Corporate Governance Rating of Family Firms at the Athens Exchange Market

Abstract

Corporate governance (CG) has mainly focused on highly dispersed corporations. This paper has two objectives: to enrich the debate in this area and to contribute to the increasing body of literature by exploring the CG of the listed family firms in Greece; and to place the CG practices of the Greek family firms within the international debate, especially in the framework of a small open capital market. In addition, this paper presents an attempt to quantify the compliance of family firms with international best practices. The methodology consisted in the creation of a questionnaire reflecting the Greek CG code and other well-regarded CG codes, like the OECD Principles. We constructed a CG rating system and we applied it to distinguish family from non-family firms. The main conclusion is that the family firms lack efficient CG mechanism and they are demonstrated poor governance compared with non-family firms. The results disclose the potential strengths and weaknesses of the existing CG framework of the family-owned firms. Our methodology applies in a small open economy and may have significant implications in other similar capital markets. Methodologically, the merit of the exercise lies in its approach toward the creation of collectively subjective weightings, and is valuable to policymakers and academics.