We review what the financial economics literature has to say about the unique ways in which the following three classic agency problems manifest themselves in family firms: (a) shareholders versus managers, (b) controlling (family) shareholders versus noncontrolling shareholders, and (c) shareholders versus creditors. We also call attention to a fourth agency problem that is unique to family firms: the conflict of interest between family shareholders and the family at large, which can be thought of as the “superprincipal” in a multi-tier agency structure akin to those found in other concentrated ownership structures in which the controlling owner is the state, a bank, a corporation, or other institutions. We then discuss the solutions or corporate governance mechanisms that have been devised to address these problems and what research has taught us about these mechanisms' effectiveness at solving these four conflicts in family firms.

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This article examines the effects of family involvement on dividend policy in closely held firms that face agency problems involving majority–minority shareholders. We argue that minority shareholders press for dividends when they perceive situations fostering wealth expropriation. Looking at 458 Colombian companies, we find that family involvement in management does not affect dividend policy; family involvement in both ownership and control through pyramids affects dividend policy negatively; and family involvement in control through disproportionate board representation affects dividend policy positively. Thus, family influence on agency problems, and hence on dividend policy as a mitigating mechanism, varies depending on family involvement.

In this study, using a unique hand-collected sample of 523 closely held Colombian family firms and 5.094 firm-year observations, with 4907 board members, including 833 female board members, we show that female directors have a negative effect on firm performance. However, when we separate female directors into two groups, family female directors and outside female directors, we find that the latter has a positive and significant effect on firm performance. We further construct a human capital index after a detailed analysis of 15% of the total curriculum vitae of directors for those in our sample we were able to find. Although the subsample is not representative enough to make general claims for the whole sample due to data constraints, we shed some light about a potential gender bias in the development of the human capital of heirs and the corresponding impact of different levels of directors' education and experience on firms' financial performance.