Outsiders on the board of directors and firm performance: Evidence from Spanish non-listed family firms

OUTSIDERS ON THE BOARD OF DIRECTORS AND FIRM PERFORMANCE:
EVIDENCE FROM SPANISH NON-LISTED FAMILY FIRMS
Abs ac :
The aim o he s udy is o analyze he e ec o he p esence o ou side s (a ilia ed and
independen s) on he boa d o di ec o s on i m pe o mance in amily SMEs, also
conside ing he gene a ional e ec . To es ou hypo heses whe he ou side di ec o s ac
as agen s o s ewa ds, we examined he ela ion be ween i m pe o mance and he
p opo ion o a ilia ed and independen di ec o s on he boa d, using da a om non-
lis ed amily i ms in Spain. Ou indings show he exis ence o a posi i e impac o
a ilia ed di ec o s on i m pe o mance in amily i ms. I is also impo an o no e he
di e en beha iou be ween amily i ms un by he i s gene a ion and hose un by
subsequen gene a ions. In his case, he p esence o independen s on he boa d has a
posi i e e ec on pe o mance when he i m is un by he i s gene a ion. When he
i m is un by second and subsequen gene a ions, he p esence o independen s has no
e ec on pe o mance.
Key wo ds: A ilia ed di ec o s, independen di ec o s, gene a ion, non-lis ed i ms,
amily i ms
1.- INTRODUCTION
Wi hin he managemen esea ch a ea, co po a e go e nance is one o he opics
ecei ing inc eased a en ion. Speci ically, co po a e boa d s uc u e and i s impac on
i m beha io has been one o he mos deba ed issues in li e a u e (Ande son and Reeb,
2004; Huse, 2000; Zah a and Pea ce, 1989). The e a e many s udies ha analyze he
boa d o di ec o s om di e en pe spec i es. Some o hem analyze he de e minan s
Blanca A osa, Txomin I u alde, Amaia Maseda
This is he accep ed manusc ip o he a icle ha appea ed in inal o m in Jou nal o Family Business S a egy 1(4) : 236-245 (2010),
which has been published in inal o m a h ps://doi.o g/10.1016/j.j bs.2010.10.004. © 2010 Else ie unde CC BY-NC-ND license (h p://
c ea i ecommons.o g/licenses/by-nc-nd/4.0/)
2
o boa d composi ion (Fiegene e al., 2000; Voo decke s e al., 2007; Jaskiewicz and
Klein, 2007; Bammens e al., 2008; Ga cía-Olalla and Ga cía-Ramos, 2010; Gio annini,
2010). Minichilli e al. (2009) s udy he an eceden s o boa d asks pe o mance,
de eloping and empi ically es ing a heo e ical model on he impac o boa d
cha ac e is ics on boa d ask pe o mance o a sample o 2000 la ges I alian indus ial
companies. O he s udies analyse he e ec o boa d composi ion on i m pe o mance
bu , in gene al, he empi ical e idence is no conclusi e. Some empi ical indings
ega ding boa d composi ion owa ds pe o mance inds ha ou side di ec o s could
imp o e boa d e ec i eness and i m pe o mance. Fo ins ance, Weisbach (1988),
McKnigh and Mi a (2003) and Ande son and Reeb (2004) ind a posi i e and
signi ican ela ionship be ween ou side s’ p opo ion and i m alue. Howe e , o he s
like Baysinge and Bu le (1985), He malin and Weisbach (1991), Ag awal and
Knoebe (1996) and Gio annini (2010) ind a nega i e ela ionship be ween he
p opo ion o ou side di ec o s and i m pe o mance. Dal on e al. (1998), De And es e
al. (2005) and Jackling and Johl (2009) ind no ela ion be ween he wo a iables.
Di e ences in indings ha e in pa been a ibu able o he di e ences in he heo e ical
bases o in es iga ion and di e en measu e o i m pe o mance (Jackling and Johl,
2009).
P i a e i ms ha e mo e deg ees o eedom han publicly-lis ed i ms as o whom hey
appoin o he boa d. Fu he mo e, amily i ms a e he p edominan o m o business
in economies a ound he wo ld, and hey con ibu e ex ensi ely o g oss na ional
p oduc s and job c ea ion (IFERA 2003). Howe e he e is li le esea ch on he e ec
o he ole o ou side di ec o s on i m pe o mance in p i a ely owned amily SMEs.
And he li le esea ch ha does exis o en unc i ically adop s concep s and heo ies
de eloped o la ge co po a ions wi hou adjus ing hem o he pa icula con ex s o
3
p i a ely owned amily i ms he si ua ion o di e ences in o example owne ship
in ol emen , and he gene al lack o in e nal esou ces ha o en cha ac e ize hese
en u es (Huse, 2000; Daily e al, 2002). The e consequen ly seem o be de iciencies in
ou knowledge o he ole and con ibu ion o ou side di ec o s in SMEs (Gab ielson
and Huse, 2005).
