Governance structure and performance of private family firms

  • Tarun MukherjeeEmail author
  • Vighneshwara Swami
  • Wei Wang


A debate exists on the issue of whether a governance system is value additive or even necessary for a privately-held firm. One side of the debate suggests that, since agency problems do not exist in a small private firm, it does not need a costly governance system. The other side argues that a private firm indeed faces agency costs in the form of altruism and, therefore, could extract net gains from a governance system. In this paper, we empirically investigate whether a good governance system crates or destroys value of private family firms. We first demonstrate that a multifamily firm encounters larger agency costs stemming from inter-family conflicts, and therefore, has larger incentive than a single-family firm to institute a superior governance system. We then show that a multifamily firm, owing to its better governance system, outperforms its single-family counterpart.


Family firms Ownership structure Financial performance Governance 

JEL Classification

G30 G32 G34 L25 



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Copyright information

© Academy of Economics and Finance 2019

Authors and Affiliations

  1. 1.University of New OrleansNew OrleansUSA
  2. 2.IBS Business SchoolHyderabadIndia
  3. 3.Department of FinanceCleveland State UniversityClevelandUSA

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