The authors are grateful for the comments from the editor and two anonymous reviewers. An earlier version of this paper was presented at the International Council for Small Business (ICSB) 50th World Conference in Washington, D.C., June 15–17, 2005.
The Relationship between Family Firms and Corporate Governance*
Article first published online: 10 MAR 2006
Journal of Small Business Management
Volume 44, Issue 2, pages 245–267, April 2006
How to Cite
Bartholomeusz, S. and Tanewski, G. A. (2006), The Relationship between Family Firms and Corporate Governance. Journal of Small Business Management, 44: 245–267. doi: 10.1111/j.1540-627X.2006.00166.x
- Issue published online: 10 MAR 2006
- Article first published online: 10 MAR 2006
This paper contributes to the agency theory literature by identifying relations between family control and corporate governance structure. Emerging literature supports the notion that family control creates strong incentives that have potentially competing influences on the manner in, and extent to, which internal corporate governance mechanisms are utilized. A sample of 100 listed companies (evenly divided between family and nonfamily firms) is used to test the hypotheses that corporate governance structures are different between family and nonfamily firms; and that family firms adopt optimal corporate governance structures. This research finds evidence that suggests that family firms utilize substantially different corporate governance structures from nonfamily firms and that these differences lead to performance differentials. Indeed, results suggest that family control creates, rather than negates, agency costs and future research may be well rewarded by pursuing this latter notion further.