THE ROLE OF SHAREHOLDER AGREEMENTS
Peter Jaskiewicz University Research Chair in Enduring Entrepreneurship Telfer School of Management, University of Ottawa, 55 Laurier Ave E, Ottawa, ON, K1N 6N5, Canada Phone: 514-796-7689; Fax: 613-562-5164 E-mail: [email protected]
Emmanuel Boutron Assistant Professor of Finance Université Paris Ouest Nanterre La Défense, Nanterre, France 200 Avenue de la République, 92000 Nanterre, Phone: +33 67445 3355 E-mail: [email protected]
François Belot Assistant Professor of Finance, Université de Cergy-Pontoise - THEMA - 33, boulevard du Port Cergy-Pontoise Cedex, France Phone: +33 1 34 25 23 01 E-mail: [email protected]
James G. Combs Della Phillips Martha Schenck Chair of American Private Enterprise College of Business, University of Central Florida Orlando, FL 32816-1400, USA, AND Telfer School of Management, University of Ottawa, 55 Laurier Ave E, Ottawa, ON, K1N 6N5, Canada Phone: 407-823-1102 E-mail: [email protected]
Celine Barredy Associate Professor Université de Lorraine, IUT de Metz, Ïle de Saulcy 57000 METZ, France Phone: +33(0) 685 431 233 E-mail: [email protected]
MITIGATING SUPERPRINCIPAL AGENCY CONFLICTS IN FAMILY FIRMS: THE ROLE OF SHAREHOLDER AGREEMENTS
ABSTRACT Research paints a bleak picture regarding the consequences of shareholder agreements (SAs). These legally binding contracts dictate terms through which participating shareholders collude and entrench themselves, thereby aggravating principal-principal (P-P) agency conflicts and hurting firm performance. We suggest a boundary condition regarding the negative impact of SAs on firm performance. While SAs might foster P-P agency conflicts in non-family firms, we posit that in family firms SAs limit “superprincipal” agency conflicts between the main family-member shareholders and the larger family. We present two studies based on different samples of French firms that broadly support our theorizing. Results suggest that investors are concerned about superprincipal agency conflicts and draw attention to the need to study these conflicts and their consequences.