Family Firms and Good Corporate Governance: Altruism and Agency Considerations
Do descendants of founders make good monitors and managers (Chairs and CEOs) in publicly traded firms? We use insights from agency theory and the theory of altruism to develop testable propositions; we argue that both economic incentives and positive altruism drive the behavior of descendant Chairs. This may reduce agency costs, and ensure the continuity of the founders’ strategic vision and therefore higher firm performance. On the other hand, descendant CEOs, who are responsible for executing a strategic vision, can reflect an inefficient market for managerial labor. This may produce negative altruism and lower firm performance. Furthermore, for descendant Chairs, the presence of takeover defenses reduces the positive performance effect of to a lesser extent than for non-descendant Chairs. Evidence from 141 manufacturing, property, and shipping firms in Norway and Sweden largely support our hypotheses.
Publisert i Conference on Corporate Governance in Family Firms, 2004
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