Joms 12076

When do Non-Family CEOs Outperform in Family
Firms? Agency and Behavioural Agency Perspectives

Danny Miller, Isabelle Le Breton-Miller,
Alessandro Minichilli, Guido Corbetta and Daniel Pittino
HEC Montreal and University of Alberta; HEC Montreal and University of Alberta; Bocconi University,
CRIOS; Bocconi University, CRIOS; University of Udine
ABSTRACT Family rms represent a globally dominant form of organization, yet they confront
a steep challenge of nding and managing competent leaders. Sometimes, these leaders cannot
be found within the owning family. To date we know little about the governance contexts
under which non-family leaders thrive or founder. Guided by concepts from agency theory
and behavioural agency theory, we examine the conditions of ownership and leadership that
promote superior performance among non-family CEOs of family rms. Our analysis of 893
Italian family rms demonstrates that these leaders outperform when they are monitored by
multiple major family owners as opposed to a single owner; they also outperform when they
are not required to share power with co-CEOs who are family members, and who may be
motivated by parochial family socioemotional priorities.
Keywords: co-leadership, family rms, non-family CEOs, ownership structure
INTRODUCTION
Agency theory suggests that agent-principals such as family member-CEOs of family
rms incur reduced agency costs due to the alignment of their interests with those of
other owners, and thus will outperform agents who are at arms length from principals
(Fama and Jensen, 1983). Indeed, several studies have celebrated the advantages of
having family CEOs run family companies (Anderson and Reeb, 2003; Miller and Le
Breton-Miller, 2005; Miller et al., 2008; Minichilli et al., 2010; Ward, 2006). However,
some literature advancing behavioural agency explanations argues that CEOs who are
members of an owning family frequently are motivated by non-nancial, socioemotional
wealth objectives, such as preserving family control, even if that sacrices rm prot-
ability (Gomez-Mejia et al., 2007, 2011). In that case, non-family CEOs who may be less
swayed by such family-centric diversions would outperform nancially in family rms
Address for reprints: Alessandro Minichilli, Department of Management and Technology and CRIOS, Bocconi
University, Via Roentgen, 1, 20136 Milan, Italy (alessandro.minichilli@unibocconi.it).
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2013 John Wiley & Sons Ltd and Society for the Advancement of Management Studies
Journal of Management Studies 51:4 June 2014
doi: 10.1111/joms.12076
(e.g., Bennedsen et al., 2007; Bloom and Van Reenen, 2007; Mehrotra et al., 2013;
Miller et al., 2007). Given these disparities in the literature, it remains unclear whether
and when non-family CEOs will outperform family CEOs. This uncertainty has both
empirical and conceptual sources. Empirically, studies of family rms have only just
begun to uncover the drivers of leader performance (e.g., Miller et al., 2013). Concep-
tually, two important theories that might inform the question namely behavioural
agency and agency theory generate conicting expectations. This research helps to
reconcile these theories in demonstrating the governance contexts that enable non-
family CEOs to outperform. Indeed such governance contexts can cast light on just when
each of these theories may have the most useful application.
We shall argue that agency theory helps to make clear the ownership conditions under
which a non-family CEO will outperform, namely where there can be effective moni-
toring by major family owners. By contrast, behavioural agency theory suggests the lead-
ership arrangements specically, the co-CEO teams in which a non-family CEO must
share power with other family executives that foster hobbling socioemotional diver-
sions. Based on a longitudinal study of 893 medium and large-sized Italian private,
family controlled enterprises, we nd that non-family CEO performance is highly
sensitive to these contextual aspects of ownership and leadership.
Our study contributes to the literatures on both family business and strategic leader-
ship. First, we add to the debate on the situational prevalence and impact of non-
nancial and socioemotional wealth (SEW) priorities advanced by some behavioural
agency proponents (Gomez-Mejia et al., 2011), identifying when such priorities may
trump nancial objectives and restrict performance. This enables us to reconcile con-
icting studies in the literature on family business performance (see, e.g., Miller et al.,
2007, 2013). Also, we contribute to the strategic leadership literature (Finkelstein et al.,
2009), showing how the ownership and leadership contexts of CEOs can inuence their
effectiveness. We call into question as well the utility of senior leadership teams involving
co-CEOs (see, e.g., Hambrick and Cannella, 2004; Marcel, 2009), showing how in family
rms their potential benets may be outweighed by their shortcomings.
The paper is structured as follows. In theorizing, we rst argue for the superiority of
talent of non-family versus family CEOs in family rms. Then, by adapting arguments
from agency theory, we specify the ownership structures that are most apt to lead to
the effective monitoring of non-family CEOs in family rms, and hence their
outperformance. Finally, using behavioural agency theory, we discuss the leadership
conditions within the group of top managers that enable or prevent a non-family CEO
from outperforming in a family rm. Our arguments and hypotheses are followed by our
methods and ndings, and we conclude with a discussion of the implications and
limitations of the study.
THEORETICAL BACKGROUND
Agency vs. Behavioural Agency Theory
Agency and behavioural agency theories lead to rather different expectations regarding
the utility of non-family CEOs in family rms. The former argues that agents tend
D. Miller et al. 548
towards opportunism unless they are very closely monitored and signicantly
incentivized to act in the best interests of shareholders (Fama and Jensen, 1983; Jensen
and Meckling, 1976). Following that logic, one would anticipate that family CEOs who
are signicant shareholders in their rm and/or whose interests are aligned with those of
the owning family will outperform hired hands, that is, non-family CEOs who are
mere agents (Miller and Le Breton-Miller, 2005, 2006).
In direct contrast, behavioural agency theorists would predict the reverse. They
postulate that risk taking behaviour is a function of existing endowments. For example,
that family CEOs, to preserve the socioemotional wealth they derive from their business,
will eschew intelligent business risks and in doing so sacrice economic performance
(Gomez-Mejia et al., 2007; Wiseman and Gomez-Mejia, 1998). Socioemotional goals
include preserving control of the rm for the family, hiring family managers, using
business resources, and avoiding promising risk-bearing initiatives to do so
(Gomez-Mejia et al., 2011; Miller et al., 2011, 2013). Thus family CEOs are more likely
to embrace such SEW objectives than non-family CEOs who are less tied emotionally to
other family members.
We shall argue that both agency and behavioural agency theories have important
merit the SEW perspective being a special variety of the latter reecting the non-
economic preferences of some family ofcers. But they apply to different situations and
aspects of governance and help determine just when non-family CEOs will outperform.
Specically, agency theory applies mostly to the relationship between an agent and the
owners of a rm, and to well-spaced, periodic interactions regarding strategic oversight.
Here non-family executives will require monitoring by an informed group of major
owners whose collective wisdom can prevent opportunism. By contrast, behavioural
agency theory, specically, its SEW sub-variety, applies mostly to the day-to-day execu-
tive actions of top executives and the extent to which family members have direct
involvement in those interactions. In that case, non-family executives will be freer from
nancially compromising family socioemotional priorities when acting alone, rather than
when having to act with the approval of family co-executives.
The Relative Merit of Non-Family CEOs
Family rms may have an especially hard time obtaining talented executives as these are
too often drawn from a small pool of relatives wherein kinship takes precedence over
talent (Handler, 1992; Lansberg, 1999; Mehrotra et al., 2013), and where CEO positions
are reserved exclusively for family members (Bertrand and Schoar, 2006; Bloom and
Van Reenen, 2007). On the one hand, family CEO candidates may constitute a familiar
and motivated pool of talent, thanks in part to the more effective transmission of
knowledge about the business from a founder to his or her offspring (Miller and Le
Breton-Miller, 2005). However, Bertrand and Schoar (2006) and Mehrotra et al. (2013)
have highlighted the negative consequences of such nepotistic appointments that fail to
exploit the larger market for professional managers. The selection of non-family over
family CEOs removes these pool restrictions. It also may lessen the challenge of having
to balance the socioemotional wealth objectives of family owners with the commercial
requirements of the business (Gomez-Mejia et al., 2011; Schulze et al., 2001).
When do Non-Family CEOs Outperform in Family Firms? 549
However, non-family CEOs may not always outperform. Agency theory suggests that
they may behave in opportunistic ways as their interests are not necessarily aligned with
those of the major owners (Fama and Jensen, 1983). Moreover, in family rms, there are
often other family members involved in running the business individuals who behav-
ioural agency theory suggests may have non-economic socioemotional objectives that
can derail the initiatives of a non-family CEO (Gomez-Mejia et al., 2007). We turn now
to those conditioning factors.
Superior Monitoring by Multiple Major Owners Agency Considerations
Where a non-family CEO runs a family rm, agency theory suggests that monitoring by
informed and powerful owners is warranted to reduce opportunism (Fama and Jensen,
1983).
[1]
Their personal attachment and nancial stake in the rm makes many major
family owners effective monitors. They feel more responsible for the business than do
non-family owners (Gomez-Mejia et al., 2011; Le Breton-Miller and Miller, 2009), and
thus are more likely to acquire a deeper knowledge of its operations. Hence, in family
rms multiple major family owners who understand the business and have its best interests
at heart can serve as effective monitors (Daily et al., 2003).
By contrast, where there is only a single dominant owner involved in a family business, that
person is less likely to have the talent and knowledge to monitor and advise a non-family
leader than would several major owners (OToole et al., 2002), increasing the risks of
CEO opportunism. Where ownership is distributed among multiple major owners, as
opposed to residing within a single owner, there is a greater collective capacity to monitor
an agent and address rm challenges (e.g., Daily et al., 2003; Kim, 2010). Our argument
here diverges slightly from the traditional agency logic that decries ownership dispersion
