The Agency Implication of a Professional Manager's Position: An Empirical Study of Family Businesses in Taiwan's Electronic Industry

Family governance is a typical governance structure in publicly traded firms in Taiwan and around the world. The founding family of a firm can choose direct ownership or a pyramidal ownership structure to achieve control over a publicly traded family business or a family business group. In addressing performance issues in family businesses, the family ownership structure could generate positive or negative impacts on performance. Thus, determining the contingent condition that will moderate the relationship between family ownership and performance is a key concern in family businesses. Utilizing longitudinal data in family businesses in Taiwan's personal computer industry, this study examines the relationships between the roles of professional managers on the board, the family ownership structure, and the firm's performance from agency theory viewpoint. The results indicate that the professional manager's position on the board will moderate the relationship between the family ownership structure and performance. Specifically, the professional managers serving as directors will enhance the positive impact from family direct ownership on performance and mitigate the negative performance impact from family pyramidal ownership. This study extends the principal-agent and principal-principal agency arguments by further considering the role of the professional manager's position in family businesses.