Family Ownership and Tunneling and Propping Effect in Nonfinancial Firms: Moderating Role of Corporate Governance

The moderating role of corporate governance (CG) on the association between family ownership (FO) and tunneling (TN) and propping (PR) behaviors of Pakistani family firms is tested. Using the data from the Pakistan Stock Exchange (PSX) listed 326 firms in the period 2012-2022, the analysis adopts panel data regression method in order to quantify these links. The findings show that before moderation, FO has a significant positive influence on TN and a mixed effect on PR. Firm size, leverage, and growth appear as important other control variables for both types of behaviors. Furthermore, the introduction of CG as a moderator was confirmed to reduce the negative effects of FO on TN and to boost its positive effect on PR. This research stresses the need for strong governance controls to deter opportunistic behaviors in establishing transparency and enhancing agency theory for family firms in emerging markets.