( Jensen and Meckling, 1976) as for our concentrated businesses, some dispersion is to be
preferred to concentration within one dominant owner.
Leadership Context of Non-Family CEOs Behavioural
Agency Considerations
Proponents of behavioural agency theory argue that some agents and principals favour
non-nancial objectives (Wiseman and Gomez-Mejia, 1998). Indeed, Gomez-Mejia
et al. (2007, 2011) maintain that in family rms, the socioemotional wealth priorities of
family members such as keeping family control of the rm, avoiding risk, and entrench-
ing family executives may outweigh nancial objectives, to the detriment of rm
performance. Thus where a non-family CEO is required to deal with members of the
controlling family who have equivalent formal power and day-to-day administrative
responsibilities, those SEW priorities can offset the market-oriented initiatives of a
non-family CEO (Gomez-Mejia et al., 2007, 2011; Miller and Le Breton-Miller, 2006;
Minichilli et al., 2010). This may be especially true in the presence of inuential family
co-CEOs with substantial power but sometimes different goals and skills (Miller et al.,
2013). As we shall see later, such co-CEO arrangements are very common in private
rms in Italy and other European countries, and in US family rms as well (OToole
et al., 2002).
HYPOTHESES
In this section, we shall argue for the relative merits of non-family CEOs in family rms
under particular conditions. Using agency and behavioural agency perspectives, we shall
specify some general conditions of context under which non-family CEOs can perform
in a superior manner.
Non-Family CEOs and Firm Financial Performance
From a labour market perspective, family CEOs are drawn from too restrictive a group
of eligible people to be as effective and capable as outsider talent drawn from a much
larger pool of individuals (Mehrotra et al., 2013). This is consistent with evidence from
Bloom and Van Reenen (2007), who found signicant variations in talent within
medium-sized, mostly family rms, versus a quite uniform and superior distribution of
talent in larger companies (Gabaix and Landier, 2008). In fact, prior evidence suggests
that family CEOs can have a more negative effect on performance in family rms (e.g.,
Bennedsen et al., 2007; Lin and Hu, 2007; Prez-Gonzles, 2006). Bennedsen et al.
(2007) found that non-family CEOs tend to be more educated and experienced than
their family counterparts. Other scholars argue that non-family CEOs are more apt to
implement professional managerial practices (e.g., Dyer, 1989; Soneld and Lussier,
2009). Indeed, if we compare the professional ability of virtually all non-family CEOs
with the greatly varying abilities of most family CEOs, the likely superiority of the former
becomes very plausible (Bertrand and Schoar, 2006; Bloom and Van Reenen, 2007).
Non-family CEOs may also be more immune than family CEOs to having to preserve
the socioemotional endowment of owning families using business resources (Gomez-
Mejia et al., 2007, 2011). They are more apt to focus on nancial performance than
socioemotional returns and less likely to be emotionally swayed by family-centric issues.
In short, non-family CEOs may contribute to company nancial performance, both by
bringing a larger repertoire of management skills and by reducing the disruptive poten-
tial of a family socioemotional agenda (Blumentritt et al., 2007; Klein and Bell, 2007;
Miller et al., 2013). Hence, we hypothesize the following:
Hypothesis 1: The presence of a non-family CEO has a positive effect on family rm
nancial performance.
Notwithstanding the above hypothesis, our thesis is that the effectiveness of a non-family
CEO will be contingent on the leadership and governance context within which that
person nds him- or herself. Specically, non-family CEOs may require ample moni-
toring by major owners to discourage opportunism, and also freedom from interference
by powerful family executives distracted by an SEW agenda. We now turn to these
important qualications.
Non-Family CEOs within a Dispersed Ownership Structure
Proponents of agency theory argue that in order to reduce opportunism on the part of
executives who are not principals, owners must have the knowledge and power to
monitor their agents effectively (Fama and Jensen, 1983; Jensen and Meckling, 1976).
They argue that this cannot happen when ownership is highly dispersed among minor
owners who have neither the ability nor the knowledge to monitor top executives. Hence
ownership dispersion has been associated with signicant agency costs. The situation
may be different however in closely controlled family rms where some dispersion
among multiple major owners as opposed to a singular owner may actually improve moni-
toring (Daily et al., 2003; Morck et al., 1988). Here, dispersion of ownership among
several major owners will add to the collective expertise of the ownership group and thus
increase monitoring capability. Such broader ownership structures may be benecial
because multiple family members can contribute more wide-ranging expertise to oversee
the business (Ward, 2006). Where a single individual owns the vast majority of shares,
there is less incentive and capacity for other owners to serve as monitors.
These arguments do not apply to the atomistic ownership dispersion that occurs in large
public rms and increases traditional agency costs (Fama and Jensen, 1983). They only
pertain to family rms in which several family members each have sufcient shares or
votes to have an important voice in governance. Again, the contrast here is with rms in
which a single owner dominates.
Hypothesis 2: The positive effect of a non-family CEO on family rm performance
becomes stronger under dispersed family ownership (i.e., weaker under highly con-
centrated ownership).
Non-Family CEOs within a Co-CEO Leadership Model
Co-CEO arrangements are by no means uncommon, but they are under-studied. As
noted, many rms worldwide, especially family rms, employ co-CEOstructures in which
members of the executive suite each have the same title and share responsibility for
developing rm strategy and overseeing different division or functions. Co-CEO struc-
tures in family rms are acknowledged to be an important means of apportioning
leadership responsibilities across family members (Aronoff et al., 1997; Lansberg, 1999).
Co-CEO structures exist in many countries. In Germany, for example, research on 500
high performing companies (hidden champions) revealed that a signicant number of
themadopted collegial leadership structures with more than one CEO(Simon, 1996). The
co-CEO phenomenon also exists in the USA, although mostly in smaller, private rms. A
survey of 1035 US family rms aged 10 years or older and with at least $1 million in sales
revealed that 42 per cent of the entrepreneurs entertained the option of employing
co-CEOs in the next generation of leadership a percentage that has remained stable over
the years (MassMutual, Kennesaw State University and Family Firm Institute report,
2007). Co-CEO-like arrangements also exist in larger American companies where there is
a strong chairman who is an ex-CEO, or where important powers are shared between a
CEO and chief operating ofcer (Hambrick and Cannella, 2004; Marcel, 2009; Zhang,
2006). Giant rms such as Michelin, Motorola, and Nordstrom have at some periods in
their histories employed co-CEO-like arrangements (Miller and Le Breton-Miller, 2005).
Indeed, sharing of executive power occurs even within top management teams where
divisional and head ofce executives are represented (Hambrick et al., 1996).
In general, co-CEO leadership may be harmful as it violates unity of command
(Fayol, 1949) and fosters confusion regarding lines of authority and accountability
(Galbraith, 1977; OToole et al., 2002). Moreover, it may prevent cohesive strategy
formulation (Charan and Colvin, 1999), reduce any individual leaders efforts (Aghion
and Tirole, 1997), and make it easier for a leader to diffuse accountability (Marcel, 2009).
Additionally, co-leadership may create tension between collaboration and competition
within corporate elites, with uncertain organizational consequences (Zhang, 2006).
Behavioural agency proponents have suggested that family executives running family
rms are especially susceptible to family demands for SEW and parochial, non-nancial
benets from the business (Gomez-Mejia et al., 2007, 2011). These benets include
preserving family control of the rm by hiring and entrenching less capable relatives, and
avoiding risks associated with business renewal and innovation (Gomez-Mejia et al.,
2007, 2011; Miller et al., 2011). To the extent that a non-family CEO must share power
with family co-CEOs, it is likely that the discretion of the former to act in the best
interests of the rm will be restricted. The non-family leader now must take into account
the priorities of other family executives executives who may be less capable and less
willing to pursue a sound business agenda.
[2]
Given that a family co-CEO is more likely to have a family socioemotional agenda and
to be less competent than a non-family co-CEO (see Hypothesis 1), the latters business
initiatives may be hindered by the former (Bertrand and Schoar, 2006; Gomez-Mejia
et al., 2007; Kellermanns andEddleston, 2004). For example, family members may favour
dividend payouts to provide them with liquidity, whereas a non-family CEO may be
inclined to reinvest cash to grow the company (Gomez-Mejia et al., 2011). The utility of
having a talented non-family CEO may be nullied in the presence of family co-CEOs.
Indeed, friction between family and non-family CEOs may even de-motivate the latter.
Moreover, where non-family CEOs must share power with other co-CEOs, the absence
of unity of command may be especially problematic, again in part due to the conicts
caused by the often opposing nature of family-centric and business agendas. Hence:
Hypothesis 3: The positive effect of a non-family CEO on family rm nancial perfor-
mance will become negative in the presence of co-CEOs who are family members.
In comparing Hypotheses 2 and 3, we may surmise that traditional agency theory,
slightly modied, applies mostly to the domain of arms-length, periodic interactions
between owners and agent, whereas behavioural agency theory applies more to the
intimate, intensive agentagent interactions typical of top managers running a rm
together on a day-to-day basis.
Non-Family CEOs in Co-CEO Leadership Structures and
Dispersed Ownership
The conjunction of non-family CEOs operating in a co-CEO leadership structure may
negate the positive monitoring effects of having multiple major family owners. As noted,
there are apt to be differences in priorities between family and non-family CEOs with
the former being more susceptible to parochial SEW priorities for the family, and the
latter more given to pursuing an economic agenda for the business (Gomez-Mejia et al.,
2007). Family executives with differing priorities from a non-family CEO might appeal
to different owners thereby bringing owners onboard to second guess and thwart the
initiatives of a non-family executive (Gersick et al., 1997). Such appeals might prevent a
coherent business strategy that is free from SEW diversions (OToole et al., 2002).
Moreover, the resulting de-motivation of a non-family CEO in an environment in which
