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[SECTION: Purpose] Organizations of various sectors are not giving proper attention toward the importance of social context in highly challenging working environment for employees. The social context in highly challenging work settings plays a vital role in shaping employees' proficiencies and behaviors. Social context at work captures the interpersonal interactions that develop as employees perform their jobs, roles and tasks (Chou, 2015; Grant and Parker, 2009). The relational perspective of work design focuses on how the social aspects of a job combined with job roles and/or tasks advance an employee's understanding of the job and how this understanding can impact organizational outcomes (Grant and Parker, 2009). In this regard, social exchange theory is a very useful approach for integrating relational or social work context variables into JCM. The JCM posits that five core job characteristics make jobs intrinsically motivating and satisfying and encourage the achievement of high performance (Hackman and Oldham, 1980). Despite the popularity and continuous use of JCM in job enrichment literature, the model has received multiple criticisms from other scholars (Grant et al., 2010). Two main critiques of the model stand out. First, although the JCM advocates that "Growth Need Strength" (GNS), a trait associated with the need for achievement, moderates the relationship between job characteristics and outcome variables, empirical research has not been conclusive about the moderating effects of GNS (Johns, 2006). Second, the commonly used job design measure in the model, known as the Job Diagnostic Survey (JDS) (Hackman and Oldham, 1980) focused on narrow set of motivational job characteristics which may be less applicable in current work contexts (Parker et al., 2001). If scholars continue to ignore broader range of work design literature, the JCM model runs the risk of being deficient (Morgeson and Humphrey, 2006). More recently, studies in the theory and research of work design have emphasized the importance of the relational aspects of job design (Morgeson and Humphrey, 2006). More specifically, they have suggested that there is a need to explore the role of social support in modifying the effects of job characteristics on outcomes. The research on social networks points out that interpersonal relationships often enhance employees' motivations, opportunities and resources (Frazier and Tupper, 2016; Hongvichit, 2015). Economically constrained research communities require a careful assessment of responsibilities and options for researchers and research subjects alike (Rafique, 2015). Very few research studies are available for managers and practitioners in Pakistan at job design and its affirmative relatedness to enhance the performance of employees in various sectors of Pakistan. Thus, managers in Pakistan are facing hindrances in finding the ways to improve the quality of job design through focusing on various factors which ultimately boost the performance of employees (Ali and Zia-ur-Rehman, 2014). Drawing upon social exchange theory and related literature, in this paper we explore how supervisor support, an important aspect of social context, can act as a moderator in JCM. We propose that social support is a critical factor that will enhance the five core job characteristics for individuals in organizations. Strong social support should encourage employees to take up the challenges associated with high scope jobs and lead to improved productivity. The JCM framework of Hackman and Oldham (1975) includes the five job characteristics that influence work-attitudes and behaviors: skills variety, task identity, task significance, autonomy and feedback. They also suggested that GNS, a trait associated with internal energy achievement orientation, acts as moderator in the job characteristics/outcomes relationship. Although JCM continues to enjoy strong support among scholars for the proposed direct relationship between core job characteristics and outcomes, there is mixed evidence confirming the moderator effects of GNS or other related variables such as personality (e.g. Xie and Johns, 1995). We will first briefly review the research on the relationship between job characteristics and job performance and then discuss the proposed moderating effects of supervisor support in shaping this relationship. Relationship of job characteristics with job performance Standard job performance states the degree to which a management employee accomplish organizationally prescribed work role prospects (Katz and Kahn, 1966). In order to get efficiency at workplace, inventive job performance considered as critical element for organizations (Kanter, 1988). Different research studies conducted in the field of Psychology and Organizational Behavior propose that individual job performance gets affected by characteristics of the work environment, which may in turn interact, with employees' personal characteristics (Hyatt and Prawitt, 2001). The Job Characteristics Model (Hackman and Oldham, 1976) reinforced the value of job enrichment that generates positive effects on work outcomes such as job performance, job satisfaction, motivation and work effectiveness. Job performance is one of the most important individual behaviors that concern organizations and the relationship between job characteristics and job performance has caught the attention of many researchers seeking to enhance scholarly and practical understanding (Schleicher et al., 2004). Furthermore, previous research was mainly based on data collected in the developed Western countries, and there is still a need to test and analyze the job characteristics in different cultural settings to test the efficacy and thus generalizability of JCM. According to Parker et al. (2001), untraditional cultural settings could affect a study's findings. With this need in mind, our study was conducted in Pakistan, a country very different from Western countries in terms of socio-political, cultural and legal aspects. Designing jobs and roles appropriately are imperative in elevating the performance of employees, which is addressed through job characteristic model. So this motivates us to test that how job design can enhance the performance of the employees (Ali and Zia-ur-Rehman, 2014). Designing positions with enriched job characteristics may help with the development of effective performance in a challenging organizational environment. Enriched jobs often promote the creativity that leads to high job performance (Elsbach and Hargadon, 2006). The paper is based on a questionnaire survey. The data were subjected to t-test and correlation analysis using SPSS software. Thus, that was an empirical study. In quintessence, enriched and complex jobs are associated with positive attitudinal/behavioral outcomes. Therefore, we suggest the following hypothesis: H1. Job scope will be positively related to job performance. The moderating role of supervisor support Meta-analytic studies suggest that a substantial amount of variance in job performance is not explained by job characteristics. For example, Fried and Ferris (1987) indicated that the five dimensions of job characteristics are all weakly related to job performance. In a more recent meta-analysis, however, Humphrey and colleagues (2007) found a strong relationship between job characteristics and job performance. This variation between scholars in the observed strength of the relationship between core job characteristics and job performance may be indicative that moderators are at work (Parker and Wall, 1998). In this inquiry, we explore the specific moderating role of supervisor support. Social exchange theory asserts that employees making contributions to the organization in the form of effort and time expect that these investments will be reciprocated by the organization. One way to reciprocate is the provision of support through manager to the employees which they feel that supervisors value their contributions and care about their well-being (Chou, 2015; O'Donnell et al., 2012). Social support is positively linked with different work outcomes (Morgeson and Humphrey, 2006), and also acts as an important buffer against job-related demands (Thomas and Wright, 2013). According to recent findings, employees who receive career-related suggestions and psychological support from their supervisors reciprocate by stretching their performance and going that extra mile (Sun et al., 2014). For employees to be able to cope with a challenging work environment characterized by a need for continuous change and innovation, appropriate supervisor support and guidance is crucial so that employees can accomplish challenging goals with high levels of performance (Carter et al., 2013). Thus, supervisor support in a challenging work environment operates as a pivotal catalyst to improve the in-role performance of employees (Rooney et al., 2008). Supervisor support depends on the interpersonal skills of supervisors and in a challenging job environment it displays in terms of credibility and a deep concern for their subordinates' needs (Hongvichit, 2015). In challenging job situations, strong social bonds between management and employees reflects that supervisors, through their support, are able to adjust individual job conditions in order to facilitate better in-role performance. Therefore, we suggest the following hypothesis: H2. Supervisor support moderates the relationship of job scope with job performance such that the relationship will be stronger when supervisor support is high. Data collection and sample This study was conducted in Pakistan, where people attitude toward research is not serious. Thus, for the collection of quality data it was decided that those sectors should be focused from where the chance of collection of quality data would be higher. Different sectors were chosen to look at the variability of responses regarding job design in them. Various professions were represented in the sample, with respondents belonging to all designations levels ranging from entry level office work to top management for checking the impact of supervisor support in challenging work environment at broader level. The questionnaires were distributed by hand and through mail as well. Data were collected through survey distributed to eight different organizations of five miscellaneous sectors to capture maximum variations. The business activities and operations of the organizations include the banks/financial institutions, the educational sector, the health sector, water and power development authority and Pakistan International Airlines. Reminders were given to the respondents of that concerned organization to fill out questionnaires. Total of 640 distributed questionnaires yielded 426 returns for a response rate of 66 percent. After removing incomplete questionnaires and ones with missing peer-reports, 328 complete useable pairs of responses were available for analyses. To avoid problems associated with common method bias and social desirability, we collected the data from two different sources: self and supervisor-reports. While job scope characteristics, supervisor support and all demographic data were measured with self-reports and job performance data were collected through supervisor-reports. The self and supervisor report versions of the survey received a similar code to match survey responses. A cover letter accompanied all questionnaires that explained the study's scope, the voluntary nature of the survey, and assured participants of strict confidentiality for the responses. Completed responses were personally collected by the first author. Measures In Pakistan, English is the language of instruction in all higher education institutes and it is the official language of correspondence in companies. In general, white collar workers in Pakistan are proficient in English according to previous workplace research conducted in Pakistan (e.g. Raja and Johns, 2010). Therefore, it was decided to distribute the questionnaires in English. Job scope Job scope was measured with the self-reported measures from the JDS (Hackman and Oldham, 1976). Sample items with anchors of 1= very little and 7= very much included for all five characteristics. The reliability of overall job scope was 0.86. In-role performance Job performance was measured using supervisor-reports based on the seven-item measure developed by Williams and Anderson (1991). Five point Likert scale used to measure the responses of respondents. The job performance had an excellent Cronbach's a coefficient of 0.89. Supervisor support We measured supervisor support using the nine-item scale developed by Greenhaus et al. (1990). Sample items with anchors of 1= strongly disagree and 5= strongly agree. The reliability of this measure was 0.83. Control variables Information about demographic factors were collected through self-reports. One-way analysis of variance (ANOVA) revealed significant differences between organizations and age in performance. Therefore, we controlled for the effects of organizations and age in analyses. Confirmatory factor analyses The factor structure of the variables was checked through confirmatory factor analysis (CFA) using AMOS 22 with maximum likelihood estimation. CFA was conducted for each measure in order to examine the model fit and the uniqueness of the measures. CFA analysis ran on a five-factor model of job scope, which resulted in a very good model fit (kh2=194, df= 99, RMSEA=0.04, CFI=0.96, GFI=0.94, AGFI=0.90). The results of the CFA for the one-factor model of performance revealed that the one-factor model produced satisfactory fit (kh2=159, df=27, CFI=0.79, GFI=0.94, AGFI=0.92, RMSEA=0.07). The results of standardized factor loadings indicated that all the items loaded above 0.30. The results of the CFA for the one-factor model of self-reported supervisor support revealed that the one-factor model yielded better fit (kh2=87, df=12, CFI=0.86, GFI=0.94, AGFI=0.90, RMSEA=0.03). The results of standardized factor loadings indicated that all the items loaded above 0.30. Results Table I displays the mean values, standard deviations and correlation between the variables. The highest correlation obtained in the current study was between job scope and in-role performance (r=0.46, p<0.001). With respect to the associations between job scope, supervisor support, job scope correlated significantly with supervisor support (r=0.34, p<0.01). We used simple multiple regression analysis to test H1. Results of this analysis are displayed in Table II. The relationship of job scope with in-role performance was positively significant (b=0.45, p<0.001) and explained 17 percent (DR2=0.17, p<0.001) variance in in-role performance. In order to test H2, we used the regression method suggested by Preacher and Hayes (2004), which deploys bootstrap models to test moderation. Bias-corrected confidence intervals (CI) were computed at two selected levels of supervisor support, with 5,000 random samples and replacement from the full sample. Results of this analysis are presented in Table III, which show that the interaction term of job scope and supervisor support was significant in predicting in-role performance (B=-0.31, t=-4.0, p<0.01). The formal two-tailed significance test which assumed normal distribution demonstrated that the conditional direct effect was significant (Effect=0.49, Boot SE=0.02, t=5.4, p<0.001). Bootstrap results confirmed these effects with a bootstrapped 95 percent CI around the conditional direct effect not containing zero (0.11, 0.31). Figure 1 shows that the relationship of job scope with in-role performance was positive and high when supervisor support was high and low when supervisor support was low. Therefore, H2 received support. Overall, there were two hypotheses and these hypotheses were confirmed. More specifically, our results pertaining to the hypothesized relations can be summarized as follows; all predictions related to direct relations of job scope with in-role performance, interaction effects of job scope and supervisor's support were confirmed. Since the emergence of studies on job design, researchers have failed to properly recognize the significance of interpersonal interactions as a crucial aspect that contributes to the meaningfulness of the job (Humphrey et al., 2007). This paper attempts to address this gap by considering the role of supervisor support as a moderator. In support of our hypotheses, job scope was found to be positively related with in-role performance. Furthermore, this positive relationship is more pronounced when supervisor support is strong. Theoretical implications Our study makes key theoretical contributions to our current knowledge about enriched job and the supervisor role to enhance performance of employees. First, we contribute to the research by highlighting two major determinants of performance simultaneously including "system factors" and "person factors" The former factor is related with organizational environment such as work design, later aspects is related with motivation of individuals through different sources such as supervisor support or co-worker support that may affect individual performance (Williams, 2002). Second, the results from our study reveal a positive relationship between job scope and in-role job performance for those employees who are experiencing high levels of supervisor support. Hence, supervisor support seems to be a boundary condition for the positive influence that high job scope has on in-role performance (Grant and Parker, 2009). By incorporating social/relational characteristics of the work context into theories of job design, we have responded to earlier calls of scholars to extend JCM by considering characteristics that are pivotal in many current jobs (Grant and Parker, 2009). Hence through social support theory it is proved that employees will outperform in challenging jobs when they are receiving managerial/supervisor support (Eisenberger et al., 2002). Third, previous research studies were mainly based on data collected in the developed Western countries, and there is still a need to test and analyze the job characteristics in different cultural settings to enhance the generalizability of JCM. Parker et al. (2001) advocated for untraditional cultural settings for generalizability of study's findings. Keeping in view such factors in mind we conducted this study in Pakistan, a country very different from Western countries in various terms. Practical implications The findings from this inquiry offer useful insights for managers and consultants. First, it highlights the importance of social characteristics in a job which are likely to influence a range of work outcomes. Increased interaction between supervisor and employees strengthens interpersonal relationships at work and increases opportunities for communication which is a fundamental key to enhancing job performance. Social activities have a positive quality in that they generate feelings of energy, enthusiasm and positive affect while at work (Watson, 2000). Second, strong social support provides opportunities through which employees can acquire assistance from their supervisors. This form of interaction is likely to help employees clarify and make sense of their roles and quickly address their concerns and issues. Third, such kind of interactions provides additional insight to employees about their performance and important feedback for continuous learning and personal development (Berman et al., 2002). Managerial implications Multiple sources for data collection were being adopted. Thus, the results of the study may applicable to the various sectors from where data were collected. The results of the study have provided inputs on how to enhance perceived organizational support of supervisors for employees in highly challenging jobs in various organizations. In public or private sector performance level of employees can be boosted when the employees feel content. That state can only be appeared when informal and formal organization policies like mentoring, socialization and open-door conflict management intend to encourage workplace supervisor supportive policies (Frazier and Tupper, 2016). According to the Job Demand-Resource model framework, in highly competitive work environment quality of the relationship with supervisor matters a lot in the company at various levels, not only in the board room but also with employees at the team or department level, or in focus groups. Such kind of supporting relations of supervisors with employees are crucially important to build commitment and credibility of employees for the various types of organizations (Bauer and Hammig, 2014). Similarly, organizations are likely to reap many benefits by providing to new entrants fresh work trends at the workplace where they feel comfortable sharing their ideas and feel valued (Bhatnagar, 2014; Kim, 2014). Limitations and suggestions for future research There are several limitations that should be considered when assessing this study's findings. First, the data collected at one point in time for all the variables, limiting the causal inferences that can be drawn based on our findings. For stronger and more convincing results, future research should consider the use of experimental, quasi-experimental or longitudinal design. Also, in order to reduce concerns about common method bias, data were collected by using two different sources: self and supervisory reports (Podsakoff et al., 2003). Second, the study was conducted in Pakistan. For the generalizability of the study's findings, these results should be validated in other cultural settings because Pakistan is very different in terms of socio-political, cultural and legal aspects in comparison to Western countries (Parker et al., 2001). Finally, this study only focused on one side of the interpersonal support: the critical role that supervisors play in determining employees' workplace perceptions, motivations, attitudes and behaviors. The support employees get from their peers was not considered in this study but may also be a crucial source that moderates the relationship between job scope and performance. Co-worker/peer support involves actions by co-workers that are either helpful or intended to be helpful (Hongvichit, 2015). This study proposed that the relational context of jobs, particularly in the form of social support by supervisors, can motivate employees to perform their duties more productively. It also highlights how the structure of an employee's work with the manifestation of social support plays a critical role in shaping the employee's relationships with their supervisors. This study highlights that both job design and in-role performance have a strong link with relational contexts that can motivate employees to achieve their stated targets. Thus, this research improves our understanding of how social context at the workplace can make a difference for employees and their organizations.
