Governing for Good? Exploring ESG Challenges in Family-Owned, Dual-Led Enterprises

Abstract

The impact of family ownership and dual leadership on ESG performance is significant, influencing corporate governance, strategic direction, and stakeholder engagement. Empirical evidence from 43 countries, spanning the period 2015–2023, suggests that family-owned firms generally underperform in ESG practices. This deficiency is particularly pronounced in the Governance (G) dimension, affecting key areas such as Corporate Social Responsibility (CSR) strategy, shareholder relationships, and management oversight. The concentration of power associated with dual leadership—combining both CEO leadership and ownership—can be equally or more detrimental to ESG outcomes than family ownership alone. This consolidation often leads to ESG underperformance, even if a family firm’s overall performance otherwise matches that of its peers. Beyond ownership and leadership structures, several external factors also shape ESG practices. Company size and sector can play relevant roles. Furthermore, the national context is crucial: countries with higher levels of human well-being may exhibit greater awareness and adoption of ESG standards, while the income level and geographic location of a country can have a considerable impact on enterprise scores. These findings suggest that practitioners should separate CEO and owner roles to reduce ESG risks, while policymakers should create targeted incentives/regulations for family firms to boost ESG integration.

1. Introduction

The increasing focus on Environmental, Social, and Governance (ESG) performance has become a defining characteristic of modern corporate strategy, fueling intense academic inquiry across disciplines (e.g., [1,2,3,4,5,6,7,8,9]). All firms are facing escalating stakeholder and investor demands for transparency, alongside evolving regulatory frameworks and voluntary standards (e.g., B Corp Certification, UN Sustainable Development Goals), which increasingly encourage or mandate ESG compliance (e.g., [10,11]). This universal pressure highlights the critical need to understand the internal and external factors that drive or inhibit effective ESG engagement within distinct organizational forms.

Family firms are uniquely situated in the ESG landscape due to their intrinsic long-term orientation, which prioritizes intergenerational longevity and reputational safeguarding, thereby driving greater engagement with ESG activities (e.g., [12]). Internally, commitment is motivated by the preservation of Socio-Emotional Wealth (SEW)—non-financial assets such as family identity and reputation (e.g., [13,14])—and the adoption of a stewardship model that favors long-term ESG investments essential for successful succession (e.g., [8]).

This commitment is often catalyzed by the next generation’s increased awareness and proactive strategies (e.g., [15]), amidst heavy external pressures (e.g., [16]). However, these motivations are tempered by constraints: family firms often operate with fewer available resources (e.g., [5,12,17]) and tend toward a cautious, conservative approach aimed at preserving long-term stability (e.g., [3]). Consequently, the actual approach to ESG is highly heterogeneous, contingent on various internal and contextual factors (e.g., [8,18,19]).

The structure of ownership and management significantly impacts performance, introducing the principal–principal problem when the controlling family holds key executive roles (e.g., CEO), potentially eroding value for minority shareholders (e.g., [20]). This complexity ensures that governance often emerges as the weakest ESG pillar due to the inherent difficulties in managing family dynamics, potential conflicts of interest, and resource diversion (e.g., [17,21,22]). Furthermore, a belief in internalized ESG values may weaken formal accountability mechanisms, such as linking executive compensation to ESG metrics (e.g., [23]).

This study addresses a critical gap by providing a global, large-scale empirical analysis of the actual ESG performance of family firms, specifically investigating how traditional family ownership and the presence of redefined dual leadership (owner holding the CEO position) affect various ESG metrics, contrasting with the typical definition of duality (e.g., [3,9]).

The key findings of this study reveal that family firms, particularly those with dual leadership, generally underperform across most ESG categories compared to non-family firms. This underperformance is pronounced in all three pillars, with governance being the weakest, and dual leadership significantly exacerbating negative impacts in the Environmental (Resource Use, Innovation) and Social (Human Rights, Product Responsibility) subcategories. Both ownership and dual leadership have a consistent negative impact on aggregate ESG scores, yet neither affects the ESG Controversies Score. Firm size emerges as a consistently positive predictor, reducing ESG controversies and boosting performance, while geographic region and country-specific patterns also prove relevant. Crucially, an analysis of consistent ESG reporters suggests a potential reporting-performance gap within family firms, particularly in the E and S dimensions.

Altogether, the key contribution of this study lies in introducing the new insight that dual leadership, as defined by the owner holding the CEO position, may be more detrimental to ESG outcomes than family ownership alone, a finding that contrasts with some prior literature (e.g., [5,19]). Furthermore, the study moves beyond internal structures to highlight the substantial relevance of company characteristics and the broader national context, detailing the influence of human/economic well-being, income level, and geographic location on overall and specific ESG pillar results.

The structure of this study is as follows: Section 2 outlines the research hypotheses based on existing literature. Section 3 provides a description of the data, methodological aspects, and some initial descriptive statistics. Section 4 presents and discusses statistical results and their implications. Section 5 brings the study to a conclusion by summarizing the main findings and drawing some policy implications.

2. Research Hypotheses

2.1. Overview

Family businesses possess an inherent inclination toward positive ESG performance driven by their commitment to protecting the family legacy across extended timeframes (e.g., [8,24]). Their objective is often focused on boosting the family’s standing and retaining power, with environmental and social contributions directly serving this purpose (e.g., [12,13,14]).

However, this very desire for control and high ownership concentration creates a structural weakness in governance (e.g., [16,24]). The most significant hurdle is dual leadership, where the same person is both owner and top executive. This power centralization dismantles the essential checks and balances, risking that company decisions are made to serve private familial interests over broader stakeholders’ needs, potentially discouraging long-term ESG investment (e.g., [1,20,22,25]).

2.2. Family Ownership

Family enterprises characteristically adopt a multi-generational perspective. This long-term temporal orientation is not merely a planning horizon but a fundamental lens through which all strategic decisions are viewed. This approach predisposes them to invest in sustainable practices and environmental preservation, viewing themselves as stewards responsible for the firm’s impact on future generations (e.g., [8,24]). The imperative to preserve the family legacy necessitates ensuring the business maintains a positive environmental and communal footprint, safeguarding the asset for subsequent generations.

Concurrently, family firms prioritize non-financial objectives, specifically the enhancement of Socioemotional Wealth (SEW), a critical component of their overall utility function. SEW encompasses family identity, reputation, and the retention of control across generations. Positive contributions to environmental and social performance serve as powerful, visible signals that augment this SEW, consequently deepening commitment to relevant initiatives (e.g., [13,14]). Furthermore, their deep community embeddedness means the corporate reputation is inextricably linked to the family name itself, highly motivating robust social practices such as fair labor, proactive community engagement, and stringent supply chain management (e.g., [12,17,26]). The founding family’s values typically permeate the organizational culture, institutionalizing commitment to ethical conduct and environmental stewardship. For these firms, ESG is frequently an intrinsic identity component, transcending mere regulatory or investor compliance.

The very structure that underpins the family firm’s environmental and social strengths—concentrated family ownership and control—often creates material weaknesses in governance by compromising independent oversight. The convergence of family interests, ownership, and management creates challenges in decoupling strategic business decisions from internal family dynamics (e.g., [12,16,24]).

Specifically, family firms may exhibit reluctance to appoint external, independent board members who could provide objective oversight or contest family decisions (e.g., [17,21]). Consequently, board composition often favors family members or close associates, limiting diversity of perspective and skillsets. This increases the risk that critical governance decisions—particularly concerning related-party transactions, executive compensation, and succession—are influenced by personal familial interests, such as preserving control or reputation, rather than pure meritocratic or market principles (e.g., [20]). Prioritizing SEW can, in these cases, create agency problems where the interests of the controlling family supersede those of non-family stakeholders and broader governance best practices.

In conclusion, the foundational characteristics of family firms—their long-term orientation, deeply ingrained values, and local embeddedness—naturally align them with environmental and social responsibilities. Yet, their inherent ownership structures and emphasis on familial control simultaneously present obstacles to establishing the independent, transparent, and professionalized governance practices mandated by modern ESG frameworks. This inherent tension is the core dynamic driving their often-observed mixed ESG performance profile.

Therefore, the first research hypothesis is:

H1. 

Family firms will demonstrate superior performance in the environmental and social dimensions compared to the governance dimension.

2.3. Dual Leadership

Effective corporate governance relies on principles of accountability, fairness, transparency, and responsibility that ensure a company is directed and controlled ethically and efficiently (e.g., [27]). Dual leadership—the conflation of owner/board member and top manager roles—systematically undermines this foundation by concentrating power, creating an environment where the leader’s personal interests may supersede the optimal interests of broader stakeholders (e.g., minority shareholders, employees, customers). This dynamic can manifest as a skewed risk profile: an owner-manager might be excessively risk-averse to protect personal wealth and legacy, thereby forgoing growth opportunities, or conversely, undertaking excessive, self-beneficial risk using the firm’s assets (e.g., [20,22]).

The concentration of authority inherent in dual leadership, a classic violation of the principle of separation of CEO and chair roles in standard governance models, can narrow the scope of decision making (e.g., [28]). This centralization can potentially inhibit organizational innovation and adaptability by creating a bottleneck, stifle internal dissent, and result in the unchallenged adoption of sub-optimal strategies based on the owner-manager’s intuition or preference (e.g., [29]).

Crucially, this structure also fosters managerial entrenchment. Indeed, the owner-manager’s deep control diminishes the influence of external stakeholders and complicates attempts to effect change or removal, even in cases of deficient performance or unethical conduct (e.g., [20,30]). This lack of accountability mechanisms means the dual leader can operate with relative impunity, shielding herself/himself from the external pressures for transparency and performance that typically drive improvements in non-family or professionally managed firms.

While not intrinsically counter to environmental and social objectives, dual leadership poses an indirect, yet material, threat to the environmental and social pillars by distorting investment incentives. When ESG investments entail immediate costs (e.g., new pollution control equipment, improved labor standards), the dual leader may prioritize short-term financial gains or personal liquidity over long-term sustainability and social responsibility (e.g., [1]).

Resource allocation decisions for discretionary environmental investments (e.g., green technology) or social programs (e.g., community development, robust supply chain audits) may be deprioritized if deemed non-essential to the owner-manager’s immediate financial metrics (e.g., [31]). Critically, the corresponding lack of robust governance and independent oversight can marginalize ethical considerations and stakeholder engagement processes. This vulnerability can result in the firm taking shortcuts, potentially leading to violations of environmental regulations, labor exploitation, or broader human rights disregard (e.g., [32]).

Therefore, the second research hypothesis is:

H2. 

Dual leadership has a detrimental effect on ESG performance, specifically on the Governance dimension.

3. Resources and Methods

3.1. Data

Information on ESG scores comes from LSEG’s ESG active universe database, which gathers over 9000 firms worldwide. Information on family ownership and dual leadership in turn is drawn from the NREG family firm database. By merging these two sources of information by International Security Identification Number (ISIN), one obtains a balanced panel of about 6300 firms from 43 countries for the period 2015–2023.

Table A1. Sampled countries.