Boa ds o di ec o s a e a cen al ins i u ion in he in e nal go e nance o a company. In
addi ion o s a egic di ec ion, hey p o ide a key moni o ing unc ion in dealing wi h
agency p oblems in he i m (Fama, 1980; Jensen, 1993). In a di use owne ship
con ex , he moni o ing unc ion mus ocus on educing he agency p oblems be ween
dispe se sha eholde s and managemen (He malin and Weisbach, 2001). In he con ex
o companies wi h high owne ship concen a ion, on he o he hand, he agency con lic
in he i m is be ween con olling sha eholde s and mino i y sha eholde s (Le o and
U zua, 2008; Mo ck & Yeung, 2003). Acco ding o agency heo y, he ole o he boa d
o di ec o s, and ou side boa d membe s in pa icula , is o sa egua d agains sel -
se ing beha io o a dominan amily owne coali ion and o p e en he e en ual
exp op ia ion o mino i y sha eholde s (Ande son & Reeb, 2004). Howe e he e is
some deba e abou he use ulness o agency heo y in he amily i m con ex (Piepe ,
2010; Wes head and Howo h, 2006), since agency heo y may p o ide only a pa ial
explana ion o he dynamics ound in p i a e amily i ms (Howo h e al. 2004).
S ewa dship heo y, in con as wi h agency heo y (Da is e al. 1997), de ines
si ua ions in wi ch manage s and employe s a e no mo i a ed by indi idual goals, bu
ins ead beha e as s ewa ds who mo i es a e aligned wi h objec i es o he o ganiza ion
(Co be a and Sal a o, 2004a; Mu h and Donaldson, 1998; Piepe e al., 2008). The
ypical owne ship pa e n o small and medium sized amily i ms (Fo bes and Milliken
1999) educes he need o he boa d’s con ol ole so, he appea ance o ou side
4
di ec o s will e lec he se ice and ad ice needs o he CEO a he han he con ol
ole (Fiegene a al., 2000). Acco ding o s ewa dship heo y, he boa d’s p ima y ole is
o se ice and ad ise, a he han o discipline and moni o as agency heo y p esc ibes
(Hillman and Dalziel, 2003; Co be a and Sal a o, 2004a,b).
The aim o his s udy is o analyze he e ec o he p esence o ou side s on he boa d o
di ec o s on i m pe o mance in p i a ely owned amily SMEs, also conside ing he
gene a ional e ec . While mos s udies ha e ea ed ou side s as an indis inguishable
g oup o nonexecu i e di ec o s, ollowing Ande son and Reeb (2004), we classi ied
hem in wo g oups, a ilia es and independen s. A ilia e di ec o s a e di ec o s wi h
po en ial o exis ing business ela ionships o he i m, bu a e no ull ime employees
and may play an impo an ole in any i m, and in he case o amily i ms hei
in luence is likely o be g ea e gi en he mo e pe manen and pe sonal ela ionship
wi h i m’s managemen (Jones e al., 2008). Independen di ec o s a e indi iduals
whose only business ela ionship o he i m is hei di ec o ship. The mos basic
dis inc ion be ween a ilia e di ec o s and independen di ec o s es s upon he economic
ie be ween he a ilia e i m and he ocal i m.
To es ou hypo heses whe he he ole o ou side di ec o s is o ad ise o o moni o
manage s, we examined he ela ion be ween i m pe o mance and he p opo ion o
a ilia ed and independen di ec o s on he boa d. Ou indings show he exis ence o a
posi i e impac o a ilia ed di ec o s on i m pe o mance in amily i ms. I is also
impo an o no e he di e en beha io be ween amily i ms un by he i s gene a ion
and hose ha a e un by subsequen gene a ions. In his case, he p esence o
independen s and he a ilia es on he boa d has a posi i e e ec on pe o mance when
he i m is un by he i s gene a ion. These esul s indica e ha ou side s pe o m as
s ewa ds in amily i ms in his gene a ion.
5
This s udy makes se e al con ibu ions o he li e a u e on he impac o boa d
composi ion on i m pe o mance. Fi s , ou indings p o ide a new pe spec i e on he
ole ha ou side di ec o s (a ilia ed and independen s) play in co po a e go e nance o
amily i ms, conside ing bo h he moni o ing and ad ising ole. Second, ou s udy is
one o he i s o examine he dis inc ion among ou side di ec o s in amily i ms. The
ole o a ilia e di ec o s has gene ally been o e looked in co po a e go e nance
esea ch, and, ypically, a ilia e di ec o s ha e been lumped in he o e all ca ego y o
ou side di ec o s (Jones e al., 2008). Thi d, p e ious s udies on he ole o ou side
di ec o s in amily i ms ocused on ela i ely la ge publicly- aded amily i ms (S&P
500). Ou s udy, on he con a y, ocuses on non-lis ed amily SMEs and sheds new
ligh on an impo an , ye unde - esea ched, segmen o i ms.
The emainde o his pape is o ganized as ollows. Sec ion 2 desc ibes he heo e ical
basis and he hypo heses o examine. Sec ion 3 se s ou he da a and p ocedu es o
analysis used in unde aking his empi ical s udy. Sec ion 4 p esen s he main esul s o
he in es iga ion. Sec ion 5 p esen s and discusses he esul s. Sec ion 6 concludes he
pape wi h some conclusions and implica ions o managemen heo y and p ac ice, and
indica es pa hs o u he in es iga ion.
