Ownership versus management effects on performance in family and founder companies: A Bayesian reconciliation

We employ agency theory to argue that the effects of family (and founder) ownership versus management will be quite different: the former is expected to contribute positively to performance, the latter is argued to erode performance. Previous studies, due to problems of multicollinearity have been unable to distinguish these effects. Using a Bayesian approach that avoids these problems, we find that whereas family and founder ownership are associated with superior performance, the results for family and even founder management are more ambiguous. Our study is the first to assess the distinctive performance effects of family and founder presence in both ownership and management using a Bayesian approach.

► Bayesian analysis can disentangle the effects of family ownership and family management on performance.
► Family and founder ownership are associated with superior performance but family management is not.
► The effects of family and founder management on financial performance are ambiguous.