Country	Alpha Code	Region	Income Group	Obs.	Obs./Year
Argentina	AR	Latin America & Caribbean	Upper middle income	126	14
Australia	AU	East Asia & Pacific	High income	2952	328
Austria	AT	Europe & Central Asia	High income	288	32
Brazil	BR	Latin America & Caribbean	Upper middle income	369	41
Canada	CA	North America	High income	3375	375
Chile	CL	Latin America & Caribbean	High income	216	24
China	CN	East Asia & Pacific	Upper middle income	360	40
Colombia	CO	Latin America & Caribbean	Upper middle income	135	15
Denmark	DK	Europe & Central Asia	High income	540	60
Finland	FI	Europe & Central Asia	High income	621	69
France	FR	Europe & Central Asia	High income	1530	170
Germany	DE	Europe & Central Asia	High income	2187	243
Greece	GR	Europe & Central Asia	High income	198	22
Hong Kong	HK	East Asia & Pacific	High income	972	108
India	IN	South Asia	Lower middle income	729	81
Indonesia	ID	East Asia & Pacific	Upper middle income	387	43
Ireland	IE	Europe & Central Asia	High income	153	17
Israel	IL	Middle East & North Africa	High income	117	13
Italy	IT	Europe & Central Asia	High income	882	98
Japan	JP	East Asia & Pacific	High income	1998	222
Malaysia	MY	East Asia & Pacific	Upper middle income	405	45
Mexico	MX	Latin America & Caribbean	Upper middle income	225	25
Netherlands	NL	Europe & Central Asia	High income	486	54
New Zealand	NZ	East Asia & Pacific	High income	441	49
Norway	NO	Europe & Central Asia	High income	747	83
Philippines	PH	East Asia & Pacific	Lower middle income	234	26
Poland	PL	Europe & Central Asia	High income	306	34
Portugal	PT	Europe & Central Asia	High income	135	15
Qatar	QA	Middle East & North Africa	High income	252	28
Russian Federation	RU	Europe & Central Asia	High income	306	34
Saudi Arabia	SA	Middle East & North Africa	High income	225	25
Singapore	SG	East Asia & Pacific	High income	558	62
South Africa	ZA	Sub-Saharan Africa	Upper middle income	342	38
South Korea	KR	East Asia & Pacific	High income	243	27
Spain	ES	Europe & Central Asia	High income	648	72
Sweden	SE	Europe & Central Asia	High income	1890	210
Switzerland	CH	Europe & Central Asia	High income	1449	161
Taiwan	TW	East Asia & Pacific	High income	531	59
Thailand	TH	East Asia & Pacific	Upper middle income	576	64
Turkey	TR	Europe & Central Asia	Upper middle income	477	53
United Arab Emirates	AE	Middle East & North Africa	High income	81	9
United Kingdom	GB	Europe & Central Asia	High income	3843	427
United States	US	North America	High income	24,678	2742

of the Appendix A shows the details. Subject to the availability of ESG information, the number of firms usable for statistical estimation is nearly 5900.

Family ownership is a binary variable that equals 1 if the founder or family member is an officer, director or owns more than 5% of the firm’s equity, individually or as a group; and 0 otherwise (e.g., [8]). Dual leadership in turn is a binary variable that equals 1 if the largest shareholder is a family or an individual who holds the CEO, chairman, or vice chairman position, and 0 otherwise.

Firm-level control variables come from LSEG: age, debt ratio, depreciation, depletion & amortization, DD&A (a measure of capital expenditure) to total assets, annual return on the firm value, size (total assets), and economic sector. Country-level control variables are the Sustainable Society Indices (SSI), available from the Sustainable Society Foundation at TH Köln-University of Applied Sciences, and income group and geographic region, both from the World Bank Development Indicators. Firm- and country-level controls are detailed in

Table A2. Study variables.

(a) Firm- and Country-Level Information
Firm-level characteristics
Variable	Description	Type	Source
Age	Years elapsed since the company incorporation.	Continuous	LSEG
Debt ratio	Total debt to total assets.	Continuous	LSEG
DD & A/TA	Depreciation Depletion & Amortization (DD & A) to total assets (TA).	Continuous	LSEG
Dual leadership	=1 if largest shareholder is a family or an individual who holds the CEO, chairman, or vice chairman position; 0 otherwise.	Binary	Family firms NRG database
Family firm	=1 if founder or family member is an officer, director or owns >5% of the firm’s equity, individually or as a group; 0 otherwise.	Binary	Family firms NRG database (F.F. Def.4)
Firm value return	Annual log-return on firm value.	Continuous	LSEG
Size	Total assets	Continuous	LSEG
Sector	■ Consumer = 1 if a firm belongs to the Consumer cyclicals/non-cyclicals sector; 0 otherwise.	Binary	LSEG
	■ Technology = 1 if a firm belongs to the Technology sector; 0 otherwise.
Country-level characteristics
Sustainable Society Indices
Variable	Description	Type	Source
Economic wellbeing index	Measures aspects of transition (organic farming and genuine savings) and the economy (GDP, employment, and public debt).	Continuous (1–10)	Sustainable Society Foundation
Environmental wellbeing index	Measures aspects of natural resources (e.g., biodiversity, renewable water resources), and climate & energy (e.g., greenhouse gases, energy savings).	Continuous (1–10)	Sustainable Society Foundation
Human wellbeing index	Measures basic needs, personal development & health, and a well-balanced society (income distribution, population growth, and good governance).	Continuous (1–10)	Sustainable Society Foundation
Development stage & geographic location
Variable	Description	Type	Source
Income group	Low, lower-middle, upper-middle, or high income.	Categorical	World Bank World Development Indicators
Region	East Asia & Pacific, Europe & Central Asia, Latin America & Caribbean, Middle East & North Africa, North America, South Asia, or Sub-Saharan Africa.	Categorical	World Bank World Development Indicators
(b) Firm ESG Performance Scores
Environmental
Variable	Description	Type	Source
Environmental Pillar Score (EPS)	Weighted average relative rating based on the reported environmental information and the resulting three environmental category scores.	Continuous (0–100)	LSEG
Category scores
Resource Use Score (RUS)	Performance and capacity to reduce use of materials, energy or water, and to find more eco-efficient solutions by improving supply chain management.	Continuous (0–100)	LSEG
Emission Score (ES)	Commitment and effectiveness towards reducing environmental emissions in the production and operational processes.	Continuous (0–100)	LSEG
Env. Innovation Score (EIS)	Capacity to reduce environmental costs and burdens for customers, thereby creating new market opportunities through new environmental technologies and processes or eco-designed products.	Continuous (0–100)	LSEG
Social
Variable	Description	Type	Source
Social Pillar Score (SPS)	Weighted average relative rating of a company based on the reported social information and the resulting four social category scores.	Continuous (0–100)	LSEG
Category scores
Workforce Score (WFS)	Effectiveness towards job satisfaction, healthy and safe workplace, maintaining diversity and equal opportunities, and development opportunities for its workforce.	Continuous (0–100)	LSEG
Human Rights Score (HRS)	Effectiveness towards respecting the fundamental human rights conventions.	Continuous (0–100)	LSEG
Community Score (CS)	Commitment towards being a good citizen, protecting public health and respecting business ethics.	Continuous (0–100)	LSEG
Product Responsibility Score (PRS)	Capacity to produce quality goods and services integrating the customer’s health and safety, integrity and data privacy.	Continuous (0–100)	LSEG
Governance
Variable	Description	Type	Source
Governance Pillar Score (GPS)	Weighted average relative rating of a company based on the reported governance information and the resulting three governance category scores.	Continuous (0–100)	LSEG
Category scores
Management Score (MNGTS)	Commitment and effectiveness towards following best practice corporate governance principles.	Continuous (0–100)	LSEG
Shareholders Score (SHS)	Effectiveness towards equal treatment of shareholders and the use of anti-takeover devices.	Continuous (0–100)	LSEG
CSR Strategy Score (CSRS)	Practices to communicate that company integrates financial, social and environmental dimensions into day-to-day decision-making processes.	Continuous (0–100)	LSEG
Environmental, Social, and Government (ESG)
Variable	Description	Type	Source
ESG Score (ESG)	ESG performance based on company reported data in the public domain (corporate website, annual reports, ESG reports, bylaws, code of conduct, etc.) across the ten categories detailed above.	Continuous (0–100)	LSEG
Controversies
Variable	Description	Type	Source
ESG Controversies Score (ESGC)	Exposure to environmental, social, and governance controversies and negative events reflected in global media.	Continuous (0–100)	LSEG

a. The choice of these controls follows related literature (e.g., [5,8,9,33]).

The SSIs are composed of the Economic well-being, Environmental well-being and Human well-being indices. Economic well-being measures aspects of transition, such as organic farming and genuine savings (i.e., adjusted net savings, including particulate emission damage, to GNI) and of the economy, such as GDP, employment, and public debt. Environmental well-being in turn measures aspects of natural resources, such as biodiversity and renewable water resources, and aspects of climate & energy, such as greenhouse gases and energy savings. Lastly, human well-being measures basic needs, personal development & health, and a well-balanced society (e.g., income distribution, population growth, and good governance). All indices are on a scale of 1–10, where 10 is best. For an analysis of the SSI, see [33]. The SSIs are currently available for 213 countries/territories (https://ssi.wi.th-koeln.de/ (accessed on 15 October 2025)) for 2000–2021. Therefore, these data are lagged by two periods in the statistical modeling of Section 4, meaning the SSI 2021, for instance, applies to 2023.

The definitions of the ESG scores are detailed in Table A2b. The environmental (E) dimension is composed of the Resource Use Score (RUS), the Emission Score (ES), and the Environmental Innovation Score (EIS). The Social (S) dimension in turn is composed of the Social Pillar Score (SPS), the Workforce Score (WFS), the Human Rights Score (HRS), the Community Score (CS), and the Product Responsibility Score (PRS). The governance (G) dimension is composed of the Governance Pillar Score (GPS), the Management Score (MNGTS), the Shareholders Score (SHS), and the CSR Strategy Score (CSRS). All scores are expressed on a scale of 0–100. Each dimension is summarized by its own score, which is a weighted average of reported information and the corresponding category scores: Environmental Pillar Score (EPS), Social Pillar Score (SPS), and Governance Pillar Score (GPS). Statistical modeling also considers the ESG Controversies Score (ESGC), which measures the exposure to ESG controversies and negative events reflected in global media.

3.2. Descriptive Statistics

Statistics of average ESG scores by geographic region for 2015–2023 are presented in

Table 1. Descriptive statistics.

