Family presence and financial performance in large listed companies in India

This study investigates the impacts of family presence and board independence on corporate financial performance in 131 large listed firms from India, an emerging economy dominated by the presence of large business groups having concentrated ownership. Family presence includes the extent of family ownership and appointment of family CEO and family chairperson. Employing a multiple linear regression model, this study first detects a positive relationship between family ownership and financial performance. Second, a negative relationship is found between family CEO and firm performance, indicating that family firms with non-family CEOs perform better than firms having family CEOs. Third, the proportion of Board outsiders (i.e. independent non-family directors) is found to have no significant relation to financial performance, thus challenging agency theory's need for independent monitoring in family firms to enhance performance. These results are interpreted in the context of historical Indian family business practices and modern changes.