34 International Journal of Asian Business and Information Management, 5(4), 34-47, October-December 2014 Copyright © 2014, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. ABSTRACT Numerous studies have focused on ownership structure and frm performance. In recent years a growing amount of research has recognized the importance of family-controlled frms (FCFs) where ownership concentrates on single individual or family. Despite many important insights, however, signifcant gaps in the literature remain. Studies have produced divergent fndings about the performance of FCFs, leading to calls for further research. Utilizing 151 and 753 frm-years of FCFs drawn from the Colombo Stock Exchange, Sri Lanka, and the Tokyo Stock Exchange, Japan, respectively during 2011-2013, this study examines the relationship between family ownership and frm performance. Regression results show conficting fndings in that family ownership has a positive relationship with frm performance in Japan whereas a negative relationship is found in Sri Lanka. In sum, fnding supports that view of the extant studies that family ownership and frm performance have a curvilinear relationship meaning that ownership concentration beyond a certain point likely creates entrenchment and consequently negative effects on performance. Family Ownership and Firm Performance: Further Evidence from Sri Lanka and Japan Pradeep Dharmadasa, Faculty of Management and Finance, University of Colombo, Colombo, Sri Lanka Keywords: Agency Theory, Family Ownership Concentration, Family-Controlled Firms, Firm Performance, Herfndahl Index, Japan, Sri Lanka 1. INTRODUCTION Family-controlled firms (FCFs) are the old- est form of business in the world. The study of FCFs has attracted significant attention in recent times because of FCFs prevalence in the global economic and business landscape (Gomez-Mejia, Haynes, Nunez-Nickel, Ja- cobson, & Moyano-Fuentes, 2007; Moores & Mula, 2000; Morck & Yeung, 2004). Their role in the economy is significant in terms of employment generation, wealth creation and industrialisation. Researchers have suggested, based on conservative estimates, that more than 75% of all businesses in most economies are family-controlled (Miller, Steier, & Le Breton- Miller, 2003). According to Carlson, Upton and Seaman (2006), 60% of all employment, 78% of all new jobs, more than 50% of GDP and about 65% of all wages paid in the US are from family businesses. Mishra and McConaugh (1999) re- ported that a majority of privately owned Indian, Korean and Canadian firms, and a lion share of small and medium-sized firms in Germany and DOI: 10.4018/ijabim.2014100104