Family involvement in board of directors and market valuation: evidence from Egyptian listed firms

PurposeThis study aimed to investigate how family involvement in management (FIM) affects market valuation and whether this effect is influenced by the presence of founder chief executive officers (CEOs) and the dual role of their CEO positions.Design/methodology/approachTobin's Q ratio measured market valuation, while FIM was measured by the ratio of family managers to the total number of board of directors (BOD) seats. Additionally, the appointment of founders to CEO positions and the dual role of their CEO positions were used as moderators. As a panel data technique, the dynamic generalized method of moments (GMM) estimator was employed for a sample of 85 Egyptian-listed firms from 2011 to 2018.FindingsThe findings revealed that FIM negatively affects market valuation; hence, the more family managers serving on the BOD, the lower the firm's market value. Moreover, the findings showed that the impact of FIM on market valuation is mitigated by the presence of founder CEOs and the dual role of their CEO positions.Originality/valueThis study highlights the negative repercussions of FIM on firm value and the urgency of professionalizing the family business through an independent BOD and ensuring more effective monitoring systems.