(a) ESG Scores by Region
	All Regions			East Asia & Pacific			Europe & Central Asia			LA & Caribbean
Variable	Obs.	Mean	Std. Dev	Obs.	Mean	Std. Dev.	Obs.	Mean	Std. Dev.	Obs.	Mean	Std. Dev.
HRS	46,311	35.4	34.5	8589	35.7	32.6	12,440	49.6	33.9	976	52.4	33.1
CS	46,313	56.1	27.3	8589	53.5	28.3	12,440	52.4	30.1	976	63.3	27.3
PRS	46,313	48.0	28.9	8589	52.4	30.7	12,440	55.4	29.9	976	53.6	28.7
WFS	46,359	53.7	28.6	8590	62.5	25.8	12,451	65.7	25.7	977	65.1	28.1
RUS	46,313	41.4	34.2	8589	48.9	32.0	12,440	52.7	32.6	976	57.8	30.2
ES	46,313	42.2	33.9	8589	51.9	32.5	12,440	54.4	31.1	976	60.1	30.4
CSRS	46,363	38.5	34.3	8590	48.1	32.7	12,452	47.3	31.5	977	53.5	31.9
SHS	46,363	51.5	28.6	8590	50.5	28.4	12,452	52.3	28.4	977	54.7	28.6
MNGTS	46,363	53.6	28.4	8590	54.4	28.5	12,452	53.8	28.0	977	58.5	28.5
SPS	46,359	48.3	22.9	8590	51.0	22.4	12,451	55.8	23.3	977	58.6	22.4
EPS	46,313	36.1	28.7	8589	44.2	27.8	12,440	46.4	27.1	976	48.6	26.1
GPS	46,363	47.9	20.9	8590	51.0	20.0	12,452	51.2	20.7	977	55.6	18.5
ESG	46,317	47.1	20.8	8589	50.9	20.2	12,441	53.3	20.4	976	56.3	20.1
ESGC	46,313	93.0	20.1	8589	94.4	17.5	12,440	92.7	20.3	976	91.9	21.7
	Middle East & N. Africa			North America			South Asia			Sub-Saharan Africa
Variable	Obs.	Mean	Std. Dev	Obs.	Mean	Std. Dev.	Obs.	Mean	Std. Dev.	Obs.	Mean	Std. Dev.
HRS	562	18.8	27.3	22,751	26.6	32.8	674	46.2	32.3	319	49.2	33.7
CS	562	42.3	31.7	22,753	58.7	24.7	674	67.7	24.9	319	64.8	27.3
PRS	562	44.4	31.1	22,753	41.7	25.9	674	62.0	28.9	319	55.5	29.6
WFS	562	39.2	30.1	22,786	43.0	27.0	674	63.7	23.5	319	79.0	21.8
RUS	562	33.0	32.3	22,753	31.2	33.0	674	54.1	30.6	319	62.0	28.0
ES	562	28.7	29.3	22,753	30.7	32.1	674	55.3	32.1	319	61.3	24.2
CSRS	562	38.2	36.3	22,789	28.5	33.4	674	59.2	31.9	319	64.6	27.7
SHS	562	49.2	29.7	22,789	51.4	28.6	674	48.3	29.8	319	54.4	28.9
MNGTS	562	51.5	28.3	22,789	53.1	28.5	674	52.9	30.4	319	50.2	26.1
SPS	562	36.2	24.6	22,786	42.4	21.2	674	59.9	20.1	319	62.1	18.9
EPS	562	26.6	25.6	22,753	26.6	26.9	674	48.5	25.5	319	50.5	21.3
GPS	562	46.3	21.6	22,789	44.4	20.8	674	53.5	21.0	319	56.4	18.0
ESG	562	38.2	21.7	22,756	41.8	19.7	674	55.6	18.3	319	58.1	17.0
ESGC	562	96.5	14.4	22,753	93.0	20.5	674	83.3	27.0	319	84.9	25.8
(b) ESG Scores by Ownership Type
		Non-Family Firm						Family Firm
Variable		Obs.		Mean		Std. Dev.		Obs.		Mean		Std. Dev.
HRS		32,473		36.9		34.8		13,829		31.7		33.7
CS		32,473		56.9		27.3		13,831		54.2		27.4
PRS		32,473		49.1		29.0		13,831		45.5		28.4
WFS		32,498		54.9		28.6		13,852		50.9		28.4
RUS		32,473		43.2		34.3		13,831		37.1		33.7
ES		32,473		43.8		33.9		13,831		38.2		33.6
CSRS		32,499		40.7		34.5		13,855		33.4		33.1
SHS		32,499		52.8		28.3		13,855		48.6		28.9
MNGTS		32,499		55.4		28.3		13,855		49.4		28.2
SPS		32,498		49.4		23.0		13,852		45.5		22.6
EPS		32,473		37.8		28.9		13,831		32.2		27.7
GPS		32,499		49.6		20.8		13,855		43.8		20.6
ESG		32,474		48.6		20.8		13,834		43.6		20.3
ESGC		32,473		92.6		20.6		13,831		93.9		18.8
(c) Ownership Versus Dual Leadership
				Dual Leadership
Family Ownership				No				Yes		Total
No				37,226				2240		39,466
%				94.32				5.68		100.00
Yes				14,320				3418		17,738
%				80.73				19.27		100.00
Total				51,546				5658		57,204
%				90.11				9.89		100
p-value of χ2 (1) independence statistics = 0.000

Notes: HRS: Human Rights Score, CS: Community Score, PRS: Product Responsibility Score, WFS: Workforce Score, RUS: Resource Use Score, ES: Emission Score, CSRS: Corporate Social Responsibility Score, SHS: Shareholders Score, MNGTS: Management Score, SPS: Social Pillar Score, EPS: Environmental Pillar Score, GPS: Government Pillar Score, ESG: Environmental, Social, and Governance Score, ESGC: Environmental, Social, and Governance Controversies Score. ( Family ownership is a binary variable that equals 1 if the founder or family member is an officer, director or owns more than 5% of the firm’s equity, individually or as a group; and 0 otherwise. Dual leadership in turn is a binary variable that equals 1 if the largest shareholder is a family or an individual who holds the CEO, chairman, or vice chairman position; and, 0 otherwise.

a. As can be seen, the Middle East & North Africa (MENA) and North America underperformed other regions such as Europe & Central Asia and Latin America & the Caribbean. When looking at all regions, one sees that among category scores, HRS and CSRS were lowest (35.4 and 38.5, respectively), while CS and WFS were highest (56.1 and 53.7, respectively). Among pillar scores in turn, the E dimension was 12.2 points below the S dimension and 11.8 points below the G dimension.

Table 1b in turn shows ESG scores by family and non-family ownership. Family firm-year observations represent about 30% of the sample. The figures in the table suggest that family firms underperformed in the category and pillar scores during the sample period. For example, in CRS, non-family firms scored 40.7, while family firms scored 33.4. In relative terms, the weakest pillar among family firms was G, with an average score of 43.8 as compared with 49.6 of non-family firms.

Table 1c in turn reports the frequency of family ownership versus that of dual leadership. As shown, the latter was significantly more prevalent in family firms (19.3%) than in their non-family counterparts (5.7%). Indeed, a chi-squared test rejects independence between the two variables. Altogether, firm-year observations with dual leadership represented about 9.9% of the sample.

3.3. Statistical Modeling

3.3.1. Panel Structure

Given that this study’s metric of family ownership is time-invariant, statistical analysis is based on random-effects panel data modeling. Dependent variables are category and pillar scores where independent variables are family ownership and dual leadership:

Score_i,t = b₁ Family ownership_i + b₂ Dual leadership_it +b₃′ firm-level control variables_it + b₄′ country-level control variables_it + η_t + (α_i + ε_it)

(1)

where η_t is a time-fixed effect and (α_i + ε_it) is composed of a time-invariant random effect, α_i, and an error term, ε_it, which may be both heteroscedastic and autocorrelated.

3.3.2. Endogenous Treatment

Consider the following model (e.g., [34,35]):

Score_i0 = E(Score_i0|x_i) + ε_i0

(2)

Score_i1 = E(Score_i1|x_i) + ε_i1

(3)

τ_i = E(τ_i|z_i) + υ_i

(4)

Score_i = τ_iScore_i1 + (1 − τ_i)Score_i0

(5)

E(ε_ij|x_i, z_i) = E(ε_ij|z_i) = E(ε_ij|x_i) = 0 for j = 0, 1

(6)

E(ε_ij|τ_i) ≠ 0                                       for j = 0, 1

(7)

where subscript i denotes firm-level observations, Score_i1 is the potential outcome of receiving treatment, Score_i0 is the potential outcome when not receiving treatment, τ_i is the observed binary treatment, and Score_i is the observed outcome.

Equation (7) states that unobservable factors in the potential-outcome equations are correlated with treatment status. For example, if treatment is family ownership, unobservable managerial factors that impact company ESG performance may be correlated with the ownership structure (e.g., [5,19]). Hence, the latter is not independent of performance.

On the other hand, the correlation between τ_i and ε_ij must be equivalent to that between ε_ij and υ_i, ρ_j. That is, E(ε_ij|τ_i) = E(ε_ij|υ_i) = ρ_jυ_i. Then, if the outcome variable is linear:

E(Score_ij|x_i, υ_i, τ_i = j) = x_i′b_j + ρ_jυ_i, j = 0, 1.

(8)

4. Results and Discussion

4.1. ESG Performance of the Full Sample of Countries

4.1.1. Absolute Scores

Table 2. Absolute category scores (0–100 scale).