2. BOARD OF DIRECTORS AND FIRM PERFORMANCE: THEORICAL
BACKGROUND AND HYPOTHESES
Co po a e boa d s uc u e and i s impac on i m beha iou has been one o he mos
deba ed issues in li e a u e (Ande son and Reeb, 2004; Huse, 2000; Zah a and Pea ce,
1989). In ecen yea s, he discussion has ocused on he s uc u e o he boa d o
di ec o s, he mos ou s anding go e nance mechanism o he in e nal con ol sys ems
(Jensen, 1993). Resea che s s udying co po a e go e nance ha e used a di e se se o

6
heo e ical pe spec i es o unde s and he cha ac e is ics, oles and e ec s o boa d o
di ec o s (Co be a and Sal a o, 2004a; Piepe e al., 2008). Al hough agency heo e ic
a gumen s ep esen one explana ion in desc ibing he ela ion be ween owning amilies
and boa ds o di ec o s, s ewa dship heo y p o ides an al e na i e explana ion
(Ande son and Reeb, 2004). I is no necessa y o choose one heo e ical pe spec i e
o e ano he . Indeed, one can ob ain a be e unde s anding o amily business boa ds o
di ec o s by ying o in eg a e di e en heo e ical pe spec i es (Co be a and Sal a o,
2004a; Minichilli e al., 2009).
Boa d s uc u e has elied hea ily on agency heo y concep s, ocusing on he con ol
unc ion o he boa d (Hillman and Dalziel 2003; Fama and Jensen 1983; Jensen and
Meckling 1976). Agency heo y ea s he company as a nexus o con ac s h ough
which a ious pa icipan s ansac wi h each o he (Jensen and Meckling 1976). Since
asse s a e he p ope y o he sha eholde s, a p incipal–agen p oblem may a ise because
manage s ha e o make decisions conce ning he p oduc i e use o hese asse s.
Ins alling a boa d o di ec o s can be an e ec i e ins umen o moni o ing op
manage s and coping wi h his p oblem and o educe agency cos s (Fama and Jensen
1983). Thus, agency heo y is used o examine he ole ha he boa d o di ec o s may
play in con ibu ing o he pe o mance o he o ganiza ions hey go e n (Jackling and
Johl, 2009). Howe e , he agency p oblem seems less impo an in he con ex o amily
i ms wi h high owne ship concen a ion, gi en ha he con olling sha eholde s ha e
su icien incen i es, powe and in o ma ion o con ol op manage s (Jensen and
Meckling, 1976). High owne ship concen a ion can igge o he p oblems wi h
co po a e go e nance and o he ypes o cos . Asymme ic al uism, ee- ide p oblems,
amily membe s’ en enchmen could cancel o e en exceed he bene i s de i ed om
he agency ag eemen be ween owne s and manage s (Chua e al., 2009; Oswald e al.,
7
2009; Schulze e al., 2001, 2003). I he e a e con olling sha eholde s, hey a e mo e
likely o be able o use hei powe o unde ake ac i i ies in ended o ob ain p i a e
p o i o he de imen o mino i y sha eholde s’ weal h (La Po a e al., 1999; Mo ck &
Yeung, 2003; Villalonga and Ami , 2006). The main con ibu ion o independen
di ec o s acco ding o agency heo y is consequen ly hei abili y o be independen
when o e seeing ope a ing ma e s, p o ec ing he asse s o he i m, and holding
manage s accoun able o he i m’s a ious key s akeholde s o ensu e he u u e
su i al and success o he en e p ise (Gab ielson and Huse, 2005).
S ewa dship heo y, in con as wi h agency heo y (Da is e al. 1997), de ines
si ua ions in wi ch manage s and employe s a e no mo i a ed by indi idual goals, bu
ins ead beha e as s ewa ds who mo i es a e aligned wi h objec i es o he o ganiza ion,
ha is, people a e no inclined o oppo unism, and manage s wan o since ely pu sue
sha eholde s’ in e es s (Da is e al. 1997). A ègle e al. (2007, p. 84) main ain ha :
“Family membe s a e conce ned abou he i m because i is pa o hei collec i e
pa imony and is o en he main asse o he amily.” Family owne s’ and manage s’
s ewa dship s ems om hei socio-emo ional a achmen o he business, which can be
e y high since he company can se e o sa is y needs o secu i y, social con ibu ion,
belonging, and amily s anding (Ash o h and Mael 1989; Gomez-Mejia e al. 2007;
Lansbe g 1999). The esul s o s ewa dship conduc , gene ous in es men in
capabili ies, people, and long- e m ela ionships, may be sus ainable business alue.
The expec a ion is ha businesses will build compe i i e ad an ages and he eby
ou pe o m hei pee s in g ow h, e u ns, and ma ke alua ions (Le B e on-Mille and
Mille , 2009). Recen esea ch employing a s ewa dship pe spec i e has shown ha
e ec i e amily ela ionships and p ocesses con ibu e o i m pe o mance (Eddles on
& Kelle manns, 2007; Eddles on e al., 2008; Piepe e al., 2008).
