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Past Issue • Oct-Dec 2013

Family Firms and Boards of Directors

Critical differences in board tenures and characteristics between family and nonfamily firms affect firm value and performance, argue Professors Huimin Li, Harley Ryan, Lingling Wang and Baozhong Yang. Their study extends our understanding of the mechanisms that govern family firms and has important implications for founding families, investors and policy makers.

As an integral component of governance mechanisms in publicly held firms, the board of directors seeks to protect the interests of dispersed shareholders who finance the firm’s operations but delegate daily control to professional managers. However, in a large proportion of publicly traded firms, founding families maintain concentrated ownership and are active in the management of the firm. These features mitigate the need to protect the interests of diffuse shareholders from the actions of delegated management, but create new incentive conflicts between family owners, who can receive unique private benefits of control, and nonfamily shareholders. In Li et al. (2013) and ongoing research, we examine boards of directors in family and nonfamily firms and address the following questions: 1) How do boards of directors in family firms differ from those in nonfamily firms? and 2) How are board characteristics associated with firm performance in family and nonfamily firms?

ABOUT THE AUTHORS

  • HuiminLi

    Huimin Li

    PhD Candidate in Finance at the Robinson College of Business of Georgia State University.
  • HarleyRyan

    Harley Ryan

    SunTrust Professor of Capital Markets and Assistant Dean for Flex and Professional MBA at the Robinson College of Business at Georgia State University.
  • LinglingWang

    Lingling Wang

    Assistant Professor of Finance at the A B Freeman School of Business at Tulane University.
  • Baozhong-Yang-Thumb

    Baozhong Yang

    Assistant Professor of Finance at the Robinson College of Business at Georgia State University.
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