	Environmental			Social				Governance
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
Covariate	RUS	ES	EIS	HRS	CS	PRS	WFS	CSRS	SHS	MNGTS
Family firm	−2.21 ***	−1.26 *	−1.95 ***	−3.13 ***	−1.16 *	−1.76 **	−0.15	−2.99 ***	−3.96 ***	−4.43 ***
	(0.69)	(0.67)	(0.73)	(0.72)	(0.65)	(0.69)	(0.63)	(0.68)	(0.74)	(0.71)
Dual leadership	−3.42 ***	−1.72	−2.08 **	−3.09 ***	−3.67 ***	−2.26 **	−2.98 ***	−1.28	−0.69	−4.33 ***
	(1.07)	(1.04)	(1.04)	(1.11)	(1.00)	(1.00)	(0.95)	(1.04)	(1.19)	(1.09)
Firm-level controls
Log(firm age)	0.88 ***	0.34	0.72 ***	1.04 ***	0.03	0.69 ***	0.19	0.42 **	0.30	1.22 ***
	(0.22)	(0.21)	(0.18)	(0.21)	(0.16)	(0.17)	(0.20)	(0.21)	(0.21)	(0.21)
Log(firm size)	8.10 ***	8.49 ***	5.20 ***	6.23 ***	5.43 ***	4.11 ***	5.87 ***	8.46 ***	1.01 ***	3.43 ***
	(0.18)	(0.16)	(0.18)	(0.18)	(0.15)	(0.17)	(0.15)	(0.17)	(0.18)	(0.16)
Lagged debt ratio	1.14 *	1.30 *	−0.05	0.33	0.70	−0.76	−1.98 **	−0.28	−0.18	−1.93 ***
	(0.68)	(0.67)	(0.64)	(0.77)	(0.57)	(0.74)	(0.82)	(0.83)	(0.84)	(0.71)
Lagged firm value Δ%	0.05	0.03	−0.04	0.08 *	0.03	−0.01	0.05	0.11 ***	0.02	0.05
	(0.03)	(0.03)	(0.03)	(0.04)	(0.03)	(0.03)	(0.03)	(0.04)	(0.04)	(0.04)
Lagged log (DD & A/TA)	2.64 ***	2.84 ***	0.65 ***	3.26 ***	1.73 ***	1.43 ***	0.82 ***	2.86 ***	0.58 ***	1.28 ***
	(0.20)	(0.20)	(0.17)	(0.20)	(0.17)	(0.19)	(0.17)	(0.21)	(0.19)	(0.18)
Consumer sector	3.75 ***	1.28 *	3.44 ***	4.06 ***	0.17	1.01	−0.86	−0.62	0.11	−0.67
	(0.80)	(0.76)	(0.88)	(0.85)	(0.74)	(0.82)	(0.70)	(0.79)	(0.84)	(0.79)
Technology sector	2.65 ***	1.86 **	1.60 *	4.62 ***	1.26	2.69 ***	3.14 ***	−2.13 **	−0.74	−0.22
	(0.95)	(0.93)	(0.95)	(1.01)	(0.83)	(0.92)	(0.85)	(0.89)	(1.00)	(0.93)
Country-level controls
Human well-being	2.09 **	2.09 **	2.39 ***	1.19	0.20	2.58 **	−0.77	−0.40	0.71	0.05
	(0.85)	(0.94)	(0.93)	(1.04)	(1.09)	(1.14)	(0.81)	(1.05)	(1.02)	(1.10)
Envmt. well-being	−0.78 *	−0.71	0.60	−0.75	0.28	−0.70	0.11	−0.64	−0.21	0.13
	(0.45)	(0.44)	(0.48)	(0.49)	(0.44)	(0.48)	(0.42)	(0.47)	(0.46)	(0.44)
Economic well-being	−1.26 ***	−2.14 ***	−0.87 ***	−0.45	0.75 ***	−1.08 ***	−0.44 *	−0.55 **	−0.20	−0.10
	(0.27)	(0.27)	(0.31)	(0.29)	(0.29)	(0.29)	(0.23)	(0.27)	(0.29)	(0.27)
Lower-middle income	−13.30 ***	−5.72	−9.08 *	−16.97 ***	11.65 **	3.04	−6.47 *	−7.41	3.90	−6.02
	(3.09)	(4.20)	(4.68)	(3.14)	(4.55)	(4.69)	(3.47)	(5.08)	(5.07)	(4.85)
Upper-middle income	2.07	1.20	−1.25	1.54	5.62 ***	6.79 ***	3.24 **	5.09 ***	−0.82	−1.98
	(1.57)	(1.57)	(1.84)	(1.78)	(1.80)	(1.68)	(1.50)	(1.53)	(1.61)	(1.62)
Europe & Central Asia	5.47 ***	4.29 ***	1.12	13.96 ***	−0.84	4.40 ***	4.87 ***	2.08 **	2.50 **	1.16
	(0.97)	(0.94)	(1.15)	(1.01)	(0.99)	(1.04)	(0.86)	(0.97)	(0.98)	(0.96)
Latin America & Carib.	3.94	2.92	−4.69	13.21 ***	4.27 *	−3.40	−2.60	−1.43	4.84 *	4.38 *
	(2.46)	(2.36)	(2.97)	(2.79)	(2.50)	(2.49)	(2.35)	(2.40)	(2.75)	(2.66)
Mid. East & N. Africa	−22.57 ***	−32.04 ***	−19.93 ***	−23.98 ***	−16.61 ***	−9.72 ***	−29.76 ***	−16.45 ***	−2.52	−6.17 **
	(3.05)	(2.66)	(2.61)	(2.74)	(3.06)	(3.21)	(2.91)	(3.33)	(3.17)	(2.98)
North America	−12.38 ***	−16.05 ***	−10.12 ***	−5.99 ***	8.97 ***	−6.75 ***	−15.47 ***	−13.21 ***	1.79 *	1.11
	(0.91)	(0.88)	(1.05)	(0.93)	(0.88)	(0.95)	(0.82)	(0.93)	(0.93)	(0.91)
South Asia	15.37 ***	5.56	11.28 **	24.85 ***	1.06	5.48	4.16	15.94 ***	−4.59	4.35
	(4.09)	(5.01)	(5.59)	(4.13)	(5.20)	(5.25)	(4.05)	(5.69)	(5.90)	(5.78)
Sub-Saharan Africa	10.00 **	7.75 **	−1.88	12.48 ***	5.29	−2.33	13.65 ***	9.97 **	5.49	−5.07
	(3.98)	(3.40)	(4.87)	(4.41)	(4.11)	(4.35)	(3.01)	(4.11)	(3.98)	(3.86)
Year fixed effects	Yes	Yes		Yes	Yes	Yes	Yes	Yes	Yes	Yes
Observations	31,555	31,555	31,554	31,554	31,555	31,555	31,587	31,589	31,589	31,589
No. of firms	5905	5905	5905	5905	5905	5905	5905	5905	5905	5905
R2	0.408	0.435	0.218	0.319	0.204	0.167	0.336	0.392	0.010	0.076

Notes: Robust standard errors in parentheses. *** p < 0.01, ** p < 0.05, * p < 0.1. (1) HRS: human resources score, CS: community score, PRS: product responsibility score, RUS: resource use score, ES: environmental score, EIS: Environmental Innovation Score, WFS: Workforce Score, CSRS: corporate social responsibility score, SHS: shareholders score, and MNGTS: management score. (2) Baseline region: East Asia & Pacific; baseline country income group: high income. (3) Parameter estimates are obtained from a random-effects panel model with robust standard errors.

presents estimation results for category scores, expressed on a scale of 0–100, of the E, S, and G dimensions for the full sample of countries. As shown, under the E dimension, there is strong statistical evidence that family firms underperformed in resource use (RU) and environmental innovation (EI), although not considerably so in magnitude. For example, the RUS for a family firm was 2.2 points lower on average. For both RU and EI, there is evidence that dual leadership was also detrimental. For example, for firms with a dual leader, the RUS was 3.4 points lower. In the case of emissions, there is weak evidence of underperformance among family firms (−1.3 points) but no impact in this sense among dual leaders.

Under the S dimension, in turn, family firms underperformed in human rights (HR) and product responsibility (PR) by 3.1 and 1.8 points, respectively. By contrast, there is weak evidence of underperformance for community (C) relationships (−1.2 points) and no evidence in this regard for workforce (WF) management. For dual leadership, underperformance in HR, C, PR, and WF was more evident: −3.1, −3.7, −2.3, and −3.0 points, respectively. Lastly, under the G dimension, family firms consistently underperformed in corporate social responsibility (CSR), shareholder (SH) relationships, and management (MNGT) by more meaningful numerical differences: −3.0, −4.0, and −4.4 points, respectively. Interestingly, dual leadership had no impact on CSR or SHS but hindered management performance by 4.3 points.

Altogether, this evidence suggests that family firms performed poorly in most ESG subcategories, especially in those of the G dimension. Nevertheless, dual leadership seemed to have had a more adverse impact in some cases. For example, family ownership did not have an impact on workforce (WF) management, but dual leadership did by nearly −3.0 points. Regarding firm-level controls, size, capital expenditures, and economic sector were relevant predictors. For example, a one-percent increase in size led to an 8.1-point increase in RUS and to a 5.2-point increase in EIS.

It is also worth highlighting the relevance of country-level controls. Indeed, companies in MENA considerably underperformed those in the baseline region of East Asia & Pacific (e.g., −22.6 in resource use, −32 in emissions, −16.7 in corporate social responsibility). To a lesser extent, this was also the case for companies in North America—a result mainly driven by US companies (see Section 4.2). In contrast, companies in Europe & Central Asia and South Asia outperformed in various categories (e.g., +5.5 in resource use, +14.0 in human rights), reflecting heterogeneity in ESG policies across geographic regions (These results are not surprising since Europe has generally been at the forefront of robust ESG regulation. This includes mandatory reporting requirements, specific sustainability disclosures (such as those related to climate change), and stringent governance standards. This proactive regulatory approach encourages companies to integrate ESG principles more deeply into their operations and contributes to their strong performance in areas like resource use and human rights. While ESG awareness is growing, the US has experienced significant internal variations in ESG policies and practices, often driven by a diverse cultural and political landscape. The presence of state-level anti-ESG policies and political backlash has influenced corporate commitments and fund flows, potentially hindering widespread ESG adoption compared to Europe. In turn, some Asian economies are rapidly adopting international standards and developing their own taxonomies for sustainable finance, which is leading to improved ESG performance. While interest in addressing environmental and social issues is growing in the MENA countries, the maturity of reporting and action in this area may lag in other developed regions (e.g., [10]).

Regarding income group, companies in upper-middle countries outperformed in community relations (+5.6), product responsibility (+6.8), workforce management (+3.2), and CSR strategy (+5.1). Companies in lower-income countries, in turn, underperformed in resource use (−13.3), environmental innovation (−9.1), and human rights policies (−17.0); but outperformed in community relations (+11.7), relative to the baseline of high-income countries. Human well-being (e.g., a well-balanced society in terms of income distribution, population growth, and good governance) in turn contributed to better performance (RUS (+2.1), ES (+2.1), EIS (+2.4), and PRS (+2.6)) as opposed to economic well-being (RUS (−1.3), ES (−2.1), EIS (−0.87), PRS (−1.1), WFS (−0.4) and CSRS (−0.6). An exception was CS (+0.8). Environmental well-being, in turn, does not seem to have impacted ESG performance. Taken together, in several cases, country-level indicators had a greater impact on score magnitudes than company-level characteristics did.

Table 3. Absolute ESG pillar scores (0–100 scale).

	(1)	(2)	(3)	(4)	(5)
Covariate	Environmental	Social	Governance	ESG	ESGC
Family firm	−1.86 ***	−1.64 ***	−3.81 ***	−2.58 ***	−0.08
	(0.56)	(0.49)	(0.48)	(0.43)	(0.36)
Dual leadership	−2.51 ***	−3.11 ***	−2.15 ***	−2.86 ***	−0.44
	(0.86)	(0.74)	(0.75)	(0.67)	(0.54)
Firm-level controls
Log(firm age)	0.60 ***	0.44 ***	0.66 ***	0.64 ***	0.07
	(0.17)	(0.14)	(0.14)	(0.13)	(0.11)
Log(firm size)	7.08 ***	5.22 ***	4.22 ***	5.12 ***	−3.51 ***
	(0.15)	(0.12)	(0.11)	(0.11)	(0.14)
Lagged debt ratio	0.85	−0.34	−0.73 *	−0.24	−0.28
	(0.53)	(0.50)	(0.43)	(0.39)	(0.51)
Lagged firm value Δ%	0.01	0.03	0.06 **	0.03 *	−0.14 ***
	(0.02)	(0.02)	(0.02)	(0.02)	(0.04)
Lagged log (DD & A/TA)	1.85 ***	1.57 ***	1.46 ***	1.31 ***	−1.29 ***
	(0.16)	(0.13)	(0.13)	(0.11)	(0.10)
Consumer sector	2.96 ***	1.27 **	−0.31	1.26 **	−1.51 ***
	(0.65)	(0.58)	(0.55)	(0.50)	(0.45)
Technology sector	2.13 ***	3.07 ***	−0.97	1.73 ***	−1.33 **
	(0.77)	(0.66)	(0.64)	(0.57)	(0.52)
Country-level controls
Human well-being	2.22 ***	1.05	0.25	1.03 *	2.49 ***
	(0.69)	(0.67)	(0.63)	(0.56)	(0.60)
Envmt. well-being	−0.41	−0.36	−0.28	−0.23	1.03 ***
	(0.35)	(0.32)	(0.29)	(0.26)	(0.25)
Economic well-being	−1.51 ***	−0.34 *	−0.31 *	−0.68 ***	−0.15
	(0.23)	(0.20)	(0.18)	(0.17)	(0.14)
Lower-middle income	−7.15 **	−0.14	−2.99	−4.41	5.94 ***
	(3.39)	(2.69)	(3.61)	(2.94)	(1.45)
Upper-middle income	1.72	5.08 ***	0.61	1.76	4.97 ***
	(1.46)	(1.47)	(1.19)	(1.21)	(0.87)
Europe & Central Asia	3.20 ***	5.43 ***	2.07 ***	3.08 ***	−4.63 ***
	(0.93)	(0.84)	(0.75)	(0.71)	(0.61)
Latin America & Carib.	−1.01	2.71	2.52	1.76	−5.65 ***
	(2.20)	(2.08)	(1.77)	(1.82)	(1.59)
Middle East & N. Africa	−20.97 ***	−18.58 ***	−8.17 ***	−16.80 ***	10.67 ***
	(2.57)	(2.69)	(2.31)	(2.32)	(1.36)
North America	−16.93 ***	−6.11 ***	−4.44 ***	−7.70 ***	−3.69 ***
	(0.98)	(0.84)	(0.78)	(0.72)	(0.62)
South Asia	8.75 **	8.45 ***	4.79	7.44 **	−12.48 ***
	(3.97)	(3.08)	(4.10)	(3.31)	(2.01)
Sub-Saharan Africa	1.39	6.78 **	2.83	3.69	−12.34 ***
	(3.15)	(2.64)	(2.64)	(2.53)	(2.59)
Year fixed effects	Yes	Yes	Yes	Yes	Yes
Observations	31,555	31,587	31,589	31,557	31,555
No. of firms	5905	5905	5905	5905	5905
R2	0.466	0.363	0.245	0.419	0.138

