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The Relationship between Family Firms and Corporate Governance

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  • Simon Bartholomeusz
  • George A. Tanewski

Abstract

This paper contributes to the agency theory literature by identifying relations between family control and corporate governance structure. Emerging literature supports the notion that family control creates strong incentives that have potentially competing influences on the manner in, and extent to, which internal corporate governance mechanisms are utilized. A sample of 100 listed companies (evenly divided between family and nonfamily firms) is used to test the hypotheses that corporate governance structures are different between family and nonfamily firms; and that family firms adopt optimal corporate governance structures. This research finds evidence that suggests that family firms utilize substantially different corporate governance structures from nonfamily firms and that these differences lead to performance differentials. Indeed, results suggest that family control creates, rather than negates, agency costs and future research may be well rewarded by pursuing this latter notion further.

Suggested Citation

  • Simon Bartholomeusz & George A. Tanewski, 2006. "The Relationship between Family Firms and Corporate Governance," Journal of Small Business Management, Taylor & Francis Journals, vol. 44(2), pages 245-267, April.
    • Handle: RePEc:taf:ujbmxx:v:44:y:2006:i:2:p:245-267
    DOI: 10.1111/j.1540-627X.2006.00166.x
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    Cited by:

    1. Abbas Saad Hamada Alkhuzaie & Alaa Zuhair Mansour & Marwan Altarawneh & Alya Elfedawy, 2024. "CEO Compensation and SMEs Performance: A Structural Equation Modelling Approach from Jordanian Listed SMEs," Business and Economic Research, Macrothink Institute, vol. 14(1), pages 57-71, December.
    2. Wenig, Thilo, 2021. "Performance of German Family Firms During the Global Financial Crisis," Junior Management Science (JUMS), Junior Management Science e. V., vol. 6(2), pages 237-278.

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