An agency theory framework is used to test the effects of founding family control on firm performance, capital structure, and value. Both the finance and management literatures regarding the relationship between firm control and firm value are explored. Controlling for size, industry, and managerial ownership, the results suggest that firms controlled by the founding family have greater value, are operated more efficiently, and carry less debt than other firms.

Using cognitive categorization as a foundation, this paper develops a theory of leadership succession in the family firm. We specify a general leadership succession model that includes the process by which both the parent/leader and child/successor evaluate each other and themselves through the cognitive categorization process, and we develop testable propositions from the parent/leader and child/successor classifications. This paper posits that these classifications influence the succession process as the parent/leader prepares the child/successor for leadership, and that the child/successor determines both the desirability of assuming leadership and his or her readiness to accept succession.