Principal-principal conflicts and socioemotional wealth in family firms

Abstract

Corporate governance is the concern of all the parties throughout the world regarding their viability in order to ensure the sustainability of the firm. As the family firms are listed in the public exchange, there are different kind of the investors in the corporation produce the resolution that are opposing to each other. Moreover, the large capital that is injected by the institutional investor complicates the role played in the corporation that shapes the culture and philanthropy. The phenomenon leads to the complex relationship in one corporation due to the different types of interest. Board composition and board independence are stretched by numerous scholars regarding the core importance in the corporation. Executive compensation is another area of corporate governance that is widely discussed by the scholars regarding the relationship with the long-term firm performance. Therefore, this review paper will focus on the application of the Principal-principal Conflicts theory and Socio-Emotional Wealth theory to narrate the whole scenario of the governance practice in the family firm. Throughout the paper, current rigorous practice of the family firms will be deeply investigated to cover the deep insights of the current phenomenon. The meticulous review of this paper is able to synthesize the significance of these theories towards the general governance setting in the family firms. Eventually, the working paradigm of the family firm can be clearly justified with the rationale that is justified. At the end of the review, the two main theories are concluded to be equally essential to illustrate the corporate governance practice in family firms across the globe.