Institutional Reforms and the Effects of Family Control on Corporate Governance

Abstract

According to the institution-based view of corporate governance, firm-governance efficiency is influenced by the institutional environment in which the firm operates. In this study, we examine how firms under a family-governance system adapted to institutional reforms over time. The results of the analysis indicate that institutional reforms reduce firm dependence on family governance and eliminate the negative effects on performance exerted by a controlling family’s pyramidal ownership structure. We also find that institutional reforms foster external corporate governance by domestic institutional investors. In conclusion, our study shows that institutional reforms alter the essence of family firm governance.

The Intersection of Family Firms and Institutional Contexts: A Review and Agenda for Future Research

“…Additionally, pro-market reforms define a new competitive landscape with more emphasis on arm’s length contracting and more competition from international companies, which drives family firms’ professionalization (Lien, Teng, & Li, 2016; Zhang & Ma, 2009). Family owners in this new competitive landscape may decide to stay competitive by amplifying institutional reforms within their firms, reducing family involvement, and relinquishing control to professional managers voluntarily (Chung & Luo, 2008a; Tsui-Auch, 2004).…”

Family Firms and Compliance: Reconciling the Conflicting Predictions Within the Socioemotional Wealth Perspective

“…The institution-based view assumes that companies are embedded in an institutional environment that shapes internal and external corporate governance mechanisms to foster economic exchanges while reducing agency problems (Lien, Teng, & Li, 2016; Peng & Jiang, 2010). An institutional setting with strong (weak) protection of shareholder rights imposes more (less) pressure for internal mechanisms to enhance firms’ governance quality and, at the same time, defines and enforces property rights allowing resources to be allocated efficiently (North, 1990).…”

Perceptions of organizational justice and commitment of non-family employees in family and non-family firms

“…Therefore, it is no surprise that over the last decade, family firms have received growing attention from the scientific community (Poutziouris et al, 2006;Sharma, 2004). So far, research has dedicated to the identification and clarification of processes and behaviors that differ between family and non-family businesses, for example, corporate governance (Lien et al, 2015), ownership (Villalonga and Amit, 2006), management (Morck and Yeung, 2003;Zellweger and Astrachan, 2008), leadership (P erez-Gonz alez, 2006), careers (Schr€ oder, 2011), job satisfaction (Pimentel, 2018) and succession (Meier and Schier, 2016), organizational reputation (Deephouse and Jaskiewicz, 2013), innovation (Classen et al, 2013), entrepreneurial orientation (Boling et al, 2015;Pimentel et al, 2017a, b), and decision-making styles (Pimentel et al, 2018). However, several important organizational aspects are yet to be addressed in the comparison between these two organizational forms.…”