8
In his iew, boa ds o di ec o s a e g oups o compe en people ha help manage s o
enhance hei decision-making p ocess, e.g. con ibu ing o he boa d oom deba e
h ough hei expe iences, compe ences and di e en iewpoin s (Minichilli e al,
2009). In o he wo ds, boa d membe s p o ide ad ice and suppo o op manage s, and
hus ep esen a aluable esou ce o co po a e boa ds (Donaldson and Da is, 1991).
O ganiza ions migh equi e less con ol om a boa d when goal alignmen be ween
owne s and manage s is high (Da is e al., 1997; Luoma and Goods ein, 1999; Mu h
and Donaldson, 1998; Sunda amu hy and Lewis, 2003).
S ewa dship heo y sugges s ha he main ole o he boa d o di ec o s is o ad ise and
suppo managemen a he han o discipline and moni o as agency heo y p esc ibes
(B unninge e al., 2007; Co be a and Sal a o, 2004a,b; Daily e al., 2003; Gubi a and
Gianecchini, 2002; Hillman and Dalziel, 2003; Mu h and Donaldson, 1998; Piepe e
al., 2008). Ac ing as s ewa ds, amilies may place ou side di ec o s (independen and
a ilia e) on he boa d o p o ide indus y speci ic expe ise, objec i e ad ice, o
gene ally ac as ad oca es o co po a e heal h and iabili y. They can play an impo an
ole in he de elopmen o s a egic change p ocesses in amily businesses (B unninge
e al., 2007, Fiegene e al., 2000; Voo decke s e al., 2007).
S ewa dship heo y as such, po en ially o e s an al e na i e explana ion o obse ing a
ela ion be ween ou side di ec o s and i m pe o mance (Ande son and Reeb, 2004).
Consequen ly, a ela ion po en ially exis s be ween boa d independence and i m
pe o mance because o he counsel and ad ice ha ou side di ec o s o e , as opposed
o hei moni o ing and con ol ac i i ies (Ande son and Reeb, 2004).
Agency heo y and s ewa dship heo y indica e ha independen di ec o s exhibi a
posi i e ela ion o i m pe o mance, bu he ole o he boa d o di ec o s is di e en in
each heo y. Unde agency, independen di ec o s moni o and con ol inside s and/o
9
he amily. Unde s ewa dship, independen di ec o s p o ide aluable ou side ad ice
and counsel o he i m.
In his con ex , he i s hypo hesis p oposes ha a highe p opo ion o independen
di ec o s on he boa d will be associa ed wi h a posi i e impac on pe o mance due o
he ole, moni o o ad iso , which hese di ec o s play in i ms.
Acco dingly, we p esen he ollowing hypo hesis:
H1: The p opo ion o boa d independen di ec o s o non-lis ed amily i ms is
posi i ely associa ed wi h i m pe o mance.
Agency heo y and s ewa dship heo y o e an al e na i e explana ion o obse ing a
ela ion be ween boa d independence and i m pe o mance as ou lined unde ou i s
hypo hesis. To p o ide insigh s in o which o hese compe ing heo ies be e explain
he ole o boa ds in amily i ms, we analyze he ole o a ilia e di ec o s ollowing he
app oach by Ande son and Reeb (2004),
The mos basic dis inc ion be ween a ilia e di ec o s and independen di ec o s es s
upon he economic ie be ween he a ilia e i m and he ocal i m. A ilia e di ec o s
a e non-employee boa d membe s wi h exis ing o po en ial business ies o he i m
(Daily e al., 1998) and may play an impo an ole in any i m, and in he case o amily
i ms hei in luence is likely o be g ea e gi en he mo e pe manen and pe sonal
ela ionship wi h i m’s managemen (Jones e al., 2008). The economic link be ween
he a ilia e i m and he ocal i m p o ides he basis o inc eased in e ac ion and he
po en ial o he de elopmen o social capi al be ween he a ilia e di ec o and he op
managemen eam o he ocal i m.
An agency pe spec i e sugges s a ilia e di ec o s, in seeking o p o ec o enhance hei
business ela ionship wi h he i m, a e less objec i e and less e ec i e moni o s o he
16
Boa d composi ion: We use a wo ie ca ego iza ion o boa d membe s; independen
and a ilia ed (Ande son and Reeb, 2004). A ilia e di ec o s (AFFILLITED) a e
di ec o s wi h po en ial o exis ing business ela ionships o he i m, bu a e no ull
ime employees. Consul an s, lawye s, inancie s, and in es men banke s a e example
o a ilia e di ec o s. Independen di ec o s (INDEPENDENT) a e indi iduals whose
only business ela ionship o he i m is hei di ec o ship. Ou p ima y measu e o
independen and a ilia e di ec o in luence is he numbe o independen /a ilia ed
di ec o s di ided by o al boa d size ( ac ion o independen /a ilia ed di ec o s).
