Corporate governance mechanisms in family firms – A socioemotional wealth perspective

Abstract

This paper examines how German family firms differ in the usage of corporate governance mechanisms in comparison to non-family firms. We give an overview about the relation of corporate governance and family firms, and deliver hypotheses from an empirical study. The study was conducted in 2017 as a written survey and 86 questionnaires could be used for statistical analysis. Based on socioemotional wealth (SEW) theory, we find that with a higher extent of family influence in the firm, less corporate governance instruments are used. Furthermore, corporate governance is used primarily to prevent stakeholder confidence in the long-run. However, a formalization of corporate governance mechanisms does not take place. We draw implications for more corporate governance formalization and awareness in family firms both for theory and practice.