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The purpose of this paper is to explore how the relationship between job scope and in-role performance is contingent upon the level of social support (i.e. supervisor support) received in the workplace.
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[SECTION: Method] Organizations of various sectors are not giving proper attention toward the importance of social context in highly challenging working environment for employees. The social context in highly challenging work settings plays a vital role in shaping employees' proficiencies and behaviors. Social context at work captures the interpersonal interactions that develop as employees perform their jobs, roles and tasks (Chou, 2015; Grant and Parker, 2009). The relational perspective of work design focuses on how the social aspects of a job combined with job roles and/or tasks advance an employee's understanding of the job and how this understanding can impact organizational outcomes (Grant and Parker, 2009). In this regard, social exchange theory is a very useful approach for integrating relational or social work context variables into JCM. The JCM posits that five core job characteristics make jobs intrinsically motivating and satisfying and encourage the achievement of high performance (Hackman and Oldham, 1980). Despite the popularity and continuous use of JCM in job enrichment literature, the model has received multiple criticisms from other scholars (Grant et al., 2010). Two main critiques of the model stand out. First, although the JCM advocates that "Growth Need Strength" (GNS), a trait associated with the need for achievement, moderates the relationship between job characteristics and outcome variables, empirical research has not been conclusive about the moderating effects of GNS (Johns, 2006). Second, the commonly used job design measure in the model, known as the Job Diagnostic Survey (JDS) (Hackman and Oldham, 1980) focused on narrow set of motivational job characteristics which may be less applicable in current work contexts (Parker et al., 2001). If scholars continue to ignore broader range of work design literature, the JCM model runs the risk of being deficient (Morgeson and Humphrey, 2006). More recently, studies in the theory and research of work design have emphasized the importance of the relational aspects of job design (Morgeson and Humphrey, 2006). More specifically, they have suggested that there is a need to explore the role of social support in modifying the effects of job characteristics on outcomes. The research on social networks points out that interpersonal relationships often enhance employees' motivations, opportunities and resources (Frazier and Tupper, 2016; Hongvichit, 2015). Economically constrained research communities require a careful assessment of responsibilities and options for researchers and research subjects alike (Rafique, 2015). Very few research studies are available for managers and practitioners in Pakistan at job design and its affirmative relatedness to enhance the performance of employees in various sectors of Pakistan. Thus, managers in Pakistan are facing hindrances in finding the ways to improve the quality of job design through focusing on various factors which ultimately boost the performance of employees (Ali and Zia-ur-Rehman, 2014). Drawing upon social exchange theory and related literature, in this paper we explore how supervisor support, an important aspect of social context, can act as a moderator in JCM. We propose that social support is a critical factor that will enhance the five core job characteristics for individuals in organizations. Strong social support should encourage employees to take up the challenges associated with high scope jobs and lead to improved productivity. The JCM framework of Hackman and Oldham (1975) includes the five job characteristics that influence work-attitudes and behaviors: skills variety, task identity, task significance, autonomy and feedback. They also suggested that GNS, a trait associated with internal energy achievement orientation, acts as moderator in the job characteristics/outcomes relationship. Although JCM continues to enjoy strong support among scholars for the proposed direct relationship between core job characteristics and outcomes, there is mixed evidence confirming the moderator effects of GNS or other related variables such as personality (e.g. Xie and Johns, 1995). We will first briefly review the research on the relationship between job characteristics and job performance and then discuss the proposed moderating effects of supervisor support in shaping this relationship. Relationship of job characteristics with job performance Standard job performance states the degree to which a management employee accomplish organizationally prescribed work role prospects (Katz and Kahn, 1966). In order to get efficiency at workplace, inventive job performance considered as critical element for organizations (Kanter, 1988). Different research studies conducted in the field of Psychology and Organizational Behavior propose that individual job performance gets affected by characteristics of the work environment, which may in turn interact, with employees' personal characteristics (Hyatt and Prawitt, 2001). The Job Characteristics Model (Hackman and Oldham, 1976) reinforced the value of job enrichment that generates positive effects on work outcomes such as job performance, job satisfaction, motivation and work effectiveness. Job performance is one of the most important individual behaviors that concern organizations and the relationship between job characteristics and job performance has caught the attention of many researchers seeking to enhance scholarly and practical understanding (Schleicher et al., 2004). Furthermore, previous research was mainly based on data collected in the developed Western countries, and there is still a need to test and analyze the job characteristics in different cultural settings to test the efficacy and thus generalizability of JCM. According to Parker et al. (2001), untraditional cultural settings could affect a study's findings. With this need in mind, our study was conducted in Pakistan, a country very different from Western countries in terms of socio-political, cultural and legal aspects. Designing jobs and roles appropriately are imperative in elevating the performance of employees, which is addressed through job characteristic model. So this motivates us to test that how job design can enhance the performance of the employees (Ali and Zia-ur-Rehman, 2014). Designing positions with enriched job characteristics may help with the development of effective performance in a challenging organizational environment. Enriched jobs often promote the creativity that leads to high job performance (Elsbach and Hargadon, 2006). The paper is based on a questionnaire survey. The data were subjected to t-test and correlation analysis using SPSS software. Thus, that was an empirical study. In quintessence, enriched and complex jobs are associated with positive attitudinal/behavioral outcomes. Therefore, we suggest the following hypothesis: H1. Job scope will be positively related to job performance. The moderating role of supervisor support Meta-analytic studies suggest that a substantial amount of variance in job performance is not explained by job characteristics. For example, Fried and Ferris (1987) indicated that the five dimensions of job characteristics are all weakly related to job performance. In a more recent meta-analysis, however, Humphrey and colleagues (2007) found a strong relationship between job characteristics and job performance. This variation between scholars in the observed strength of the relationship between core job characteristics and job performance may be indicative that moderators are at work (Parker and Wall, 1998). In this inquiry, we explore the specific moderating role of supervisor support. Social exchange theory asserts that employees making contributions to the organization in the form of effort and time expect that these investments will be reciprocated by the organization. One way to reciprocate is the provision of support through manager to the employees which they feel that supervisors value their contributions and care about their well-being (Chou, 2015; O'Donnell et al., 2012). Social support is positively linked with different work outcomes (Morgeson and Humphrey, 2006), and also acts as an important buffer against job-related demands (Thomas and Wright, 2013). According to recent findings, employees who receive career-related suggestions and psychological support from their supervisors reciprocate by stretching their performance and going that extra mile (Sun et al., 2014). For employees to be able to cope with a challenging work environment characterized by a need for continuous change and innovation, appropriate supervisor support and guidance is crucial so that employees can accomplish challenging goals with high levels of performance (Carter et al., 2013). Thus, supervisor support in a challenging work environment operates as a pivotal catalyst to improve the in-role performance of employees (Rooney et al., 2008). Supervisor support depends on the interpersonal skills of supervisors and in a challenging job environment it displays in terms of credibility and a deep concern for their subordinates' needs (Hongvichit, 2015). In challenging job situations, strong social bonds between management and employees reflects that supervisors, through their support, are able to adjust individual job conditions in order to facilitate better in-role performance. Therefore, we suggest the following hypothesis: H2. Supervisor support moderates the relationship of job scope with job performance such that the relationship will be stronger when supervisor support is high. Data collection and sample This study was conducted in Pakistan, where people attitude toward research is not serious. Thus, for the collection of quality data it was decided that those sectors should be focused from where the chance of collection of quality data would be higher. Different sectors were chosen to look at the variability of responses regarding job design in them. Various professions were represented in the sample, with respondents belonging to all designations levels ranging from entry level office work to top management for checking the impact of supervisor support in challenging work environment at broader level. The questionnaires were distributed by hand and through mail as well. Data were collected through survey distributed to eight different organizations of five miscellaneous sectors to capture maximum variations. The business activities and operations of the organizations include the banks/financial institutions, the educational sector, the health sector, water and power development authority and Pakistan International Airlines. Reminders were given to the respondents of that concerned organization to fill out questionnaires. Total of 640 distributed questionnaires yielded 426 returns for a response rate of 66 percent. After removing incomplete questionnaires and ones with missing peer-reports, 328 complete useable pairs of responses were available for analyses. To avoid problems associated with common method bias and social desirability, we collected the data from two different sources: self and supervisor-reports. While job scope characteristics, supervisor support and all demographic data were measured with self-reports and job performance data were collected through supervisor-reports. The self and supervisor report versions of the survey received a similar code to match survey responses. A cover letter accompanied all questionnaires that explained the study's scope, the voluntary nature of the survey, and assured participants of strict confidentiality for the responses. Completed responses were personally collected by the first author. Measures In Pakistan, English is the language of instruction in all higher education institutes and it is the official language of correspondence in companies. In general, white collar workers in Pakistan are proficient in English according to previous workplace research conducted in Pakistan (e.g. Raja and Johns, 2010). Therefore, it was decided to distribute the questionnaires in English. Job scope Job scope was measured with the self-reported measures from the JDS (Hackman and Oldham, 1976). Sample items with anchors of 1= very little and 7= very much included for all five characteristics. The reliability of overall job scope was 0.86. In-role performance Job performance was measured using supervisor-reports based on the seven-item measure developed by Williams and Anderson (1991). Five point Likert scale used to measure the responses of respondents. The job performance had an excellent Cronbach's a coefficient of 0.89. Supervisor support We measured supervisor support using the nine-item scale developed by Greenhaus et al. (1990). Sample items with anchors of 1= strongly disagree and 5= strongly agree. The reliability of this measure was 0.83. Control variables Information about demographic factors were collected through self-reports. One-way analysis of variance (ANOVA) revealed significant differences between organizations and age in performance. Therefore, we controlled for the effects of organizations and age in analyses. Confirmatory factor analyses The factor structure of the variables was checked through confirmatory factor analysis (CFA) using AMOS 22 with maximum likelihood estimation. CFA was conducted for each measure in order to examine the model fit and the uniqueness of the measures. CFA analysis ran on a five-factor model of job scope, which resulted in a very good model fit (kh2=194, df= 99, RMSEA=0.04, CFI=0.96, GFI=0.94, AGFI=0.90). The results of the CFA for the one-factor model of performance revealed that the one-factor model produced satisfactory fit (kh2=159, df=27, CFI=0.79, GFI=0.94, AGFI=0.92, RMSEA=0.07). The results of standardized factor loadings indicated that all the items loaded above 0.30. The results of the CFA for the one-factor model of self-reported supervisor support revealed that the one-factor model yielded better fit (kh2=87, df=12, CFI=0.86, GFI=0.94, AGFI=0.90, RMSEA=0.03). The results of standardized factor loadings indicated that all the items loaded above 0.30. Results Table I displays the mean values, standard deviations and correlation between the variables. The highest correlation obtained in the current study was between job scope and in-role performance (r=0.46, p<0.001). With respect to the associations between job scope, supervisor support, job scope correlated significantly with supervisor support (r=0.34, p<0.01). We used simple multiple regression analysis to test H1. Results of this analysis are displayed in Table II. The relationship of job scope with in-role performance was positively significant (b=0.45, p<0.001) and explained 17 percent (DR2=0.17, p<0.001) variance in in-role performance. In order to test H2, we used the regression method suggested by Preacher and Hayes (2004), which deploys bootstrap models to test moderation. Bias-corrected confidence intervals (CI) were computed at two selected levels of supervisor support, with 5,000 random samples and replacement from the full sample. Results of this analysis are presented in Table III, which show that the interaction term of job scope and supervisor support was significant in predicting in-role performance (B=-0.31, t=-4.0, p<0.01). The formal two-tailed significance test which assumed normal distribution demonstrated that the conditional direct effect was significant (Effect=0.49, Boot SE=0.02, t=5.4, p<0.001). Bootstrap results confirmed these effects with a bootstrapped 95 percent CI around the conditional direct effect not containing zero (0.11, 0.31). Figure 1 shows that the relationship of job scope with in-role performance was positive and high when supervisor support was high and low when supervisor support was low. Therefore, H2 received support. Overall, there were two hypotheses and these hypotheses were confirmed. More specifically, our results pertaining to the hypothesized relations can be summarized as follows; all predictions related to direct relations of job scope with in-role performance, interaction effects of job scope and supervisor's support were confirmed. Since the emergence of studies on job design, researchers have failed to properly recognize the significance of interpersonal interactions as a crucial aspect that contributes to the meaningfulness of the job (Humphrey et al., 2007). This paper attempts to address this gap by considering the role of supervisor support as a moderator. In support of our hypotheses, job scope was found to be positively related with in-role performance. Furthermore, this positive relationship is more pronounced when supervisor support is strong. Theoretical implications Our study makes key theoretical contributions to our current knowledge about enriched job and the supervisor role to enhance performance of employees. First, we contribute to the research by highlighting two major determinants of performance simultaneously including "system factors" and "person factors" The former factor is related with organizational environment such as work design, later aspects is related with motivation of individuals through different sources such as supervisor support or co-worker support that may affect individual performance (Williams, 2002). Second, the results from our study reveal a positive relationship between job scope and in-role job performance for those employees who are experiencing high levels of supervisor support. Hence, supervisor support seems to be a boundary condition for the positive influence that high job scope has on in-role performance (Grant and Parker, 2009). By incorporating social/relational characteristics of the work context into theories of job design, we have responded to earlier calls of scholars to extend JCM by considering characteristics that are pivotal in many current jobs (Grant and Parker, 2009). Hence through social support theory it is proved that employees will outperform in challenging jobs when they are receiving managerial/supervisor support (Eisenberger et al., 2002). Third, previous research studies were mainly based on data collected in the developed Western countries, and there is still a need to test and analyze the job characteristics in different cultural settings to enhance the generalizability of JCM. Parker et al. (2001) advocated for untraditional cultural settings for generalizability of study's findings. Keeping in view such factors in mind we conducted this study in Pakistan, a country very different from Western countries in various terms. Practical implications The findings from this inquiry offer useful insights for managers and consultants. First, it highlights the importance of social characteristics in a job which are likely to influence a range of work outcomes. Increased interaction between supervisor and employees strengthens interpersonal relationships at work and increases opportunities for communication which is a fundamental key to enhancing job performance. Social activities have a positive quality in that they generate feelings of energy, enthusiasm and positive affect while at work (Watson, 2000). Second, strong social support provides opportunities through which employees can acquire assistance from their supervisors. This form of interaction is likely to help employees clarify and make sense of their roles and quickly address their concerns and issues. Third, such kind of interactions provides additional insight to employees about their performance and important feedback for continuous learning and personal development (Berman et al., 2002). Managerial implications Multiple sources for data collection were being adopted. Thus, the results of the study may applicable to the various sectors from where data were collected. The results of the study have provided inputs on how to enhance perceived organizational support of supervisors for employees in highly challenging jobs in various organizations. In public or private sector performance level of employees can be boosted when the employees feel content. That state can only be appeared when informal and formal organization policies like mentoring, socialization and open-door conflict management intend to encourage workplace supervisor supportive policies (Frazier and Tupper, 2016). According to the Job Demand-Resource model framework, in highly competitive work environment quality of the relationship with supervisor matters a lot in the company at various levels, not only in the board room but also with employees at the team or department level, or in focus groups. Such kind of supporting relations of supervisors with employees are crucially important to build commitment and credibility of employees for the various types of organizations (Bauer and Hammig, 2014). Similarly, organizations are likely to reap many benefits by providing to new entrants fresh work trends at the workplace where they feel comfortable sharing their ideas and feel valued (Bhatnagar, 2014; Kim, 2014). Limitations and suggestions for future research There are several limitations that should be considered when assessing this study's findings. First, the data collected at one point in time for all the variables, limiting the causal inferences that can be drawn based on our findings. For stronger and more convincing results, future research should consider the use of experimental, quasi-experimental or longitudinal design. Also, in order to reduce concerns about common method bias, data were collected by using two different sources: self and supervisory reports (Podsakoff et al., 2003). Second, the study was conducted in Pakistan. For the generalizability of the study's findings, these results should be validated in other cultural settings because Pakistan is very different in terms of socio-political, cultural and legal aspects in comparison to Western countries (Parker et al., 2001). Finally, this study only focused on one side of the interpersonal support: the critical role that supervisors play in determining employees' workplace perceptions, motivations, attitudes and behaviors. The support employees get from their peers was not considered in this study but may also be a crucial source that moderates the relationship between job scope and performance. Co-worker/peer support involves actions by co-workers that are either helpful or intended to be helpful (Hongvichit, 2015). This study proposed that the relational context of jobs, particularly in the form of social support by supervisors, can motivate employees to perform their duties more productively. It also highlights how the structure of an employee's work with the manifestation of social support plays a critical role in shaping the employee's relationships with their supervisors. This study highlights that both job design and in-role performance have a strong link with relational contexts that can motivate employees to achieve their stated targets. Thus, this research improves our understanding of how social context at the workplace can make a difference for employees and their organizations.
