EXPLORING THE AGENCY CONSEQUENCES OF OWNERSHIP DISPERSION AMONG THE DIRECTORS OF PRIVATE FAMILY FIRMS.

Using an agency theoretic lens and insights drawn from the behavioral economics and family business literatures, we develop hypotheses concerning the effect of dispersion of ownership on the use of debt by private family-owned and managed firms. Results from a field study of 1,464 family firms suggest that during periods of market growth the relationship between the use of debt and the dispersion of ownership among directors at family firms is U-shaped. In Press- AMJ The principal-agent model has had a profound influence on corporate governance theory (Jensen, 1998). A central premise of this theory is that management decisions are strongly influenced by the agency position of the individual decision-makers…