Notes: Robust standard errors in parentheses. *** p < 0.01, ** p < 0.05, * p < 0.1. (1) ESG: ESG score, ESGC: ESG controversies score. (2) Baseline region: East Asia & Pacific; baseline country income group: high income. (3) Parameter estimates are obtained from a random-effects panel model with robust standard errors. (4) DD&A/TA: Depreciation Depletion & Amortization (DD&A) to total assets (TA). (5) Δ% : percentage change.

provides evidence for the E, S, and G pillar scores and for the overall ESG and ESGC scores. As reported in columns (1) through (3), when looking at aggregate scores, it is evident that family ownership and dual leadership hindered performance. For example, the governance score decreased by −3.8 points in family-owned businesses, while it decreased by −2.2 points in businesses with dual leadership. Altogether, the overall ESG score in a family-owned business with dual leadership would have been 5.4 points (=2.58 + 2.86) lower over the sample period. Interestingly, there is no evidence that either family ownership or dual leadership had an impact on the ESG Controversies Score (ESGC). As recalled, this measures exposure to ESG controversies and negative events reflected in global media. Regarding firm- and country-level controls, statistical findings resemble those of Table 2. For example, companies of certain geographic regions (e.g., MENA) consistently underperformed on pillars E, S, and G (−21.0, −18.6, and −8.2, respectively) and were exposed to controversies and unfavorable media coverage (+10.7).

4.1.2. Z-Scores

Up to this point, the discussion has focused on absolute (0–100) rather than on relative performance. Z-scores allow addressing the latter. Specifically, for each sample year, the average and standard deviation of each score (h) is computed from the full sample of firms (i) to produce a z score_h,i $={\displaystyle \frac{{\mathrm{S}\mathrm{c}\mathrm{o}\mathrm{r}\mathrm{e}}_{\mathrm{h},\mathrm{i}}-{\overline{\mathrm{S}\mathrm{c}\mathrm{o}\mathrm{r}\mathrm{e}}}_{\mathrm{h}}}{{\mathsf{\sigma }}_{\mathrm{s}{\mathrm{c}\mathrm{o}\mathrm{r}\mathrm{e}}_{\mathrm{h}}}}}$. This measures performance relative to the average firm, re-scaled by the variability of the score across firms. It follows that the marginal impacts of covariates are expressed in standard deviations from the mean and, therefore, provide a clearer picture of their relative importance.

Table 4. Category z-scores.

	Environmental			Social				Governance
	(1)	(3)	(4)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
Covariate	RUS	ES	EIS	HRS	CS	PRS	WFS	CSRS	SHS	MNGTS
Family firm	−0.066 ***	−0.040 **	−0.061 ***	−0.092 ***	−0.043 *	−0.063 ***	−0.005	−0.089 ***	−0.139 ***	−0.157 ***
	(0.020)	(0.020)	(0.023)	(0.021)	(0.024)	(0.024)	(0.022)	(0.020)	(0.026)	(0.025)
Dual leadership	−0.104 ***	−0.055 *	−0.064 *	−0.091 ***	−0.137 ***	−0.082 **	−0.105 ***	−0.040	−0.024	−0.154 ***
	(0.032)	(0.031)	(0.033)	(0.033)	(0.037)	(0.035)	(0.033)	(0.031)	(0.042)	(0.039)
Firm-level controls
Log(firm age)	0.025 ***	0.008	0.026 ***	0.031 ***	0.001	0.023 ***	0.006	0.012 *	0.011	0.043 ***
	(0.006)	(0.006)	(0.006)	(0.006)	(0.006)	(0.006)	(0.007)	(0.006)	(0.007)	(0.007)
Log(firm size)	0.239 ***	0.253 ***	0.168 ***	0.185 ***	0.200 ***	0.143 ***	0.206 ***	0.251 ***	0.035 ***	0.121 ***
	(0.005)	(0.005)	(0.006)	(0.005)	(0.006)	(0.006)	(0.005)	(0.005)	(0.006)	(0.006)
Lagged debt ratio	0.035 *	0.043 **	−0.004	0.008	0.027	−0.022	−0.067**	−0.008	−0.006	−0.068 ***
	(0.020)	(0.020)	(0.020)	(0.023)	(0.021)	(0.026)	(0.029)	(0.025)	(0.030)	(0.025)
Lagged firm value Δ%	0.002 *	0.002	−0.002	0.002 **	0.001	−0.000	0.002	0.004 ***	0.001	0.002
	(0.001)	(0.001)	(0.001)	(0.001)	(0.001)	(0.001)	(0.001)	(0.001)	(0.001)	(0.001)
Lagged log (DD & A/TA)	0.078 ***	0.086 ***	0.020 ***	0.096 ***	0.063 ***	0.050 ***	0.029 ***	0.085 ***	0.020 ***	0.045 ***
	(0.006)	(0.006)	(0.006)	(0.006)	(0.006)	(0.007)	(0.006)	(0.006)	(0.007)	(0.007)
Consumer sector	0.111 ***	0.038 *	0.109 ***	0.121 ***	0.007	0.036	−0.030	−0.018	0.004	−0.024
	(0.024)	(0.023)	(0.028)	(0.025)	(0.027)	(0.029)	(0.025)	(0.024)	(0.029)	(0.028)
Technology sector	0.077 ***	0.054 *	0.054 *	0.138 ***	0.046	0.093 ***	0.109 ***	−0.064 **	−0.026	−0.009
	(0.028)	(0.028)	(0.030)	(0.030)	(0.031)	(0.032)	(0.030)	(0.026)	(0.035)	(0.033)
Country-level controls
Human well-being	0.064 **	0.062 **	0.079 ***	0.033	0.003	0.095 **	−0.026	−0.008	0.025	0.001
	(0.025)	(0.028)	(0.029)	(0.031)	(0.040)	(0.040)	(0.028)	(0.031)	(0.036)	(0.039)
Envmt. well-being	−0.016	−0.007	0.010	−0.022	0.011	−0.020	0.007	−0.014	−0.007	0.005
	(0.013)	(0.013)	(0.015)	(0.015)	(0.016)	(0.017)	(0.015)	(0.014)	(0.016)	(0.016)
Economic well-being	−0.035 ***	−0.061 ***	−0.033 ***	−0.015 *	0.028 ***	−0.034 ***	−0.014 *	−0.016 **	−0.007	−0.004
	(0.008)	(0.008)	(0.010)	(0.009)	(0.011)	(0.010)	(0.008)	(0.008)	(0.010)	(0.009)
Lower-middle income	−0.319 ***	−0.143	−0.241	−0.415 ***	0.410 **	0.277	−0.301 **	−0.212	0.136	−0.231
	(0.100)	(0.129)	(0.156)	(0.110)	(0.179)	(0.173)	(0.130)	(0.164)	(0.178)	(0.183)
Upper-middle income	0.097 *	0.047	−0.000	0.066	0.221 ***	0.305 ***	0.076	0.138 ***	−0.021	−0.087
	(0.051)	(0.053)	(0.065)	(0.061)	(0.075)	(0.066)	(0.059)	(0.053)	(0.066)	(0.068)
Europe & Central Asia	0.157 ***	0.107 ***	−0.002	0.425 ***	−0.056	0.143 ***	0.163 ***	0.076 **	0.091 **	0.030
	(0.034)	(0.033)	(0.042)	(0.035)	(0.043)	(0.042)	(0.036)	(0.034)	(0.040)	(0.040)
Latin America & Carib.	0.087	0.000	−0.226 **	0.413 ***	0.187 *	−0.172 *	−0.128	−0.052	0.160	0.151
	(0.078)	(0.075)	(0.097)	(0.090)	(0.098)	(0.091)	(0.088)	(0.076)	(0.099)	(0.097)
Mid. East & N. Africa	−0.559 ***	−0.838 ***	−0.499 ***	−0.672 ***	−0.610 ***	−0.212 *	−1.057 ***	−0.495 ***	−0.061	−0.219 *
	(0.098)	(0.090)	(0.096)	(0.101)	(0.127)	(0.126)	(0.111)	(0.108)	(0.119)	(0.120)
North America	−0.465 ***	−0.639 ***	−0.401 ***	−0.225 ***	0.394 ***	−0.341 ***	−0.570 ***	−0.435 ***	0.039	0.024
	(0.035)	(0.034)	(0.043)	(0.036)	(0.042)	(0.043)	(0.036)	(0.034)	(0.042)	(0.041)
South Asia	0.408 ***	0.100	0.329 *	0.700 ***	0.128	0.118	0.143	0.442 **	−0.148	0.142
	(0.123)	(0.148)	(0.179)	(0.125)	(0.193)	(0.186)	(0.143)	(0.175)	(0.201)	(0.207)
Sub-Saharan Africa	0.216 *	0.065	−0.151	0.346 ***	0.286 *	−0.154	0.419 ***	0.249 **	0.165	−0.164
	(0.120)	(0.106)	(0.158)	(0.134)	(0.153)	(0.154)	(0.107)	(0.123)	(0.142)	(0.142)
Year fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Observations	31,555	31,555	31,554	31,554	31,555	31,555	31,587	31,589	31,589	31,589
No. of firms	5905	5905	5905	5905	5905	5905	5905	5905	5905	5905
R2	0.400	0.433	0.217	0.291	0.204	0.164	0.334	0.377	0.011	0.075

Notes: Robust standard errors in parentheses. *** p < 0.01, ** p < 0.05, * p < 0.1. (1) HRS: human resources score, CS: community score, PRS: product responsibility score, WFS: Workforce Score, RUS: resource use score, ES: environmental score, EIS: Environmental Innovation Score, CSRS: corporate social responsibility score, SHS: shareholders score, and MNGTS: management score. (2) Baseline region: East Asia & Pacific; baseline country income group: high income. (3) Parameter estimates are obtained from a random-effects panel model with robust standard errors. (4) A z-score of index h for company i is computed as ${\mathrm{z}\mathrm{s}\mathrm{c}\mathrm{o}\mathrm{r}\mathrm{e}}_{\mathrm{h},\mathrm{i}}={\displaystyle \frac{{\mathrm{S}\mathrm{c}\mathrm{o}\mathrm{r}\mathrm{e}}_{\mathrm{h},\mathrm{i}}-{\overline{\mathrm{S}\mathrm{c}\mathrm{o}\mathrm{r}\mathrm{e}}}_{\mathrm{h}}}{{\mathsf{\sigma }}_{\mathrm{s}{\mathrm{c}\mathrm{o}\mathrm{r}\mathrm{e}}_{\mathrm{h}}}}}$. (5) DD&A/TA: Depreciation Depletion & Amortization (DD&A) to total assets (TA). (6) Δ% : percentage change.

and

Table 5. ESG pillar z-scores.

