Is It Better to Govern Managers via Agency or Stewardship? Examining Asymmetries by Family Versus Nonfamily Affiliation

Abstract

This article examines whether agency or stewardship is the more effective form of managerial governance within family firms. Synthesizing arguments regarding the differential tendencies of nonfamily versus family managers and the bifurcated manner in which they are likely to be governed, we propose asymmetric responses to agency versus stewardship mechanisms. Our empirical results provide evidence challenging common assumptions regarding the behavior exhibited by nonfamily versus family managers and the mechanisms by which each is governed. Although our findings also provide evidence of response asymmetry, they nevertheless point to the greater effectiveness of stewardship over agency governance irrespective of a manager’s family affiliation.

Keywords

family firm governance agency theory stewardship theory family and nonfamily managers bifurcation bias

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