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A total of 640 questionnaires were distributed to employees of Pakistani companies, yielding 328 useable responses for analysis. Regression analysis was used to test for both hypotheses.
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[SECTION: Findings] Organizations of various sectors are not giving proper attention toward the importance of social context in highly challenging working environment for employees. The social context in highly challenging work settings plays a vital role in shaping employees' proficiencies and behaviors. Social context at work captures the interpersonal interactions that develop as employees perform their jobs, roles and tasks (Chou, 2015; Grant and Parker, 2009). The relational perspective of work design focuses on how the social aspects of a job combined with job roles and/or tasks advance an employee's understanding of the job and how this understanding can impact organizational outcomes (Grant and Parker, 2009). In this regard, social exchange theory is a very useful approach for integrating relational or social work context variables into JCM. The JCM posits that five core job characteristics make jobs intrinsically motivating and satisfying and encourage the achievement of high performance (Hackman and Oldham, 1980). Despite the popularity and continuous use of JCM in job enrichment literature, the model has received multiple criticisms from other scholars (Grant et al., 2010). Two main critiques of the model stand out. First, although the JCM advocates that "Growth Need Strength" (GNS), a trait associated with the need for achievement, moderates the relationship between job characteristics and outcome variables, empirical research has not been conclusive about the moderating effects of GNS (Johns, 2006). Second, the commonly used job design measure in the model, known as the Job Diagnostic Survey (JDS) (Hackman and Oldham, 1980) focused on narrow set of motivational job characteristics which may be less applicable in current work contexts (Parker et al., 2001). If scholars continue to ignore broader range of work design literature, the JCM model runs the risk of being deficient (Morgeson and Humphrey, 2006). More recently, studies in the theory and research of work design have emphasized the importance of the relational aspects of job design (Morgeson and Humphrey, 2006). More specifically, they have suggested that there is a need to explore the role of social support in modifying the effects of job characteristics on outcomes. The research on social networks points out that interpersonal relationships often enhance employees' motivations, opportunities and resources (Frazier and Tupper, 2016; Hongvichit, 2015). Economically constrained research communities require a careful assessment of responsibilities and options for researchers and research subjects alike (Rafique, 2015). Very few research studies are available for managers and practitioners in Pakistan at job design and its affirmative relatedness to enhance the performance of employees in various sectors of Pakistan. Thus, managers in Pakistan are facing hindrances in finding the ways to improve the quality of job design through focusing on various factors which ultimately boost the performance of employees (Ali and Zia-ur-Rehman, 2014). Drawing upon social exchange theory and related literature, in this paper we explore how supervisor support, an important aspect of social context, can act as a moderator in JCM. We propose that social support is a critical factor that will enhance the five core job characteristics for individuals in organizations. Strong social support should encourage employees to take up the challenges associated with high scope jobs and lead to improved productivity. The JCM framework of Hackman and Oldham (1975) includes the five job characteristics that influence work-attitudes and behaviors: skills variety, task identity, task significance, autonomy and feedback. They also suggested that GNS, a trait associated with internal energy achievement orientation, acts as moderator in the job characteristics/outcomes relationship. Although JCM continues to enjoy strong support among scholars for the proposed direct relationship between core job characteristics and outcomes, there is mixed evidence confirming the moderator effects of GNS or other related variables such as personality (e.g. Xie and Johns, 1995). We will first briefly review the research on the relationship between job characteristics and job performance and then discuss the proposed moderating effects of supervisor support in shaping this relationship. Relationship of job characteristics with job performance Standard job performance states the degree to which a management employee accomplish organizationally prescribed work role prospects (Katz and Kahn, 1966). In order to get efficiency at workplace, inventive job performance considered as critical element for organizations (Kanter, 1988). Different research studies conducted in the field of Psychology and Organizational Behavior propose that individual job performance gets affected by characteristics of the work environment, which may in turn interact, with employees' personal characteristics (Hyatt and Prawitt, 2001). The Job Characteristics Model (Hackman and Oldham, 1976) reinforced the value of job enrichment that generates positive effects on work outcomes such as job performance, job satisfaction, motivation and work effectiveness. Job performance is one of the most important individual behaviors that concern organizations and the relationship between job characteristics and job performance has caught the attention of many researchers seeking to enhance scholarly and practical understanding (Schleicher et al., 2004). Furthermore, previous research was mainly based on data collected in the developed Western countries, and there is still a need to test and analyze the job characteristics in different cultural settings to test the efficacy and thus generalizability of JCM. According to Parker et al. (2001), untraditional cultural settings could affect a study's findings. With this need in mind, our study was conducted in Pakistan, a country very different from Western countries in terms of socio-political, cultural and legal aspects. Designing jobs and roles appropriately are imperative in elevating the performance of employees, which is addressed through job characteristic model. So this motivates us to test that how job design can enhance the performance of the employees (Ali and Zia-ur-Rehman, 2014). Designing positions with enriched job characteristics may help with the development of effective performance in a challenging organizational environment. Enriched jobs often promote the creativity that leads to high job performance (Elsbach and Hargadon, 2006). The paper is based on a questionnaire survey. The data were subjected to t-test and correlation analysis using SPSS software. Thus, that was an empirical study. In quintessence, enriched and complex jobs are associated with positive attitudinal/behavioral outcomes. Therefore, we suggest the following hypothesis: H1. Job scope will be positively related to job performance. The moderating role of supervisor support Meta-analytic studies suggest that a substantial amount of variance in job performance is not explained by job characteristics. For example, Fried and Ferris (1987) indicated that the five dimensions of job characteristics are all weakly related to job performance. In a more recent meta-analysis, however, Humphrey and colleagues (2007) found a strong relationship between job characteristics and job performance. This variation between scholars in the observed strength of the relationship between core job characteristics and job performance may be indicative that moderators are at work (Parker and Wall, 1998). In this inquiry, we explore the specific moderating role of supervisor support. Social exchange theory asserts that employees making contributions to the organization in the form of effort and time expect that these investments will be reciprocated by the organization. One way to reciprocate is the provision of support through manager to the employees which they feel that supervisors value their contributions and care about their well-being (Chou, 2015; O'Donnell et al., 2012). Social support is positively linked with different work outcomes (Morgeson and Humphrey, 2006), and also acts as an important buffer against job-related demands (Thomas and Wright, 2013). According to recent findings, employees who receive career-related suggestions and psychological support from their supervisors reciprocate by stretching their performance and going that extra mile (Sun et al., 2014). For employees to be able to cope with a challenging work environment characterized by a need for continuous change and innovation, appropriate supervisor support and guidance is crucial so that employees can accomplish challenging goals with high levels of performance (Carter et al., 2013). Thus, supervisor support in a challenging work environment operates as a pivotal catalyst to improve the in-role performance of employees (Rooney et al., 2008). Supervisor support depends on the interpersonal skills of supervisors and in a challenging job environment it displays in terms of credibility and a deep concern for their subordinates' needs (Hongvichit, 2015). In challenging job situations, strong social bonds between management and employees reflects that supervisors, through their support, are able to adjust individual job conditions in order to facilitate better in-role performance. Therefore, we suggest the following hypothesis: H2. Supervisor support moderates the relationship of job scope with job performance such that the relationship will be stronger when supervisor support is high. Data collection and sample This study was conducted in Pakistan, where people attitude toward research is not serious. Thus, for the collection of quality data it was decided that those sectors should be focused from where the chance of collection of quality data would be higher. Different sectors were chosen to look at the variability of responses regarding job design in them. Various professions were represented in the sample, with respondents belonging to all designations levels ranging from entry level office work to top management for checking the impact of supervisor support in challenging work environment at broader level. The questionnaires were distributed by hand and through mail as well. Data were collected through survey distributed to eight different organizations of five miscellaneous sectors to capture maximum variations. The business activities and operations of the organizations include the banks/financial institutions, the educational sector, the health sector, water and power development authority and Pakistan International Airlines. Reminders were given to the respondents of that concerned organization to fill out questionnaires. Total of 640 distributed questionnaires yielded 426 returns for a response rate of 66 percent. After removing incomplete questionnaires and ones with missing peer-reports, 328 complete useable pairs of responses were available for analyses. To avoid problems associated with common method bias and social desirability, we collected the data from two different sources: self and supervisor-reports. While job scope characteristics, supervisor support and all demographic data were measured with self-reports and job performance data were collected through supervisor-reports. The self and supervisor report versions of the survey received a similar code to match survey responses. A cover letter accompanied all questionnaires that explained the study's scope, the voluntary nature of the survey, and assured participants of strict confidentiality for the responses. Completed responses were personally collected by the first author. Measures In Pakistan, English is the language of instruction in all higher education institutes and it is the official language of correspondence in companies. In general, white collar workers in Pakistan are proficient in English according to previous workplace research conducted in Pakistan (e.g. Raja and Johns, 2010). Therefore, it was decided to distribute the questionnaires in English. Job scope Job scope was measured with the self-reported measures from the JDS (Hackman and Oldham, 1976). Sample items with anchors of 1= very little and 7= very much included for all five characteristics. The reliability of overall job scope was 0.86. In-role performance Job performance was measured using supervisor-reports based on the seven-item measure developed by Williams and Anderson (1991). Five point Likert scale used to measure the responses of respondents. The job performance had an excellent Cronbach's a coefficient of 0.89. Supervisor support We measured supervisor support using the nine-item scale developed by Greenhaus et al. (1990). Sample items with anchors of 1= strongly disagree and 5= strongly agree. The reliability of this measure was 0.83. Control variables Information about demographic factors were collected through self-reports. One-way analysis of variance (ANOVA) revealed significant differences between organizations and age in performance. Therefore, we controlled for the effects of organizations and age in analyses. Confirmatory factor analyses The factor structure of the variables was checked through confirmatory factor analysis (CFA) using AMOS 22 with maximum likelihood estimation. CFA was conducted for each measure in order to examine the model fit and the uniqueness of the measures. CFA analysis ran on a five-factor model of job scope, which resulted in a very good model fit (kh2=194, df= 99, RMSEA=0.04, CFI=0.96, GFI=0.94, AGFI=0.90). The results of the CFA for the one-factor model of performance revealed that the one-factor model produced satisfactory fit (kh2=159, df=27, CFI=0.79, GFI=0.94, AGFI=0.92, RMSEA=0.07). The results of standardized factor loadings indicated that all the items loaded above 0.30. The results of the CFA for the one-factor model of self-reported supervisor support revealed that the one-factor model yielded better fit (kh2=87, df=12, CFI=0.86, GFI=0.94, AGFI=0.90, RMSEA=0.03). The results of standardized factor loadings indicated that all the items loaded above 0.30. Results Table I displays the mean values, standard deviations and correlation between the variables. The highest correlation obtained in the current study was between job scope and in-role performance (r=0.46, p<0.001). With respect to the associations between job scope, supervisor support, job scope correlated significantly with supervisor support (r=0.34, p<0.01). We used simple multiple regression analysis to test H1. Results of this analysis are displayed in Table II. The relationship of job scope with in-role performance was positively significant (b=0.45, p<0.001) and explained 17 percent (DR2=0.17, p<0.001) variance in in-role performance. In order to test H2, we used the regression method suggested by Preacher and Hayes (2004), which deploys bootstrap models to test moderation. Bias-corrected confidence intervals (CI) were computed at two selected levels of supervisor support, with 5,000 random samples and replacement from the full sample. Results of this analysis are presented in Table III, which show that the interaction term of job scope and supervisor support was significant in predicting in-role performance (B=-0.31, t=-4.0, p<0.01). The formal two-tailed significance test which assumed normal distribution demonstrated that the conditional direct effect was significant (Effect=0.49, Boot SE=0.02, t=5.4, p<0.001). Bootstrap results confirmed these effects with a bootstrapped 95 percent CI around the conditional direct effect not containing zero (0.11, 0.31). Figure 1 shows that the relationship of job scope with in-role performance was positive and high when supervisor support was high and low when supervisor support was low. Therefore, H2 received support. Overall, there were two hypotheses and these hypotheses were confirmed. More specifically, our results pertaining to the hypothesized relations can be summarized as follows; all predictions related to direct relations of job scope with in-role performance, interaction effects of job scope and supervisor's support were confirmed. Since the emergence of studies on job design, researchers have failed to properly recognize the significance of interpersonal interactions as a crucial aspect that contributes to the meaningfulness of the job (Humphrey et al., 2007). This paper attempts to address this gap by considering the role of supervisor support as a moderator. In support of our hypotheses, job scope was found to be positively related with in-role performance. Furthermore, this positive relationship is more pronounced when supervisor support is strong. Theoretical implications Our study makes key theoretical contributions to our current knowledge about enriched job and the supervisor role to enhance performance of employees. First, we contribute to the research by highlighting two major determinants of performance simultaneously including "system factors" and "person factors" The former factor is related with organizational environment such as work design, later aspects is related with motivation of individuals through different sources such as supervisor support or co-worker support that may affect individual performance (Williams, 2002). Second, the results from our study reveal a positive relationship between job scope and in-role job performance for those employees who are experiencing high levels of supervisor support. Hence, supervisor support seems to be a boundary condition for the positive influence that high job scope has on in-role performance (Grant and Parker, 2009). By incorporating social/relational characteristics of the work context into theories of job design, we have responded to earlier calls of scholars to extend JCM by considering characteristics that are pivotal in many current jobs (Grant and Parker, 2009). Hence through social support theory it is proved that employees will outperform in challenging jobs when they are receiving managerial/supervisor support (Eisenberger et al., 2002). Third, previous research studies were mainly based on data collected in the developed Western countries, and there is still a need to test and analyze the job characteristics in different cultural settings to enhance the generalizability of JCM. Parker et al. (2001) advocated for untraditional cultural settings for generalizability of study's findings. Keeping in view such factors in mind we conducted this study in Pakistan, a country very different from Western countries in various terms. Practical implications The findings from this inquiry offer useful insights for managers and consultants. First, it highlights the importance of social characteristics in a job which are likely to influence a range of work outcomes. Increased interaction between supervisor and employees strengthens interpersonal relationships at work and increases opportunities for communication which is a fundamental key to enhancing job performance. Social activities have a positive quality in that they generate feelings of energy, enthusiasm and positive affect while at work (Watson, 2000). Second, strong social support provides opportunities through which employees can acquire assistance from their supervisors. This form of interaction is likely to help employees clarify and make sense of their roles and quickly address their concerns and issues. Third, such kind of interactions provides additional insight to employees about their performance and important feedback for continuous learning and personal development (Berman et al., 2002). Managerial implications Multiple sources for data collection were being adopted. Thus, the results of the study may applicable to the various sectors from where data were collected. The results of the study have provided inputs on how to enhance perceived organizational support of supervisors for employees in highly challenging jobs in various organizations. In public or private sector performance level of employees can be boosted when the employees feel content. That state can only be appeared when informal and formal organization policies like mentoring, socialization and open-door conflict management intend to encourage workplace supervisor supportive policies (Frazier and Tupper, 2016). According to the Job Demand-Resource model framework, in highly competitive work environment quality of the relationship with supervisor matters a lot in the company at various levels, not only in the board room but also with employees at the team or department level, or in focus groups. Such kind of supporting relations of supervisors with employees are crucially important to build commitment and credibility of employees for the various types of organizations (Bauer and Hammig, 2014). Similarly, organizations are likely to reap many benefits by providing to new entrants fresh work trends at the workplace where they feel comfortable sharing their ideas and feel valued (Bhatnagar, 2014; Kim, 2014). Limitations and suggestions for future research There are several limitations that should be considered when assessing this study's findings. First, the data collected at one point in time for all the variables, limiting the causal inferences that can be drawn based on our findings. For stronger and more convincing results, future research should consider the use of experimental, quasi-experimental or longitudinal design. Also, in order to reduce concerns about common method bias, data were collected by using two different sources: self and supervisory reports (Podsakoff et al., 2003). Second, the study was conducted in Pakistan. For the generalizability of the study's findings, these results should be validated in other cultural settings because Pakistan is very different in terms of socio-political, cultural and legal aspects in comparison to Western countries (Parker et al., 2001). Finally, this study only focused on one side of the interpersonal support: the critical role that supervisors play in determining employees' workplace perceptions, motivations, attitudes and behaviors. The support employees get from their peers was not considered in this study but may also be a crucial source that moderates the relationship between job scope and performance. Co-worker/peer support involves actions by co-workers that are either helpful or intended to be helpful (Hongvichit, 2015). This study proposed that the relational context of jobs, particularly in the form of social support by supervisors, can motivate employees to perform their duties more productively. It also highlights how the structure of an employee's work with the manifestation of social support plays a critical role in shaping the employee's relationships with their supervisors. This study highlights that both job design and in-role performance have a strong link with relational contexts that can motivate employees to achieve their stated targets. Thus, this research improves our understanding of how social context at the workplace can make a difference for employees and their organizations.