family politics come to dominate may enhance opportunism and agency costs.
Hypothesis 4: The positive effect of a non-family CEO on family rm performance
under dispersed ownership becomes weaker when he or she is acting within a team of
family co-CEOs.
METHOD
Sample and Variables
Our sample is drawn from Bocconi Universitys Italian Observatory of Family Firms. The
Observatory monitors the entire population of Italian family-controlled rms with turn-
over of over 50 million, as identied from public sources such as AIDA (Italian Digital
Database of Companies) a branch of the Bureau van Dijk group. AIDA incorporates
comprehensive nancial information for almost all the private rms in Italy. Data on
ownership, governance, and performance were collected for the period 200008 from
company ofcial lings in the Italian Chambers of Commerce, in which all Italian
companies are obliged by law to deposit annually distinct lings regarding: (a) ownership
structure and its evolution over time, with a full account of owners names, individual
shares held, owners characteristics (name, gender, age, family afliation, etc.), as well as
transfers of shares within or outside the family; (b) governance structures, including
information on the leadership model (individual versus co-CEO structures), the CEOs
characteristics (age, gender, tenure in ofce, etc.), repeated for each individual CEO in
case of co-CEOs arrangements; and (c) nancial performance, including all data and
nancial ratios from balance sheet and income statements, which are subsequently
elaborated by AIDA.
To build our dataset, we identied 4221 family controlled rms out of the entire
population of 7663 companies with revenues exceeding 50 million. We dened as
family-controlled those private rms in which a family owned an absolute majority (i.e.,
50 per cent) of shares. Due to the large blockholdings characterizing Italian privately
controlled rms, 50 per cent of ownership (25 per cent for listed companies) is required
to achieve control (Bennedsen and Wolfenzon, 2000). We used consolidated nancial
information for the aggregate holding companies when all their subsidiaries operated in
the same two-digit industry classication, and used information on the individual sub-
sidiaries if these operated in different two-digit industries. This holding company con-
solidation caused the sample to reduce to 2522 rms. From that sample, we focused on
privately controlled rms, and excluded observations on publicly listed companies which
rarely employ co-CEO ownership structures, and that are exposed to different resource
needs, and different issues involving external stakeholders. Additionally, in order to
compare rms with comparable legal status, we excluded companies without a formal
board of directors. List-wise exclusion of cases due to missing values in nancial data
resulted in a nal usable number of 7149 observations on 893 privately controlled family
companies.
The dependent variable in our study is an industry-adjusted measure of ROA (Industry-
adj ROA), computed as the difference between the rms ROA and the average ROA of
the rms in the same two-digit SIC code industry in the same year. ROA has been
commonly used to assess top executive and family impact on rm performance (e.g.,
Anderson and Reeb, 2003; Cannella and Shen, 2001). Our independent variable is the
presence of non-family CEOs as business leaders (Non-family CEO leadership), coded 1 if
there is at least one non-family CEO leading the company (either alone or within
co-CEO structures), and 0 otherwise. Firms having co-CEO leadership are 58 per cent
of the nal sample. For rms with co-CEO leadership structures, 55.8 per cent of cases
have two co-CEOs (rm/year observations); 26.5 per cent of cases have three co-CEOs;
10.6 per cent of cases have four co-CEOs; 3.9 per cent of cases have ve co-CEOs; and
less than 3 per cent have more than ve.
The familial nature of the CEOs has been determined by surname afnity with that of
the controlling family, as recorded in Chamber of Commerce lings (Miller et al., 2013).
Although this may miss some family rms in the rare cases where the only major owner
is an in-law with a different name than the founding family, and it counts as a family rm
one in which there are multiple major owners or CEOs with the name of the founder,
given our very large sample of private rms, these inaccuracies are not apt to signicantly
distort our results. More importantly, our cross-referencing national scal code numbers
with personal data on our owners and executives (such as residence, change in address,
etc.) allowed us to determine marriage relationships and spousal branch involvement,
further decreasing the likelihood of signicant inaccuracies in our classications.
Two moderating variables were used to test our hypotheses. The rst is a measure of
Family ownership dispersion, computed as the complement to 1 of the Herndahl concen-
tration index of family ownership. The family Herndahl concentration index was
adapted for family owners based on the original formulation of Schulze et al. (2003) as:
H family ( ) =
=
( )
Si
i
n f
2
1
where n( f ) is the number of family shareholders (shares were tallied for the seven largest
family shareholders, since almost 90 per cent of our rms had seven shareholders or less,
and also because our study focuses on potential resources and conicts pertaining to major
owners), and Si is the number of shares held by the i-th family shareholder of the rm.
An index close to 1 indicates stronger concentration, with the maximum being 100 per
cent of shares held by a sole family owner. The second moderating variable is a
dichotomous variable accounting for the existence of a Co-CEO leadership structure, coded
1 if the company is led by two or more co-CEOs, and 0 otherwise. Specically, we
identied a co-CEO arrangement when all these conditions occurred: (a) more than one
person was formally designated as the company CEO; and (b) the breadth and depth of
responsibilities and power in the hands of each of the co-CEOs was substantially the
same as attested to by documentation. To this end, we hand-collected and analysed all
rm lings to the Chamber of Commerce, specically the sections reporting CEOs
proxies and job descriptions, and excluding those whose job was too narrow or specic
(e.g., roles in sales, marketing, operations, administrative activities).
Based on prior studies of family rm performance, we also included the following
control variables in all regressions: Firm age, size, R&D/Sales ratio, and Debt/Equity ratio
(Anderson and Reeb, 2003; Miller et al., 2007), as well as the previous years nancial
performance. Firm age, size, and R&D to sales were log transformed to achieve nor-
mality. We also controlled for the generation of the leader (I generation), the percentage of
non-executives on the board of directors (Board % of Non-Exec), the percentage of family
directors (Board % of Family Members) (Andres, 2008; Villalonga and Amit, 2006), the
share of the largest shareholder (Largest shareholders share) (Schulze et al., 2003), as well as
the age and the tenure of the CEO, averaged for teams of co-CEOs (respectively, Average
CEO age and Average CEO tenure) (Henderson et al., 2006). Table I provides means,
standard deviations, and correlations among our variables. Reported VIF (variable
ination factor) values are consistently lower than 10 and, as suggested by Neter et al.
(1996), this indicates the absence of signicant collinearity problems.
We tested our hypotheses estimating a panel regression model with the relevant
interaction terms of Non-Family CEO*co-CEOs; Non-Family CEO*Dispersion; Non-Family
CEO*co-CEOs*Dispersion. In all these analyses, variables have been standardized to avoid
collinearity. We also tested the robustness of the three-way interaction ndings using
sub-sample analyses, which also facilitated interpretation.
ANALYSIS AND RESULTS
Table II reports descriptive statistics for the subsamples identied by all the possible
combinations of the variables of non-family CEO leadership, ownership dispersion, and
co-CEO leadership. For purposes of Table II only, we transformed the measure of
ownership dispersion into a dichotomous variable, classifying as concentrated ownership
structures those with the value of the dispersion measure above the median (i.e., disper-
sion index = 0.63), whereas those having values below the median are classied as
dispersed structures.
The descriptive statistics in the subsamples suggest that the rms having concentrated
ownership and non-family CEOs as single leaders or within co-CEO structures suffer a
performance disadvantage. Poorly performing companies also have a smaller percentage
of family directors and a higher average CEO age. On the other hand, companies that
perform better have dispersed ownership structures and non-family CEOs acting as single leaders with no
co-CEOs.
To test our hypotheses, we ran panel regression xed effects estimations of the impact
of non-family leadership on rm performance (Industry-adj ROA) (Table III). Hausman
tests performed for each model produced statistically signicant results, suggesting that
xed-effect models were more appropriate than random-effects models (
2
= 1240.37***
in model 1,
2
= 1286.18*** in model 2,
2
= 1301.22*** in model 3,
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= 1333.28*** in
model 4). The inclusion of rm xed effects allowed us to control for time-invariant
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Table III. Panel regressions analyses on industry adjusted ROA
Industry-adjusted ROA (2 digit Ateco-code)
(1) (2) (3) (4)
Base Co-CEO
leadership
Ownership
dispersion
Three-way
interaction
ROAadj (n 1) 2.33*** 2.33*** 2.33*** 2.31***
(0.10) (0.10) (0.10) (0.10)
Firm size 1.72*** 1.72*** 1.73*** 1.73***
(0.13) (0.13) (0.13) (0.13)
Firm age 1.39*** 1.35*** 1.37*** 1.44***
(0.30) (0.30) (0.30) (0.30)
R&D/Sales 1.67*** 1.64*** 1.65*** 1.65***
(0.47) (0.47) (0.47) (0.47)
Debt/Equity 1.91*** 1.91*** 1.92*** 1.92***
(0.10) (0.10) (0.11) (0.11)
I generation 0.32 0.38 0.40 0.41
(0.30) (0.31) (0.31) (0.31)
Board % of non-executives 0.11 0.12 0.14 0.13
(0.13) (0.13) (0.13) (0.13)
Board % of family members 0.31
0.29
0.26 0.27
(0.18) (0.18) (0.18) (0.18)
Largest shareholders share 0.04 0.06 0.05 0.06
(0.19) (0.19) (0.19) (0.74)
Average CEO age 0.22* 0.23* 0.21* 0.22*
(0.11) (0.11) (0.11) (0.11)
Average CEO tenure 0.04 0.07 0.05 0.03
(0.11) (0.11) (0.11) (0.11)
Non-family CEO leadership 0.01 0.41* 0.43* 0.43*
(0.13) (0.19) (0.19) (0.19)
Co-CEO leadership 0.65** 0.72** 0.72** 0.71**
(0.25) (0.25) (0.25) (0.24)
Family ownership dispersion 0.56** 0.57** 0.55** 0.82**
(0.20) (0.20) (0.20) (0.23)
Non-Family CEO
*
Co-CEOs 0.63*** 0.63** 0.76**
(0.22) (0.22) (0.22)
Non-Family CEO
*
Dispersion 0.24** 0.46**
(0.09) (0.13)
Co-CEOs
*
Dispersion 0.43*
(0.19)
Non-family CEO
*
Co-CEOs
*
Dispersion 0.35*
(0.17)
Constant 1.81*** 1.93*** 1.94*** 1.94***
(0.17) (0.17) (0.17) (0.17)
Fixed effects Y Y Y Y
Model F 116.16*** 109.10*** 102.81*** 91.97***
R-squared (within) 0.221 0.223 0.224 0.231
Incremental F-test 8.19*** 7.52*** 5.89***
LR test 10.13*** 18.60*** 29.14***
Relative likelihood based on AIC (vs. model 4)
a
0.000 0.001 0.003
Observations 7,149 7,149 7,149 7,149
Note: Standard errors in parentheses; *** p < 0.001, ** p < 0.01, * p < 0.05,

