Excess control of family board seats and corporate innovation

We examine the impact of board‐level control on corporate innovation in family firms. We find that excess control of family board seats (ECFBS) is negatively correlated with innovation investment, innovation output and innovation efficiency. Our findings suggest that ECFBS exacerbates type II agency...

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Bibliographic Details
Published in:Journal of business finance & accounting 2024-10, Vol.51 (9-10), p.2635-2667
Main Authors: Chen, Suyun, Li, Zongze, Chu, Lingling, Cao, Qingzi
Format: Article
Language:English
Subjects:
corporate innovation
excess control of family board seats
financing constraints
Governance
Innovations
innovative professional knowledge
Professional knowledge
risk taking
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Summary:We examine the impact of board‐level control on corporate innovation in family firms. We find that excess control of family board seats (ECFBS) is negatively correlated with innovation investment, innovation output and innovation efficiency. Our findings suggest that ECFBS exacerbates type II agency problems. Mechanistic analyses show that ECFBS reduces firms’ risk‐taking level, increases their financing constraints and damages channels for acquiring innovative professional knowledge. We also observe that effect of ECFBS on innovation is associated with family origin, familiarization time and family management characteristics. Our findings should be of interest to family firm manager investors and lenders who are interested in family governance mechanisms.
ISSN:0306-686X
1468-5957
DOI:10.1111/jbfa.12793