Governance of Family Firms

Alexander Guzmán (), Belén Villalonga (), María-Andrea Trujillo () and Raphael Amit ()
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Alexander Guzmán: CESA School of Business, Bogotá 110311, Colombia
Belén Villalonga: Stern School of Business, New York University, New York, NY 10012
María-Andrea Trujillo: CESA School of Business, Bogotá 110311, Colombia
Raphael Amit: Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104

Annual Review of Financial Economics, 2015, vol. 7, issue 1, 635-654

Abstract: We review what the financial economics literature has to say about the unique ways in which the following three classic agency problems manifest themselves in family firms: (a) shareholders versus managers, (b) controlling (family) shareholders versus noncontrolling shareholders, and (c) shareholders versus creditors. We also call attention to a fourth agency problem that is unique to family firms: the conflict of interest between family shareholders and the family at large, which can be thought of as the “superprincipal” in a multi-tier agency structure akin to those found in other concentrated ownership structures in which the controlling owner is the state, a bank, a corporation, or other institutions. We then discuss the solutions or corporate governance mechanisms that have been devised to address these problems and what research has taught us about these mechanisms' effectiveness at solving these four conflicts in family firms.

Keywords: agency theory; control; corporate governance; family firms; minority shareholders (search for similar items in EconPapers)
JEL-codes: G3 G32 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (63)

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