Revisiting the impact of families on family firm performance

Author:

Jaskiewicz Peter1,Combs James G.23,Uhlenbruck Klaus45,Datta Amlan3

Affiliation:

1. University Research Chair in Enduring Entrepreneurship, Telfer School of Management University of Ottawa Ottawa Ontario Canada

2. Della Phillips Martha Schenck Chair of American Private Enterprise, College of Business University of Central Florida Orlando Florida USA

3. Telfer School of Management University of Ottawa Ottawa Ontario Canada

4. College of Business University of Montana Missoula Montana USA

5. EBS Universität für Wirtschaft und Recht Oestrich‐Winkel Germany

Abstract

AbstractFamily owners monitor managers, attenuating principal–agent conflicts and improving firm performance. However, family owners also appropriate resources, creating principal–principal conflicts that harm firm performance. Although these effects occur simultaneously, research does not explain when one outweighs the other. We theorize that agency costs are minimized when the family's involvement on the board of directors is proportional to its ownership; too little board involvement fuels principal–agent conflicts, and too much fuels principal–principal conflicts. Consistent with our theorizing, evidence from French panel data shows firm performance increases as family board involvement and family ownership jointly increase, and performance is maximized when family board involvement and family ownership are proportional.

Publisher

Wiley

Subject

Strategy and Management,Business and International Management

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