The determinants of family firms' board structure in Thailand

Abstract

Using data fron a samole of 384 Thai nonfinancial listed firms during 2003-2008, this study examines the determinants of three board structure (board size, proportion of independent directors, CEO duality) in family firms and nonfamily firms. Based on the extensive literature, family firms have uniquely gorverance, which has an impact on determinants of structure differently. This study finds that board size in family firms and nonfamily firms increase as firms grow over time amd reflect the tradeoff between the firm-speciific benefits and costs of monitoring. Family firm require higher advisory than nonfamily firm as the firm rrow, which results in the larger board size. Evidence also exists that the proportion of independent directors in family and non family firms is empirically the same. This is a positive association between propotion of independent directors and scope of operation in both firms, However, family firms' proportion of independent directors has no relationship with agency problem unlike nonfamily firms. The family firm's board leadership is observed to be higher in family firms as there are higher chances for family firm to give to CEO the chairman of the board positiion. These results indicate that family firms' directors' main role is to give advisory while nonfamily firms' directors are required more to monitor. Nonetheless, non family firms' the proportion of director is as low as family firms'. The study suggests that family firms' board structures are more suitable in low corporate governance environment than nonfamily firms in Thailand. Regulators should focus on improving nonfamily firms' corporate governance in term of the firms' proportion of independent directors.