Type I and type II agency conflicts in family firms: An empirical investigation

Abstract

Dominant family control reduces Type I agency conflicts because of monitoring efficiencies, while increasing Type II agency conflicts because of the family’s voting power. Additionally, Type II agency conflicts could be exacerbated if the family agents managed the firm solely for the family’s benefit. The two different types of agency conflicts were examined in a sample of 499 public Indian family businesses during the years 2006 to 2015. Family-controlled and non-family-managed firms appeared to be optimally configured to minimize both types of agency conflicts. The absence of management control appeared to alleviate some of the dissipative agency conflict effects of dominant family ownership.