Family i m: One o he p ima y conce ns in de ining he independen a iables has
been o de ine he no ion o he amily i m. As men ioned wi h ega d o selec ion o
he sample, o he pu poses o his esea ch a amily i m was conside ed o be one in
which one o mo e amilies can be shown o ha e a leas a 50% holding (Voo decke s
e al., 2007; Wes head and Howo h, 2006), allowing hem o exe cise con ol o e he
i m while a he same ime hey pa icipa e ac i ely in managemen wi h amily
membe s on he boa d. We ha e co obo a ed his de ini ion h ough he su ey and,
besides, he su ey also shows he amily's desi e o emain in he business, wha i
could no be de ec ed wi h he da abase in o ma ion. Following Ande son and Reeb
(2003) and Wang (2006), a dummy a iable (FD) was c ea ed wi h a alue o 1 when
he i m mee s he condi ions necessa y o be conside ed a amily i m and 0 o he wise.
Gene a ion managing he i m: Ano he dummy a iable has been c ea ed o amily
i ms o de e mine he gene a ion heading he i m's managemen . Gi en he di e en
cha ac e is ics displayed by amily i ms depending on he gene a ion ha manages
hem, i is necessa y o make his dis inc ion in o de o ob ain he conclusions in he
mos app op ia e way, di e en ia ing be ween he di e en possible ypes o amily
i m. We can hus de e mine whe he he beha io o amily i ms a ies depending on

17
he gene a ion managing hem. We dis inguish be ween i s gene a ion amily i ms
and amily i ms un by subsequen gene a ions. We he e o e c ea ed he GEN a iable,
which akes alue 1 i he i m is managed by he i s gene a ion and 0 o he wise.
Con ol a iables: Following au ho s such as Ande son and Reeb (2003) and
Villalonga and Ami (2006) we also c ea ed a a iable o e lec inside owne ship
(INSOWN). This a iable measu es he pe cen age o owne ship in he hands o inside
di ec o s and he CEO and was c ea ed o ake in o accoun he possible e ec s o
incen i es esul ing om he p opo ion o owne ship in he hands o inside s.
Boa d Size (BOARDSIZE) was measu ed using he na u al loga i hm o o al numbe
o membe s o he boa d o di ec o s (Anse don and Reeb, 2003, De And és e al., 2005;
Jackling and Johl, 2009).
The numbe o di ec o s is a ele an ea u e ha can ha e much o do wi h he boa d’s
moni o ing and con ol ac i i y. Whe eas he abili y o he boa d o moni o can inc ease
as mo e di ec o s a e added, he bene i s can be ou weighed by he cos s in e ms o he
poo e communica ion and decision-making associa ed wi h la ge g oups (Lip on and
Lo sch, 1992; Jensen, 1993).
Size o i m (SIZE) was measu ed using he na u al loga i hm o o al asse s (Ande son
and Reeb, 2003; Ca e e al., 2003; Ba on ini and Cap io, 2006; Wang, 2006; San alo
and Dies e, 2006).
G ow h oppo uni ies (GROWTHOP), ollowing Sche and Hulbu (2001) we e
calcula ed as Sales0/Sales-1. In his case, i ms ha g ew mos in he pas we e
conside ed o ha e mos chance o g ow h in he u u e.
Bo owing le el (LEV) was measu ed as he quo ien be ween o al deb and o al
asse s, (Coles e al., 2005; Wang, 2006).
18
Fi m age (AGE) was measu ed as he na u al loga i hm o he numbe o yea s since he
i m was inco po a ed.
Indus y sec o (SECT) was measu ed by means o Dummy a iables, using he
s anda d indus ial classi ica ion (Clasi icación Nacional de Ac i idades Económicas).
4.- RESULTS
The ela ion be ween i m pe o mance and he independen a iables is examined
h ough an OLS eg ession. Table 2 p esen s desc ip i e s a is ics o he a iables in
he analysis. We show mean alues o amily i ms in he sample. These i ms show a
signi ican di e si ica ion, wi h nea ly 64% epo ing only one line o business. I
should be no ed he signi ican p opo ion o independen di ec o s in amily i ms
boa ds o di ec o s. These boa ds ha e a composi ion which, a i s sigh , seems
e icien in o de o main ain amily i m in e es s ep esen ed and sepa a ed. The
e olu ion o his composi ion ends o educe he p esence o inside di ec o s in a ou
o a ilia ed, main aining also a signi ican p esence o independen di ec o s, ega dless
o which gene a ion manages he i m. I is he e o e necessa y o de e mine he
possible e ec he p esence o di e en ype o di ec o s migh ha e on i m
pe o mance due o he g ea e moni o ing o counselling capaci y. In ela ion o con ol
a iables, i can be highligh ed he high inside owne ship, due o he CEO’s pe cen age
o owne ship, which is, on a e age, 20%. I is also no ewo hy ha amily i ms ha e an
a e age age o 40 yea s, sugges ing ha ou i ms a e well es ablished.
