Family ownership, control, and firm performance: Does gender diversity matter?

This study investigates the influence of family ownership and family control on firm performance while considering the moderating effect of gender diversity. Utilising a dataset of 226 nonfinancial firms listed on Pakistan Stock Exchange spanning from 2008 to 2019, the paper employs the Generalized Method of Moments (GMM) estimation to test the proposed hypotheses. Additionally, the paper uses ordinary least squares regression (OLS) analysis, industry-adjusted measures of firm performance, difference-in-difference (DID) estimation, and Blau and Shannon index to confirm the results. The findings indicate that family ownership and control positively affect firm performance. This relationship is further enhanced by the presence of female directors on the board. Using the agency theory and stewardship theory frameworks, the paper delves into the dynamics of agency conflict and family owner behavior within family firms, highlighting the role of gender-diverse boards. Overall, the analysis reveals that family owners, motivated by a strong attachment to their businesses and a desire to preserve socio-emotional wealth, tend to adopt a stewardship role, thereby mitigating principal-principal conflicts within our sample firms. The study contributes to the literature on family businesses by elucidating the behavior of such firms within an emerging economy context and revealing the role of gender diversity in the presence of family ownership. The findings suggest useful implications for investors regarding the positive influence of family owners on firm performance and underscore the importance for policymakers to prioritize female career development and professional growth. This, in turn, can yield economic benefits through the integration of female directors in boardrooms, thereby reducing agency costs and enhancing overall governance structures within firms.