An exploratory study on a new corporate governance mechanism: Evidence from small family firms

The purpose of this paper is to explore relationships between different governance configurations and firm survival. The objective is to describe the alternative mechanisms through which the owning family takes a stake in the governance of the firm.

The governance systems of 116 family enterprises in Lebanon are examined. The study integrates family, ownership, leadership and the business itself constituting the four structural elements of a family firm's governance system. Then, the study tests four hypotheses whether the family, the ownership, the leadership and the business dimensions influence positively firm survival/longevity. The other hypotheses tested concern the advisory services and the legal form of the board, and how that might affect the survival/longevity of the family firm.

This integrative view allows observation of interactions among the different structures, and the establishment of a coordinating governing structure. Hypotheses testing results show that family, leadership and business dimensions have an impact on the performance/survival of the firm, whereas the ownership dimension has no effect.

Limitations of this paper relate to the relatively small size of the sample, and the sampled firms are young and small according to international standards. The study also suffers from common method bias and external validity.

The proposed framework allows the establishment of a governance structure, for control and co‐ordination. Ownership should be integrally separated from the other dimensions in the governance of a family firm to be able to achieve fairly good performance and ensure the survival and longevity of the firm.

No other studies have been conducted on Lebanon. Moreover, the study integrates the four governance mechanisms developed by Klein which was not done previously.