Guiding the governance system for the future using dynamic modelling techniques

Abstract

This study develops an equation allowing family businesses to have an optimal board structure in terms of size and composition through a dynamic mathematical modelling technique. The project- or product-type, growth opportunity and objectives that the business needs to achieve and the CEO influence on board, are not considered as determinants of the board size. It was also found that firm size and network links are positively related to both board size and composition. The only factor that is negatively related to board size and composition is market competitiveness. Those that are negatively related to board composition, are the project or product type, inside ownership, growth opportunity and age of the family business. Through this study and the unique mathematical model technique adopted, family businesses can identify which factor can be a determinant of board size and composition, and their relation with each, developing an optimal board structure.