The impact of family CEO’s ownership and the moderating effect of the second largest owner in private family firms

摘要

This study explores two ownership issues in private family firms. First, we investigate the relationship between the ownership of family CEOs and firm performance, and postulate that this relationship in private family firms is more complex than the inverted “U” relationship found in public family firms. Second, we predict a potential moderating effect of the second largest owner, who may exert a monitoring role on family CEOs. We focus on private family firms as recent studies show that private family firms have distinct features compared to public family firms, and that findings documented in public family firms may not apply to the ubiquitous, but much less studied, private family firms. We have applied agency theory to develop the two hypotheses, used secondary data on a large sample of private family firms, utilized an adjusted conventional quadratic technique to test the hypotheses, and validated the findings using a second method of piecewise linear specification. The results show that the non-linear relationship between the ownership of family CEOs and firm performance is more complicated than the often-documented inverted “U” shape from public firms. Meanwhile, the second largest owner with a high enough ownership stake can impose a positive moderating effect by mitigating potential agency problems caused by family CEOs.