will result in a perceived need for liquidity within the company, but retaining cash may be risky for shareholders who could look for less risky alternatives. The dividend payout strategy is thus even more closely related to the overall type concentration and strategy of the owners during the crisis.Design/methodology/approachThe effects are explored and tested on early data from 2019 to 2020 of Finnish companies using ANCOVA while controlling for profitability and sector variables.FindingsA significant effect on dividend payout during the COVID crisis was found when the companies are dominantly held by individual owners validating early suggestions on such an influence. Therefore, this study contributes further to the academic debates on the influence of ownership concentration in times of crises. This study lists certain sectors which experience diminished profits during such a crisis which pinpoints sector separation in future discussions.Research limitations/implicationsThis study explores early data from a specific context in the Nordic countries. However, it does so out of purpose as explained in the paper.Practical implicationsOwnership type and concentration matters when it comes to dividend payout decisions under uncertainty with regard to changes in profit. Investors need to accept these behavioural insights into their decisions.Originality/valueThis study examines the signalling effect of dividends by analysing how actual or anticipated change in profitability due to a crisis is reflected by owners and leads to dividend payout decisions under uncertainty.

Family firm competitiveness and owner involvement

PurposeIn many countries, small and medium-sizes enterprises (SMEs) are primarily responsible for wealth, economic growth, innovation and research and development. In this paper, the authors examine the impact of family ownership and owner involvement on the financial performance of unlisted Finnish SMEs.Design/methodology/approachThis is an empirical paper using a random sample of 1,137 non-listed Finnish SMEs. Through regression analyses and robustness tests, the authors examine the effects of family management, family and employee ownership and involvement.FindingsUsing profitability measures, the authors find family-owned and controlled SMEs perform significantly better than non-family firms. The number of family members actively involved in daily business operations bears a significant negative relation to firm performance. In contrast, non-family firms in which owners are actively involved, provide comparable returns to family firms, suggesting that in non-family firms active involvement contributes to performance. The authors find that employee ownership in SMEs does not provide an efficient way to compensate employees since more dispersed ownership does not lead to higher performance.Research limitations/implicationsSME employee ownership does not provide an efficient way to compensate employees since more dispersed ownership does not lead to higher performance.Practical implicationsIn the case of Finland, family ownership is an effective organisational structure. As the depth of the COVID pandemic remains uncertain, firms with committed ownership are key to the economic recovery.Originality/valueThe authors approach the family ownership and involvement issue from a different angle. Unlike earlier studies, the authors examine the impact of both family ownership and involvement on the financial performance of privately owned SMEs. This paper helps shed light on the role of family ownership and involvement as a possible explanatory factor of overall economic performance.

Employment policies in private loss firms: Return to profitability and the role of family CEOs

We study employment policies in private loss firms and their impact on loss reversal. We show that employee retention positively affects the likelihood of a return to profitability in firms with family CEOs, who are typically averse to employee dismissals for reasons mainly related to preserving socioemotional wealth. This effect is more pronounced for firms with transitory (i.e., less severe) losses. Further analysis suggests that productivity improvement following employee retention is the main economic channel of our results. A lack of socioemotional wealth also helps explain the negative association between employee retention and loss reversal in firms with outside CEOs. This pronounced duality of performance responses to employee retention supports prior findings on the importance of socioemotional wealth for family firms. In light of the crisis induced by COVID-19, our findings can provide insights that may enhance the efficacy of employee retention-related government schemes assisting firm recovery.