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Benevolence Based Trust And Agency Relations Among Upper Echelons Of Family-Owned Firms

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  • CRISTINA CRUZ

    ()
    (Instituto de Empresa)

  • LUIS GOMEZ - MEJIA

    ()
    (Instituto de Empresa)

  • MANUEL BECERRA

    ()
    (Instituto de Empresa)

Abstract

We investigate how the family status of owners, CEO, and top management team (TMT) determine CEO´s perceptions regarding the benevolence of his/her TMT and how in turn these perceptions of benevolence-based trust influence the nature of TMT control and incentive mechanisms. Using a sample of 122 Spanish firms, we find that CEOs´ assessment of TMT benevolence in family firms is more positive when (a) the CEO is a family member and the family is in a stronger ownership position; (b) there is greater similarity in family status between CEO and top managers and (c) environmental turbulence is low.

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Bibliographic Info

Paper provided by Instituto de Empresa, Area of Economic Environment in its series Working Papers Economia with number wp05-23.

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Length: 36 pages
Date of creation: May 2005
Date of revision:
Handle: RePEc:emp:wpaper:wp05-23

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  1. Yermack, David, 1995. "Do corporations award CEO stock options effectively?," Journal of Financial Economics, Elsevier, vol. 39(2-3), pages 237-269.
  2. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, 04.
  3. Kevin J. Murphy, 1986. "Incentives, Learning, and Compensation: A Theoretical and Empirical Investigation of Managerial Labor Contracts," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 59-76, Spring.
  4. Kathleen M. Eisenhardt, 1985. "Control: Organizational and Economic Approaches," Management Science, INFORMS, vol. 31(2), pages 134-149, February.
  5. Olson, Patricia D. & Zuiker, Virginia S. & Danes, Sharon M. & Stafford, Kathryn & Heck, Ramona K. Z. & Duncan, Karen A., 2003. "The impact of the family and the business on family business sustainability," Journal of Business Venturing, Elsevier, vol. 18(5), pages 639-666, September.
  6. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts And The Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 39-84, February.
  7. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  8. Harvey James, 1999. "Owner as Manager, Extended Horizons and the Family Firm," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(1), pages 41-55.
  9. Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-77, December.
  10. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
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