Family Firms And Boards Of Directors
23rd October 2013 Paul Andrews
Interesting research piece from ISB Insight, The quarterly research journal from the Indian School of Business.
Critical differences in board tenures and characteristics between family and non-family firms affect firm value and performance, argue Professors Huimin Li, Harley Ryan, Lingling Wang and Baozhong Yang. Their study extends our understanding of the mechanisms that govern family firms and has important implications for founding families, investors and policy makers.
As an integral component of governance mechanisms in publicly held firms, the board of directors seeks to protect the interests of dispersed shareholders who finance the firm’s operations but delegate daily control to professional managers.
However, in a large proportion of publicly traded firms, founding families maintain concentrated ownership and are active in the management of the firm. These features mitigate the need to protect the interests of diffuse shareholders from the actions of delegated management, but create new incentive conflicts between family owners, who can receive unique private benefits of control, and nonfamily shareholders. In Li et al. (2013) and ongoing research, we examine boards of directors in family and nonfamily firms and address the following questions: 1) How do boards of directors in family firms differ from those in non-family firms? and 2) How are board characteristics associated with firm performance in family and non -family firms?
Interesting research piece from the Indian School of Business, as published in the ISB Insight, the quarterly journal from the Indian School of Business.
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