HRM retrenchment practices and firm performance in times of economic downturn: exploring the moderating effects of family involvement in management

Abstract

A substantial number of studies have indicated a significant negative relationship between human resource management (HRM) retrenchment practices such as downsizing, and firm performance. However, a consideration of the potential effects of business family involvement in management is largely absent from the general employment restructuring literature. Using a sample of 218 Taiwanese publicly listed firms, this study seeks to further our understanding in this area by examining the moderating effects of family involvement in management on the relationship between the adoption of HRM retrenchment practices and firm performance during the period of global economic downturn that erupted in the middle of 2008. Data analysis reveals that HRM retrenchment practices had a negative influence on firm performance, and that the relationship between HRM retrenchment practices and firm performance was negatively and significantly moderated by family involvement in management.

Keywords::

• economic downturn
• family involvement
• firm performance
• HRM retrenchment practices
• Taiwanese publicly listed firms

Acknowledgements

The authors gratefully acknowledge the assistance of Professor Chi-Cheng Wu, Dr. Yi-Hsien Wang, Mr. Kai-Hsiang Wen, Ms. Hui-Ju Tsai, and Mr. Wen-Chung Hsu in collecting data used in this study.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

^1. Email: [email protected].

^2. Email: [email protected].

^3. Email: [email protected].

^4. Source: Council for Economic Planning &Development, ROC, ‘Business Indicators of Taiwan’. Department of Statistics, Ministry of Economic Affairs, ‘Domestic & Foreign Express Report of Economic Statistics Indicators’.

^5. Source: DGBAS, Executive Yuan, ‘Quarterly National Economic Trends’, Taiwan Area, ROC; The Central Bank of China, Financial statistics, Taiwan District, The Republic of China.

^6. Source: same as footnote 5.

^7. Source: Department of Statistics, Ministry of Finance, Taiwan District, The Republic of China, ‘2010 Primary Statistic of Export & Import’.

^8. Source: Department of Statistics, Ministry of Finance, Taiwan District, The Republic of China, ‘2010 Primary Statistic of Export & Import’.

^9. Although the literature reveals that there is no accepted and unified definition of family business among scholars (Chrisman, Chua, & Sharma, 2003; Chrisman, Chua, & Steier, 2003), most researchers generally accept family involvement in business operations as a key component in the definition of family business (Kowalewski et al., 2010). For the purposes of this study we adopt Anderson and Reeb (2003) measure of family involvement given it has been used in prior research on Taiwanese firms (Tsao et al., 2009) namely ratio of family members on the Board of Directors. We do not look at equity ownership of the family as this does not relate to day-to-day involvement in the firm's business operations. We also include for robustness another measure of family involvement that has been used by other researchers (Kowalewski et al., 2010; González et al., 2014), namely Family CEO.