The management of family wealth across generations in Malta

Abstract

Purpose: This study seeks to identify the main factors leading to the success or failure of a family business by looking into subsets of succession planning. It assesses the dynamics in a family business to see whether the business can cause tension within the family or vice versa. It also aims to analyse how nepotism affects non-family members, and how family businesses change as generations progress. Design: A qualitative methodology approach is adopted to achieve the research objectives. The study is based on sixteen semi-structured interviews held with executive members in large family businesses. Findings: Family members’ involvement in the management of the family business affects the business, the family, as well as non-family members. Moreover, family members dominate family wealth management decisions, with the majority favouring wealth over family control. Nepotism does not play a role in most family businesses; consequently, non-family professional management is very common amongst large Maltese family businesses. The study indicates that Maltese family businesses recognise the importance of succession planning. However, notwithstanding its importance, some family businesses still lack such a plan. Lastly, the study revealed that as generations progress, new generations are inclined to branch off into new industries or modify the company’s structure, in an attempt to better suit their interests. Conclusions: Although most family businesses have planned for succession, there are still several who fail to do so. Unfortunately, the Family Business Act did not have the desired effect, which is attested by the lack of knowledge on the matter and the poor uptake. Furthermore, most family businesses also lack a good governance structure that regulates family members’ involvement with the business as well as independent professional wealth management advisors. Value: This research bridges the research gap identified in previous literature, whilst raising awareness on the importance of succession planning. The study serves to provide insight on the Family Business Act and the Family Office to family businesses in Malta.