Beyond structural compliance: a governance hierarchy perspective on family power and board effectiveness

Purpose This paper examines governance mechanisms in Moroccan listed family firms, emphasizing how anticipated regulatory changes interact with strong family entrenchment to affect real earnings management and financial performance. Design/methodology/approach This study analyzes 42 family firms listed on the Casablanca Stock Exchange from 2016 to 2022. It uses a dynamic panel with the System GMM estimator to address endogeneity, unobserved heterogeneity and moderation. Findings The results indicate that a governance hierarchy emphasizing cognitive diversity, particularly gender diversity, more effectively challenges family power than structural independence does. While board independence reflects symbolic compliance and is associated with negative performance effects, gender diversity serves as a governance barrier that disrupts family entrenchment and significantly reduces opportunistic real earnings management. Research limitations/implications The study is constrained by limited data access given the relatively small number of listed firms in Morocco. Comparative studies across emerging markets could examine whether the governance hierarchy we identify also appears in other legal and cultural contexts. Practical implications The findings indicate that gender diversity is a strategic advantage for long-term survival, rather than a regulatory burden. It helps safeguard the family legacy by preventing value-destroying earnings manipulation that family CEOs might engage in to maintain control. Originality/value This paper develops and tests a governance hierarchy model, showing that governance mechanisms occupy distinct positions, and extending previous work on the configurational perspective of corporate governance.