Mazur, M. and Wu, B. H.-T. (2016) Founding family firms, CEO incentive pay, and dual agency problems. Journal of Small Business Management, 54(4), pp. 1099-1125. (doi: 10.1111/jsbm.12237)
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Abstract
This paper contributes to the literature on agency theory by examining relations between family involvement and CEO compensation. Using a panel of 362 small U.S. listed firms, we analyze how founding families influence firm performance through option portfolio price sensitivity. Consistent with the dual agency framework, we find that family firms have lower CEO incentive pay, which is further reduced by higher executive ownership. Interestingly, such incentive pay offsets the positive impact that families have on firm valuation. Collectively, our results show that, compared with nonfamily firms, lower incentive pay adopted by family firms due to lower agency costs mitigates the direct effect of family involvement on firm performance. Once accounting for CEO incentive pay, we do not observe performance differences between family and nonfamily firms.
Item Type: | Articles |
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Status: | Published |
Refereed: | Yes |
Glasgow Author(s) Enlighten ID: | Wu, Dr Betty |
Authors: | Mazur, M., and Wu, B. H.-T. |
College/School: | College of Social Sciences > Adam Smith Business School > Accounting and Finance |
Journal Name: | Journal of Small Business Management |
Publisher: | Wiley |
ISSN: | 0047-2778 |
ISSN (Online): | 1540-627X |
Published Online: | 16 February 2016 |
Copyright Holders: | Copyright © 2016 The Authors |
First Published: | First published in Journal of Small Business Management 54(4):1099-1125 |
Publisher Policy: | Reproduced in accordance with the copyright policy of the publisher |
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