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The Impact of Governance Structure on the Performance of Small Family and Nonfamily Firms: The Moderating Role of Firm Age

Author

Listed:
  • Vitaliy Skorodziyevskiy
  • Hanqing “Chevy†Fang
  • Esra Memili
  • James J. Chrisman

Abstract

Drawing upon agency theory and the family business literature, we hypothesize that governance structure, the extent to which ownership and management are concentrated in the hands of a single individual or family, has an inverted U-shaped relationship with firm performance in small owner-managed firms. We further hypothesize that the inverted U-shaped relationship diminishes as firms age. Using a cross-sectional sample of 8,201 SBDC clients, we find support for an inverted U-shaped relationship between governance structure and firm performance. We also find that this relationship is moderated by firm age. Our findings have implications for the fields of finance and family business in terms of the concentration and separation of ownership and management in single and multi-family firms.

Suggested Citation

  • Vitaliy Skorodziyevskiy & Hanqing “Chevy†Fang & Esra Memili & James J. Chrisman, 2022. "The Impact of Governance Structure on the Performance of Small Family and Nonfamily Firms: The Moderating Role of Firm Age," Review of Corporate Finance, now publishers, vol. 2(4), pages 721-743, December.
    • Handle: RePEc:now:jnlrcf:114.00000028
    DOI: 10.1561/114.00000028
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    Citations

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    Cited by:

    1. Katrin Hussinger & Wunnam Issah, 2023. "Early Patent Disclosure and R&D Investment in Family Firms," DEM Discussion Paper Series 23-17, Department of Economics at the University of Luxembourg.

    More about this item

    Keywords

    Agency theory; family firm; family ownership; firm performance; firm age;
    All these keywords.

    JEL classification:

    • D19 - Microeconomics - - Household Behavior - - - Other
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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