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Industry and Information Asymmetry: The Case of the Employment of Non‐Family Managers in Small and Medium‐Sized Family Firms

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  • Hanqing “chevy” Fang
  • Esra Memili
  • James J. Chrisman
  • Christopher Penney

Abstract

As family firms begin to professionalize, they face an important crossroads in deciding whether to employ non‐family managers. To preserve socioemotional wealth and minimize agency costs, family owners may resist employing non‐family managers. However, industry sector may play a role that influences the employment of non‐family managers. We argue that the family's reluctance will be stronger in industries where information asymmetries make monitoring managers more difficult. For industries where monitoring is easier, the benefits of employing non‐family managers may offset the loss in socioemotional wealth and increase in agency costs. Results based on a sample of 965 small and medium‐sized retail and manufacturing firms confirm our predictions.

Suggested Citation

  • Hanqing “chevy” Fang & Esra Memili & James J. Chrisman & Christopher Penney, 2017. "Industry and Information Asymmetry: The Case of the Employment of Non‐Family Managers in Small and Medium‐Sized Family Firms," Journal of Small Business Management, Taylor & Francis Journals, vol. 55(4), pages 632-648, October.
    • Handle: RePEc:taf:ujbmxx:v:55:y:2017:i:4:p:632-648
    DOI: 10.1111/jsbm.12267
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    Cited by:

    1. Ine Umans & Maarten Corten, 2023. "Ownership succession intentions affecting earnings management in private family firms," Small Business Economics, Springer, vol. 61(2), pages 827-842, August.

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