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Excess control of family board seats and corporate innovation

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  • Suyun Chen
  • Zongze Li
  • Lingling Chu
  • Qingzi Cao

Abstract

We examine the impact of board‐level control on corporate innovation in family firms. We find that excess control of family board seats (ECFBS) is negatively correlated with innovation investment, innovation output and innovation efficiency. Our findings suggest that ECFBS exacerbates type II agency problems. Mechanistic analyses show that ECFBS reduces firms’ risk‐taking level, increases their financing constraints and damages channels for acquiring innovative professional knowledge. We also observe that effect of ECFBS on innovation is associated with family origin, familiarization time and family management characteristics. Our findings should be of interest to family firm manager investors and lenders who are interested in family governance mechanisms.

Suggested Citation

  • Suyun Chen & Zongze Li & Lingling Chu & Qingzi Cao, 2024. "Excess control of family board seats and corporate innovation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 51(9-10), pages 2635-2667, October.
    • Handle: RePEc:bla:jbfnac:v:51:y:2024:i:9-10:p:2635-2667
    DOI: 10.1111/jbfa.12793
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