Ownership structure, family leadership, and performance of affiliate firms in large family business groups

Utilizing the agency viewpoint, this research attempts to shed light on the issue of family leadership by examining ethnic Chinese family business groups in Taiwan. The study examines the performance implications of this kind of leadership under the ownership structure concern. The research results indicate that the ownership structure of the affiliate firm influences the likelihood that family leadership will be used. Specifically, if the founding family owns more direct ownership of the affiliate firm, the family will be likely to appoint a family leader at the affiliate firm. However, when the founding family has a greater degree of pyramidal ownership of an affiliate firm, family leadership will be less likely at that affiliate firm. Additionally, family leadership mediates the relationship between ownership structure and affiliate firm performance in a family business group. Family leadership positively affects the effect of direct family ownership on affiliate firm performance but does not significantly affect the negative relationship between pyramidal ownership and affiliate firm performance. The implications of these findings for future research on leadership in family business groups are discussed.