This study aims to examine the impact of the CEO and board-chair familial ties on the financial performance of firms, as well as the potential moderating role of independent directors.
The authors used a two-step system generalized method of moments (GMM) estimate for analyzing the longitudinal panel data of 2,582 firm-year observations collected from Bangladeshi firms listed with the Dhaka Stock Exchange PLC (DSE) during 2006–2023.
Results indicate that CEO – board-chair family relation is negatively associated with firm performance, but this family control only brings out a better economic outcome if firms have more independent directors on their boards.
This study challenges the current governance rules of separation between the CEO and the board-chair, particularly, in family-controlled firms. On the other hand, this study reinforces the framework of board structural independence for mitigating the principal-principal agency problems in family-led firms. As such, findings have important policy and managerial implications for regulators, practitioners and investors.
To the best of the authors’ knowledge, this is the first study to attempt in the context of an emerging economy like Bangladesh that unveils the impact of CEO – board-chair family ties on firm performance and the moderating role of board independence in that relationship. The findings extend the existing knowledge in family business literature.