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The results support the role of supervisor support as a moderator in the relationship between in-role performance, a dimension of job performance and job scope. The findings show that a higher job scope would facilitate higher job performance from employees who receive high levels of supervisor support.
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[SECTION: Value] Organizations of various sectors are not giving proper attention toward the importance of social context in highly challenging working environment for employees. The social context in highly challenging work settings plays a vital role in shaping employees' proficiencies and behaviors. Social context at work captures the interpersonal interactions that develop as employees perform their jobs, roles and tasks (Chou, 2015; Grant and Parker, 2009). The relational perspective of work design focuses on how the social aspects of a job combined with job roles and/or tasks advance an employee's understanding of the job and how this understanding can impact organizational outcomes (Grant and Parker, 2009). In this regard, social exchange theory is a very useful approach for integrating relational or social work context variables into JCM. The JCM posits that five core job characteristics make jobs intrinsically motivating and satisfying and encourage the achievement of high performance (Hackman and Oldham, 1980). Despite the popularity and continuous use of JCM in job enrichment literature, the model has received multiple criticisms from other scholars (Grant et al., 2010). Two main critiques of the model stand out. First, although the JCM advocates that "Growth Need Strength" (GNS), a trait associated with the need for achievement, moderates the relationship between job characteristics and outcome variables, empirical research has not been conclusive about the moderating effects of GNS (Johns, 2006). Second, the commonly used job design measure in the model, known as the Job Diagnostic Survey (JDS) (Hackman and Oldham, 1980) focused on narrow set of motivational job characteristics which may be less applicable in current work contexts (Parker et al., 2001). If scholars continue to ignore broader range of work design literature, the JCM model runs the risk of being deficient (Morgeson and Humphrey, 2006). More recently, studies in the theory and research of work design have emphasized the importance of the relational aspects of job design (Morgeson and Humphrey, 2006). More specifically, they have suggested that there is a need to explore the role of social support in modifying the effects of job characteristics on outcomes. The research on social networks points out that interpersonal relationships often enhance employees' motivations, opportunities and resources (Frazier and Tupper, 2016; Hongvichit, 2015). Economically constrained research communities require a careful assessment of responsibilities and options for researchers and research subjects alike (Rafique, 2015). Very few research studies are available for managers and practitioners in Pakistan at job design and its affirmative relatedness to enhance the performance of employees in various sectors of Pakistan. Thus, managers in Pakistan are facing hindrances in finding the ways to improve the quality of job design through focusing on various factors which ultimately boost the performance of employees (Ali and Zia-ur-Rehman, 2014). Drawing upon social exchange theory and related literature, in this paper we explore how supervisor support, an important aspect of social context, can act as a moderator in JCM. We propose that social support is a critical factor that will enhance the five core job characteristics for individuals in organizations. Strong social support should encourage employees to take up the challenges associated with high scope jobs and lead to improved productivity. The JCM framework of Hackman and Oldham (1975) includes the five job characteristics that influence work-attitudes and behaviors: skills variety, task identity, task significance, autonomy and feedback. They also suggested that GNS, a trait associated with internal energy achievement orientation, acts as moderator in the job characteristics/outcomes relationship. Although JCM continues to enjoy strong support among scholars for the proposed direct relationship between core job characteristics and outcomes, there is mixed evidence confirming the moderator effects of GNS or other related variables such as personality (e.g. Xie and Johns, 1995). We will first briefly review the research on the relationship between job characteristics and job performance and then discuss the proposed moderating effects of supervisor support in shaping this relationship. Relationship of job characteristics with job performance Standard job performance states the degree to which a management employee accomplish organizationally prescribed work role prospects (Katz and Kahn, 1966). In order to get efficiency at workplace, inventive job performance considered as critical element for organizations (Kanter, 1988). Different research studies conducted in the field of Psychology and Organizational Behavior propose that individual job performance gets affected by characteristics of the work environment, which may in turn interact, with employees' personal characteristics (Hyatt and Prawitt, 2001). The Job Characteristics Model (Hackman and Oldham, 1976) reinforced the value of job enrichment that generates positive effects on work outcomes such as job performance, job satisfaction, motivation and work effectiveness. Job performance is one of the most important individual behaviors that concern organizations and the relationship between job characteristics and job performance has caught the attention of many researchers seeking to enhance scholarly and practical understanding (Schleicher et al., 2004). Furthermore, previous research was mainly based on data collected in the developed Western countries, and there is still a need to test and analyze the job characteristics in different cultural settings to test the efficacy and thus generalizability of JCM. According to Parker et al. (2001), untraditional cultural settings could affect a study's findings. With this need in mind, our study was conducted in Pakistan, a country very different from Western countries in terms of socio-political, cultural and legal aspects. Designing jobs and roles appropriately are imperative in elevating the performance of employees, which is addressed through job characteristic model. So this motivates us to test that how job design can enhance the performance of the employees (Ali and Zia-ur-Rehman, 2014). Designing positions with enriched job characteristics may help with the development of effective performance in a challenging organizational environment. Enriched jobs often promote the creativity that leads to high job performance (Elsbach and Hargadon, 2006). The paper is based on a questionnaire survey. The data were subjected to t-test and correlation analysis using SPSS software. Thus, that was an empirical study. In quintessence, enriched and complex jobs are associated with positive attitudinal/behavioral outcomes. Therefore, we suggest the following hypothesis: H1. Job scope will be positively related to job performance. The moderating role of supervisor support Meta-analytic studies suggest that a substantial amount of variance in job performance is not explained by job characteristics. For example, Fried and Ferris (1987) indicated that the five dimensions of job characteristics are all weakly related to job performance. In a more recent meta-analysis, however, Humphrey and colleagues (2007) found a strong relationship between job characteristics and job performance. This variation between scholars in the observed strength of the relationship between core job characteristics and job performance may be indicative that moderators are at work (Parker and Wall, 1998). In this inquiry, we explore the specific moderating role of supervisor support. Social exchange theory asserts that employees making contributions to the organization in the form of effort and time expect that these investments will be reciprocated by the organization. One way to reciprocate is the provision of support through manager to the employees which they feel that supervisors value their contributions and care about their well-being (Chou, 2015; O'Donnell et al., 2012). Social support is positively linked with different work outcomes (Morgeson and Humphrey, 2006), and also acts as an important buffer against job-related demands (Thomas and Wright, 2013). According to recent findings, employees who receive career-related suggestions and psychological support from their supervisors reciprocate by stretching their performance and going that extra mile (Sun et al., 2014). For employees to be able to cope with a challenging work environment characterized by a need for continuous change and innovation, appropriate supervisor support and guidance is crucial so that employees can accomplish challenging goals with high levels of performance (Carter et al., 2013). Thus, supervisor support in a challenging work environment operates as a pivotal catalyst to improve the in-role performance of employees (Rooney et al., 2008). Supervisor support depends on the interpersonal skills of supervisors and in a challenging job environment it displays in terms of credibility and a deep concern for their subordinates' needs (Hongvichit, 2015). In challenging job situations, strong social bonds between management and employees reflects that supervisors, through their support, are able to adjust individual job conditions in order to facilitate better in-role performance. Therefore, we suggest the following hypothesis: H2. Supervisor support moderates the relationship of job scope with job performance such that the relationship will be stronger when supervisor support is high. Data collection and sample This study was conducted in Pakistan, where people attitude toward research is not serious. Thus, for the collection of quality data it was decided that those sectors should be focused from where the chance of collection of quality data would be higher. Different sectors were chosen to look at the variability of responses regarding job design in them. Various professions were represented in the sample, with respondents belonging to all designations levels ranging from entry level office work to top management for checking the impact of supervisor support in challenging work environment at broader level. The questionnaires were distributed by hand and through mail as well. Data were collected through survey distributed to eight different organizations of five miscellaneous sectors to capture maximum variations. The business activities and operations of the organizations include the banks/financial institutions, the educational sector, the health sector, water and power development authority and Pakistan International Airlines. Reminders were given to the respondents of that concerned organization to fill out questionnaires. Total of 640 distributed questionnaires yielded 426 returns for a response rate of 66 percent. After removing incomplete questionnaires and ones with missing peer-reports, 328 complete useable pairs of responses were available for analyses. To avoid problems associated with common method bias and social desirability, we collected the data from two different sources: self and supervisor-reports. While job scope characteristics, supervisor support and all demographic data were measured with self-reports and job performance data were collected through supervisor-reports. The self and supervisor report versions of the survey received a similar code to match survey responses. A cover letter accompanied all questionnaires that explained the study's scope, the voluntary nature of the survey, and assured participants of strict confidentiality for the responses. Completed responses were personally collected by the first author. Measures In Pakistan, English is the language of instruction in all higher education institutes and it is the official language of correspondence in companies. In general, white collar workers in Pakistan are proficient in English according to previous workplace research conducted in Pakistan (e.g. Raja and Johns, 2010). Therefore, it was decided to distribute the questionnaires in English. Job scope Job scope was measured with the self-reported measures from the JDS (Hackman and Oldham, 1976). Sample items with anchors of 1= very little and 7= very much included for all five characteristics. The reliability of overall job scope was 0.86. In-role performance Job performance was measured using supervisor-reports based on the seven-item measure developed by Williams and Anderson (1991). Five point Likert scale used to measure the responses of respondents. The job performance had an excellent Cronbach's a coefficient of 0.89. Supervisor support We measured supervisor support using the nine-item scale developed by Greenhaus et al. (1990). Sample items with anchors of 1= strongly disagree and 5= strongly agree. The reliability of this measure was 0.83. Control variables Information about demographic factors were collected through self-reports. One-way analysis of variance (ANOVA) revealed significant differences between organizations and age in performance. Therefore, we controlled for the effects of organizations and age in analyses. Confirmatory factor analyses The factor structure of the variables was checked through confirmatory factor analysis (CFA) using AMOS 22 with maximum likelihood estimation. CFA was conducted for each measure in order to examine the model fit and the uniqueness of the measures. CFA analysis ran on a five-factor model of job scope, which resulted in a very good model fit (kh2=194, df= 99, RMSEA=0.04, CFI=0.96, GFI=0.94, AGFI=0.90). The results of the CFA for the one-factor model of performance revealed that the one-factor model produced satisfactory fit (kh2=159, df=27, CFI=0.79, GFI=0.94, AGFI=0.92, RMSEA=0.07). The results of standardized factor loadings indicated that all the items loaded above 0.30. The results of the CFA for the one-factor model of self-reported supervisor support revealed that the one-factor model yielded better fit (kh2=87, df=12, CFI=0.86, GFI=0.94, AGFI=0.90, RMSEA=0.03). The results of standardized factor loadings indicated that all the items loaded above 0.30. Results Table I displays the mean values, standard deviations and correlation between the variables. The highest correlation obtained in the current study was between job scope and in-role performance (r=0.46, p<0.001). With respect to the associations between job scope, supervisor support, job scope correlated significantly with supervisor support (r=0.34, p<0.01). We used simple multiple regression analysis to test H1. Results of this analysis are displayed in Table II. The relationship of job scope with in-role performance was positively significant (b=0.45, p<0.001) and explained 17 percent (DR2=0.17, p<0.001) variance in in-role performance. In order to test H2, we used the regression method suggested by Preacher and Hayes (2004), which deploys bootstrap models to test moderation. Bias-corrected confidence intervals (CI) were computed at two selected levels of supervisor support, with 5,000 random samples and replacement from the full sample. Results of this analysis are presented in Table III, which show that the interaction term of job scope and supervisor support was significant in predicting in-role performance (B=-0.31, t=-4.0, p<0.01). The formal two-tailed significance test which assumed normal distribution demonstrated that the conditional direct effect was significant (Effect=0.49, Boot SE=0.02, t=5.4, p<0.001). Bootstrap results confirmed these effects with a bootstrapped 95 percent CI around the conditional direct effect not containing zero (0.11, 0.31). Figure 1 shows that the relationship of job scope with in-role performance was positive and high when supervisor support was high and low when supervisor support was low. Therefore, H2 received support. Overall, there were two hypotheses and these hypotheses were confirmed. More specifically, our results pertaining to the hypothesized relations can be summarized as follows; all predictions related to direct relations of job scope with in-role performance, interaction effects of job scope and supervisor's support were confirmed. Since the emergence of studies on job design, researchers have failed to properly recognize the significance of interpersonal interactions as a crucial aspect that contributes to the meaningfulness of the job (Humphrey et al., 2007). This paper attempts to address this gap by considering the role of supervisor support as a moderator. In support of our hypotheses, job scope was found to be positively related with in-role performance. Furthermore, this positive relationship is more pronounced when supervisor support is strong. Theoretical implications Our study makes key theoretical contributions to our current knowledge about enriched job and the supervisor role to enhance performance of employees. First, we contribute to the research by highlighting two major determinants of performance simultaneously including "system factors" and "person factors" The former factor is related with organizational environment such as work design, later aspects is related with motivation of individuals through different sources such as supervisor support or co-worker support that may affect individual performance (Williams, 2002). Second, the results from our study reveal a positive relationship between job scope and in-role job performance for those employees who are experiencing high levels of supervisor support. Hence, supervisor support seems to be a boundary condition for the positive influence that high job scope has on in-role performance (Grant and Parker, 2009). By incorporating social/relational characteristics of the work context into theories of job design, we have responded to earlier calls of scholars to extend JCM by considering characteristics that are pivotal in many current jobs (Grant and Parker, 2009). Hence through social support theory it is proved that employees will outperform in challenging jobs when they are receiving managerial/supervisor support (Eisenberger et al., 2002). Third, previous research studies were mainly based on data collected in the developed Western countries, and there is still a need to test and analyze the job characteristics in different cultural settings to enhance the generalizability of JCM. Parker et al. (2001) advocated for untraditional cultural settings for generalizability of study's findings. Keeping in view such factors in mind we conducted this study in Pakistan, a country very different from Western countries in various terms. Practical implications The findings from this inquiry offer useful insights for managers and consultants. First, it highlights the importance of social characteristics in a job which are likely to influence a range of work outcomes. Increased interaction between supervisor and employees strengthens interpersonal relationships at work and increases opportunities for communication which is a fundamental key to enhancing job performance. Social activities have a positive quality in that they generate feelings of energy, enthusiasm and positive affect while at work (Watson, 2000). Second, strong social support provides opportunities through which employees can acquire assistance from their supervisors. This form of interaction is likely to help employees clarify and make sense of their roles and quickly address their concerns and issues. Third, such kind of interactions provides additional insight to employees about their performance and important feedback for continuous learning and personal development (Berman et al., 2002). Managerial implications Multiple sources for data collection were being adopted. Thus, the results of the study may applicable to the various sectors from where data were collected. The results of the study have provided inputs on how to enhance perceived organizational support of supervisors for employees in highly challenging jobs in various organizations. In public or private sector performance level of employees can be boosted when the employees feel content. That state can only be appeared when informal and formal organization policies like mentoring, socialization and open-door conflict management intend to encourage workplace supervisor supportive policies (Frazier and Tupper, 2016). According to the Job Demand-Resource model framework, in highly competitive work environment quality of the relationship with supervisor matters a lot in the company at various levels, not only in the board room but also with employees at the team or department level, or in focus groups. Such kind of supporting relations of supervisors with employees are crucially important to build commitment and credibility of employees for the various types of organizations (Bauer and Hammig, 2014). Similarly, organizations are likely to reap many benefits by providing to new entrants fresh work trends at the workplace where they feel comfortable sharing their ideas and feel valued (Bhatnagar, 2014; Kim, 2014). Limitations and suggestions for future research There are several limitations that should be considered when assessing this study's findings. First, the data collected at one point in time for all the variables, limiting the causal inferences that can be drawn based on our findings. For stronger and more convincing results, future research should consider the use of experimental, quasi-experimental or longitudinal design. Also, in order to reduce concerns about common method bias, data were collected by using two different sources: self and supervisory reports (Podsakoff et al., 2003). Second, the study was conducted in Pakistan. For the generalizability of the study's findings, these results should be validated in other cultural settings because Pakistan is very different in terms of socio-political, cultural and legal aspects in comparison to Western countries (Parker et al., 2001). Finally, this study only focused on one side of the interpersonal support: the critical role that supervisors play in determining employees' workplace perceptions, motivations, attitudes and behaviors. The support employees get from their peers was not considered in this study but may also be a crucial source that moderates the relationship between job scope and performance. Co-worker/peer support involves actions by co-workers that are either helpful or intended to be helpful (Hongvichit, 2015). This study proposed that the relational context of jobs, particularly in the form of social support by supervisors, can motivate employees to perform their duties more productively. It also highlights how the structure of an employee's work with the manifestation of social support plays a critical role in shaping the employee's relationships with their supervisors. This study highlights that both job design and in-role performance have a strong link with relational contexts that can motivate employees to achieve their stated targets. Thus, this research improves our understanding of how social context at the workplace can make a difference for employees and their organizations.