	(1)	(2)	(3)	(4)	(5)
Covariate	Environmental	Social	Governance	ESG	ESGC
Family firm	−0.068 ***	−0.073 ***	−0.183 ***	−0.127 ***	−0.005
	(0.020)	(0.022)	(0.023)	(0.021)	(0.018)
Dual leadership	−0.092 ***	−0.139 ***	−0.103 ***	−0.142 ***	−0.023
	(0.031)	(0.033)	(0.036)	(0.033)	(0.027)
Firm-level controls
Log(firm age)	0.019 ***	0.019 ***	0.032 ***	0.030 ***	0.003
	(0.006)	(0.006)	(0.007)	(0.006)	(0.006)
Log(firm size)	0.249 ***	0.230 ***	0.204 ***	0.249 ***	−0.173 ***
	(0.005)	(0.005)	(0.005)	(0.005)	(0.007)
Lagged debt ratio	0.032 *	−0.013	−0.036 *	−0.010	−0.013
	(0.019)	(0.022)	(0.021)	(0.019)	(0.025)
Lagged firm value Δ%	0.001	0.002 *	0.003 ***	0.002 **	−0.006 ***
	(0.001)	(0.001)	(0.001)	(0.001)	(0.002)
Lagged log (DD & A/TA)	0.066 ***	0.070 ***	0.070 ***	0.064 ***	−0.063 ***
	(0.006)	(0.006)	(0.006)	(0.006)	(0.005)
Consumer sector	0.105 ***	0.056 **	−0.015	0.062 **	−0.069 ***
	(0.023)	(0.026)	(0.026)	(0.025)	(0.022)
Technology sector	0.073 ***	0.135 ***	−0.046	0.083 ***	−0.070 ***
	(0.027)	(0.029)	(0.031)	(0.028)	(0.026)
Country-level controls
Human well-being	0.078 ***	0.046	0.013	0.048 *	0.097 ***
	(0.025)	(0.030)	(0.031)	(0.028)	(0.030)
Envmt. well-being	−0.005	−0.012	−0.013	−0.004	0.051 ***
	(0.012)	(0.014)	(0.014)	(0.013)	(0.013)
Economic well-being	−0.050 ***	−0.014	−0.016 *	−0.032 ***	−0.006
	(0.008)	(0.009)	(0.009)	(0.008)	(0.007)
Lower-middle income	−0.267 **	−0.014	−0.143	−0.229	0.264 ***
	(0.120)	(0.118)	(0.174)	(0.143)	(0.071)
Upper-middle income	0.064	0.224 ***	0.030	0.085	0.222 ***
	(0.052)	(0.065)	(0.058)	(0.059)	(0.044)
Europe & Central Asia	0.099 ***	0.234 ***	0.099 ***	0.140 ***	−0.223 ***
	(0.033)	(0.037)	(0.036)	(0.035)	(0.031)
Latin America & Carib.	−0.049	0.114	0.121	0.075	−0.282 ***
	(0.077)	(0.091)	(0.086)	(0.088)	(0.081)
Middle East & N. Africa	−0.729 ***	−0.817 ***	−0.392 ***	−0.814 ***	0.483 ***
	(0.092)	(0.119)	(0.112)	(0.114)	(0.067)
North America	−0.588 ***	−0.266 ***	−0.215 ***	−0.371 ***	−0.168 ***
	(0.035)	(0.037)	(0.037)	(0.035)	(0.031)
South Asia	0.321 **	0.376 ***	0.231	0.368 **	−0.631 ***
	(0.140)	(0.136)	(0.198)	(0.161)	(0.101)
Sub-Saharan Africa	0.052	0.300 **	0.137	0.179	−0.630 ***
	(0.111)	(0.117)	(0.127)	(0.123)	(0.129)
Year fixed effects	Yes	Yes	Yes	Yes	Yes
Observations	31,555	31,587	31,589	31,557	31,555
No. of firms	5905	5905	5905	5905	5905
R2	0.458	0.354	0.236	0.410	0.126

Notes: Robust standard errors in parentheses. *** p < 0.01, ** p < 0.05, * p < 0.1. (1) ESG: ESG score, ESGC: ESG controversies score. (2) Baseline region: East Asia & Pacific; baseline country income group: high income. (3) Parameter estimates are obtained from a random-effects panel model with robust standard errors. (4) A z-score of index h for company i is computed as ${\mathrm{z}\mathrm{s}\mathrm{c}\mathrm{o}\mathrm{r}\mathrm{e}}_{\mathrm{h},\mathrm{i}}={\displaystyle \frac{{\mathrm{S}\mathrm{c}\mathrm{o}\mathrm{r}\mathrm{e}}_{\mathrm{h},\mathrm{i}}-{\overline{\mathrm{S}\mathrm{c}\mathrm{o}\mathrm{r}\mathrm{e}}}_{\mathrm{h}}}{{\mathsf{\sigma }}_{\mathrm{s}{\mathrm{c}\mathrm{o}\mathrm{r}\mathrm{e}}_{\mathrm{h}}}}}$. (5) DD&A/TA: Depreciation Depletion & Amortization (DD&A) to total assets (TA). (6) Δ% : percentage change.

report regression models analogous to those of Table 2 and Table 3 where the dependent variables are now expressed as z-scores.

Table 4 shows that family ownership led to a decrease of 0.14 and 0.16 standard deviations (from the mean) in the shareholder and management scores, respectively. In turn, dual leadership was particularly detrimental to resource use (−0.10 std.), workforce management (−0.11 std.), community relations (−0.14 std.), and management (−0.15 std.). Once again, income group and geographic region had a significant impact on performance. Indeed, the RUS and HRS of firms in low-income countries were 0.32 and 0.42 standard deviations, respectively, lower than those in high-income countries. Meanwhile, the ES, HRS, and WFS of firms in MENA were 0.84, 0.67, and 1.1 standard deviations, respectively, lower than those of firms in East Asia & the Pacific. Among firm-level controls, size continued to be one of the most relevant drivers. For instance, a one-percent increase in size led to a 0.30-standard deviation increase in the ES and CSRS.

Table 5 reports statistical results for the pillar scores. As in Table 3, there was evidence of a negative impact of family ownership and dual leadership on the three individual pillar scores and on the combined ESG score. In terms of magnitudes, family ownership and dual leadership were most detrimental to governance (−0.18 std.) and social aspects (−0.14 std.), respectively. Their overall impact on the ESG score was −0.13 and −0.14 standard deviations, respectively. Like Table 3, neither family ownership nor dual leadership impacted the ESGC score.

Regarding firm-level controls, as in Table 3, size had the most significant positive impact on the three pillar scores and combined ESG score and made it less likely to face ESG controversies. For example, a one-percent increase in size led to a 0.17 std. decrease in the ESGC score. Company performance was also significantly shaped by geographic location. For example, ESG and ESGC performance for a company from MENA was 0.81 standard deviations below and 0.48 standard deviations above, respectively, that of a company from the baseline region. Human and economic well-being indices in turn were statistically relevant to the environmental dimension mainly, although their numerical impacts were small (+0.08 std. and −0.05 std., respectively).

4.2. ESG Performance of Selected Countries

To understand how family ownership and dual leadership impacted firm performance in some specific countries, this section presents evidence for Australia (East Asia & Pacific), Germany (Europe & Central Asia), Japan (East Asia & Pacific), and the US (North America). The selection of these countries is based on their relatively large sample sizes. For brevity, empirical results are reported for absolute scores only.

Some distinctive patterns emerge from

Table 6. Absolute category scores (0−100 scale): selected countries.

	Australia
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
	RUS	ES	EIS	HRS	CS	PRS	WFS	CSRS	SHS	MNGTS
Family firm	−8.16 ***	−5.59 **	−1.71	−2.61	−5.32 **	−3.99	−4.07	−5.33 *	−1.36	−5.52 *
	(2.82)	(2.64)	(2.78)	(2.85)	(2.71)	(2.89)	(2.84)	(2.80)	(3.28)	(2.97)
Dual leadership	0.75	2.42	−2.851	−0.47	−1.18	1.38	−2.20	−3.50	3.21	−1.26
	(4.45)	(4.42)	(3.62)	(3.95)	(4.09)	(3.82)	(3.88)	(4.29)	(4.85)	(3.67)
Firm-level ctrl.	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Country-level ctrl.	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Year fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Observations	1632	1632	1632	1632	1632	1632	1632	1632	1632	1632
No. of firms	304	304	304	304	304	304	304	304	304	304
R2	0.422	0.420	0.169	0.346	0.287	0.084	0.234	0.406	0.038	0.231
	Germany
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
	RUS	ES	EIS	HRS	CS	PRS	WFS	CSRS	SHS	MNGTS
Family firm	−2.09	1.29	−3.09	−6.44 *	−3.46	−0.82	0.85	−3.31	−7.70 ***	−8.75 **
	(3.42)	(3.48)	(3.51)	(3.78)	(3.56)	(3.74)	(3.13)	(3.04)	(2.96)	(3.57)
Dual leadership	−0.84	−5.12	−7.82 *	−5.67	−16.16 ***	2.33	−0.88	−2.37	1.85	−11.40 **
	(5.12)	(4.51)	(4.45)	(5.58)	(4.15)	(4.90)	(4.45)	(4.35)	(5.06)	(4.61)
Firm-level ctrl.	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Country-level ctrl.	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Year fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Observations	1159	1159	1159	1159	1159	1159	1161	1161	1161	1161
No. of firms	233	233	233	233	233	233	233	233	233	233
R2	0.425	0.395	0.284	0.326	0.273	0.138	0.297	0.519	0.118	0.197
	Japan
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
	RUS	ES	EIS	HRS	CS	PRS	WFS	CSRS	SHS	MNGTS
Family firm	−5.10	−2.19	−8.34	−1.85	3.38	10.06 **	0.27	−3.05	−3.09	−0.62
	(4.79)	(5.35)	(5.94)	(4.52)	(5.25)	(4.91)	(3.92)	(5.57)	(4.35)	(4.71)
Dual leadership	−14.11	−19.64 **	−12.08 *	−8.67	−19.06 **	−18.37 **	−10.44	−9.31	10.18	−3.92
	(10.89)	(7.90)	(6.62)	(8.60)	(7.44)	(7.92)	(8.33)	(9.16)	(6.39)	(7.27)
Firm-level ctrl.	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Country-level ctrl.	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Year fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Observations	1416	1416	1416	1416	1416	1416	1416	1416	1416	1416
No. of firms	220	220	220	220	220	220	220	220	220	220
R2	0.264	0.257	0.201	0.259	0.154	0.175	0.106	0.224	0.051	0.051
	United States
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
	RUS	ES	EIS	HRS	CS	PRS	WFS	CSRS	SHS	MNGTS
Family firm	−3.16 ***	−2.00 **	−0.91	−4.14 ***	−1.47 *	−2.99 ***	−0.22	−3.24 ***	−5.18 ***	−5.28 ***
	(1.02)	(0.971)	(1.01)	(1.03)	(0.86)	(0.97)	(0.948)	(0.97)	(1.14)	(1.05)
Dual leadership	−7.75 ***	−5.04 ***	−3.14 **	−7.44 ***	−5.46 ***	−1.74	−6.69 ***	−5.77 ***	−2.35	−8.05 ***
	(1.589)	(1.55)	(1.51)	(1.56)	(1.367)	(1.46)	(1.46)	(1.40)	(1.99)	(1.84)
Firm-level ctrl.	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Country-level ctrl.	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Year fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Observations	13,529	13,529	13,529	13,529	13,529	13,529	13,550	13,552	13,552	13,552
No. of firms	2588	2588	2588	2588	2588	2588	2588	2588	2588	2588
R2	0.401	0.420	0.166	0.312	0.258	0.110	0.275	0.409	0.032	0.092

Notes: Robust standard errors in parentheses. *** p < 0.01, ** p < 0.05, * p < 0.1. (1) HRS: human resources score, CS: community score, PRS: product responsibility score, WFS: Workforce Score, RUS: resource use score, ES: environmental score, EIS: Envronmental Innovation Score, CSRS: corporate social responsibility score, SHS: shareholders score, and MNGTS: management score. (2) Baseline region: East Asia & Pacific; baseline country income group: high income. (3) Parameter estimates are obtained from a random-effects panel model with robust standard errors.

