We study the risk-return relationship for an international sample of family and nonfamily firms in the period 2007 to 2014. According to prior studies and following the Prospect theory, we obtain a nonlinear risk-return relation and a target level of profitability for family firms in order not to assume excessive level of corporate risk taking. This relation is more prominent in companies from countries with lower protection to creditors and less aversion to uncertainty. Also, we find evidence that institutional investors exert pressure on family firms to increase corporate risk taking, even when the return is lower than the target, with the negative consequence of reducing the profitability and going to bankruptcy, as it happened during the years of financial crisis. While banks, as big shareholders, reduce risk because they try to preserve their financial relationship with family firms. This conservative role is positive to the profitability of the firm for values lower than the return target.
