Family ownership and busy boards: impact on performance

The purpose of this paper is to empirically assess the effect, if any, of family ownership and busy boards on companies’ Tobin’s Q and cash holdings in France.

Using a multiple regression analysis for panel data, the author investigate the impacts of being family-owned and of multiple directorships on cash holdings and then on Tobin’s.

Family ownership seems to have no significant effect. The most significant finding is that family-owned companies are smaller and work in the manufacturing and construction sectors compared to non-family-owned companies. However, multiple directorship is not negatively related to firm performance in France.

The current study focusses solely on France, which, even though different from the more usual American perspective, is not enough to make broad generalizations. It is however, a useful step toward better understanding the issues at hand. International data on family firms and busy boards, while hard to come by, would further enhance the knowledge of corporate governance.

It is interesting to know if family-owned companies and those with multiple directorships perform differently from others, especially in a context where organizations can choose between a one-tier or two-tier system of governance, as is the case in France.