Exploring the relation between family ownership and incentive stock options: The contingency of family leadership, board monitoring and financial crisis

Simona Catuogno, Claudia Arena, Alessandro Cirillo and Luca Pennacchio

Journal of Family Business Strategy, 2018, vol. 9, issue 1, 59-72

Abstract: This paper investigates the curvilinear relationship between family ownership and the incentive aim of stock options, considering the effect of family leadership, board monitoring and financial distress. Using Italy as a study setting because of the large number of family businesses, we categorize incentive and rent-extractive stock option plans by their design features. We assume that the co-existence of family and non-family managers expose family firms to underexplored agency problems between owners and managers, and posit that stock options help to mitigate these problems. Our logit model reveals the existence of an inverted U-shaped relationship between family ownership and the incentive aim of stock options that becomes a U-shaped one in family-led firms. We also find that family firms are more likely to grant incentive stock options at low to intermediate level of family ownership in presence of effective board monitoring and during the global financial crisis. This paper contributes to the existing literature on corporate governance and accounting in family businesses, and also has practical significance for investors, regulators and policy-makers.

Keywords: Stock option plans; Curvilinear relationship; Family ownership; Family leadership; Board monitoring; Financial crisis (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1877858516301590
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:fambus:v:9:y:2018:i:1:p:59-72

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/journaldescription.cws_home/719791/bibliographic
http://www.elsevier. ... 719791/bibliographic

DOI: 10.1016/j.jfbs.2017.11.005

Access Statistics for this article

Journal of Family Business Strategy is currently edited by J.H. Astrachan

More articles in Journal of Family Business Strategy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().