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Int. J. Financial Stud. 2015, 3(3), 194-229; doi:10.3390/ijfs3030194

Corporate Governance Provisions, Family Involvement, and Firm Performance in Publicly Traded Family Firms

1
Bryan School of Business and Economics, University of North Carolina-Greensboro, 370 Bryan, Greensboro, NC 27402, USA
2
College of Business and Management, Saginaw Valley State University, C326, 7400 Bay Road, University Center, MI 48710, USA
*
Author to whom correspondence should be addressed.
Academic Editor: Nicholas Apergis
Received: 2 April 2015 / Revised: 26 June 2015 / Accepted: 1 July 2015 / Published: 17 July 2015
(This article belongs to the Special Issue Performance and Behavior of Family Firms)
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Abstract

This study examines the moderation effects of corporate governance provisions on the link between family involvement (i.e., family ownership and family management) in publicly-traded firms and firm performance by drawing upon agency theory, with a focus on principal-principal agency issues, and the extant family governance literature. We develop and test the hypotheses on 386 of the S&P 500 firms longitudinally. Findings support the hypotheses suggesting the moderation effects of the use of provisions (a) protecting controlling owners in terms of their sustainability of controlling status, and (b) protecting management legally on the inverted U-shaped relationship between family ownership and firm performance. We also found support for the moderation effects of provisions (c) protecting controlling owners in terms of their voting rights, (d) protecting noncontrolling owners, and (e) protecting management monetarily on the inverted U-shaped relationship between family management and firm performance. By this, our study provides empirical support for the principal-principal agency perspective on the corporate governance in publicly-traded family firms. As such, it suggests new avenues of research for both the corporate governance literature, as well as for the theory of the family firm. Our study also offers insights to policy directed toward monitoring the actions of large shareholders such as family and enhancing the overall shareholder value in publicly-traded family firms. View Full-Text
Keywords: corporate governance; principal-principal agency theory; governance provisions; family firms; firm performance corporate governance; principal-principal agency theory; governance provisions; family firms; firm performance
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Memili, E.; Misra, K. Corporate Governance Provisions, Family Involvement, and Firm Performance in Publicly Traded Family Firms. Int. J. Financial Stud. 2015, 3, 194-229.

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