Agency in family business: The CEO, the board of directors, and the moderating effects of ownership structure and ownership form

When one thinks of family businesses one does not naturally think of an organization suffering the inefficiencies of agency conflict. The common perception is that family businesses do not accrue the costs associated with the separation of ownership and management, which are common in large, publicly-held firms where ownership is widely-dispersed. Family businesses are owned by the family and familial ties have long been thought to mitigate potential agency conflict. Ownership in the private-family firm may, however, be dispersed among many family members, effectively separating ownership and control.; Utilizing an agency perspective, this study proposes a model of risk-taking behavior in family business. CEO characteristics and the board of directors' independence are hypothesized to influence the risk-taking behavior of the firm, specifically the use of debt and the level of internationalization. The ownership concentration of the firm and the legal form of organization are proposed as moderators of these relationships. A structural equation model of these relationships was analyzed using data drawn from a two large-scale, national surveys of family businesses (the 1997 and 2002 American Family Business Surveys).; The results suggest that younger CEOs use more debt and more educated CEOs engage in greater levels of internationalization. CEOs of subsequent generations engage in less international activities. The independence of the board of directors was also positively related to the use of debt. The ownership concentration of the firm and the legal form of organization do not affect these direct relationships in either sample.; The results of this dissertation provide some support for the influence of independent directors on risk-taking behaviors. Independent directors serving on the boards of family firms may serve a useful monitoring function. As an agency perspective is appropriate for investigating the governance of family firms, future research should continue to investigate control mechanisms when examining risk-taking behavior in family firms. Furthermore, research should attempt to rule out alternative theoretical explanations.