Is board turnover driven by performance in family firms?

We study director turnover as a corporate governance mechanism in family firms; specifically, the effect that family involvement in management, ownership, and control has on director turnover (direct effect) and on director turnover-performance sensitivity (moderating effect). Using a sample of Colombian companies, we find a negative relationship between turnover and firm performance. Additionally, we find that family involvement in management, ownership, and on boards leads to (1) more stable directorships and reduced director turnover and (2) cancellation of the expected director turnover-performance sensitivity. This last result implies that director turnover in firms with family influence is not driven by financial results, which suggests greater (more severe) agency conflicts between controlling families and minority shareholders. Finally, we find that family involvement as indirect ownership through pyramidal control increases director turnover, which suggests the existence of internal markets for directors within business groups.