The corporate governance-diversification link: exploring the heterogeneity of family firms

Purpose Building on behavioral agency theory, the authors explore the role played by corporate governance characteristics as drivers of the diversification strategies of family firms. Specifically, this study aims to investigate the effects of board size and board gender diversity on the likelihood that family firms will execute a diversifying acquisition vis-à-vis a related acquisition. Furthermore, the authors investigate the contingency effects played by foreign directorship and the firm’s listing status. Design/methodology/approach The hypotheses are tested on an original sample of 213 cross-border acquisitions executed by Italian family firms between 2008 and 2021. Findings The findings suggest that both large board sizes and greater gender diversity positively affect the diversification of family firms. While the presence of foreign directors magnifies the positive effect of board size, gender diversity discourages diversification in the case of listed firms. Originality/value The originality of this study is twofold. First, while prior literature has mostly focused on the family vs nonfamily dichotomy, this paper contributes to an emergent line of research investigating the heterogeneity among family firms’ corporate strategy decisions. Second, by exploring the corporate governance-diversification link in the context of family business, the authors answer to recent calls that diversification by family firms deserves further investigation in light of its highly controversial nature in terms of socioemotional wealth implications and potential mismatch among multiple objectives.