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Do Standard Corporate Governance Practices Matter in Family Firms?

  • Sridhar Arcot
  • Valentina Bruno
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    We study the unique governance dynamics surrounding family ownership in a voluntary regulatory arena where we can directly observe the impact of firm ownership on corporate governance practices pertaining to the composition of the board of directors. We find that family firms are more likely to deviate from standards of best practice in corporate governance. However, lesser governance standards in family firms are not associated with lower performance because the family shareholder is the monitor in-place. In contrast, governance practices and disclosures matter in widely-held firms because they alleviate the conflicts between managers and dispersed shareholders. More broadly, our results show that family ownership and board governance practices are substitute governance mechanisms.

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    File URL: http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmgdps/dp710.pdf
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    Paper provided by Financial Markets Group in its series FMG Discussion Papers with number dp710.

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    Date of creation: Sep 2012
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    Handle: RePEc:fmg:fmgdps:dp710
    Contact details of provider: Web page: http://www.lse.ac.uk/fmg/

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