Family businesses have been a crucial source
of private wealth creation in Asia in the past decade, new Credit
Suisse research confirms.
An analysis of 3,568 publicly listed Asian
family businesses found that they delivered 261% cumulative total
return and a compound annual growth rate of 13.7% during 2000-2010,
outperforming local benchmarks in seven out of 10 Asian
markets.
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The study showed family businesses accounted
for about 50% of all listed companies, 32% of total market
capitalisation, as well as 57% and 32% of all listed companies’
employees in South Asia and North Asia respectively.
Bank lending major source of business
funding
The results underline how providing financing
and services to family businesses must form a key strut of private
banks’ offerings in Asia.
“Across Asia, family businesses are generally
less able, or willing, to issue bonds than nonfamily businesses,
relying more on bank lending to finance their business activities,”
Credit Suisse’s study said.
Countries surveyed included China, Hong Kong,
India, Indonesia, Malaysia, the Philippines, Singapore, South
Korea, Taiwan and Thailand.
In particular, family businesses in China,
Malaysia, Singapore and South Korea strongly outperformed their
local benchmarks in total return during the period.
Family businesses were defined as
family-controlled companies (or an individual of the family) that
held at least 20% of the cash flow rights in the firm either
directly, or indirectly, through holdings in private or public
entities.
Economic importance of South Asian
tigers
The majority of the family businesses surveyed
were in South Asia (65%) compared with 37% in North Asia.
India had the largest number of family
businesses (67%) while Chinese family businesses accounted for the
least (13%) due to its state-owned economic structure.
In particular, family businesses in Singapore
were found to have played a prominent role in the domestic economy
and capital market.
As of the end of 2010, family businesses
accounted for 63% of listed companies in Singapore, with a total
market capitalisation of 54% and 140% of nominal GDP.
Speaking to Banking & Payments
Asia, Marcel Kreis head of private banking for Asia-Pacific at
Credit Suisse, said that as family businesses grow, there is a
shift towards using family offices for more professional
investment.
Kreis said: “We are seeing more and more
clients that run family businesses express a desire to have the
proceeds of their activities more professionally managed. There, we
can play a very important role, and that business is of growing
interest to us.”
Methodology
The study drew upon primary data from 3,568
publicly listed family businesses in Asia with market
capitalisation of more than $50m.
The financial performance of 1,279 publicly
listed family businesses with market capitalisation of over $500m
was also evaluated.