p < 0.1. Bold type signies the predicted relationships.
a
Relative likelihood measures the relative probability that the model minimizes AIC information loss compared to model 4. Values close
to zero indicate that the goodness of t of model 4 is the highest compared to the others.
unobserved rm level attributes, which could have inuenced the results. In Table III,
Model 1 introduces control variables as well as the effects of non-family CEO leadership,
co-CEO leadership, and dispersion; Model 2 presents the interaction between non-
family CEO and co-CEO leadership; Model 3 presents the interaction with ownership
dispersion; Model 4 presents a three-way interaction considering co-CEO leadership and
dispersion. To test for the change in R-square across different models which is
inevitably low due to the use of xed effects models with large numbers of observations
we relied on incremental F-change tests, Akaikes Information Criterion (AIC) tests,
and Likelihood Ratio (LR) tests, which all return signicant values. These indicate that
the inclusion of the interaction terms improves the t of our model.
Hypotheses 1 and 2 are supported. The main effects of non-family CEO leadership
and the effect of the interaction between ownership dispersion and CEO leadership are
positive and signicant (there was no quadratic effect for dispersion). Regarding Hypoth-
esis 3, the effect of having a non-family co-CEO interacting with family co-CEOs is
negative, as expected (see discussion of Table IV below). Finally, the coefcient of the
three-way interaction term for non-family CEOs, co-CEOs, and dispersion is negative,
thereby supporting Hypothesis 4.
Figure 1 shows the different impacts of non-family CEOs on performance in single vs.
co-CEO settings and under concentrated vs. dispersed ownership. On average compa-
nies with dispersed ownership perform better. In dispersed settings, the effect of having
a non-family CEO on performance is positive when the CEO acts as a single leader,
whereas it is negative for co-CEO structures with one or more non-family CEOs.
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
with non-family CEO family CEO(s) only
P
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(
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a
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d

