Greater managerial ownership in family firms need not mitigate agency problems, especially when each family controls a group of publicly traded and private firms, as is the case in most countries. Such structures give rise to their own set of agency problems, as managers act for the controlling family, but not for shareholders in general. For example, to avoid what we call “creative self–destruction,” a family might quash innovation in one firm to protect its obsolete investment in another. At present, we do not know whether these agency problems are more or less serious impediments to general prosperity than those afflicting widely held firms.
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