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When the big “R” hits home: governance in family firms during economic recession

Michael R. Braun (School of Business Administration, University of Montana, Missoula, Montana, USA)
Scott F. Latham (Bentley University, Waltham, Massachusetts, USA)

Journal of Strategy and Management

ISSN: 1755-425X

Article publication date: 15 May 2009

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Abstract

Purpose

This paper seeks to give consideration to the family imprint on governance in the context of firms experiencing economic recession. It aims to rely on agency and stewardship theories to empirically examine the relationship between CEO duality and slack resources on family firm performance during economic recession.

Design/methodology/approach

Trend analyses were used employing hierarchical linear modeling (HLM) to evaluate the influence of duality and slack resources on the performance of 75 family‐controlled public firms (FCPFs) during the 2001‐2002 US economic recession and recovery.

Findings

The results indicate that duality and slack by themselves do not influence firm performance. However, family firms with a combined CEO‐chair and ample slack resources experience enhanced performance both at the onset of recession and at its conclusion. The findings suggest that a unified leadership and access to slack provide the family with the means to weather economic hardship. The paper makes the case that the stewardship afforded by this combination provides clear benefits to outside shareholders.

Practical implications

The absolute leadership and decision‐making control afforded to a CEO‐chair who also holds the reins over firm resources helps to favorably position the business and ease its course through difficult times. The results of this paper suggest that what is good for the family may also be good for other stakeholders in the firm, in this case non‐family shareholders.

Originality/value

With this study, attention is drawn to the governance of family businesses during times of economic duress. To the authors' knowledge, this study represents the only empirical investigation into family firm governance within this unique, albeit prevalent context.

Keywords

Citation

Braun, M.R. and Latham, S.F. (2009), "When the big “R” hits home: governance in family firms during economic recession", Journal of Strategy and Management, Vol. 2 No. 2, pp. 120-144. https://doi.org/10.1108/17554250910965290

Publisher

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Emerald Group Publishing Limited

Copyright © 2009, Emerald Group Publishing Limited

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