R
O
A
)
(1) co-CEOs,
Dispersed ownership
(2) co-CEOs,
Concentrated
ownership
(3) single CEO,
Dispersed ownership
(4) single CEO,
Concentrated
ownership
Figure 1. Interaction plot
Conversely, companies with concentrated ownership and non-family CEOs, in both
single and plural leadership settings, have the lowest levels of performance. Co-CEO
partnerships perform better if they are entirely composed of family members. However,
leadership settings with family members exhibit similar performance almost irrespective
of ownership dispersion and single vs. multiple CEO arrangements. The greatest vari-
ance occurs among companies having non-family CEOs.
Table IV reports the analyses of the sub-sample of companies led by co-CEOs,
evaluating respectively the impact of (1) partnerships composed equally of family and
non-family CEOs, (2) entirely non-family co-CEOs partnerships, and (3) partnerships
with at least one non-family CEO. Follow-up analyses suggest that within co-CEO
settings with at least one non-family CEO, entirely professional teams exhibit a perfor-
mance advantage compared to partnerships where family and non-family CEOs are
equally represented.
Robustness Tests
To establish the robustness of our results, we rst performed additional tests employing
alternative measures of company performance. We estimated the full regression model of
Table III using unadjusted ROA (ROA), Return on Equity (ROE), and Return on Sales
(ROS) as dependent variables. We also estimated different specications of performance
using lagged measures of the dependent variable: average industry adjusted ROA in year
(t) and (t + 1), average industry adjusted ROA in the interval between year (t) and (t + 2).
Again, the results were consistent with our main ndings (Appendix, Table A1).
Additionally, in order to rule out the possible effect of increased inter-generational conict
when more than one generation is present in the rm (Eddleston et al., 2008), we ran the
models of Table III controlling for the age difference between the oldest and the youngest
CEO in the team as a proxy of multiple generations involvement. Results again were very
consistent withour base models (Appendix, Table A2). Finally, we ranthe models of Table III
byincludingyear dummies tocontrol for time effects andusingrobust rm-clusteredstandard
errors. These results too conrmed our ndings (Appendix, Table A3).
We wished to determine whether our results were robust to different rm ages and to
the exclusion of single-owner rms. Thus we median-bifurcated the sample according to
rm age, and in another analysis excluded single owner rms. We also reran analyses
dropping rms with more than one non-family CEO. All results continued to hold true.
[3]
DISCUSSION
In accordance with agency and behavioural agency expectations, respectively, our results
conrm that ownership and leadership contexts in which non-family CEOs act are
decisive in determining whether or not these parties contribute positively to rm nancial
performance. Specically, non-family CEOs do best for a rm when working alone and
monitored by multiple major owners; they do worst when working alone under more
concentrated ownership; and they perform between those extremes under different
co-CEO arrangements. The performance of family CEOs is far less sensitive to these
contextual factors. This is vividly illustrated by the interaction plots of Figure 1.
Table IV. Types of co-CEO arrangements in companies with co-CEOs
Industry-adjusted ROA (2 digit Ateco-code)
(1) (2) (3)
Family and non-
family CEO 50:50
Non-family
CEOs only
At least one non-
family CEO
ROAadj (n 1) 2.28*** 2.29*** 2.29***
(0.13) (0.13) (0.13)
Firm Size 1.70*** 1.70*** 1.70***
(0.17) (0.17) (0.17)
Firm age 0.66 0.79 0.67
(0.44) (0.44) (0.44)
R&D/Sales 3.91*** 3.95*** 3.79***
(1.19) (1.19) (1.19)
Debt/Equity 1.80*** 1.79*** 1.79***
(0.14) (0.14) (0.14)
I generation 0.91
0.88* 0.88*
(0.45) (0.45) (0.45)
Board % of non-executives 0.19 0.16 0.21
(0.18) (0.18) (0.18)
Board % of family members 0.11 0.11 0.01
(0.26) (0.23) (0.25)
Largest shareholders share 0.26 0.26 0.26
(0.23) (0.23) (0.23)
Average CEO age 0.27 0.27 0.26
(0.18) (0.18) (0.18)
Average CEO tenure 0.38* 0.32 0.38*
(0.22) (0.22) (0.22)
50_50 Family and non family CEOs 0.80
(0.77)
Non family CEOs only 1.54*
(0.25)
At least one non family CEO 0.08
(0.19)
Family ownership dispersion 1.63*** 0.57* 0.57**
(0.43) (0.25) (0.25)
50_50 Family/non family
*
Dispersion 1.37**
(0.47)
Non family CEOs only
*
Dispersion 0.84
(0.58)
At least one non family CEO
*
Dispersion 0.27**
(0.13)
Constant 2.18*** 1.47*** 1.59***
(0.59) (0.15) (0.15)
Fixed effects Y Y Y
Model F 67.33*** 67.21*** 66.96***
R-squared (within) 0.221 0.221 0.222
Observations 4205 4205 4205

