Title: Outside directors and firm performance across family generations in Lebanon

Authors: Charbel Salloum; Elie Bouri; Laura Salloum; Catherine Mercier-Suissa

Addresses: USEK School of Business, Holy Spirit University of Kaslik, P.O. Box 446, Lebanon ' USEK School of Business, Holy Spirit University of Kaslik, P.O. Box 446, Lebanon ' Bart & Jones Publishers, 'Le Ramier' 406 Chemin de Terre Blanque, 31340 Mirepoix sur Tarn, France ' IAE School of Management, Lyon 3 University, Lyon, France

Abstract: This paper investigates the relationship between the percentage of outside directors and financial performance in non-listed family firms while considering the generational effect. Using longitudinal data on 322 Lebanese firms covering the period 2008-2010, a regression analysis indicates that firm profitability depends upon the percentage of outside directors only in second and later generations. In first-generation family firms, the replacement of an inside director by an outsider has no significant impact on performance. In contrast, in the second and subsequent generations, outsiders can be used as an effective governance mechanism to reduce agency costs and thus enhance performance. Local entrepreneurs and regulators could build upon these results to implement better corporate governance practices in order to enrich the growth and prosperity of Lebanese family firms.

Keywords: board of directors; family generations; financial performance; Lebanon; non-listed family firms; outside directors; firm performance; family businesses; generational effect; profitability; agency costs; corporate governance; firm growth.

DOI: 10.1504/IJBPM.2016.075536

International Journal of Business Performance Management, 2016 Vol.17 No.2, pp.147 - 160

Accepted: 26 Feb 2015
Published online: 28 Mar 2016 *

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