Corporate Governance in Family Firms: Control Mechanisms, Agency Conflicts, and Corporate Values Across Generations

Abstract

This study analyzes how control mechanisms in family firms—both
formal (board process quality: proportion of independent
commissioners, audit committee independence, intensity of
oversight agenda) and informal family-based (family constitution,
family council, and succession plan)—influence agency conflict and
lead to cross-generational firm value. Using a quantitative-empirical
design of a panel of issuers (2019–2025), this study develops two
measurable constructs, namely the Board Process Quality Index
(IKPD) and the Family Control Practices Index (IPPK), as well as
agency conflict proxies (related party transaction/RPT intensity,
dividend payout, and control rights–cash flow wedge). Firm value is
measured using Tobin's Q and PBV. The relationship is tested
using fixed-effect panel regression (firm & year), mediation tests
(bootstrap/SEM) and cross-generational moderation (G1, G2,
G3+), complemented by robustness tests (alternative proxies,
winsorizing, index redefinition). The results show that IKPD and
IPPK are negatively associated with agency conflict, while wedge
increases it. Furthermore, agency conflict is negatively associated
with values, while IKPD is positively associated with values,
confirming the mediation mechanism: control → agency conflict ↓
→ values ↑. The effect of IPPK is stronger in G2/G3, indicating that
institutionalization of family governance becomes more crucial with
transgenerational complexity. The study's primary contributions are
the integration of formal and informal mechanisms within a single,
auditable empirical framework, the differentiation of crossgenerational
heterogeneity, and the exploration of mechanistic
channels through agency conflicts. Practical implications
emphasize strengthening board processes, institutionalizing family
governance, and controlling wedges/RPTs to maintain and grow
family firm value across generations