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Independent directors, large shareholders and firm performance: the generational stage of family businesses and the socioemotional wealth approach

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  • Rebeca García-Ramos

    (University of Cantabria)

  • Belén Díaz-Díaz

    (University of Cantabria)

  • Myriam García-Olalla

    (University of Cantabria)

Abstract

The effectiveness of independent directors is empirically addressed in the Southern European context using a sample of 221 publicly traded firms during the 2001–2007 period. Drawing on the socioemotional wealth approach, we focus on family control and influence to test whether there are significant differences in the effect of independent directors on the firm’s performance among non-family businesses (NFBs) that have a non-family large shareholder, and family businesses (FBs). In doing so, we consider the heterogeneity of FBs by testing whether the FB’s life cycle moderates the effectiveness of independent directors. To that end, we differentiate among founder lead family businesses and non-founder lead family businesses. Moreover, we test whether dual leadership structures, in particular when the family chief executive officer is also the chairperson of the board, moderates the effectiveness of independent directors. A cross-country and panel data design was used, taking into account the endogeneity problem arising in studies of corporate governance. The results show that the contribution of independent directors to a firm’s performance differs for NFBs and FBs. Moreover, findings confirm that in FBs, contribution is moderated by the generational stage of the FB and by the leadership structure of the firm.

Suggested Citation

  • Rebeca García-Ramos & Belén Díaz-Díaz & Myriam García-Olalla, 2017. "Independent directors, large shareholders and firm performance: the generational stage of family businesses and the socioemotional wealth approach," Review of Managerial Science, Springer, vol. 11(1), pages 119-156, January.
    • Handle: RePEc:spr:rvmgts:v:11:y:2017:i:1:d:10.1007_s11846-015-0182-8
    DOI: 10.1007/s11846-015-0182-8
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    More about this item

    Keywords

    Independent directors; Socioemotional wealth; Large shareholders; Family businesses; Chief executive officer; Generational stage; Firm performance;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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