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The effects of parental altruism on the governance of family‐managed firms
Author(s) -
Lubatkin Michael H.,
Schulze William S.,
Ling Yan,
Dino Richard N.
Publication year - 2005
Publication title -
journal of organizational behavior
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.938
H-Index - 177
eISSN - 1099-1379
pISSN - 0894-3796
DOI - 10.1002/job.307
Subject(s) - altruism (biology) , corporate governance , adverse selection , moral hazard , great rift , agency (philosophy) , control (management) , business , principal–agent problem , agency cost , microeconomics , economics , incentive , finance , shareholder , social psychology , management , psychology , sociology , social science , physics , astronomy
We draw on the economic, corporate governance, and family business literatures to explain why the effects of family on family firms makes this governance form theoretically distinct from those of public and private non‐family firms. Our thesis is that parental altruism, when combined with private ownership and owner‐management, influences the ability of the firm's owner‐manager to exercise self‐control, which, in turn, can expose some family firms to conflicts rooted in the agency threats of moral hazard, hold‐up, and adverse selection. We then discuss why some other family firms are able to minimize these dark side threats and thereby attain altruism's brighter side. Finally, we discuss how altruism's influence changes over time as ownership becomes dispersed among family members and across generations. Copyright © 2005 John Wiley & Sons, Ltd.