Table. 2 – Desc ip i e s a is ics o sample i ms: Mean alues o a iable measu es
Family Fi ms
Numbe o obse a ions
369
Boa d o Di ec o ’s composi ion (Ou side s %)
% inside s
% a ilia ed
% independen
37.48
1s Gen
74.39
16.48
9.13
2nd Gen
68.58
17,89
13.53
3 d Gen
51.99
33.65
14.37
19
Con ol a iables
Inside owne ship (%)
50.17
Boa d o Di ec o ’s size (Numbe o di ec o s)
5
Re u n on Asse s (%)
6.42
G ow h oppo uni y (Sales0/Sales-1)
1.14
Le e age (To al Deb / To al Asse s)
61.98
Fi m’s size (To al Asse s)
27309.48
Fi m’s age (yea s)
40
As shown in Table 3, he co ela ion coe icien s a e weak and do no iola e he
assump ion o independence be ween he a iables. To es o mul icollinea i y, he
Va iance In la ion Fac o (VIF) was calcula ed o each independen a iable. Mye s
(1990) sugges s ha a VIF alue o 10 and abo e is cause o conce n. The esul s
indica e ha all he independen a iables had VIF alues o less han 10.
Table. 3 - Co ela ion ma ix
Va iables
VIF
1
2
3
4
5
6
7
8
9
1 Independen
1.38
1
2 A ilia ed
1.07
0.38***
1
3 Inside
owne ship
1.12
-0.06
-0.07
1
4 Boa d size
1.21
0.01
0.02
-0.20***
1
5 ROA
-
-0.05
0.09
0.03
0.20
1
6 G ow h
oppo uni ies
1.08
-0.05
-0.01
-0.00
0.06
0.24***
1
7 Bo owing
le el
1.15
-0.03
-0.03
0.12**
-0.11
-0.29***
-0.24***
1
8 Fi m size
1.07
0.03
-0.01
-0.08
0.18***
-0.02
-0.05
0.13**
1
9 Fi m age
1.05
-0.04
-0.01
-0.11**
0.16***
-0.01
-0.01
0.3
0.01
1
*** Co ela ion is signi ican a he 0.01 le el
Table 4 se s ou he esul s o ou linea eg ession e alua ing he in luence o boa d
composi ion on business pe o mance o amily i ms.
Table 4.- Rela ionship be ween boa d composi ion and i m pe o mance
ROA
I
II
III
IV
V
VI
Cons an
0.112
0.142
0.186
0.150**
0.144**
0.143**
Independen
-0.022
-0.040
-0.025
-0.019
Independen *Gene a ion
0.089**
0.081**
A ilia ed
0.070*
0.089*
-0.004
-0.003
A ilia ed*Gene a ion
0.072***
0.067***
Inside owne ship
0.029
0.028
0.022
0.010
0.003
0.011
Boa d size
0.002
0.002
0.002
0.002
0.006
0.003
G ow h oppo uni ies
0.273
0.385
0.444*
0.335***
0.327***
0.327***
Bo owing le el
-0.105**
-0.109*
-0.112**
-0.113***
-0.103***
-0.106***
Fi m size
-0.001
-0.002
-0.003
0.001
0.001
0.001
Fi m age
0.009
0.008
0.009
0.002
0.004
0.003
F alue
2.15
2.17
2.3
4.28
4.61
4.30
20
R2
0.18
0.19
0.20
0.22
0.25
0.26
*** ,** and * indica e signi icance a 1%, 5% and 10%.
In ou i s and hi d eg essions we examined he in luence o independen di ec o s on
i m pe o mance (Table 4, column I and III). Ou esul s show a nonsigni ican
ela ionship (β1 = -0.022 and -0.040) be ween independen s and i m pe o mance.
Thus, i m pe o mance seems o be insensi i e o he p esence o independen di ec o s
in he boa d. Hypo hesis 1 was no suppo ed. These esul s show ha moni o ing and
counseling by independen s does no necessa ily imply e iciency imp o emen s o
amily i ms.
The Hypo hesis 2a p edic ed ha he g ea e he ac ion o a ilia ed di ec o s in amily
i ms, he be e he pe o mance o he i m and Hypo hesis 2b p edic ed a nega i e
e ec . The coe icien (β1 in column II) is posi i e and signi ican , so he e is a posi i e
e ec be ween he p esence o a ilia ed di ec o s on boa d and i m pe o mance. The
esul s (β2 in column III) a e simila i we include independen and a ilia ed di ec o s in
he same eg ession. The esul s suppo he hypo hesis 2a.
Columns IV, V and VI show he e ec o boa d composi ion conside ing which
gene a ion is unning he i m. When he amily i m is un by subsequen gene a ions,
he esul s a e no expec ed.
The dummy a iable akes alue 1 i he amily i ms a e un by he i s gene a ion. In
his case, he coe icien is (β1 + β2), bu as β1 is no signi ican and β2 is signi ican , we
only conside β2. So, he coe icien o he in e ac ion be ween he pe cen age o
independen s on he boa d and he dummy co esponding o he i s gene a ion (2) is
posi i e (0.089) and signi ican . We may he e o e conclude ha when he amily i m
is un by he i s gene a ion, he p esence o independen s on he boa d imp o es
business pe o mance. I we spli he sample in wo g oups, i s gene a ion amily i ms
21
and hose un by subsequen gene a ion, he esul s a e simila ( hese esul s ha e no
been included).
