Board characteristics and firm performance in public founder- and nonfounder-led family businesses

In this study, we examine whether the presence of a founder influences the relationship between the board of directors’ characteristics and company performance in a sample of European, publicly traded, family firms. Our findings contradict the widespread belief that smaller and more independent boards as well as nondual leadership structures always lead to better firm performance, suggesting that agency theory is limited in its explanation of the relationship between board characteristics and firm performance. We find a positive effect of board size on business performance in nonfounder-led family firms and a negative effect of board size on founder-led family businesses. The presence of independent directors on the board has a positive effect on performance when a firm is run by its founder. However, when descendants lead the firm, the presence of independent directors has a negative effect on performance. Although the effect of board meetings on firm performance is positive, this relationship is weaker when the family business is run by its founder. Finally, CEO duality improves firm performance when descendants run the business, although CEO duality has no effect on performance when the firm is led by the founder.