Family vs. Non-Family Firms: Linking Future Environmental Expenditures to Firm Value

Abstract

This study investigates the relationship between future environmental protection investments and corporate value in family firms during the 2015–2020 period. Family firms play a vital role in the economy, but their governance structures and succession dynamics create unique challenges for balancing sustainability with profitability. Using data from firm annual reports, this research compares environmental expenditures between family and non-family firms and examines their impact on corporate value. The results indicate that family firms invest more in future environmental protection than non-family firms, reflecting their emphasis on long-term value creation. Furthermore, the leadership structure influences these investments, with firms led by successor chairmen allocating more resources to environmental protection than those led by founder or outsider chairmen. Employing a two-stage least squares (2SLS) approach to address endogeneity, the findings reveal that higher environmental investments are positively associated with firm value, particularly in successor-led family firms. These results highlight the importance of environmental initiatives in mitigating agency problems and enhancing reputation, offering practical implications for policymakers and family firm leaders. This research contributes to the literature on family firm sustainability, demonstrating the role of governance and environmental responsibility in driving long-term corporate value.