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This paper makes three key contributions to the literature on job design. First, this inquiry shows that a strong link does exist between job scope and job performance; previous studies have failed to find a strong relationship. Second, it highlights how social context, especially in highly challenging work settings, can shape employees' proficiencies and behaviors. Third, this paper offers a novel perspective in job design research by incorporating a contextual moderator (i.e. supervisor support).
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[SECTION: Purpose] Family businesses are the most dominant among publically traded firms across the world (Shleifer and Vishny, 1986; Burkart et al., 2003; Anderson and Reeb, 2003; La Porta et al., 1999). In Continental Europe, about 44 per cent of publicly held firms are family-controlled (Faccio and Lang, 2002). In the USA, the equity ownership concentration is modest; among the Fortune 500 firms, around one-third is family firms (Anderson and Reeb, 2003). The concentration of ownership was found to be higher in other developed nations (Faccio and Lang, 2002; Franks and Mayer, 2001; Gorton and Schmid, 1996). Family businesses dominate many developing economies with about two-third of the firms in Asian countries owned by families or individuals (Claessens et al., 2000). In India, around 60 per cent of the listed top 500 firms are family firms (Chakrabarti et al., 2008). These family firms hold large equity stakes and more often than not have family representation on the board of directors. Family equity stake in Indian firms may be divided across individual holdings by promoters and their family members, privately held firms and through cross-holdings from other listed group businesses. The control and influence exerted by family firms may lead to performance difference with the non-family firms (Anderson and Reeb, 2003). The impact of organizational form (separate ownership and control or combined ownership and control) on firm performance has been mixed empirically. Berle and Means (1932) and Jensen and Meckling (1976) asserted that with the separation of ownership and control, there arises a potential for conflict of interest, which leads to the reduction in firm value. Managers may pursue activities in self-interest at the expense of profit maximization creating agency costs. The costs involved in monitoring the management and the difficulty of developing contracts to accurately specify the actions of the managers in the interest of the shareholders leads to lower market valuation of the firm. Contrary to this, Fama and Jensen (1983) argue that separation of ownership and control is advantageous as the efficiency costs outweigh the agency costs. Institutional mechanisms evolve over time to align with the objectives of managers and the shareholders (James, 1999). Firms with combined ownership and control may choose to pursue different investment rule and may have incentive to forgo profitable investment opportunity thereby reducing the firm value (Fama and Jensen, 1985; James, 1999). Active shareholders act as a mechanism for monitoring the firm management. However, shareholders who own very few shares of a firm have little incentive to do so. On the other hand, blockholders or large shareholders who have a substantial investment in a firm can play a key role to mitigate the agency problem. Blockholders can be the family or promoters of the company or institutional investors. Owing to the percentage of votes they hold, blockholders can pressurize the firm management toward improving investor protection (Shleifer and Vishny, 1997). Blockholders can force change the management that fails to deliver the expected results either in an AGM or through proxy fights in the case of a staggered board. A positive correlation between institutional investor's involvement and firm performance has been found in the literature (Agrawal and Knoeber, 1996; Strickland et al., 1996; Shome and Singh, 1995). However, a major problem is that the voting by the institutional investors has been low historically (Hampel, 1998) and those who vote also may be just "Box Tickers" who vote without considering the issues appropriately (Solomon, 2007). Others, like the mutual fund houses and the insurance companies, opt to sell their shares rather than have their say on the management of the firm. Another issue is that these institutional investors may hold a highly diversified portfolio, making it difficult for them to focus on any one company. In some cases, these institutional investors may exert pressure on the management to further their own gains rather than of all the shareholders (Shleifer and Vishny, 1997). This potential tradeoff between high agency cost of monitoring and clash of interest between managers and shareholders may not exist in family firms (James, 1999). Family blockholders can mitigate the agency problem associated with the separation of ownership and management (Villalonga and Amit, 2006; Anderson and Reeb, 2003) and, hence, should have a positive effect on firm value (Berle and Means, 1932). Combining ownership and management can help mitigate managerial opportunism (Demsetz and Lehn, 1985). Family blockholders have a strong incentive, by way of protecting their family wealth, to monitor managers and minimize free rider problem associated with minority shareholders (Anderson and Reeb, 2003; Barontini and Caprio, 2006). At the same time concentrated shareholders can, in exchange for profits, extract private benefits from the firm (Fama and Jensen, 1983; Shleifer and Vishny, 1997; Demsetz, 1983). Thus, concentrated shareholders can generate conflict of interest with minority shareholders (Burkart et al., 2003). The impact of blockholdings by family members on firm performance has yielded mixed empirical results. Family firms were found to perform better than nonfamily firms more so when a family member serves as CEO (Anderson and Reeb, 2003; Maury, 2006). Contrary to these results, family firms were not found to have better firm performance (measured by Tobin's q) as compared to nonfamily firms (Holderness and Sheehan, 1988; Miller et al., 2007). The corporate governance practices of family firms are also found to differ from those of nonfamily firms (Bartholomeusz and Tanewski, 2006). So, does family firms improves firm performance or destroys the firm value? Also, how effective are corporate governance mechanisms in controlling the agency costs in family firms. Is there any significant difference in the relationship between board structure and firm performance among family and nonfamily firms? We explore these questions, by studying the board structure and ownership pattern using a sample of top Indian firms from 2002 to 2012 and comparing family firms and nonfamily firms. Most governance studies on family firms have used data from the developed countries (Jameson et al., 2014). Given the predominance of controlling shareholders in emerging economies, a country level study in the Indian context will help to improve our understanding of the impact of controlling shareholders on corporate governance and firm performance. To provide a context for this study, we briefly describe the institutional background in India. India inherited a financial market developed by the British India and a legal system based on British laws that had excellent provision for shareholder protection (La Porta et al., 1998). Despite these advantages, law enforcement remained a problem. India had its share of issues arising out of poor monitoring of Indian firms, law enforcement, limited information dissemination and licensing requirements. Those issues resulted in the stock market scandals, insider trading issues and allotment of preferential shares to family members at a discount (Khanna and Palepu, 2004; Rajagopalan and Zhang, 2008). Indian legal system today is characterized by long delays due to limitations in resources. A case in point is the bankruptcy resolution, which is deemed to take the longest time to resolve and has the lowest rate of recovery (Kang and Nayar, 2004). Post-independence, India adopted the development strategy of import substituting industrialization. The set of regulations laid out to implement this strategy in the Industries Act 1951 resulted in a system that required businesses to obtain multiple licenses and bureaucratic approvals (Chakrabarti et al., 2008). This system labeled as "license-permit raj" created institutional barriers for smaller businesses, thereby weakening the competition (Reed, 2002). Further, the equity markets were illiquid, and the banks were reluctant to fund private sector due to weak creditor protection. Thus, the business environment benefitted those with government connection while discouraging market-based interactions. This institutional business environment led to the growth of the family business group and concentrated shareholdings (Chakrabarti et al., 2008). These behavioral and institutional differences in emerging markets can provide different insights into corporate governance (Fan et al., 2011). More so for the Asian countries; the diverse institutional development background makes the corporate governance issues unique (Peng and Jiang, 2010). As mentioned in the literature above, Indian firms are characterized by large shareholders and more so by the founding families. This presents a unique setting for studying their impact or lack of it on the firm's corporate governance. This study provides, to our knowledge, the first multi-year comparative analysis of the relationship between board structure and firm performance of family firms in India. The paper is subsequently structured as follows. Section 2 outlines the potential benefits and negative effects of family firms. Section 3 details the sample data and the methodology used in the analysis. Section 4 reports the results of the analysis and Section 5 discusses the results and concludes the paper. Controlling blockholders like family can have potential benefits and competitive advantage. The extent literature on family firms focuses mostly on the agency problem. The problem in widely held firms includes limited ability to select reliable agents, monitor the selected agents and ensure performance (Fama and Jensen, 1983). An effective monitoring can improve firm performance and reduce agency cost (Fama and Jensen, 1983; Jensen and Meckling, 1976). The principle agent conflict associated with widely held firms may be reduced by concentrated blockholders, specifically the family blockholders, as they have a significant economic incentive to monitor the management (Demsetz and Lehn, 1985). Specifically, the substantial intergenerational ownership stake and having a majority of their wealth invested in a single business, the family firms have strong incentive to monitor the management. The lengthy involvement of family members in the business, in some cases spanning generations, permits them to move further along the learning curve. This superior knowledge allows the family members to monitor the managers better (Anderson and Reeb, 2003). Also, this long-term presence of family members in their firm leads to longer investment horizons than other shareholders and may provide an incentive to invest according to market rules (James, 1999). This willingness of family firms to invest in the long-term project leads to greater investment efficiency (Anderson and Reeb, 2003; James, 1999; Stein, 1988). Another advantage of having a long-term presence of family firms is that the external suppliers, dealers, lenders, etc., are more likely to have favorable dealings with the same governing bodies, owing to the long-term dealings and reputation, than with nonfamily firms. This sustained presence of family necessitates having their reputation maintained (Anderson and Reeb, 2003). Thus, family firms have several advantages while monitoring managers, superior knowledge, longer investment horizons and the need to pass on the business to future generation. Consistent with this argument, several studies have shown that family firms have superior performance compared to nonfamily firms. In large public US firms, stronger firm performance was found in family firms compared to nonfamily firms (Anderson and Reeb, 2003). In Japan, the family firms owned or managed by the founder showed superior performance (Saito, 2008). In a study of 13 Western European countries, it was found that family control was associated with higher valuation (Maury, 2006). In listed Swiss firms, Isakov and Weisskopf (2014) found that family firms were more profitable than non-family firms. The controlling families are often involved in the management of the firms, reducing the agency problem of owner-manager conflict. Combining ownership and managerial control can help mitigate the managerial expropriation (Demsetz and Lehn, 1985). This nonseparation of management and ownership also reduces the agency costs involved in establishing the mechanism to monitor the management (Garcia-Ramos and Garcia-Olalla, 2011). Morck et al. (1988) suggest that founder CEOs bring in innovation and value enhancing expertise. Family firms intend to maintain continuity by passing on the business to the next generation of the family (Casson, 1999; Chami, 1999). Thus, to improve the viability of the company for a longer time horizon, the present generation family managers may take decisions to maximize the long-term firm value. The empirical results on the impact of family management on firm performance have been mixed. In the US firms, CEOs who are family members had a positive relationship with accounting measures of performance (Anderson and Reeb, 2003; McConaughy et al., 1998). Family firms, where the founding family is on the supervisory or the executive board, showed better firm performance in German firms (Andres, 2008). Villalonga and Amit (2006) found that family ownership creates value when a family member serves as CEO or the chairman of the firm. The literature suggests that having a family CEO may be beneficial to the value of the firm. Family firms are also said to be fraught with nepotism, family disputes, capital restrictions, exploitation of minority shareholders and executive entrenchment, all of which adversely affect firm performance (Allen and Panian, 1982; Chandler, 1990; Faccio et al., 2001; Gomez-Mejia et al., 2001; Perez-Gonzalez, 2006; Schulze et al., 2001, 2003). Expropriation of minority shareholders by large shareholders may generate additional agency problem (Faccio et al., 2001). Concentrated shareholders, by virtue of their controlling position in the firm, may extract private benefits at the expense of minority shareholders (Burkart et al., 2003). Capital expenditure can be affected by the families' preference for special dividends (DeAngelo and DeAngelo, 2000). Employee productivity can also be adversely affected by family shareholders acting on their own behalf (Burkart et al., 1997). Family firms are found to show biases toward business ventures of other family members resulting in suboptimal investment (Singell, 1997). Family shareholders tend to forgo profit maximization activities owing to their financial preferences which often conflicts with those of minority shareholders (Anderson and Reeb, 2003). The empirical evidence has also backed these negative aspects of controlling shareholding as family firms have been found to have an adverse effect on firm performance. Family ownership structure in US firms is perceived as less efficient and profitable than dispersed ownership (Anderson and Reeb, 2003; Morck, 2007; Singell, 1997). Holderness and Sheehan (1988) using Tobin's q as performance measure found that family firms have lower firm performance than nonfamily firms. The proportion of family shareholdings has also been found to have an impact on the firm performance. Anderson and Reeb (2003) show that when the family ownership exceeds 30 per cent, the gains from family control starts to taper off. Studies from other countries have also provided evidence for the adverse effect of family ownership on firm value. In Canadian and Swedish firms, family shareholders were found to have a negative effect on firm performance (Morck, 2007; Cronqvist and Nilsson, 2003). In East Asian countries where transparency is low, the family firms are shown to harm minority shareholders (Faccio et al., 2001). Preference for family members for the executive positions in family firms suggests a restricted talent pool for selection of qualified candidates (Anderson and Reeb, 2003). Family CEO may also lead to resentment among other senior outside executives of the firm as talent, merit and tenure are not seen as criteria for top management positions (Schulze et al., 2001). This limitation in talent pool may lead to competitive disadvantage for the family-run businesses when compared to nonfamily firms. Also, the accountability of a family CEO toward minority shareholders may be less than that exhibited by professional managers (Gomez-Mejia et al., 2001). The role of family members in selection of managers and the desire to remain in control of the firms may lead to greater managerial entrenchment (Gomez-Mejia et al., 2001). Shleifer and Vishny (1997) opine that the greatest cost imposed by large shareholders is by continuing to run the business in spite of being incompetent and unqualified. The mixed results on the impact of the family firms on firm performance raise several questions. Does family firms perform better compared to non-family firms? How do family firms impact the relationship between board structure and firm performance? Does having a family CEO improve firm performance compared to a professionally managed firm? Does having a family CEO impact the relationship between board structure and firm performance? Having analyzed the difference between family and nonfamily firms, the following question can be asked for within family firms analysis. Within the family firms, does having a higher proportion of family ownership improve firm performance? How does higher proportion of family representative directors impact the firm performance of family firms? Again, does having a professional CEO improve firm performance compared to family CEO in family firms? How did family firms cope with the recession period? Also, does having a larger board, higher proportion of independent directors and independent chairman improve the performance of family firm? These are some of the questions that we address in this study. 4.1 Sample For our investigation, we use top Indian firms listed on the Bombay Stock Exchange (BSE), specifically the firms forming a part of the BSE 200 index. We exclude financial institutions and public sector units as strong government regulations may potentially affect performance of these firms. Firm-specific control variables were collected from the ACE Equity database. Governance data comprising of board characteristics such as independent directors, chairman independence, role duality, non-executive directors, board busyness, board size, board meetings and board attendance, was manually collected from the annual reports of the firms from ReportJunction database. As per Clause 49 of listing agreement, firms are required to file the corporate governance report quarterly; however, for our empirical analysis, we considered annual performance of the firm and select the financial year-end corporate governance reports. We excluded the firms where the governance data was not available for more than one year. Our final sample consisted of 100 firms yielding 1,100 firm-years or observations as our sample was restricted by the publically available data from 2002 to 2012. The Variance inflation factor (VIF) was calculated for each independent variable, and all VIF values were less than 10 suggesting that there is no multicollinearity issue (Myers, 1990). 4.2 Variables and data source We identify the family firms based on the fractional equity ownership of the family members and the presence of family members on the board of directors. We were also guided by the classification of the family firms for listed Indian firms given by the ACE Equity database. We use a dummy variable that equals one for family firms and zero otherwise. Our study incorporates variables such as family management, family shareholdings and family representative directors on the board. We measure family management using a dummy that indicates the presence of a family CEO. Family shareholdings represent the percentage of equity held by the family members in the firm. Family representative directors are the proportion of family members on the board. We also study the recession period and the impact it had on the family firms. According to National Bureau of Economic Research (NBER), the recession that began in December 2007 officially ended in June 2009. We use a dummy variable to specify the period as pre-recession from the year 2002 to 2008 with a value 0, and recession period from the year 2008 to 2012 with a value 1 (Table I). 