The role of the board of directors in the value creation process and performance of family businesses

Abstract

An important feature of family firms is that the controlling shareholders normally aim to maintain their investment in the long term. The theme of performance stability might be of great importance for a family firm’s survival over time. We hypothesize that family firm owner-managers are likely to choose as board members those outsiders who are able to help the firm overcome problems of performance stability over time. We then test the hypotheses through empirical analysis. Our findings suggest that the number of independents on the board of a family firm has no impact on performance stability. Instead, we find that interlocking directors can provide a significant contribution to the achieving of lower performance variability.