Entrenchment in publicly traded family firms: Evidence from the S&P 500 |
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Authors: | Robert Randolph Zhonghui “Hugo” Wang Esra Memili |
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Affiliation: | 1. Lee Business School, University of Nevada-Las Vegas, 4505 S. Maryland Parkway, Las Vegas, NV 89154, USA;2. Jack H. Brown College of Business and Public Administration, California State University San Bernardino, 5500 University Parkway, San Bernardino, CA 92407, USA;3. Bryan School of Business and Economics, University of North Carolina at Greensboro, PO Box 26170, Greensboro, NC 27402, USA |
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Abstract: | Family involvement in corporate governance through ownership, management, and board membership presents a unique dilemma for understanding the strategic impetus and costs of entrenchment decisions. The presence of shared family ties and the family-centered goals of firm principals call to question the applicability of extant agency arguments regarding the nature and antecedents of managerial entrenchment. Exploring this, we develop and test a model of family firm-specific determinants (i.e., family ownership and family's involvement in management and governance) of entrenchment in publicly traded firms by drawing upon principal-principal agency theory. Findings of the empirical analysis of family owned S&P 500 firms suggest family firms are motivated to entrench managers when doing so supports the pursuit of family-centric goals. However, the extent to which entrenchment supports such goals varies at different levels of family ownership. |
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Keywords: | Entrenchment Family governance Agency theory Family firm heterogeneity |
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