Family representatives in family firms

Chen, En-Te, Gray, Stephen, & Nowland, John (2013) Family representatives in family firms. Corporate Governance : An International Review, 21(3), pp. 242-263.

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Research Question/Issue:

Family control in family firms can extend beyond the direct involvement of family members, but identifying these mechanisms is difficult in most markets. We utilize unique disclosures made by Taiwanese firms to examine the role played by family representatives in listed family firms. Family representatives are non-family members that represent the controlling family’s indirect shareholdings in the firm. We examine whether family representatives are used in the same manner as family members and whether they provide net benefits or costs to shareholders.

Research Findings/Insights:

In our sample of listed family firms, we find that omitting family representatives understates the influence of controlling families by 46 percent. We show that family representatives are associated with net costs to shareholders, but to a lesser extent than family members. We also find that controlling families use family members and family representatives differently. Family members are more involved in older family firms and in firms founded by the family. Family representatives are more involved in acquired and second generation family firms and in larger firms with more fixed assets.

Theoretical/Academic Implications:

We apply agency theory to the use of family representatives and show that family representatives are being used by controlling families to extend their influence within their firms, increasing agency costs to minority shareholders.

Practitioner/Policy Implications:

For policymakers, our analysis shows that disclosure of family member and representative relationships within firms is important and value-relevant to investors. Furthermore, our results suggest that firm performance could be improved by limiting the involvement of family members and family representatives in family firms.

Impact and interest:

10 citations in Scopus
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7 citations in Web of Science®

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Full-text downloads:

46 since deposited on 25 Nov 2013
18 in the past twelve months

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ID Code: 64764
Item Type: Journal Article
Refereed: Yes
Keywords: Corporate Governance, Family Firms, Family Members, Family Representatives, Firm Performance
DOI: 10.1111/corg.12009
ISSN: 0964-8410
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Accountancy
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2013 John Wiley & Sons, Inc
Deposited On: 25 Nov 2013 04:51
Last Modified: 06 Apr 2017 22:17

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