CEO – Board-Chair familial relation, firm performance and moderating role of board independence: further evidence from an emerging economy

Purpose This study aims to examine the impact of the CEO and board-chair familial ties on the financial performance of firms, as well as the potential moderating role of independent directors. Design/methodology/approach The authors used a two-step system generalized method of moments (GMM) estimate for analyzing the longitudinal panel data of 2,582 firm-year observations collected from Bangladeshi firms listed with the Dhaka Stock Exchange PLC (DSE) during 2006–2023. Findings Results indicate that CEO – board-chair family relation is negatively associated with firm performance, but this family control only brings out a better economic outcome if firms have more independent directors on their boards. Practical implications This study challenges the current governance rules of separation between the CEO and the board-chair, particularly, in family-controlled firms. On the other hand, this study reinforces the framework of board structural independence for mitigating the principal-principal agency problems in family-led firms. As such, findings have important policy and managerial implications for regulators, practitioners and investors. Originality/value To the best of the authors’ knowledge, this is the first study to attempt in the context of an emerging economy like Bangladesh that unveils the impact of CEO – board-chair family ties on firm performance and the moderating role of board independence in that relationship. The findings extend the existing knowledge in family business literature.