Journal of Management & Governance

, Volume 21, Issue 3, pp 757–784 | Cite as

The impact of family CEO’s ownership and the moderating effect of the second largest owner in private family firms

  • Limei CheEmail author
  • Pingying Zhang


This study explores two ownership issues in private family firms. First, we investigate the relationship between the ownership of family CEOs and firm performance, and postulate that this relationship in private family firms is more complex than the inverted “U” relationship found in public family firms. Second, we predict a potential moderating effect of the second largest owner, who may exert a monitoring role on family CEOs. We focus on private family firms as recent studies show that private family firms have distinct features compared to public family firms, and that findings documented in public family firms may not apply to the ubiquitous, but much less studied, private family firms. We have applied agency theory to develop the two hypotheses, used secondary data on a large sample of private family firms, utilized an adjusted conventional quadratic technique to test the hypotheses, and validated the findings using a second method of piecewise linear specification. The results show that the non-linear relationship between the ownership of family CEOs and firm performance is more complicated than the often-documented inverted “U” shape from public firms. Meanwhile, the second largest owner with a high enough ownership stake can impose a positive moderating effect by mitigating potential agency problems caused by family CEOs.


Family CEO The second largest owner Moderating effect Private family firms Agency theory Firm performance 



We thank Roberto Di Pietra (the editor) and two anonymous reviewers for their insightful and constructive comments. We appreciate the comments from Martin Hilb and Morten Huse, and other comments received at the 12th workshop on Corporate Governance. We are grateful for the data provided by the Center for Corporate Governance Research (CCGR) at BI Norwegian Business School.


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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.University College of Southeast NorwayKongsbergNorway
  2. 2.University of North FloridaJacksonvilleUSA

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