Corporate Governance and Profitability in Famliy SMEs

We analyze the determinants of performance in small unlisted family firms, and find, in line with previous studies, a positive effect associated with a family CEO. We contribute to previous literature by also analyzing the effect of board size in these already small family boards, where the maximum number of board members is 6. We find that even here, board size is significantly negatively associated with firm performance. We also bring in a novel variable, the proportion of family members employed by the firm, and find a negative effect especially for ROI . There is a significant tendence for family CEOs to employ more family members, which – given the negative effect of these – should take off some of the positive performance effects of a family CEOs.