The Board's Strategic and Control Tasks;Family Firms and their Search for outside Directors to Support Growth: Empirical Evidence from Italian Publicly Listed Companies

Abstract

This article analyses the appointments of outside directors to family firm boards within a sample of 423 observations (year/firm) regarding Italian publicly listed companies. The aim is to test predictions which suggest that efficient performance of control and service tasks by outside directors has positive effects on a company's capacity to raise capital and to grow. Unlike agency theory, which affirms that independents are efficient when performing functions of control, this article suggests that the adoption of outside directors who are also independent has no effect. The results of this research demonstrate that outside directors who have close ties with banks maintain valuable social capital with bankers in periods when such social capital is threatened by large investment policies requiring a great amount of bank financing.