Defining listed family controlled corporations - an agency theory perspective

Recent research shows that a significant proportion of listed corporations in a number of major financial markets across the world are classified as family firms. That classification is based on a number of different definitions of a family firm, using criteria such as an ownership threshold and/or the presence of a family member on the board of directors and/or in the top managerial positions. The lack of a universal definition of listed family controlled corporations may undermine the comparability or even the validity of any empirical results reported. This paper aims to resolve the diversity of definitions in use by developing an operational definition of listed family controlled corporations that is consistent with agency theory - the most commonly adopted theoretical framework in existing empirical studies. Based on agency theory, I argue that the key difference between family and non-family firms lies in the control of the decision making processes of the corporation. I further argue that a family needs to dominate the management control structure in order to control decision making processes.