Abstract
This paper examines how the involvement of family members in family firms affects the roles of supervisory boards in two-tier board systems. Taking an agency and resource-based perspective, we argue that the occurrence of monitoring and advisory tasks of the board depends on the entanglement of family management and family ownership. This entanglement creates special governance requirements for family firms in two-tier board systems. We use a unique dataset of 186 German family firm observations to show that family involvement in management as well as a high family ownership reduces the occurrence of the monitoring tasks that the supervisory board performs. Moreover, we show that a growing number of owning family branches increases the monitoring tasks. We also provide evidence that family involvement increases the occurrence of the advisory tasks in relation to the monitoring ones.
Highlights
A lot of recent research in the family firm literature is dedicated to the heterogeneities of family firms (e.g., Chua et al 2012; Nordqvist et al 2014; Songini and Gnan 2015)
The rationale is that family firms are distinct by several features that result in specific behaviors such as family influence over strategies, intention to maintain control, succession plans, and capabilities that stem from family involvement (Chua et al 1999)
In addition to our three independent variables, we report three further measures of family involvement, namely a dummy for family members as non-executive employees, involved generation(s) and board composition
Summary
A lot of recent research in the family firm literature is dedicated to the heterogeneities of family firms (e.g., Chua et al 2012; Nordqvist et al 2014; Songini and Gnan 2015). The heterogeneities in the population of family firms is rooted in the involvement of family members in management and ownership of family firms (Astrachan et al 2002; Klein et al 2005; Sharma and Nordqvist 2008). In this vein some scholars explored the impact of family involvement on the financial performance of family firms (e.g., Sacristán-Navarro et al 2011; Audretsch et al 2013), the risk of business failure (Revilla et al 2016), or entrepreneurial orientation (Bauweraerts and Colot 2017). Due to the occupation of multiple positions and the special relationship of actors within the firm, family firms offer a unique organizational setting to analyze the way boards of family firms work (Huse 2005)
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