Abstract:

This study examines profitability and leverage of family firms among the leadership of the first (founder), second (sibling partnership), and third generation (cousin consortium). This study is conducted to prove the results of previous studies which show that the number of family firms will decrease when the third generation leads the company. The decrease of family firms is caused by many factors such as family conflict, founder’s distrust to successor, successor’s  unwillingness to continue founder’s leading, and different competence in managing company between founder and successor. This study focuses on the last factor that the competence of founder, sibling partnership, and cousin consortium in managing company is different. By assuming that family firms have no problem with the three first factors, many family firms cannot continue the leadership from founder to successor because of two financial factors including profitability and leverage. First, family firms have low profitability or loss so that they cannot survive. Second, family firms can go bankrupt because of running up huge debt. Upon this consideration, this study employed profitability and leverage as performance measurement to differentiate the competence of founder, sibling partnership, and cousin consortium in managing company.