4.3 Dependent variable For our analysis, we use accounting measures of performance namely return on equity (ROE) and return on capital used (ROCE). As several studies on family firms use Tobin's q as a measure of firm performance, we also use Tobin's q measured using the book value of debt plus market value of common stock divided by the book value of assets as a proxy for Tobin's q (Black et al., 2014; Khanna and Palepu, 2000). 4.4 Explanatory variables We study the role played by the directors of a firm by categorizing the various board-related factors into two broad categories, namely, board leadership and board activity. On the basis of the agency theory, we investigate the board leadership roles played by the directors of the firm and its impact on the firm performance. Board activity is examined using the resource dependency theory. Board Leadership comprising of factors relating to the board leadership that includes role duality, independent directors, chairman independence and non-executive directors and Board Activity is measured by variables: board meeting, board size, board attendance and board busyness. We operationalize the various board parameters as follows: For our board index, based on the percentage of Independent Directors on the board, we divide the firms into three sets, the top, middle and bottom, and we respectively assign a score of 0, 1, 2 for <50 per cent, 50-75 per cent and >75 per cent independent directors on the board. Similarly, we assign the scores of 0, 1 and 2 for Non-Executive Directors on the board. For Role Duality, we assign a score of one for nonduality (splitting of the role of CEO and chairman) and zero for role duality. Similarly, for Chairman Independence, we use dummy variable by assigning a score of 1 if the chairman is independent, and zero otherwise. The dummy for Board Size is assigned a score of zero if board size is less than eight and greater than 15 and one otherwise. For the number of Board Meetings, we use a dummy variable that is equal to zero if the number of board meetings is less than four, equal to one if board meetings are between four to eight and two otherwise. For Board Attendance, we assign a score of 1 if the average board attendance is greater than 75 per cent and zero otherwise. To measure Board Busyness we assign a value zero if average outside board membership is greater than 10; one if it is between five and 10 and two if it is less than two. The governance index is constructed by adding the points for each board parameter discussed above. First, we divide the board parameters into two broad sets, namely, board leadership and board activity. We then assign weights to the two sets to form governance index. We assign more weigh to board leadership by assigning 60 per cent weightage in the overall score. This index is then converted to dummy variables by assigning a value of 1 to the top 60 per cent of the firms having the strongest board parameters and zero otherwise. We do this to compare the top firms with bottom firms with respect to the board parameters. Though this simple index may not reflect the impact of individual board parameters, it does, however, help in distinguishing between the firms with a stronger board and those with weaker board parameters. We use the board index (dummy variable that takes the value of 1 for the top 60 per cent of the firms having the strongest board parameters and zero otherwise) as the explanatory variable. Additionally, we also use the proportion of independent directors, board size and chairman independence (dummy variable that takes the value 1, if the chairman is independent else 0) as explanatory variables in our subset analysis. 4.5 Control variables To control for industry and firm characteristics, we use several control variables in our analysis, namely, leverage (ratio of debt to total assets), firm age (number of years since the date of incorporation) and firm size (log of total assets), sales growth (moving geometric average of net sales growth over the past three years), asset tangibility (fixed asset to total asset), stock volatility (4 year average of monthly standard deviation of stock price returns) and Industry classification based on two-digit National Industrial Classification (NIC) code. The data for these financial parameters were collected from ACE Equity database (Table I). 4.6 Method In our study, we observe the same firm at different point of time, and hence, we use the random effects model for our regression analysis (Arellano and Bond, 1991; Blundell and Bond, 1998). Black et al. (2014) opines that in developing countries a good approach to study this kind of relationship would be to build a panel data and use fixed or random effects model. Our primary interest is in analyzing the relationship between board structure and firm performance in a family firm. The analysis also includes additional variables such as family management, family shareholdings and family representative directors on the board. Serial correlation and heteroskedasticity are controlled by using the Huber White Sandwich Estimator (clustered) for the variance. Panel data analysis was conducted using the R statistical package (Version 3.1.1) with add-on package "PLM" (Croissant and Millo, 2008). The regression we use for the multivariate analysis takes the form: (1) Performance=b0+b1(Family Firm)+b2(CG Score)+b3(Family Firm) * (CG score)+b4(Control Variables)+b5-34(Two Digit SIC Code)+e where: Firm Performance is the accounting measures of performance ROA and ROE and Tobin's q. Family Firms is the dummy variable with value 1 for family firms, and zero otherwise. Control Variables are leverage, age, firm size, sales growth, tangibility, stock volatility, two-digit NIC code. 5.1 Summary statistics Descriptive statistics for the sample data shown in Table II is broken down into the two groups: family and nonfamily firms. The last two columns show the difference of means and the t-values between the family and nonfamily firms. Family firms constitute 73 per cent of our sample. Among family firms, about half of the sample had promoter CEO or CEO from the promoter family and about 30 per cent firms had both the CEO and the chairman from the founder family. This suggests an active participation of founders and founder families in the management of Indian firms. The governance characteristic of our sample shows that the mean independent directors for family firms (5.423) is higher than that for nonfamily firms (4.878), and the difference is significant at 1 per cent level. The mean independent chairman and mean role duality of nonfamily firms is higher than family firms and the difference is significant at the 1 per cent level in both cases. There is not much of a difference in the mean board size and non-executive directors between the two groups. The mean for the frequency of board meeting is slightly higher for family firms, but the mean board attendance is higher for nonfamily firms. The mean board busyness for family firms (5.206) was significantly higher compared to nonfamily firms (4.424). The firm level characteristics are reported in Table II. The mean performance (ROE, ROCE and Tobin's q) of nonfamily firms is significantly higher than family firms indicating that nonfamily firms on an average perform better than family firms. Consistent with this observation we find that the net sales growth is also higher for nonfamily firms. Family firms exhibit higher stock volatility compared to nonfamily firms. Family firms are leveraged more compared to nonfamily firms. The mean total assets for family firms are also significantly higher than those for nonfamily firms. These results suggest that the nonfamily firms are better performers than family firms. 5.2 Multivariate analysis The result of the panel data analysis to examine the impact of board index on firm performance in family firms is presented in Table III. The dummy variable board index takes the value of 1 for the top 60 per cent of the firms having the strongest board parameters and zero otherwise. We divide the firms into two groups representing the family and nonfamily firms using a dummy variable, which equals one for family firms and zero for nonfamily firms. The interpretations of the coefficients of the regression results are carried out as follows: The coefficient of the interaction term (family firm x board index) represents the incremental effect of board index on the performance of family firms with respect to the reference group non-family firm. Similarly, the coefficient of the board index represents the incremental effect of board index on the reference group non-family firms. The incremental effect of board index on the group family firm is given by the sum of the coefficients of board index and coefficient of the interaction between the family firm and board index [Board Index + (FF x Board Index)]. From Table III Column 1, we find that the interaction variable (Family Firms x Board Index) is negatively and significantly associated with firm performance measured by both ROE and ROCE. This result suggests that the incremental effect of the board score, for family firms with respect to nonfamily firms, is having a negative impact on the firm performance. The coefficient of board index shows that there is a positive effect of board index on firm performance of the nonfamily firms. Thus, the incremental effect of board index on family firm (b for ROE = 3.789 + (-4.439) = -0.65) is negative. Similar results are shown with the other two performance measures ROCE and Tobin's q (Columns 3 and 5). Thus, it is shown that for family firms, any improvement in board score decreases the firm performance. This result could be because the family firm management may endeavor for the improvement of the board structure as a reaction to the poor firm performance in the past. In Columns 2, 4 and 6 of Table III, the Family Firm indicator variable of Columns 1, 3 and 5 is replaced by the indicator variable Family CEO. When we segregate the firms based on the family CEO and nonfamily professional CEO managed firms, we find no significant difference in the relationship between board index and firm performance. This shows that having a family CEO or professional CEO does not make any significant impact on the relationship between corporate governance and firm performance. This result is contrary to the studies which find that family firms managed by family CEO tend to be less profitable than professionally managed firms (Gomez-Mejia et al., 2001; Singell, 1997). Our results are also contrary to studies that have showed positive relationship between family management and firm performance (Anderson and Reeb, 2003). Our results provide evidence on the irrelevance of family management on the relationship between board structure and firm performance in large firms in Indian context. The control variables, leverage, was found to be negatively and significantly associated with firm performance for both the models and all the three performance measures which are consistent with other studies (Titman and Wessels, 1988; Friend and Lang, 1988). Firm age was found to have a positive and significant effect on firm performance indicating experienced firms have an edge over newer firms. Firm size was negatively related to firm performance indicating that larger firms are less profitable. Sales growth was positive and significant. Asset tangibility was found to be negative, significant only in case of ROCE and Tobin's q as the performance measure. Stock volatility as expected was negatively related to firm performance. In Table IV, we also analyze the result of subsample containing only the family firms to study the effects of having professional CEO for the family firm, the proportion of family ownership and family representative directors on the firm performance. Columns 1, 5 and 9 show the results for family CEO for performance measures ROE, ROCE and Tobin's q respectively. Similar to our earlier findings, the results for family CEO with respect to professional CEO did not show any significant difference for all the three measures of performance. Thus, in a family firm having a professional CEO does not seem to impact the relationship between board score and firm performance. This result confirms to the study done by others that find no difference between family-managed and professionally managed firms (Daily and Dalton, 1992; Willard et al., 1992). This result may be possibly due to professional CEO being socially connected to the controlling family of the firm who controls the actions of the CEO. Another reason could be that the role of family members in the selection of managers and the desire to remain in control of the firms may lead to greater managerial entrenchment (Gomez-Mejia et al., 2001). Next, we analyze the results for the proportion of family shareholding. It is expected that the substantial intergenerational ownership stake and having a majority of their wealth invested in a single business present a strong incentive for the family firms to monitor the management (Demsetz and Lehn, 1985). Thus, having higher family ownership and the need to pass on the business to the future generation, it is expected that the firm performance would be positively associated with family ownership. Columns 2, 6 and 10 in Table IV show the results for family ownership. Within the family firms, having a higher proportion of shareholdings by family members did not show any significant impact on the firm performance. This result could be because despite having less than majority shareholding, the family still retains control in the firm by virtue of highly dispersed outside shareholdings or by being in the management of the firm. We also examine the impact of family members on the board of directors. Advocates of stewardship theory propose that the concentration of power and authority to a single person in a firm will lead to better performance (Donaldson and Davis, 1991). Thus, having more members in the board would strengthen family control over the management of the firm. Alternatively, the tendency of families to forgo profit maximization activities owing to their financial preferences (Anderson and Reeb, 2003) and biases toward business ventures of other family members (Singell, 1997) may lead to lower firm performance. However, as reported in Table IV, Columns 3, 7 and 11, we find that for family representative directors, there is no significant association with all the three measures of performance. To analyze the impact the recession period had on the performance of the family firms, we add the coefficient for board score and board score interacted with recession dummy variable for the sample of family firm. Columns 4, 8 and 12 of Table IV presents the effect of the recession on the performance of family firms. The results show a negative effect of recession compared to non-recession period; however, it was not significant. This could be due the caution exhibited by the controlling family, as family wealth would be at stake in the case of any substantial losses to the firm. Also, to improve the viability of the company for a longer time horizon, the present generation family managers may take decisions to maximize the long-term firm value. Again, the long-term presence and reputation of family firms helps them to have favorable dealings with external suppliers, dealers, lenders, etc., which are likely to continue even during any economic downturn. Hence, no discernable difference in performance is noticed before and during the recession period. Additionally, we sought to study the impact of specific governance mechanism in improving the firm performance in family firms in India. We create subsample based on above and below the median proportion of independent directors, board size and chairman independence. Having more independent directors on the board has generally been associated with better monitoring and improved firm performance. Table V reports the results for the subsample analysis. From Table V, Column 1, we find that median board independence does not show any significant relationship with firm performance. The reason for this result could be that the independent directors may not be truly independent due to allegiance toward the family who got them on the board. The results were similar for subsamples of board size and firms having independent chairman shown in Columns 2-3. Thus, this study does not find any evidence that having a higher proportion of independent directors, larger board size or an independent chairman, improves the relationship between family firms and firm performance. In this study, we analyze the interaction effect of the family firms and board governance factors on firm performance in a sample of top publically traded Indian firms. We contribute to the growing literature on family firms by providing a multi-year analysis on the influence of board structure on firm performance in a family firm vis-a-vis nonfamily firm in the Indian context. In this study, we endeavor to expand our understanding of corporate governance and to shed light on the impact of the proportion of shareholding, family representative directors and having a professional CEO in large family firms in India. The result of the panel data analysis shows that the interaction variable (family firms x board score) has a statistically significant negative associated with firm performance measured by both Tobin's q and ROE. This is consistent with the results by Garcia-Ramos and Garcia-Olalla (2011) in the European context. Our result suggests that the incremental effect of the board index score, for family firms with respect to nonfamily firms, is having a negative impact on the firm performance. When we segregate the firms based on the family CEO and professionally managed firms, we do not find any significant difference in the relationship between board structure and firm performance. We obtained similar results with subsample analysis containing only the family firms. This result is consistent with the results of Daily and Dalton (1992) and Willard et al. (1992) confirming the irrelevance of the management structure but contrary to the studies by Gomez-Mejia et al. (2001) and Singell (1997) which find that family firms managed by family CEO tend to be less profitable than professionally managed firms. Our results also contradict the studies that show CEO's who are family members had a positive relationship with accounting measures of performance (Anderson and Reeb, 2003; McConaughy et al., 1998). In the sub-sample analysis containing only the family firms, having a higher proportion of family ownership, family representative directors and having professional CEO for family firms did not show any significant impact on board structure and the firm performance. This result implies that family management and family ownership are irrelevant to the value of the firm. The impact of the recession on family firms was also not found to be significant compared to non-recession period. Contrary to the popular belief, we find that having an independent board and independent chairman does not improve firm performance. Results for the subsample based on above and below the median proportion of independent directors do not show any significant relationship with firm performance. The results were similar for subsamples of board size and firms having an independent chairman. Thus, this study does not find any evidence that having a higher proportion of independent directors, board size or an independent chairman, improves the firm performance in a family firm. The research has several limitations that need to be kept in mind while interpreting the results. This study is limited to the analysis of publically listed top Indian firm and hence further research needs to be conducted on a sample having a mix of large and small firms to improve the generalizability of the results. The difficulty in obtaining reliable data on exhaustive governance variables limits this study to board parameters. A natural extension of this study would be to include a larger number of governance parameters. The widespread pyramiding in Indian family firms makes it difficult to ascertain the quantum of actual family ownership and hence limits the accuracy of any study on family ownership. A cross-country research can also be conducted to analyze how the legal and regulatory institutional differences impact the findings presented in this study. The future extension of this study may analyze the family firms based on the founder led family firms and firms led by the subsequent generation of the founder family.
