Family firms and risk taking: Does the integration of ESG practices matter?

This study examines the evolving risk-taking behavior of family firms and the role of ESG integration in mitigating excessive risk-taking. Traditionally viewed as risk-averse, family firms are increasingly engaging in higher risk-taking to enhance competitiveness and sustain long-term growth. We find that ESG adoption significantly reduces risk-taking in family firms by improving internal control quality, governance transparency, and reducing financial constraint, thereby strengthening overall corporate resilience. Robustness tests confirm these findings, while heterogeneity analysis reveals variations across firm life cycles, ownership structures, and industry contexts. Overall, ESG serves as a crucial governance mechanism, balancing strategic risk-taking with long-term sustainability in family firms. • Traditionally risk-averse, family firms now take greater risks to enhance competitiveness and long-term sustainability. • ESG affects risk-taking differently in family and non-family firms, with significant mitigating effects in family firms. • ESG integration curbs risk-taking in family firms by improving internal controls, transparency, and financial constraints. • ESG goes beyond corporate reputation and image or mere window dressing.