The relationship between the board of directors and firm performance in private family firms: A test of the demographic versus behavioral approach

Research on corporate governance has attempted to investigate the added value of boards of directors through the lenses of both demographic and behavioral approaches. However, investigations into these two approaches, and the subsequent implications for firm performance, have thus far been mainly de...

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Bibliographic Details
Published in:Journal of management & organization 2015-07, Vol.21 (4), p.411-435
Main Authors: Basco, Rodrigo, Voordeckers, Wim
Format: Article
Language:English
Subjects:
Behavior
Boards of directors
Corporate governance
Correlation analysis
Demography
Family owned businesses
Financial performance
Hypotheses
Studies
Succession planning
Variables
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Summary:Research on corporate governance has attempted to investigate the added value of boards of directors through the lenses of both demographic and behavioral approaches. However, investigations into these two approaches, and the subsequent implications for firm performance, have thus far been mainly decoupled from one another. Therefore, the aim of this paper is to put both approaches to the test in the family business context. Using a sample of 567 Spanish family firms, we find that although both approaches can explain the performance of family firms, the behavioral approach explains a much higher proportion of the variation in the firm’s performance. Furthermore, our findings support our hypotheses that the relationship between the proportion of outside directors and firm performance follows an inverted U-shape in private family firms, and that both business-oriented and family-oriented board role performance are positively related with firm performance.
ISSN:1833-3672
1839-3527
DOI:10.1017/jmo.2015.23