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Given the prevalence of family-run businesses in India, this paper aims to empirically investigate the impact of family firms on the relationship between firm performance and board characteristics. The effectiveness of board characteristics such as independent directors, chairman independence, role duality, non-executive directors, board busyness, board size, board meetings and board attendance are studied in the Indian context.
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[SECTION: Method] Family businesses are the most dominant among publically traded firms across the world (Shleifer and Vishny, 1986; Burkart et al., 2003; Anderson and Reeb, 2003; La Porta et al., 1999). In Continental Europe, about 44 per cent of publicly held firms are family-controlled (Faccio and Lang, 2002). In the USA, the equity ownership concentration is modest; among the Fortune 500 firms, around one-third is family firms (Anderson and Reeb, 2003). The concentration of ownership was found to be higher in other developed nations (Faccio and Lang, 2002; Franks and Mayer, 2001; Gorton and Schmid, 1996). Family businesses dominate many developing economies with about two-third of the firms in Asian countries owned by families or individuals (Claessens et al., 2000). In India, around 60 per cent of the listed top 500 firms are family firms (Chakrabarti et al., 2008). These family firms hold large equity stakes and more often than not have family representation on the board of directors. Family equity stake in Indian firms may be divided across individual holdings by promoters and their family members, privately held firms and through cross-holdings from other listed group businesses. The control and influence exerted by family firms may lead to performance difference with the non-family firms (Anderson and Reeb, 2003). The impact of organizational form (separate ownership and control or combined ownership and control) on firm performance has been mixed empirically. Berle and Means (1932) and Jensen and Meckling (1976) asserted that with the separation of ownership and control, there arises a potential for conflict of interest, which leads to the reduction in firm value. Managers may pursue activities in self-interest at the expense of profit maximization creating agency costs. The costs involved in monitoring the management and the difficulty of developing contracts to accurately specify the actions of the managers in the interest of the shareholders leads to lower market valuation of the firm. Contrary to this, Fama and Jensen (1983) argue that separation of ownership and control is advantageous as the efficiency costs outweigh the agency costs. Institutional mechanisms evolve over time to align with the objectives of managers and the shareholders (James, 1999). Firms with combined ownership and control may choose to pursue different investment rule and may have incentive to forgo profitable investment opportunity thereby reducing the firm value (Fama and Jensen, 1985; James, 1999). Active shareholders act as a mechanism for monitoring the firm management. However, shareholders who own very few shares of a firm have little incentive to do so. On the other hand, blockholders or large shareholders who have a substantial investment in a firm can play a key role to mitigate the agency problem. Blockholders can be the family or promoters of the company or institutional investors. Owing to the percentage of votes they hold, blockholders can pressurize the firm management toward improving investor protection (Shleifer and Vishny, 1997). Blockholders can force change the management that fails to deliver the expected results either in an AGM or through proxy fights in the case of a staggered board. A positive correlation between institutional investor's involvement and firm performance has been found in the literature (Agrawal and Knoeber, 1996; Strickland et al., 1996; Shome and Singh, 1995). However, a major problem is that the voting by the institutional investors has been low historically (Hampel, 1998) and those who vote also may be just "Box Tickers" who vote without considering the issues appropriately (Solomon, 2007). Others, like the mutual fund houses and the insurance companies, opt to sell their shares rather than have their say on the management of the firm. Another issue is that these institutional investors may hold a highly diversified portfolio, making it difficult for them to focus on any one company. In some cases, these institutional investors may exert pressure on the management to further their own gains rather than of all the shareholders (Shleifer and Vishny, 1997). This potential tradeoff between high agency cost of monitoring and clash of interest between managers and shareholders may not exist in family firms (James, 1999). Family blockholders can mitigate the agency problem associated with the separation of ownership and management (Villalonga and Amit, 2006; Anderson and Reeb, 2003) and, hence, should have a positive effect on firm value (Berle and Means, 1932). Combining ownership and management can help mitigate managerial opportunism (Demsetz and Lehn, 1985). Family blockholders have a strong incentive, by way of protecting their family wealth, to monitor managers and minimize free rider problem associated with minority shareholders (Anderson and Reeb, 2003; Barontini and Caprio, 2006). At the same time concentrated shareholders can, in exchange for profits, extract private benefits from the firm (Fama and Jensen, 1983; Shleifer and Vishny, 1997; Demsetz, 1983). Thus, concentrated shareholders can generate conflict of interest with minority shareholders (Burkart et al., 2003). The impact of blockholdings by family members on firm performance has yielded mixed empirical results. Family firms were found to perform better than nonfamily firms more so when a family member serves as CEO (Anderson and Reeb, 2003; Maury, 2006). Contrary to these results, family firms were not found to have better firm performance (measured by Tobin's q) as compared to nonfamily firms (Holderness and Sheehan, 1988; Miller et al., 2007). The corporate governance practices of family firms are also found to differ from those of nonfamily firms (Bartholomeusz and Tanewski, 2006). So, does family firms improves firm performance or destroys the firm value? Also, how effective are corporate governance mechanisms in controlling the agency costs in family firms. Is there any significant difference in the relationship between board structure and firm performance among family and nonfamily firms? We explore these questions, by studying the board structure and ownership pattern using a sample of top Indian firms from 2002 to 2012 and comparing family firms and nonfamily firms. Most governance studies on family firms have used data from the developed countries (Jameson et al., 2014). Given the predominance of controlling shareholders in emerging economies, a country level study in the Indian context will help to improve our understanding of the impact of controlling shareholders on corporate governance and firm performance. To provide a context for this study, we briefly describe the institutional background in India. India inherited a financial market developed by the British India and a legal system based on British laws that had excellent provision for shareholder protection (La Porta et al., 1998). Despite these advantages, law enforcement remained a problem. India had its share of issues arising out of poor monitoring of Indian firms, law enforcement, limited information dissemination and licensing requirements. Those issues resulted in the stock market scandals, insider trading issues and allotment of preferential shares to family members at a discount (Khanna and Palepu, 2004; Rajagopalan and Zhang, 2008). Indian legal system today is characterized by long delays due to limitations in resources. A case in point is the bankruptcy resolution, which is deemed to take the longest time to resolve and has the lowest rate of recovery (Kang and Nayar, 2004). Post-independence, India adopted the development strategy of import substituting industrialization. The set of regulations laid out to implement this strategy in the Industries Act 1951 resulted in a system that required businesses to obtain multiple licenses and bureaucratic approvals (Chakrabarti et al., 2008). This system labeled as "license-permit raj" created institutional barriers for smaller businesses, thereby weakening the competition (Reed, 2002). Further, the equity markets were illiquid, and the banks were reluctant to fund private sector due to weak creditor protection. Thus, the business environment benefitted those with government connection while discouraging market-based interactions. This institutional business environment led to the growth of the family business group and concentrated shareholdings (Chakrabarti et al., 2008). These behavioral and institutional differences in emerging markets can provide different insights into corporate governance (Fan et al., 2011). More so for the Asian countries; the diverse institutional development background makes the corporate governance issues unique (Peng and Jiang, 2010). As mentioned in the literature above, Indian firms are characterized by large shareholders and more so by the founding families. This presents a unique setting for studying their impact or lack of it on the firm's corporate governance. This study provides, to our knowledge, the first multi-year comparative analysis of the relationship between board structure and firm performance of family firms in India. The paper is subsequently structured as follows. Section 2 outlines the potential benefits and negative effects of family firms. Section 3 details the sample data and the methodology used in the analysis. Section 4 reports the results of the analysis and Section 5 discusses the results and concludes the paper. Controlling blockholders like family can have potential benefits and competitive advantage. The extent literature on family firms focuses mostly on the agency problem. The problem in widely held firms includes limited ability to select reliable agents, monitor the selected agents and ensure performance (Fama and Jensen, 1983). An effective monitoring can improve firm performance and reduce agency cost (Fama and Jensen, 1983; Jensen and Meckling, 1976). The principle agent conflict associated with widely held firms may be reduced by concentrated blockholders, specifically the family blockholders, as they have a significant economic incentive to monitor the management (Demsetz and Lehn, 1985). Specifically, the substantial intergenerational ownership stake and having a majority of their wealth invested in a single business, the family firms have strong incentive to monitor the management. The lengthy involvement of family members in the business, in some cases spanning generations, permits them to move further along the learning curve. This superior knowledge allows the family members to monitor the managers better (Anderson and Reeb, 2003). Also, this long-term presence of family members in their firm leads to longer investment horizons than other shareholders and may provide an incentive to invest according to market rules (James, 1999). This willingness of family firms to invest in the long-term project leads to greater investment efficiency (Anderson and Reeb, 2003; James, 1999; Stein, 1988). Another advantage of having a long-term presence of family firms is that the external suppliers, dealers, lenders, etc., are more likely to have favorable dealings with the same governing bodies, owing to the long-term dealings and reputation, than with nonfamily firms. This sustained presence of family necessitates having their reputation maintained (Anderson and Reeb, 2003). Thus, family firms have several advantages while monitoring managers, superior knowledge, longer investment horizons and the need to pass on the business to future generation. Consistent with this argument, several studies have shown that family firms have superior performance compared to nonfamily firms. In large public US firms, stronger firm performance was found in family firms compared to nonfamily firms (Anderson and Reeb, 2003). In Japan, the family firms owned or managed by the founder showed superior performance (Saito, 2008). In a study of 13 Western European countries, it was found that family control was associated with higher valuation (Maury, 2006). In listed Swiss firms, Isakov and Weisskopf (2014) found that family firms were more profitable than non-family firms. The controlling families are often involved in the management of the firms, reducing the agency problem of owner-manager conflict. Combining ownership and managerial control can help mitigate the managerial expropriation (Demsetz and Lehn, 1985). This nonseparation of management and ownership also reduces the agency costs involved in establishing the mechanism to monitor the management (Garcia-Ramos and Garcia-Olalla, 2011). Morck et al. (1988) suggest that founder CEOs bring in innovation and value enhancing expertise. Family firms intend to maintain continuity by passing on the business to the next generation of the family (Casson, 1999; Chami, 1999). Thus, to improve the viability of the company for a longer time horizon, the present generation family managers may take decisions to maximize the long-term firm value. The empirical results on the impact of family management on firm performance have been mixed. In the US firms, CEOs who are family members had a positive relationship with accounting measures of performance (Anderson and Reeb, 2003; McConaughy et al., 1998). Family firms, where the founding family is on the supervisory or the executive board, showed better firm performance in German firms (Andres, 2008). Villalonga and Amit (2006) found that family ownership creates value when a family member serves as CEO or the chairman of the firm. The literature suggests that having a family CEO may be beneficial to the value of the firm. Family firms are also said to be fraught with nepotism, family disputes, capital restrictions, exploitation of minority shareholders and executive entrenchment, all of which adversely affect firm performance (Allen and Panian, 1982; Chandler, 1990; Faccio et al., 2001; Gomez-Mejia et al., 2001; Perez-Gonzalez, 2006; Schulze et al., 2001, 2003). Expropriation of minority shareholders by large shareholders may generate additional agency problem (Faccio et al., 2001). Concentrated shareholders, by virtue of their controlling position in the firm, may extract private benefits at the expense of minority shareholders (Burkart et al., 2003). Capital expenditure can be affected by the families' preference for special dividends (DeAngelo and DeAngelo, 2000). Employee productivity can also be adversely affected by family shareholders acting on their own behalf (Burkart et al., 1997). Family firms are found to show biases toward business ventures of other family members resulting in suboptimal investment (Singell, 1997). Family shareholders tend to forgo profit maximization activities owing to their financial preferences which often conflicts with those of minority shareholders (Anderson and Reeb, 2003). The empirical evidence has also backed these negative aspects of controlling shareholding as family firms have been found to have an adverse effect on firm performance. Family ownership structure in US firms is perceived as less efficient and profitable than dispersed ownership (Anderson and Reeb, 2003; Morck, 2007; Singell, 1997). Holderness and Sheehan (1988) using Tobin's q as performance measure found that family firms have lower firm performance than nonfamily firms. The proportion of family shareholdings has also been found to have an impact on the firm performance. Anderson and Reeb (2003) show that when the family ownership exceeds 30 per cent, the gains from family control starts to taper off. Studies from other countries have also provided evidence for the adverse effect of family ownership on firm value. In Canadian and Swedish firms, family shareholders were found to have a negative effect on firm performance (Morck, 2007; Cronqvist and Nilsson, 2003). In East Asian countries where transparency is low, the family firms are shown to harm minority shareholders (Faccio et al., 2001). Preference for family members for the executive positions in family firms suggests a restricted talent pool for selection of qualified candidates (Anderson and Reeb, 2003). Family CEO may also lead to resentment among other senior outside executives of the firm as talent, merit and tenure are not seen as criteria for top management positions (Schulze et al., 2001). This limitation in talent pool may lead to competitive disadvantage for the family-run businesses when compared to nonfamily firms. Also, the accountability of a family CEO toward minority shareholders may be less than that exhibited by professional managers (Gomez-Mejia et al., 2001). The role of family members in selection of managers and the desire to remain in control of the firms may lead to greater managerial entrenchment (Gomez-Mejia et al., 2001). Shleifer and Vishny (1997) opine that the greatest cost imposed by large shareholders is by continuing to run the business in spite of being incompetent and unqualified. The mixed results on the impact of the family firms on firm performance raise several questions. Does family firms perform better compared to non-family firms? How do family firms impact the relationship between board structure and firm performance? Does having a family CEO improve firm performance compared to a professionally managed firm? Does having a family CEO impact the relationship between board structure and firm performance? Having analyzed the difference between family and nonfamily firms, the following question can be asked for within family firms analysis. Within the family firms, does having a higher proportion of family ownership improve firm performance? How does higher proportion of family representative directors impact the firm performance of family firms? Again, does having a professional CEO improve firm performance compared to family CEO in family firms? How did family firms cope with the recession period? Also, does having a larger board, higher proportion of independent directors and independent chairman improve the performance of family firm? These are some of the questions that we address in this study. 4.1 Sample For our investigation, we use top Indian firms listed on the Bombay Stock Exchange (BSE), specifically the firms forming a part of the BSE 200 index. We exclude financial institutions and public sector units as strong government regulations may potentially affect performance of these firms. Firm-specific control variables were collected from the ACE Equity database. Governance data comprising of board characteristics such as independent directors, chairman independence, role duality, non-executive directors, board busyness, board size, board meetings and board attendance, was manually collected from the annual reports of the firms from ReportJunction database. As per Clause 49 of listing agreement, firms are required to file the corporate governance report quarterly; however, for our empirical analysis, we considered annual performance of the firm and select the financial year-end corporate governance reports. We excluded the firms where the governance data was not available for more than one year. Our final sample consisted of 100 firms yielding 1,100 firm-years or observations as our sample was restricted by the publically available data from 2002 to 2012. The Variance inflation factor (VIF) was calculated for each independent variable, and all VIF values were less than 10 suggesting that there is no multicollinearity issue (Myers, 1990). 