. In Australian firms, dual leadership had no significant impact on performance, while family ownership negatively impacted only the community (−5.3), resource use (−8.2), and emissions (−5.6) scores and, to a lesser statistical extent, the management (−5.5) score. In German firms, family ownership mostly hampered shareholder relations (−7.7) and management (−8.8). Dual leadership in turn negatively impacted community relations (−16.2) and management (−11.4) and, to a lesser extent, environmental innovation (−7.8).

Interestingly, in Japanese firms, there is evidence that family ownership was beneficial for product responsibility (+10.1) but had no significant impact on any other ESG dimension. In contrast, dual leadership was particularly harmful to community relations (−19–1), product responsibility (−18.4), and emissions (−19.4). For US firms, statistical evidence is more clear-cut about the negative impact of both family ownership and dual leadership on performance. The former was most detrimental to human rights (−4.1), shareholders' relations (−5.2), and management (−5.3), while the latter was most detrimental to human rights (−7.4), resource use (−7.8), and management (−8.1).

4.3. Implications of Empirical Findings

4.3.1. Support for Research Hypotheses

Based on the overall sample, the evidence strongly supports H1. While family firms do show underperformance in some environmental (e.g., resource use, environmental innovation) and social (e.g., human rights, product responsibility) subcategories, the magnitude and consistency of underperformance are most pronounced in the governance dimension. Support for H2 is mixed, with strong support for detrimental impact overall but nuanced impact on the G dimension. While dual leadership is undoubtedly detrimental to overall ESG performance, and it does negatively impact a crucial part of the governance pillar (management), it does not affect all G subcategories in the same way, unlike family ownership itself, which consistently hurts all G subcategories. The social dimension also appears to be particularly influenced by dual leadership (e.g., human rights and community relations).

While the general trend suggests governance is a weakness of family firms, evidence from individual countries demonstrates that environmental and social dimensions can also be significantly (or even more) negatively impacted by family ownership in certain contexts (e.g., Australia). Conversely, in rare cases (e.g., Japan), family ownership can even be beneficial for social aspects and not detrimental to governance. Thus, the support for H1 is generally present but with important geographical variations. Regarding H2, while dual leadership was generally associated with detrimental ESG performance across Germany, Japan, and the US, it had no impact on Australia. Furthermore, while dual leadership showed a strong negative impact on management in Germany and the US, its most severe impacts in Japan were on social and environmental aspects. This means the negative impact of dual leadership was broad across ESG pillars and not always most concentrated on governance when examined at the country level.

4.3.2. Reconciling the Findings with the Theoretical Framework

The finding that the social dimension can be positively influenced by family ownership in certain contexts (e.g., Japan) provides empirical support for SEW acting as an effective non-financial motive that deepens commitments to initiatives like robust community relations and ethical labor (e.g., [12]). However, the observed underperformance in some environmental and social subcategories shows that this SEW-driven commitment is not uniform and varies significantly by country, indicating that institutional or competitive factors can override these foundational stewardship principles.

Despite the motivational power of stewardship and SEW, the evidence overwhelmingly identifies governance as the structural weakness of family firms, demonstrating the conflict between the desire for familial control and modern accountability standards. The finding that family ownership consistently hurts all governance subcategories confirms a central tension: prioritizing the retention of family power necessitates concentrated ownership, which consequently compromises independent oversight and transparency (e.g., [16,24]). This lack of separation between ownership and management makes the firm susceptible to decisions influenced by personal interests (e.g., [20]). Therefore, while the SEW imperative pushes family firms toward the E and S pillars, the same imperative for control simultaneously makes them structurally vulnerable in the G pillar, confirming that the very trait that drives their long-term social outlook also undermines their corporate governance framework.

The role of dual leadership validates its theoretical classification as a detriment to overall ESG performance by creating a concentration of power that reduces checks and balances (e.g., [22]). The data confirms that dual leadership has a definite negative impact on the management subcategory of governance (Germany, US), but it also reveals that its most severe consequences can be externalized, directly impacting the social and environmental dimensions (e.g., Japan). This finding suggests that concentrated managerial power does not just lead to internal governance failures (like inadequate board oversight); it also creates a high risk of operational neglect and short-termism across the entire business, leading to failures in discretionary areas like environmental strategy and human rights protection (e.g., [1,32]). This emphasizes that the risks associated with dual leadership are pervasive, representing a broad ESG threat rather than a risk contained solely within the G pillar, reinforcing the idea that effective governance is a prerequisite for robust performance across all three pillars (e.g., [25]).

4.4. Extensions

4.4.1. Firms That Always Report ESG Information

The sample, comprising approximately 6300 firms from the 2015−2023 panel (Section 3.1), contains an inherent variation: not all firms consistently reported their ESG initiative data for the entire period. This section capitalizes on this reporting inconsistency to identify the causal effect of family ownership on the three individual ESG pillar scores. To do this, the analysis uses the model specified in Section 3.3.2 and compares results between the full sample and the sub-sample of firms that consistently disclosed their information for all nine years. This persistent disclosure sub-sample represents about 46% of the total firm-year observations.

Table 7. Endogenous treatment effect: Family ownership and number of years reporting ESG performance (0−100 scale).

(a) Environmental
(i) All firms					Obs. = 35,067
Average treatment effect	Coefficient	Robust s.e	z	p > |z|	95% conf. interval
Family owned (Yes vs. No)	−2.727	1.524	−1.79	0.074	−5.71	0.26
(ii) Firms that always reported during 2015−2023					Obs. = 20,146
Average treatment effect	Coefficient	Robust s.e	z	p > |z|	95% conf. interval
Family owned (Yes vs. No)	−9.419	1.990	−4.73	0.000	−13.32	−5.52
(b) Social
(i) All firms					Obs. = 35,101
Average treatment effect	Coefficient	Robust s.e	z	p > |z|	95% conf. interval
Family owned (Yes vs. No)	−4.198	1.258	−3.34	0.000	−6.66	−1.73
(ii) Firms that always reported during 2015−2023					Obs. = 20,146
Average treatment effect	Coefficient	Robust s.e	z	p > |z|	95% conf. interval
Family owned (Yes vs. No)	−7.964	1.652	−4.82	0.000	−11.02	−4.73
(c) Governance
(i) All firms					Obs. = 35,105
Average treatment effect	Coefficient	Robust s.e	z	p > |z|	95% conf. interval
Family owned (Yes vs. No)	−3.092	1.226	−2.52	0.012	−5.50	−0.69
(ii) Firms that always reported during 2015−2023					Obs. = 20,149
Average treatment effect	Coefficient	Robust s.e	z	p > |z|	95% conf. interval
Family owned (Yes vs. No)	−2.239	1.605	−1.40	0.163	−5.38	0.91

Notes: The endogenous treatment is family ownership. This is modeled on dual leadership, firm- and country-level controls and year fixed effects through a probit model. The outcome variable (E, S, or G score) is modeled on firm- and country-level controls and year fixed effects.

presents statistical results based on an endogenous treatment effect model, where family ownership represents the treatment. This is modeled on dual leadership, firm- and country-level controls and year fixed effects through a probit model. The outcome variable (E, S, or G score) is modeled on firm- and country-level controls and year fixed effects. As shown in panels (a)–(c), family ownership was systematically detrimental to performance in the full sample of countries. However, differences emerged between the full sample and persistent disclosers.

This is particularly notable for the environmental and social dimensions, where family firms in the group of persistent disclosers underperformed compared to those of the full sample. Indeed, in the environmental dimension, the average treatment effect (ATE) of family ownership was −2.7 points in the full sample, although statistically significant at the 10% only, while it was −9.4 points in the persistent-discloser sample. In the social dimension, the ATEs of family ownership were −4.2 and −8.0 points in the full and persistent discloser samples, respectively. For both dimensions, there is little overlap between the 95% confidence intervals, meaning that family firms in the persistent disclosers group underperformed family firms in the full sample. In contrast, in the G dimension, the ATE of family ownership did not statistically differ from 0 (p-value = 0.16) for persistent disclosers, in contrast to that of family ownership in the full sample (−3.1 points).

When comparing the ATEs for the full sample in Table 7 with the marginal impacts in Table 3, one sees that family ownership was less detrimental to environmental and social performance according to Table 3: −1.86 and −1.64 points, respectively. By contrast, in the governance dimension, the ATE and the marginal impact are closer in magnitude: −3.1 and −3.8 points, respectively. In other words, ignoring the potential correlation of unobservable factors associated with ESG performance and family ownership may bias relatively more the impact of family ownership on E and S performance.

On the other hand, if one ignores the potential endogeneity of family ownership and computes treatment effects based on propensity score matching (e.g., [36]), results are not so qualitatively different from those in Table 7. Indeed, in the environmental dimension, the ATE of family ownership is −1.70 points in the full sample, while −3.3 points in the persistent-discloser sample. In the social dimension, the ATEs are −1.4 and −2.5 points, respectively (with little overlap between the 95% confidence intervals). For the G dimension, a statistical difference in the ATEs is less evident: −4.5 and −4.8 in the full sample and the persistent-discloser group, respectively.

Altogether, the evidence suggests a notable disparity: within the subgroup of firms that consistently disclosed their ESG initiatives, family firms did not achieve higher quality or better relative ESG performance. If family firms are supposedly driven by legacy and reputation to genuinely perform better on ESG, then consistent disclosure should be backed up by superior performance. The fact that their performance is not relatively better suggests that the disclosure (the ‘talk’) does not match the underlying actions (the ‘walk’). (e.g., [37]).

4.4.2. Family Performance in Less Innovative Environments

This section examines how the ESG performance of family firms is influenced by innovation-related aspects: overall innovation, creative outputs, and institutional quality. Overall innovation corresponds to the World Intellectual Property Organization’s Global Innovation Index (GII). Creative outputs and institutional quality are pillars of the GII. The former measures online creativity, creative goods and services, intangible assets, and creative intangibles. The latter in turn measures business environment, regulatory environment, and political environment. GII information comes from [38].

Based on the above-mentioned endogenous treatment model,

Table 8. Endogenous treatment effect: Family ownership vs. ESG performance (0−100 scale) in selected countries.