The dummy a iable akes alue 0 i he amily i ms a e un by subsequen
gene a ions. In his case, he coe icien is β1, bu he coe icien 1 (column IV) is no
signi ican , so we can no con i m he ela ionship be ween he p esence o independen
di ec o s in he boa d and i m pe o mance.
The esul s a e simila o a ilia ed di ec o s. The coe icien 1 (column V) is no
signi ican , so we can no con i m he ela ionship be ween he p esence o a ilia ed in
he boa d and i m pe o mance o i ms un by subsequen gene a ions. Fo i s
gene a ion amily i ms he coe icien (2) is posi i e (0.072) and signi ican . The
p esence o a ilia ed di ec o s, as independen ones, imp o es i m pe o mance.
We may conclude om he esul s ha Hypo hesis 3 is no accep ed. The inding show
a bigge ela ionship be ween he pe cen age o ou side s on he boa d (independen s
and a ilia ed) and i m pe o mance in amily i ms un by he i s gene a ion.
The esul shows a clea di e ence in beha io be ween amily i ms un by he i s
gene a ion and hose un by subsequen gene a ions.
Conce ning he con ol a iables, we ind ha i m pe o mance is posi i ely ela ed
wi h g ow h oppo uni ies and we no e a nega i e ela ionship be ween i m
pe o mance and le e age. These esul s a e gene ally consis en wi h indings in ea lie
esea ch (Ande son and Reeb, 2004; Villalonga and Ami , 2006). The e is no
ela ionship be ween sec o a iables and i m pe o mance.
5.- DISCUSSION
We do no ind any obus ela ionship be ween independen di ec o s and i m
pe o mance, hus, Hypo hesis 1 was no suppo ed. These esul s a e pa ially

22
consis en wi h hose ob ained o o he ypes o i ms by au ho s such as Baysinge and
Bu le (1985), He malin and Weisbach (1991), Meh an (1995), Klein (1998), Bagha
and Black (2000), De And és e al (2005) and Jackling and Johl (2009), who ind no
e idence ela ing he p opo ion o ou side s on he boa d and di e en measu es o
business pe o mance o ma ke alue. Howe e , we ha e ad anced u he han hese
au ho s, since we ha e di e en ia ed be ween he independen and a ilia ed di ec o s.
These esul s do no suppo he assump ion ha independen di ec o s ha e an
impo an con olling and ad ising unc ion and in con as can jus i y he p esence o
a ilia ed and inside di ec o s in amily i ms.
The easons pu o wa d o explain he inexis ence o a ela ionship be ween he
p esence o independen di ec o s and pe o mance a y. He malin and Weisbach
(1991) sugges ha bo h inside and ou side di ec o s may ail o pe o m hei job o
ep esen ing sha eholde s’ in e es s p ope ly, i.e., i canno be concluded ha ou side s
pe o m hei ac i i y be e han inside s. Likewise, Mace (1986) and Vancil (1987)
a gue ha inside di ec o s acili a e he p ocess o succession in he i m, o e ing
ad ice and con eying knowledge o he CEO on he i m's day- o-day ope a ions. The
p esence o inside s on he boa d makes i easie o he o he di ec o s o iew hem as
po en ial op execu i es, since hey can assess hei skills mo e simply om seeing hem
ac on he boa d i sel (Bhaga and Black, 2000). Maug (1997) demons a es ha o
i ms wi h impo an in o ma ion asymme ies –and his is he case o amily i ms– i is
no op imal o inc ease moni o ing h ough he inco po a ion o independen s, since
ans e ing speci ic knowledge abou he i m o independen s can p o e cos ly. On he
o he hand, he CEO and managemen a e cha ac e ised by hei high le el o
commi men o he o ganisa ion and by sha ing i s alues. I also needs o be said ha
each ype o di ec o has a speci ic ole on he boa d (Baysinge and Bu le , 1985).
23
Inside di ec o s ha e a g ea e knowledge o he i m han ou side s (Raheja, 2005),
who a e o en un amilia wi h he wo king o he i m.
Ne e heless, he esul s show a clea di e ence in he beha iou o i s -gene a ion
amily i ms and hose un by subsequen gene a ions. When he amily i m is un by
he i s gene a ion, ha ing independen di ec o s on he boa d imp o es i m
pe o mance, implying ha independen di ec o s po en ially play an in luen ial ole in
mode a ing amily powe and alle ia ing con lic s amongs sha eholde g oups as well
as being ad iso s. These indings a e consis en wi h bo h heo y pe spec i es.
Speci ically, amilies ac ing o p o ec and p omo e co po a e wel a e could selec
di ec o s based on hei expe ise and decision-making abili ies a he han he
independence o lack o independence om he amily.
