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Family businesses are the backbone of Asian economies, research

Family businesses are a key source of private wealth creation in Asia and are the backbone of the region's economies, according to research from Credit Suisse.
Family businesses are the backbone of Asian economies says research

Family businesses are a key source of private wealth creation in Asia and are the backbone of the region's economies, according to research from Credit Suisse.

The study, entitled Asian Family Businesses Report 2011, analysed the performance of over 3,500 publicly listed family businesses in China, Hong Kong, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand.

It found that between 2000 and 2010, family businesses outperformed non-family controlled companies in seven of the 10 Asian countries observed. Family firms in China, Malaysia, Singapore and South Korea showed the strongest outperformance against their local standards.

Overall, family businesses delivered a 261% return during the ten-year period, with a year-on-year growth rate of 13.7%, according to Credit Suisse's Emerging Markets Research Institute.

Family-controlled companies accounted for 50% of all listed companies examined for the study. They were more common in south Asia, where they accounted for 65% of all listed companies, than in north Asia (37%).

India is home to the highest number of family businesses in the region, with family firms accounting for 67% of all listed companies, while Chinese family businesses represent the lowest percentage (13%).

Even though they are more common overall than non-family businesses, family firms represent only 32% of total market capitalisation in Asia. However, market capitalisation of Asian family businesses grew six times in the 10 years up to 2010, as companies sought growth opportunities through fundraising in capital markets.

Family firms with a large market capitalisation were more numerous in north Asia, the study also found, with almost 60% of family businesses with market capitalisation of over US$500 million (€377 million) located in the region. Hong Kong accounted for 25% of the total, followed by South Korea (13%), Taiwan (12%) and China (9%).

According to the research, Asian family businesses tend to be more prevalent in traditional sectors, especially the financial, industrial and consumer good sectors. South Korea, Taiwan and India are the only markets to show higher concentrations of technology-related family businesses.

These findings appear to contradict what Amar Gill, head of special projects research at brokerage and investment group CLSA Asia-Pacific Market, recently told CampdenFB. He said family businesses were not crucial sources of wealth creation in Asia. 

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