(i) Countries with Below-Median Innovation
(a) Environmental					Obs. = 18,178
Average treatment effect	Coefficient	Robust s.e	z	p > |z|	95% conf. interval
Family owned (Yes vs. No)	−4.400	2.120	−2.08	0.038	−8.55	−0.24
(b) Social					Obs. = 18,188
Average treatment effect	Coefficient	Robust s.e	z	p > |z|	95% conf. interval
Family owned (Yes vs. No)	−1.120	1.856	−0.60	0.546	−4.76	2.52
(c) Governance					Obs. = 18,189
Average treatment effect	Coefficient	Robust s.e	z	p > |z|	95% conf. interval
Family owned (Yes vs. No)	0.496	1.723	0.29	0.774	−2.88	3–87
(ii) Countries with Below-Median Creative Outputs
(a) Environmental					Obs. = 19,817
Average treatment effect	Coefficient	Robust s.e	z	p > |z|	95% conf. interval
Family owned (Yes vs. No)	−1.164	2.232	−0.52	0.602	−5.54	3.21
(b) Social					Obs. = 19,826
Average treatment effect	Coefficient	Robust s.e	z	p > |z|	95% conf. interval
Family owned (Yes vs. No)	−3.192	1.753	−1.82	0.069	−6.63	0.24
(c) Governance					Obs. = 19,827
Average treatment effect	Coefficient	Robust s.e	z	p > |z|	95% conf. interval
Family owned (Yes vs. No)	−1.708	1.739	−0.98	0.326	−5.12	1.70
(iii) Countries with Below-Median Institutional Quality
(a) Environmental					Obs. = 15,438
Average treatment effect	Coefficient	Robust s.e	z	p > |z|	95% conf. interval
Family owned (Yes vs. No)	1.175	2.229	0.53	0.598	−3.19	5.54
(b) Social					Obs. = 15,468
Average treatment effect	Coefficient	Robust s.e	z	p > |z|	95% conf. interval
Family owned (Yes vs. No)	0.657	1.861	0.35	0.724	−2.99	4.30
(c) Governance					Obs, = 15,470
Average treatment effect	Coefficient	Robust s.e	z	p > |z|	95% conf. interval
Family owned (Yes vs. No)	−2.461	−1.722	−1.43	0.153	−5.84	0.91

Notes: The endogenous treatment is family ownership. This is modeled on dual leadership, firm- and country-level controls and year fixed effects through a probit model. The outcome variable (E, S, or G score) is modeled on firm- and country-level controls and year fixed effects. Country-level information on innovation scores is from [38].

reports ATEs for firms in countries with below-median scores for overall innovation, creative outputs, and institutional quality. As shown, in countries that are less innovative (panel i), family firms perform worse in the environmental dimension (by 4.4 points) than non-family firms. However, their performance in the social and governance dimensions is the same as that of non-family firms. In countries with less creative output (panel ii), there is minor evidence suggesting that family firms only underperform in the social dimension (by 3.2 points, significant at 7%). Notably, in countries with weaker institutions (panel iii), there is no observable difference in ESG performance between family firms and non-family firms.

Some explanations for the above findings are the following. In countries with low innovation, there may be less sophisticated investor activism or NGO pressure demanding high environmental standards. Since family firms are often less reliant on external equity financing than non-family firms (e.g., [39]), they are less exposed to the scrutiny that drives proactive environmental investments. If the less creative context implies a less developed civil society or media scrutiny, family firms might feel less pressure to invest resources in these areas, diverting them back to core business or family interests. On the other hand, when institutional quality is weak, regulatory standards are often poorly enforced, political environments are unpredictable, and the business environment is challenging for all firms (e.g., [40]). In this scenario, the primary driver of ESG behavior is often the minimum required compliance, which all firms (family and non-family) meet to maintain their license to operate.

5. Conclusions

Family firms are increasingly focused on ESG initiatives due to their inherent long-term perspective, desire to preserve socio-emotional wealth (reputation, family identity), and stewardship model. Their strong community ties and the influence of younger generations also drive ESG adoption.

While internal motivations are key, external pressures from stakeholders, investors, and evolving regulations also play a role. However, family firms may face limitations such as fewer resources and a more cautious approach to change compared to larger, non-family firms. Their ESG engagement can vary significantly based on factors like managing generation, industry, and cultural environment.

A critical challenge for family firms in ESG is governance, especially when a single family or individual holds both majority ownership and key management roles (i.e., the principal–principal problem). This can lead to conflicts of interest, where decisions primarily benefit the family at the expense of minority shareholders, potentially diverting resources from ESG initiatives. Despite the potential for a family CEO to be a strong ESG advocate, this dual role can also create significant transparency and accountability risks. Based on a sample of nearly 6000 family and non-family companies across 43 countries from 2015 to 2023, this study investigated how family ownership and dual leadership impact ESG metrics.

5.1. Summary of Findings

5.1.1. Full Sample of Countries

Overall, family firms, especially those with dual leadership, tend to underperform in most ESG subcategories. Indeed, in the environmental dimension, family firms generally underperformed in resource use (RU) and environmental innovation (EI), though the magnitude was not always substantial. Dual leadership exacerbated this underperformance in both RU and EI. Weak evidence of underperformance in emissions was found for family firms, but no impact was seen from dual leadership in this area. In the social dimension, family firms underperformed in human rights (HR) and product responsibility (PR). Dual leadership led to more significant underperformance across HR, PR, community relationships, and workforce management. Governance was the weakest pillar for family firms, with consistent and more significant underperformance in corporate social responsibility (CSR), shareholder (SH) relationships, and management (MNGT). Interestingly, dual leadership had no impact on CSR or SH relations but significantly hindered management performance. When looking at aggregate ESG scores and pillar scores (E, S, G), both family ownership and dual leadership consistently had a negative impact on performance. Neither family ownership nor dual leadership impacted the ESG Controversies Score (ESGC). Z-scores, which assess performance relative to the mean in standard deviations, confirmed these negative impacts.

Several factors beyond ownership structure also significantly influence ESG performance. Company size consistently emerged as a relevant positive predictor across ESG dimensions and reduced ESG controversies. Larger firms showed substantially better performance. Capital expenditures and the economic sector were also relevant. Geographic region played a substantial role. Companies in the Middle East & North Africa considerably underperformed compared to East Asia & Pacific, and, to a lesser extent, so did companies in North America. Income group showed varied impacts: upper-middle-income countries generally outperformed in social and CSR aspects, while lower-income countries underperformed in environmental and human rights but outperformed in community relations. Human well-being contributed to better performance, whereas economic well-being generally had a negative impact.

5.1.2. Country-Specific Patterns

In Australia, dual leadership had no significant impact, but family ownership negatively affected community, resource use, emissions, and management scores. In Germany in turn, family ownership mostly hampered shareholder relations and management. Dual leadership negatively impacted community relations, management, and environmental innovation. In Japan, family ownership was beneficial for product responsibility but had no other significant impact. Dual leadership, however, was particularly harmful to community relations, product responsibility, and emissions. Finally, in the United States, both family ownership and dual leadership had clear negative impacts, with family ownership most detrimental to human rights, shareholder relations, and management, while dual leadership primarily affected human rights, resource use, and management.

5.1.3. Impact of Consistent ESG Reporting

An extension analyzed the impact of family ownership among firms that always reported ESG information. This showed that, while family ownership was systematically detrimental to performance, this was particularly the case for full-time reporters in the environmental and social dimensions. This finding is crucial because it highlights a potential reporting-performance gap within family-owned businesses. While regular reporting indicates a certain level of awareness and commitment to transparency, it does not automatically equate to relatively effective action or genuine progress on environmental, social, and governance fronts.

5.1.4. Impact of a Less Innovative Environment

In less innovative countries, family firms underperform in the environmental dimension possibly because their lower reliance on external equity financing exposes them to less investor and NGO scrutiny, reducing the pressure on costly environmental investments. A similar, though minor, social underperformance is observed in countries with less creative output, possibly due to weaker civil society oversight. Conversely, in countries with weaker institutions, there is no difference in ESG performance between family and non-family firms, as all companies may be primarily driven by the minimum compliance necessary to operate within a challenging regulatory environment.

5.2. Policy Implications

The research findings highlight systematic underperformance of family firms, particularly those with dual leadership, across key ESG dimensions. Policy interventions should focus on governance structure, mandatory disclosures, and targeted incentives to mitigate these negative impacts and close the observed reporting-performance gap.

5.2.1. Strengthening Governance and Board Oversight

The consistent and significant underperformance in the G pillar, particularly in MNGT and SH relations, requires direct regulatory attention. The negative effect of dual leadership (DL) on management performance is a crucial point.

• Mandate independent director quotas for family firms: Regulators should consider mandating a higher number of independent directors on the boards of publicly listed family firms. This is aimed at mitigating the identified weaknesses in management and improving the oversight of CSR and SH relations. The presence of independent directors can dilute the effects of insular decision making often associated with DL.
• Establish best practice guidelines for DL: Industry bodies and regulators should issue specific guidelines for firms with dual leadership structures, focusing on clear division of roles, responsibilities, and accountability mechanisms to prevent managerial entrenchment and conflict that seems to hinder MNGT performance.
• Enhance shareholder rights and protections: Given the underperformance in SH relations, particularly for family-owned firms, policies must ensure stronger minority shareholder protection and facilitate greater shareholder engagement in ESG matters. This could include clearer rules on related-party transactions and more transparent voting procedures.

5.2.2. Addressing the ESG Reporting-Performance Gap

The finding that family firms that consistently report ESG information still show detrimental performance in E and S areas suggests that disclosure alone is insufficient; policies must drive action and verifiable outcomes.

• Move beyond disclosure to mandate performance targets: For larger firms, especially those in sectors with high environmental impact, regulators should transition from solely demanding reporting to requiring the setting of verifiable and time-bound ESG performance targets. Targets should specifically address the areas of underperformance, such as RU, EI, HR, and PR.
• Introduce an action verification or impact audit: Implement a system where reported ESG data is subject to an independent audit or verification process that focuses on the quality of the action taken, not just the quality of the disclosure. This helps distinguish between firms that are merely compliant reporters and those making genuine progress.
• Tie financial incentives to performance improvements: Governments should offer tax breaks, preferential loan terms, or grants that are contingent upon a family firm demonstrating measurable year-over-year improvement in key underperforming ESG metrics (e.g., RU efficiency or HR ratings), rather than just the act of reporting.

5.2.3. Contextualizing Policy by Size and Geography

The strong influence of company size and geographic region suggests a need for tailored, rather than one-size-fits-all, policy approaches.

• Size-based differential regulation: Policies for smaller and medium-sized family firms may focus more on capacity building, subsidized consultancy, and accessible technology adoption programs to improve performance in areas like RU and EI.
• Region-specific ESG collaboration and standards: International bodies and regional coalitions should be supported to develop ESG standards and benchmarks that are sensitive to the economic and social contexts of different regions. This is particularly relevant given the significant underperformance of firms in the Middle East & North Africa and the mixed performance based on income group. Policy transfer and learning should be promoted, for example, from the high-performing East Asia & Pacific region.

5.3. Limitations

This study is based on LSEG ESG ratings. However, ESG ratings from different providers often vary significantly due to different methodologies, weightings, and data sources. Moreover, governance structure (e.g., board independence, CEO-Chair duality) is typically the easiest and most objectively measurable data point across countries. The environmental and social dimensions often require more subjective assessments.

On the other hand, the ESG scores are often heavily weighted toward a firm’s disclosure rather than its actual impact. If family firms are more guarded or less sophisticated in reporting than non-family peers, their lower scores might reflect a disclosure deficit rather than an underperformance deficit. Furthermore, ESG rules and reporting requirements can vary significantly even within a single country due to different regulatory bodies or governmental levels. For example, Ref. [41] found that stakeholder-oriented firms (Canadian and some U.S. firms) have better environmental performance but less consistent financial benefits from those efforts compared to shareholder-oriented U.S. firms, which see a positive financial impact from good environmental performance.

Finally, a topic not covered by this article is the significant influence of external pressure on a company’s behavior and disclosure practices. This pressure stems from sources like activist shareholders, institutional investors, and advisory firms. For instance, evidence from [42] concerning Taiwan demonstrated that higher institutional investor shareholding ratios, third-party verification of sustainability reports, and participation in corporate governance evaluations all help lessen the detrimental effects of family control and enhance overall environmental and social performance.