Governance Systems in Family SMEs: The Substitution Effects between Family Councils and Corporate Governance Mechanisms

Authors

  • Luca Gnan,

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    • Address correspondence to: Luca Gnan, Tor Vergata University of Rome, Economics and Finance, Via Columbia 2, Rome 00133, Italy. E-mail: luca.gnan@uniroma2.it.

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    • Luca Gnan is Professor of Organizational Behaviour at Department of Economics and Finance, Tor Vergata University of Rome.
  • Daniela Montemerlo,

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    • *Daniela Montemerlo is Professor of General Management and Management and Governance of Family Firms at the University of Insubria, and Professor of Strategy and Family Business at SDA Bocconi School of Management.
  • Morten Huse

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    • *Morten Huse is Reinhard-Mohn-Chair of Management and Governance at the University of Witten/Herdecke, and Professor of Organisation and Management at BI Norwegian Business School.

  • [*Corrections added on 15 November 2013, after first online publication on 25 October 2013: The affiliations of Daniela Montemerlo and Morten Huse have been updated.]

Abstract

The main objective of this paper is to explore the role of family councils vis-à-vis corporate governance mechanisms. Particularly, the paper explores whether family councils perform only their distinctive family governance role or if they also substitute for the roles performed by corporate governance control mechanisms. Based on a sample of 243 Italian family SMEs, our research findings show that the family council partially substitutes the shareholders' meeting and the board of directors in playing their respective corporate governance roles of ownership and monitoring. These findings are interpreted in the light of both agency and relational perspectives.

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