When Does the Family Govern the Family Firm?
49 Pages Posted: 26 Jul 2018 Last revised: 18 Aug 2018
Date Written: July 13, 2018
We find that the controlling family holds both the chief executive officer and chair positions in 79% of Norwegian family firms. The family holds more governance positions when it owns large stakes in small, profitable, low-risk firms. This result suggests that the family trades off expected costs and benefits by conditioning participation intensity on observable firm characteristics. We find that the positive effect of performance on participation is twice as strong as the positive effect of participation on performance. The endogeneity of participation should therefore be carefully accounted for when analyzing the effect of family governance on the family firm’s behavior.
Keywords: corporate governance, family firms, private benefits, endogeneity, self-selection
JEL Classification: G34, L21
Suggested Citation: Suggested Citation