The Moderating Effect of Large Shareholders on Board Structure–Firm Performance Relationship: An Agency Perspective

We examine the nature and significance of the moderating effects of three characteristics of ownership (ownership concentration, family ownership and institutional ownership) on the relationship between board structure and firm performance. Using a sample of 30 non-financial listed firms on Tunis Stock Exchange over the period 2004-2010, we find support for the agency view of the positive relationship between board independence and performance. Similarly, in accordance with agency theory predictions, our results show that the separation of chair and chief executive officer positions improves firm performance. However, contrary to our predictions, the results indicate that larger boards enhance performance. On the other hand, consistent with the incentive effect, our results show that ownership concentration moderates positively the relationships between board independence, board size and performance. Similarly, in accordance with the agency perspective, while the institutional ownership moderates positively the board characteristics – performance relationship, the family ownership has a negative moderating effect. Keywords: board structure, firm performance, corporate governance, ownership, agency problems.