Ownership structure appears critical to the effectiveness of a non-family CEO. It may
well be that having a single major owner leaves a rm without adequate expertise to
monitor the non-family CEO who might be tempted to pursue personal opportunism at
the expense of the business (Ward, 2006). By contrast, having multiple major owners may
enhance the effectiveness of oversight. This arrangement combines the benet of having
an outside talent recruited from a signicant pool with an effective monitoring capability
in which multiple powerful owners are able to combat executive opportunism. It is
notable that at rst glance we have a reversal of the normal agency expectation that
concentrated ownership enhances monitoring capacity (Fama and Jensen, 1983).
Looking more closely however, our entire sample is one of rms of highly concentrated
ownership so that we are comparing rms with only one or two major owners with those
having three or more major family owners.
[4]
At the same time, non-family CEOs behave according to average or underperform
when they must act in the context of co-CEOs. It may be that when non-family CEOs
must act in concert with other CEOs in their rm, especially those who are members
of the controlling family, their expertise may be nullied by having to overcome their
inuential counterparts on the top team who are: (a) connected via kinship ties to the
major owners (Gersick et al., 1997), b) less expert than the outsider as they have been
chosen due to family ties more than talent (Bertrand and Schoar, 2006; Volpin, 2002),
and (c) preoccupied with SEW priorities (Gomez-Mejia et al., 2011). In other words, it
may be that non-family CEOs contribute less to performance when they must battle
to offset an excessive SEW emphasis by family co-CEOs. Also, it is interesting
that co-CEO arrangements reduce the benecial effects of dispersed ownership,
especially when the team includes non-family CEOs. The presence of family co-CEOs
under conditions of dispersed family ownership may indeed enhance the chances
of conict and socioemotional distractions. There is the greater possibility of dis-
agreements among executives representing different family factions or among those
having SEW versus business objectives. That tension can be communicated to owners,
who themselves may come from different branches of the family or favour different
priorities (Gersick et al., 1997; Ward, 2006). Co-CEO structures are less problematic
when non-family CEOs act within a team of other non-family co-CEOs, perhaps
because their priorities are more aligned and less inuenced by family-centric
concerns.
By contrast, family CEOs, it appears, do not vary a great deal in their impact on
performance as a function of the ownership or leadership contexts in which they act.
They appear to be possessed of roughly the same degree of effectiveness no matter what
their context. Their core asset may be an incentive to act in the long term interests of
the rm for the benet of their family, its wealth, and its reputation (Miller and
Le Breton-Miller, 2005; Miller et al., 2008). Their disadvantages may be their being
drawn from a smaller talent pool than non-family CEOs (Mehrotra et al., 2013), and
their susceptibility to parochial SEW demands that may hurt the business (Gomez-Mejia
et al., 2007). For family CEOs, it may be their underlying SEW priorities and those
of their families, and the balance between these and business priorities, that are
more important to nancial performance than specic governance arrangements
(Gomez-Mejia et al., 2011).
Contributions to Theory
Our study makes several contributions to theory. First, our analyses illustrate the differ-
ential application of agency theory and behavioural agency theory to family rms.
Traditional agency theory applies mostly to relationships between owners and executives
where owners are performing the task of periodic monitoring and broad strategic
oversight. This general surveillance allows for independence and unity of command for
an often talented non-family CEO. By contrast, where a CEO must share day-to-day
administrative and leadership activities and power with other equally or more empow-
ered family CEOs, the agendas of those potentially less competent family executives may
negate the positive inuences of the non-family CEO. Thus, for family rms in which
co-CEO arrangements are very common, traditional agency theory applies mostly to the domain
of more arms length agentowner interactions, whereas behavioural agency theory applies more closely to
the intimate, intensive agentagent interactions typical of top managers running a rm on a day-to-day
basis.
Our study also reconciles classical agency assumptions with recent behavioural inter-
pretations by showing how those theories can be contextualized to have superior
explanatory power. We show how elements of governance structure in combination may
shape the degree to which managerial decisions might favour family socioemotional
wealth versus company nancial performance (Berrone et al., 2010, 2012; Gomez-Mejia
et al., 2007, 2011). Traditional agency theory has been shown to enlighten the govern-
ance conditions that improve monitoring capability. Behavioural agency theory makes it
clear why co-CEO arrangements with family executives may hamper the effectiveness of
non-family CEOs.
Our research signicantly conditions studies on the performance implications of
non-family leadership. Many prior studies have found non-family CEOs of family
rms to outperform family CEOs (e.g., Bennedsen et al., 2007; Mehrotra et al., 2013;
Miller et al., 2007; Villalonga and Amit, 2006). Unfortunately, these failed to take
into account the governance contexts of non-family CEOs conditions we found to
be critical to their performance, and thus to their relative desirability over family
executives.
Additionally, our study addresses recent calls to take into account contextual elements
regarding CEO demographics and upper echelon characteristics (Finkelstein et al.,
2009). The literature on CEO demographics (Hambrick and Mason, 1984) of the last
two decades has shown how corporate conduct and corporate success can be inuenced
by CEO personality (Miller and Droge, 1986), job and rm tenure (Hambrick and
Fukutomi, 1991; Miller, 1991), job denitions (Hambrick and Cannella, 2004), and
executive discretion (Hambrick and Finkelstein, 1987). There has also been evidence that
the administrative context of the CEO can inuence conduct. For example, the hetero-
geneity of the top team (Hambrick et al., 1996), whether the CEO holds a chairman
position, and whether there is a Chief Operating Ofcer (Hambrick and Cannella, 2004)
all can have important effects on behaviour and performance. What has not been studied
adequately, however, is the role played by the social and governance contexts of the
CEO. This research provides some early insights, demonstrating how ones social status
as a non-family outsider can confer advantages and disadvantages very much depend-
ing on the ownership structure of the rm. In this way, our results can inform research
into which ownership and governance contexts favour CEO efcacy for different types
of CEOs. We thus contribute to the debate on the advantages and disadvantages of
employing a senior team of co-CEOs (Heenan and Bennis, 1999; Marcel, 2009), sug-
gesting how its potential benets in information processing capacity may be outweighed
by socioemotionally driven disagreements about a rms goals.
Finally, we provide evidence that hiring talented CEOs from outside the family
could be of great value if properly contextualized. An executive working in surround-
ings that are complementary to his or her talents may well constitute a uniquely valu-
able resource but only in that context. Our research helps to delimit just when
different varieties of managerial talent in a family rm might actually serve as a source
of superior rents.
Implications for Practice and Limitations
Our study has important implications for practice, as it suggests that entrepreneurial
families must carefully consider whether or not a non-family CEO can operate effec-
tively in an organizational context where family-oriented goals must coexist with busi-
ness nancial goals. Specically, we show how governance considerations might help
to explain the conditions under which executive talent can thrive unimpeded by paro-
chialism. We demonstrate how the resource value of talent is inuenced by the social
and governance context within which it must function, and the associated agency
issues. Family rms benet especially when a single non-family CEO leads and own-
ership is dispersed among major family owners; lone family CEOs also operate best
under dispersed ownership but perform less well than non-family CEOs, and they
in turn outperform family co-CEOs in that context. Finally, family co-CEOs work
best where there are no non-family CEOs in the mix. As such, our study provides
guidance for designing effective governance structures, suggesting that whereas the
presence of family members is benecial for monitoring executives, it can be prob-
lematic when a non-family CEO is forced to work with family peers. Family involve-
ment in managing non-family leaders is best done from an ownership, not a
co-leadership position.
We must point out some limitations of this study. First, as in most of the studies on
family ownership and leadership, our study relies on single-country data, private rms,
and rms with relatively concentrated ownership. Thus it will be important for future
work to attempt to replicate our ndings in other countries and rm types, and to
show additional institutional or cultural conditions that affect the relationship between
governance structures and performance in family rms. Second, despite our data veri-
cation methods, there remains the possibility that we underestimated the number
of family members in some rms. Where possible, future studies should strive to assem-
ble more complete databases. Finally, future studies should investigate owners
and leaders motivations and talents in greater depth to discern just how family
involvement shapes nancial and non-nancial performance (Le Breton-Miller et al.,
2011).
CONCLUSION
Despite the prominence of family rms in the global economy, and the succession crises
that many of these must face, there has been too little research on the governance
contexts that allow one very critical form of leadership to be successful in these organi-
zations: namely that of non-family CEOs. Our analysis shows that the effectiveness of
this type of leadership is especially strongly conditioned both by the ownership structure
of a rm as well as the presence of family co-CEO executives, the latter constituting a
rather provocative arrangement that is especially common in family rms. More speci-
cally, our results show that non-family CEOs do best for a rm when working alone and
monitored by multiple major owners, and do most poorly when working with co-CEOs
under a single major owner. In contrast, the performance of family CEOs is far less
sensitive to these contextual factors. These lessons may help to caution and guide family
rm owners as they transfer their rms to the next generations and attempt to create an
appropriate governance structure. The choice of a non-family leader may produce
signicant nancial benets under the conditions we specify, but can be very costly where
those conditions are absent. By contrast, although preserving family leadership repre-
sents a more conservative governance choice, its socioemotional benets may entail
nancial costs.
ACKNOWLEDGMENTS
The data were collected for the AUB (AIdAF-Unicredit-Bocconi University) Italian Observatory on
Medium and Large Family Firms, funded by AIdAF-Italian Association of Family Firms, Bocconi Univer-
sity, Unicredit Corporate and Private Banking, and the Chamber of Commerce of Milan. We thank Allen
Amason and two anonymous reviewers for their insightful comments. We are grateful for support from the
Social Sciences and Humanities Research Council of Canada.
NOTES
[1] Non-family CEOs may also be constrained in effectiveness by conicts between principals (Dharwadkar
et al., 2000; Young et al., 2008), where large family blockholders expropriate wealth from non-family
minority shareholders (Bloom and Van Reenen, 2007). However, this principalprincipal problem is
most likely to occur when large family owners share ownership with widely dispersed non-family share-
holders (Young et al., 2008). Our study of privately held companies eliminates this possibility, and this
incentive for exploitation.
[2] Co-CEO arrangements may lead to traditional agency problems as well, because the actions of each
co-CEO may impact the interests of the others who are also responsible for the conduct of the company.
As noted by Jensen and Meckling (1976, p. 6), agency costs arise in any situation involving cooperative
effort by two or more people even though there is no clear-cut principalagent relationship. Thus the
rst source of co-CEO agency costs is the mutual monitoring that must be performed by each co-CEO
to avoid reciprocal moral hazard problems such as shirking, free riding, and opportunistic behaviours
(Alchian and Demsetz, 1972). Mutual monitoring in the case of co-CEO leadership may be difcult
since the CEO role presents substantial task complexity and ambiguity (Walsh and Seward, 1990), and
many co-CEO arrangements involve competences in specialized elds. Thus, co-CEO congurations in
general may increase agentagent agency costs (Arthurs et al., 2008) whereby co-CEOs are both
principals and agents of each other regarding their stake in the company.
[3] These results are available from the authors. We thank an anonymous reviewer for raising this issue.
[4] More precisely, if we consider a threshold of 10 per cent of shares to qualify as a major owner, 44.2 per
cent of the sample have only one or two major owners, whereas in the remaining 55.8 per cent of cases
there are at least three owners with more than 10 per cent of shares.
APPENDIX
Table A1. Panel regressions: alternative measures of performance
(1) (2) (3) (4) (5)
Unadjusted ROA ROS ROE Mean ROA
t, t+1
Mean ROA
t, t+2
Performance (t 1) 2.02*** 1.67*** 1.12*** 1.39*** 0.38***
(0.08) (0.07) (0.24) (0.11) (0.11)
Firm size 1.59*** 0.58*** 4.32*** 1.66*** 1.33***
(0.13) (0.12) (0.49) (0.16) (0.16)
Firm age 1.26*** 0.12 6.35*** 1.70*** 1.59***
(0.36) (0.25) (1.09) (0.35) (0.35)
R&D/Sales 1.65*** 1.07*** 3.57** 1.76*** 1.94***
(0.47) (0.40) (1.69) (0.41) (0.36)
Debt/Equity 1.83*** 1.19*** 9.11*** 1.16*** 0.84***
(0.10) (0.09) (0.43) (0.12) (0.12)
I generation 0.67
0.59
2.71* 0.58
0.20
(0.30) (0.25) (1.11) (0.35) (0.39)
Board % of non-executives 0.00 0.13 0.83* 0.05 0.07
(0.13) (0.10) (0.47) (0.14) (0.14)
Board % of family members 0.31
0.16 1.83* 0.15 0.04

