Financial Accounting
Leila Zamanianfar; hossein alidadi; Danial Heidari; Alireza Altafi
Abstract
The purpose of this research is to develop Caudillo's theory to appraise the strengthening levers of governance hegemony in family ownership. First, through a systematic screening process, the levers that enhance governance hegemony were identified. During the stages of fuzzy analysis, these levers were ...
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The purpose of this research is to develop Caudillo's theory to appraise the strengthening levers of governance hegemony in family ownership. First, through a systematic screening process, the levers that enhance governance hegemony were identified. During the stages of fuzzy analysis, these levers were evaluated for reliability. The results from the qualitative phase indicate the existence of six levers that strengthen governance hegemony in family companies, as identified through the steps of fuzzy Delphi analysis. All dimensions were confirmed to be reliable. Furthermore, based on the credit check process, it was determined that the most favorable fuzzy analysis method, according to participants' scores, is the hierarchical fuzzy analysis using the TODIM approach.IntroductionThe governance system in company management is the foundation for monitoring the balance of interests between the company and its stakeholders. However, based on theories such as agency cost theory, this system can often be perceived as one-dimensional or opportunistic, particularly in the ownership structure of family-owned companies. In other words, governance mechanisms in family companies tend to prioritize the expansion of interests that may not necessarily align with the broader interests of the majority of stakeholders. This misalignment gradually exacerbates the representation gap in the capital market. Therefore, assessing how the concentration of power in such structures affects stakeholder expectations is a critical issue. Beyond past research, this evaluation takes a step forward by examining its dimensions at the market level within companies of this ownership nature. Literature reviewCaudillos, or supporters of Caudillo rule (Caudilloism), represent a type of political and governing party found in one-party government systems. These systems typically revolve around a government structure loyal to a central, powerful figure. The term “Caudillo,” derived from Spanish and meaning "powerful man", describes a leader who forms a management system populated by individuals aligned with their ideology. Over time, this governance approach often leads to discrimination and corruption within the administrative system. While the characteristics of Caudillo governance-such as the pursuit of power and suppression of opposing opinions-may not directly translate to the management structures of companies, drawing thematic analogies can highlight similarities between this political system and corporate governance. A concept closely resembling Caudilloism in corporate governance is family ownership, where power is typically concentrated among the relatives of the company’s founder. In such systems, decisions often aim to satisfy the interests of the central powerful figure, mirroring the dynamics of Caudilloism. MethodologyThis research is practical and through a developmental approach, aims to identify and determine the most significant lever to strengthen sovereign ownership in family-owned companies within capital market contexts, using Todim's fuzzy analysis. Given the incoherence of the theoretical framework, this research contributes to enhancing perceptual effectiveness through a developmental lens, both thematically and analytically. In terms of data type, this research falls into the category of mixed-method research, combining qualitative and quantitative analyses to describe and survey the research topic. The implementation strategy is based on mathematical models and operational research, categorizing it as analytical-mathematical research. Descriptive-analytical research involves not only illustrating what exists but also describing and explaining the reasons behind the situation, including the “how” and “why” of the problem and its dimensions. Such research requires strong argumentative support to explain and justify its findings. This support is achieved through an extensive review of the literature, theoretical discussions, and the development of leverage criteria and general propositions regarding the phenomenon under investigation. In the qualitative phase, meta-composite analysis is used to establish a solid foundation. The researcher logically connects the details of the research problem with its components, enabling meaningful conclusions to be drawn. FindingIn this study, addressing the first research question regarding the levers to strengthen government ownership in family-owned companies, content analysis of research texts was conducted to identify evaluable dimensions. A Delphi analysis was then performed to assess the reliability of these dimensions within the Iranian capital market. The results from the qualitative phase indicated the existence of six levers. Subsequently, to address the second research question, fuzzy analysis based on TODIM was conducted to identify the most prominent dimension in this relationship. The results of the analysis revealed that the lack of independence of the board of directors is the most significant lever reinforcing corporate governance ownership in family-owned companies. DiscussionThe purpose of this research is to develop Caudillo's theory to appraise the governance hegemony levers in family ownership. Caudillo's theory outlines the structure of political governance in administration based on power-oriented processes, where individuals close to power are selected as leaders and tasked with overseeing executive affairs. Given that the structure of family-owned companies may follow a similar pattern, this research examines various aspects of the structural characteristics of companies with power-oriented ownership, specifically in the context of family ownership. In analyzing the results, it can be stated that family-owned structures often aim to maintain their power within the company. To achieve this, they tend to select board members who have close familial or interactive ties with the president or founder of the company. This ensures their influence over the company's decisions. Consequently, the independence of the board of directors in such companies is often compromised, which can lead to the allocation of bonuses to managers and an increase in information asymmetry. ConclusionThe results of this study indicate that the management of companies is often influenced by the presence of individuals who may not necessarily possess expertise in management or effective decision-making. Their primary role is to ensure that the interests of those in power are safeguarded, even at the expense of other stakeholders. In family-owned companies, the ownership structure characterized by a higher proportion of non-independent members on the board of directors, can exacerbate conflicts of interest due to the lack of independence among board members. This imbalance, where non-independent members outnumber independent ones, creates a fertile ground for conflicts between the interests of the company and its shareholders, ultimately harming the interests of minority shareholders.
