The Effects Of Founder And Family Ownership On Hired Ceos’ Incentives And Firm Performance

Abstract

Although large owners monitor managers effectively, they differ in important ways. Whereas founder owners focus on firm performance, family owners also pursue socioemotional goals. We leverage this distinction to theorize that family owners offer hired CEOs more incentive pay—to attract nonfamily CEOs, signal good governance, and achieve better firm performance. Without socioemotional wealth distractions, founder owners do not need high incentives and overusing them is counterproductive. Bayesian regressions using a panel of 335 S&P 500 firms support our theory. A key implication is that founder and family owners approach governance differently and these differences affect firm performance.

Publication Date

1-1-2017

Publication Title

Entrepreneurship: Theory and Practice

Volume

41

Issue

1

Number of Pages

73-103

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1111/etap.12169

Socpus ID

84938865637 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/84938865637

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