(0.17) (0.14) (0.65) (0.20) (0.20)
Largest shareholders share 0.10 0.05 0.53 0.02 0.00
(0.19) (0.15) (0.68) (0.22) (0.22)
Average CEO age 0.36*** 0.34*** 1.48*** 0.24* 0.17
(0.11) (0.09) (0.40) (0.14) (0.14)
Average CEO tenure 0.11 0.05 0.65 0.11 0.29
(0.11) (0.09) (0.41) (0.13) (0.13)
Non-family CEO leadership 0.46
0.33
1.59
0.40
0.55
(0.18) (0.16) (0.73) (0.22) (0.33)

Co-CEO leadership 0.69*** 0.18 3.00*** 0.77** 0.37
(0.25) (0.20) (0.90) (0.28) (0.28)
Family ownership dispersion 0.63*** 0.38** 2.06** 0.54** (0.34)
(0.23) (0.19) (0.82) (0.26) (0.26)
Non-family CEO
*
Co-CEOs 0.72*** 0.53*** 1.58** 0.68** 0.72***
(0.21) (0.18) (0.81) (0.25) (0.26)
Non-family CEO
*
Dispersion 0.50*** 0.39*** 0.40 0.34** 0.46***
(0.13) (0.11) (0.51) (0.15) (0.16)
Co-CEOs
*
Dispersion 0.45* 0.44*** 0.06 0.00 0.12
(0.18) (0.15) (0.68) (0.21) (0.22)
Non-family CEO
*
Co-CEOs
*
Dispersion
0.29
0.36** 0.68 0.29
0.28
(0.17) (0.14) (0.63) (0.20) (0.20)