To di e en ia e be ween agency and s ewa dship based explana ions o ou esul s, we
conduc ed addi ional es s o examine he in e play o amily in luence and boa d
s uc u e. We examined ano he g oup o ou side di ec o s; a ilia e di ec o s.
Acco ding o a ilia ed di ec o s, ou indings suppo he s ewa dship p edic ions,
con i ming he posi i e ela ionship be ween he p opo ion o a ilia ed di ec o s on he
boa d o non-lis ed amily i ms and pe o mance. In non-lis ed amily SMEs, a ilia ed
ac as s ewa ds o i m alue, p omo ing co po a e heal h and i m pe o mance.
Di ec o s classi ied as a ilia es o en can main ain skills in knowledge based ields such
as law, inance, accoun ing, and consul ing; sugges ing ha amilies seek hese di ec o s
o hei alue-adding ad ice and counsel (Ande son and Reeb, 2004). In sum, hese
esul s a e consis en wi h he s ewa dship explana ion on he ole o ou side di ec o ,
bu a e inconsis en wi h he moni o ing o agency hypo hesis.
Based on he di e en oles di ec o s ha e o ul ill wi hin a p i a e amily i m con ex ,
we can conclude ha , as men ioned by Voo decke s e al. (2007), i is no he
24
independence o an ou side di ec o ha is impo an bu a he he added alue o he
i m. Hence, boa d composi ion and especially he adop ion o ou side di ec o s should
hen be d i en by he go e nance, esou ce, ad ice, and in o ma ion needs o he i m
(G undei and Talaulica 2002).
Taking in o accoun he clea ly di e en ia ed beha iou o i s -gene a ion amily i ms
and hose un by subsequen gene a ions, he eason may be ha in he case o i s
gene a ion i ms, independen di ec o s eally a e mo e in ol ed in hei wo k on he
boa d and pe o m hei unc ion e ec i ely. Fi s -gene a ion amily i ms ha e a
smalle p opo ion o independen di ec o s han amily i ms un by subsequen
gene a ions. Al hough hey ha e a smalle p esence, his may be he igh composi ion
o he i s phase in he li e o a amily i m, when he inside di ec o s' knowledge o
he i m's s a egic planning is needed gi en he long- e m pe spec i e o hese i ms. In
his way, independen di ec o s moni o inside s and/o amily membe s and also o e
impo an and help ul ad ice and counsel.
Ou side s (independen s and a ilia ed) ha e a mo e mode a e p esence du ing his i s
phase o he i m's li e, which is unsu p ising, gi en ha he company equi y is in hands
o a small numbe o people, who a e p ope ly ep esen ed on he boa d. I he e o e
appea s ha he ou side s ha e been selec ed app op ia ely o pe o ming hei
unc ion, pe haps p e ailing he ad ice and counsel oles.
When he i m is un by second and subsequen gene a ions, he p esence o ou side s
(a ilia ed and independen s) do no ha e any e ec s on pe o mance. These esul s a e
consis en wi h hose ob ained by Voo decke s e al., (2007) o a sample o Belgian
SMEs amily i ms. This migh seem su p ising, gi en ha as he a ious gene a ions
succeed and he sha e base becomes mo e di e se, he p esence o independen di ec o s
may become mo e necessa y o ensu e ha he in e es s o he di e en sha eholde s a e
25
p ope ly ep esen ed and ha no decisions a e aken ha a e de imen al o he in e es s
o mino i y sha eholde s, since independen di ec o s may play a i al ole as a bi a o
in he case o con lic be ween amily membe s. These eg ession esul s can be
explained in a logical way because gene a ion can be conside ed as an in e ac ion
a iable o p oxy o se e al o he possible boa d de e minan s (Voo decke s e al.,
2007).
A highe gene a ion can be a p oxy o a well-de eloped in e nal knowledge base in he
i m. Highe gene a ion successo s a e o en be e educa ed han he i s gene a ion
owne manage . The e o e, he need o ex e nal ad ice and counsel dec eases
(Voo decke s e al., 2007).
Mo eo e , he esul s sugges ha in such cases independen s a e p obably no ac ing in
his way. I we analyze he boa d composi ion in i ms un by second and subsequen
gene a ions, we see ha hey ha e an e e g ea e p esence bu hei moni o ing ole has
no e ec on i m pe o mance.
I would be in e es ing o examine he deg ee o independence and speci ic expe ise
held by he ou side di ec o s on he boa d. Pe haps, he c i e ia o choosing di ec o s
also can a y, and pe sonal iendship could play a ele an ole. One migh he e o e
conside ha independen s may no be ac ing objec i ely, gi en hei many o e lapping
in e es s wi h he i m. B unninge e al. (2007) indica e ha one migh suspec ha
ou side di ec o s o en ha e close ela ions o he SME manage and owne based on
iendship o p o essional ies. This may esul in lack o eal powe and po en ial o
con ibu e mo e ex ensi ely o he i m’s s a egy. This may explain why hei p esence
on he boa d esul s in a d op in pe o mance.
F om ou esul s, we conclude ha in hose s ages in which agency p oblems a e high—
such as in he sibling pa ne ship s age— amily i ms do no seem o cope wi h hese
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