Family firms versus leveraged buyouts: a conceptual comparison of distinctive governance structures

Michael Braun, Larry Zacharias, Scott Latham

Research output: Contribution to journalArticlepeer-review

6 Scopus citations


PurposeThe purpose of this paper is to compare the governance structures of two distinctive governance forms: the family firm and the leveraged buyout (LBO). The paper also explores the relative performance of these two organizational forms over the course of the economic business cycle. Design/methodology/approachThe paper provides a theoretical treatment of the family firm and the LBO using the stewardship perspective and agency theory. The analysis anticipates the board structure for each organizational form and relates family firm and LBO governance to performance over the business cycle. FindingsFrom a conceptual treatment, the family‐owned concern exhibits board characteristics reflecting the longer‐term orientation of the firm, with boards empowered to include non‐economic, as well as economic, goals. LBOs are structured to maximize shareholder value over a shorter time horizon. LBOs may take advantage of expansionary environments whereas family firms may be better prepared for economic down‐cycles. Research limitations/implicationsThe paper takes a holistic approach to contrasting two organizational forms that fit their respective theoretical frames and compares some of their more salient governance characteristics and performance over the business cycle. Practical implicationsManagers and boards can structure governance to manage the business cycle. Stakeholders can selectively engage firms that portray vital governance characteristics for their benefit and may also pressure boards and top management to make necessary governance improvements. Originality/valueThe paper offers an introductory comparison between family firms and LBOs in terms of governance and managing the firm over the business cycle. This paper makes the case that some organizational forms are better suited to certain types of economic climates.

Original languageEnglish
Pages (from-to)89-106
Number of pages18
JournalJournal of Family Business Management
Issue number2
StatePublished - Sep 30 2011


  • Boards of directors
  • Business cycles
  • Economic conditions
  • Family firms
  • Governance
  • Leveraged buyouts


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