Constant 6.69*** 4.85*** 12.15*** 2.08*** 2.00***
(1.41) (0.14) (0.63) (0.19) (0.20)
Fixed effects Y Y Y Y Y
Model F 71.34*** 51.49*** 36.39*** 36.58*** 17.86***
R-squared (within) 0.10 0.14 0.10 0.16 0.11
Observations 7149 7045 6975 4312 3382

p < 0.1. Bold type signies the predicted
relationships.
Table A2. Alternative model specication. year xed-effects, and rm-clustered robust standard errors
Industry-adjusted ROA (2-digit Ateco-code)
(1) (2) (3) (4)
Base Co-CEO leadership Ownership dispersion Three-way interaction
ROAadj (n 1) 2.35*** 2.35*** 2.34*** 2.32***
(0.26) (0.26) (0.26) (0.26)
Firm size 1.51*** 1.51*** 1.52*** 1.51***
(0.35) (0.35) (0.35) (0.35)
Firm age 0.19 0.24 0.24 0.18
(0.49) (0.49) (0.49) (0.49)
R&D/Sales 1.71*** 1.68*** 1.69*** 1.69***
(0.70) (0.70) (0.70) (0.70)
Debt/Equity 1.89*** 1.89*** 1.90*** 1.89***
(0.19) (0.19) (0.19) (0.19)
I generation 0.53
0.60* 0.62* 0.63*

(0.31) (0.31) (0.32) (0.31)
Board % of non-exec 0.06 0.07 0.09 0.08
(0.16) (0.16) (0.16) (0.16)
Board % of family members 0.32 0.30 0.27 0.27
(0.21) (0.20) (0.20) (0.21)
(0.23) (0.23) (0.23) (0.24)
(0.14) (0.14) (0.14) (0.14)
Average CEO age 0.30* 0.32* 0.30* 0.30*
(0.12) (0.12) (0.12) (0.13)
Non-family CEO leadership 0.01 0.43* 0.45* 0.46*
(0.17) (0.25) (0.24) (0.38)
Co-CEO leadership 0.71* 0.79** 0.79* 0.77**
(0.24) (0.28) (0.28) (0.29)
Family ownership dispersion 0.52* 0.51* 0.49* 0.78*
(0.26) (0.84) (0.25) (1.03)
Non-family CEO
*
Co-CEOs 0.64* 0.64* 0.68*
(0.25) (0.25) (0.25)
Non-family CEO
*
Dispersion 0.23* 0.49*
(0.12) (0.65)
Co-CEOs
*
Dispersion 0.46*
(0.79)
Non-family CEO
*
Co-CEOs
*
Dispersion 0.34
(0.22)
Constant 3.01*** 3.13*** 3.15*** 3.17***
(0.32) (0.32) (0.32) (0.32)
Year xed effects Y Y Y Y
Model F 28.37*** 27.43*** 26.26*** 24.28***
R-squared (within) 0.231 0.242 0.243 0.248
LR test 11.23*** 19.12*** 28.12***
a
0.000 0.000 0.011
Observations 7,082 7,082 7,082 7,082

p < 0.1; Year dummies are included in the regression but not
displayed in the table. Bold type signies the predicted relationships.
a
Relative likelihood measures the relative probability that the model minimizes AIC information loss compared to model 4. Values close
to zero indicate that the goodness of t of model 4 is the highest compared to the others.
Table A3. Panel regressions with inter-generational controls
Industry-adjusted ROA (2-digit Ateco-code)
(1) (2) (3) (4)
Base Co-CEO leadership Ownership dispersion Three-way interaction
ROAadj (n 1) 2.33*** 2.33*** 2.32*** 2.31***
(0.10) (0.10) (0.10) (0.10)
Firm size 1.73*** 1.73*** 1.73*** 1.73***
(0.13) (0.13) (0.13) (0.13)
Firm age 1.41*** 1.45*** 1.38*** 1.45***
(0.30) (0.30) (0.30) (0.30)
R&D/Sales 1.67*** 1.66*** 1.66*** 1.65***
(0.47) (0.47) (0.47) (0.47)
Debt/Equity 1.92*** 1.92*** 1.92*** 1.92***
(0.11) (0.11) (0.11) (0.11)
I generation 0.33 0.43 0.43 0.43
(0.31) (0.31) (0.31) (0.31)
Board % of non-executives 0.15 0.16 0.16 0.16
(0.13) (0.13) (0.13) (0.13)
Board % of family members 0.31 0.26 0.26 0.26
(0.18) (0.18) (0.18) (0.18)
(0.19) (0.19) (0.19) (0.19)
Average CEO age 0.21
0.20
0.20
0.20
(0.11) (0.11) (0.11) (0.11)

(0.11) (0.11) (0.11) (0.11)
Multiple generations involved 0.14 0.14 0.14 0.14
(0.09) (0.09) (0.09) (0.09)
Non-family CEO leadership 0.43* 0.44* 0.44* 0.44*
(0.19) (0.19) (0.24) (0.19)
Co-CEO leadership 0.52 0.51
0.53*** 0.52**
(0.28) (0.28) (0.28) (0.28)
Family ownership dispersion 0.53
0.56*** 0.53** 0.80**

(0.20) (0.63) (0.43) (0.23)
Non-Family CEO
*
Co-CEOs 0.63** 0.63** 0.67**
(0.22) (0.22) (0.22)
Non-Family CEO
*
Dispersion 0.24** 0.47**
(0.09) (0.14)
Co-CEOs
*
Dispersion 0.42*
(0.19)
Non-family CEO
*
Co-CEOs
*
Dispersion 0.31
(0.17)
Constant 1.77*** 1.90*** 1.90*** 1.90***
(0.17) (0.18) (0.18) (0.18)
Model F 108.59*** 102.43*** 96.92*** 87.26***
LR test 9.43*** 17.12*** 32.63***
a
0.000 0.001 0.038
R-squared (within) 0.221 0.223 0.223 0.232
Observations 7,082 7,082 7,082 7,082

a
Relative likelihood measures the relative probability that the model minimizes information loss compared to model 4. Values close to zero
indicate that the goodness of t of model 4 is the highest compared to the others.
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When do Non-Family CEOs Outperform in Family

Firms? Agency and Behavioural Agency Perspectives

0.16 1.83* 0.15 0.04

(0.18) (0.16) (0.73) (0.22) (0.33)

0.36** 0.68 0.29

(0.17) (0.14) (0.63) (0.20) (0.20)

0.60* 0.62* 0.63*

(0.11) (0.11) (0.11) (0.11)

0.56* 0.53 0.80**

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