4.2 Variables and data source We identify the family firms based on the fractional equity ownership of the family members and the presence of family members on the board of directors. We were also guided by the classification of the family firms for listed Indian firms given by the ACE Equity database. We use a dummy variable that equals one for family firms and zero otherwise. Our study incorporates variables such as family management, family shareholdings and family representative directors on the board. We measure family management using a dummy that indicates the presence of a family CEO. Family shareholdings represent the percentage of equity held by the family members in the firm. Family representative directors are the proportion of family members on the board. We also study the recession period and the impact it had on the family firms. According to National Bureau of Economic Research (NBER), the recession that began in December 2007 officially ended in June 2009. We use a dummy variable to specify the period as pre-recession from the year 2002 to 2008 with a value 0, and recession period from the year 2008 to 2012 with a value 1 (Table I). 4.3 Dependent variable For our analysis, we use accounting measures of performance namely return on equity (ROE) and return on capital used (ROCE). As several studies on family firms use Tobin's q as a measure of firm performance, we also use Tobin's q measured using the book value of debt plus market value of common stock divided by the book value of assets as a proxy for Tobin's q (Black et al., 2014; Khanna and Palepu, 2000). 4.4 Explanatory variables We study the role played by the directors of a firm by categorizing the various board-related factors into two broad categories, namely, board leadership and board activity. On the basis of the agency theory, we investigate the board leadership roles played by the directors of the firm and its impact on the firm performance. Board activity is examined using the resource dependency theory. Board Leadership comprising of factors relating to the board leadership that includes role duality, independent directors, chairman independence and non-executive directors and Board Activity is measured by variables: board meeting, board size, board attendance and board busyness. We operationalize the various board parameters as follows: For our board index, based on the percentage of Independent Directors on the board, we divide the firms into three sets, the top, middle and bottom, and we respectively assign a score of 0, 1, 2 for <50 per cent, 50-75 per cent and >75 per cent independent directors on the board. Similarly, we assign the scores of 0, 1 and 2 for Non-Executive Directors on the board. For Role Duality, we assign a score of one for nonduality (splitting of the role of CEO and chairman) and zero for role duality. Similarly, for Chairman Independence, we use dummy variable by assigning a score of 1 if the chairman is independent, and zero otherwise. The dummy for Board Size is assigned a score of zero if board size is less than eight and greater than 15 and one otherwise. For the number of Board Meetings, we use a dummy variable that is equal to zero if the number of board meetings is less than four, equal to one if board meetings are between four to eight and two otherwise. For Board Attendance, we assign a score of 1 if the average board attendance is greater than 75 per cent and zero otherwise. To measure Board Busyness we assign a value zero if average outside board membership is greater than 10; one if it is between five and 10 and two if it is less than two. The governance index is constructed by adding the points for each board parameter discussed above. First, we divide the board parameters into two broad sets, namely, board leadership and board activity. We then assign weights to the two sets to form governance index. We assign more weigh to board leadership by assigning 60 per cent weightage in the overall score. This index is then converted to dummy variables by assigning a value of 1 to the top 60 per cent of the firms having the strongest board parameters and zero otherwise. We do this to compare the top firms with bottom firms with respect to the board parameters. Though this simple index may not reflect the impact of individual board parameters, it does, however, help in distinguishing between the firms with a stronger board and those with weaker board parameters. We use the board index (dummy variable that takes the value of 1 for the top 60 per cent of the firms having the strongest board parameters and zero otherwise) as the explanatory variable. Additionally, we also use the proportion of independent directors, board size and chairman independence (dummy variable that takes the value 1, if the chairman is independent else 0) as explanatory variables in our subset analysis. 4.5 Control variables To control for industry and firm characteristics, we use several control variables in our analysis, namely, leverage (ratio of debt to total assets), firm age (number of years since the date of incorporation) and firm size (log of total assets), sales growth (moving geometric average of net sales growth over the past three years), asset tangibility (fixed asset to total asset), stock volatility (4 year average of monthly standard deviation of stock price returns) and Industry classification based on two-digit National Industrial Classification (NIC) code. The data for these financial parameters were collected from ACE Equity database (Table I). 4.6 Method In our study, we observe the same firm at different point of time, and hence, we use the random effects model for our regression analysis (Arellano and Bond, 1991; Blundell and Bond, 1998). Black et al. (2014) opines that in developing countries a good approach to study this kind of relationship would be to build a panel data and use fixed or random effects model. Our primary interest is in analyzing the relationship between board structure and firm performance in a family firm. The analysis also includes additional variables such as family management, family shareholdings and family representative directors on the board. Serial correlation and heteroskedasticity are controlled by using the Huber White Sandwich Estimator (clustered) for the variance. Panel data analysis was conducted using the R statistical package (Version 3.1.1) with add-on package "PLM" (Croissant and Millo, 2008). The regression we use for the multivariate analysis takes the form: (1) Performance=b0+b1(Family Firm)+b2(CG Score)+b3(Family Firm) * (CG score)+b4(Control Variables)+b5-34(Two Digit SIC Code)+e where: Firm Performance is the accounting measures of performance ROA and ROE and Tobin's q. Family Firms is the dummy variable with value 1 for family firms, and zero otherwise. Control Variables are leverage, age, firm size, sales growth, tangibility, stock volatility, two-digit NIC code. 5.1 Summary statistics Descriptive statistics for the sample data shown in Table II is broken down into the two groups: family and nonfamily firms. The last two columns show the difference of means and the t-values between the family and nonfamily firms. Family firms constitute 73 per cent of our sample. Among family firms, about half of the sample had promoter CEO or CEO from the promoter family and about 30 per cent firms had both the CEO and the chairman from the founder family. This suggests an active participation of founders and founder families in the management of Indian firms. The governance characteristic of our sample shows that the mean independent directors for family firms (5.423) is higher than that for nonfamily firms (4.878), and the difference is significant at 1 per cent level. The mean independent chairman and mean role duality of nonfamily firms is higher than family firms and the difference is significant at the 1 per cent level in both cases. There is not much of a difference in the mean board size and non-executive directors between the two groups. The mean for the frequency of board meeting is slightly higher for family firms, but the mean board attendance is higher for nonfamily firms. The mean board busyness for family firms (5.206) was significantly higher compared to nonfamily firms (4.424). The firm level characteristics are reported in Table II. The mean performance (ROE, ROCE and Tobin's q) of nonfamily firms is significantly higher than family firms indicating that nonfamily firms on an average perform better than family firms. Consistent with this observation we find that the net sales growth is also higher for nonfamily firms. Family firms exhibit higher stock volatility compared to nonfamily firms. Family firms are leveraged more compared to nonfamily firms. The mean total assets for family firms are also significantly higher than those for nonfamily firms. These results suggest that the nonfamily firms are better performers than family firms. 5.2 Multivariate analysis The result of the panel data analysis to examine the impact of board index on firm performance in family firms is presented in Table III. The dummy variable board index takes the value of 1 for the top 60 per cent of the firms having the strongest board parameters and zero otherwise. We divide the firms into two groups representing the family and nonfamily firms using a dummy variable, which equals one for family firms and zero for nonfamily firms. The interpretations of the coefficients of the regression results are carried out as follows: The coefficient of the interaction term (family firm x board index) represents the incremental effect of board index on the performance of family firms with respect to the reference group non-family firm. Similarly, the coefficient of the board index represents the incremental effect of board index on the reference group non-family firms. The incremental effect of board index on the group family firm is given by the sum of the coefficients of board index and coefficient of the interaction between the family firm and board index [Board Index + (FF x Board Index)]. From Table III Column 1, we find that the interaction variable (Family Firms x Board Index) is negatively and significantly associated with firm performance measured by both ROE and ROCE. This result suggests that the incremental effect of the board score, for family firms with respect to nonfamily firms, is having a negative impact on the firm performance. The coefficient of board index shows that there is a positive effect of board index on firm performance of the nonfamily firms. Thus, the incremental effect of board index on family firm (b for ROE = 3.789 + (-4.439) = -0.65) is negative. Similar results are shown with the other two performance measures ROCE and Tobin's q (Columns 3 and 5). Thus, it is shown that for family firms, any improvement in board score decreases the firm performance. This result could be because the family firm management may endeavor for the improvement of the board structure as a reaction to the poor firm performance in the past. In Columns 2, 4 and 6 of Table III, the Family Firm indicator variable of Columns 1, 3 and 5 is replaced by the indicator variable Family CEO. When we segregate the firms based on the family CEO and nonfamily professional CEO managed firms, we find no significant difference in the relationship between board index and firm performance. This shows that having a family CEO or professional CEO does not make any significant impact on the relationship between corporate governance and firm performance. This result is contrary to the studies which find that family firms managed by family CEO tend to be less profitable than professionally managed firms (Gomez-Mejia et al., 2001; Singell, 1997). Our results are also contrary to studies that have showed positive relationship between family management and firm performance (Anderson and Reeb, 2003). Our results provide evidence on the irrelevance of family management on the relationship between board structure and firm performance in large firms in Indian context. The control variables, leverage, was found to be negatively and significantly associated with firm performance for both the models and all the three performance measures which are consistent with other studies (Titman and Wessels, 1988; Friend and Lang, 1988). Firm age was found to have a positive and significant effect on firm performance indicating experienced firms have an edge over newer firms. Firm size was negatively related to firm performance indicating that larger firms are less profitable. Sales growth was positive and significant. Asset tangibility was found to be negative, significant only in case of ROCE and Tobin's q as the performance measure. Stock volatility as expected was negatively related to firm performance. In Table IV, we also analyze the result of subsample containing only the family firms to study the effects of having professional CEO for the family firm, the proportion of family ownership and family representative directors on the firm performance. Columns 1, 5 and 9 show the results for family CEO for performance measures ROE, ROCE and Tobin's q respectively. Similar to our earlier findings, the results for family CEO with respect to professional CEO did not show any significant difference for all the three measures of performance. Thus, in a family firm having a professional CEO does not seem to impact the relationship between board score and firm performance. This result confirms to the study done by others that find no difference between family-managed and professionally managed firms (Daily and Dalton, 1992; Willard et al., 1992). This result may be possibly due to professional CEO being socially connected to the controlling family of the firm who controls the actions of the CEO. Another reason could be that the role of family members in the selection of managers and the desire to remain in control of the firms may lead to greater managerial entrenchment (Gomez-Mejia et al., 2001). Next, we analyze the results for the proportion of family shareholding. It is expected that the substantial intergenerational ownership stake and having a majority of their wealth invested in a single business present a strong incentive for the family firms to monitor the management (Demsetz and Lehn, 1985). Thus, having higher family ownership and the need to pass on the business to the future generation, it is expected that the firm performance would be positively associated with family ownership. Columns 2, 6 and 10 in Table IV show the results for family ownership. Within the family firms, having a higher proportion of shareholdings by family members did not show any significant impact on the firm performance. This result could be because despite having less than majority shareholding, the family still retains control in the firm by virtue of highly dispersed outside shareholdings or by being in the management of the firm. We also examine the impact of family members on the board of directors. Advocates of stewardship theory propose that the concentration of power and authority to a single person in a firm will lead to better performance (Donaldson and Davis, 1991). Thus, having more members in the board would strengthen family control over the management of the firm. Alternatively, the tendency of families to forgo profit maximization activities owing to their financial preferences (Anderson and Reeb, 2003) and biases toward business ventures of other family members (Singell, 1997) may lead to lower firm performance. However, as reported in Table IV, Columns 3, 7 and 11, we find that for family representative directors, there is no significant association with all the three measures of performance. To analyze the impact the recession period had on the performance of the family firms, we add the coefficient for board score and board score interacted with recession dummy variable for the sample of family firm. Columns 4, 8 and 12 of Table IV presents the effect of the recession on the performance of family firms. The results show a negative effect of recession compared to non-recession period; however, it was not significant. This could be due the caution exhibited by the controlling family, as family wealth would be at stake in the case of any substantial losses to the firm. Also, to improve the viability of the company for a longer time horizon, the present generation family managers may take decisions to maximize the long-term firm value. Again, the long-term presence and reputation of family firms helps them to have favorable dealings with external suppliers, dealers, lenders, etc., which are likely to continue even during any economic downturn. Hence, no discernable difference in performance is noticed before and during the recession period. Additionally, we sought to study the impact of specific governance mechanism in improving the firm performance in family firms in India. We create subsample based on above and below the median proportion of independent directors, board size and chairman independence. Having more independent directors on the board has generally been associated with better monitoring and improved firm performance. Table V reports the results for the subsample analysis. From Table V, Column 1, we find that median board independence does not show any significant relationship with firm performance. The reason for this result could be that the independent directors may not be truly independent due to allegiance toward the family who got them on the board. The results were similar for subsamples of board size and firms having independent chairman shown in Columns 2-3. Thus, this study does not find any evidence that having a higher proportion of independent directors, larger board size or an independent chairman, improves the relationship between family firms and firm performance. In this study, we analyze the interaction effect of the family firms and board governance factors on firm performance in a sample of top publically traded Indian firms. We contribute to the growing literature on family firms by providing a multi-year analysis on the influence of board structure on firm performance in a family firm vis-a-vis nonfamily firm in the Indian context. In this study, we endeavor to expand our understanding of corporate governance and to shed light on the impact of the proportion of shareholding, family representative directors and having a professional CEO in large family firms in India. The result of the panel data analysis shows that the interaction variable (family firms x board score) has a statistically significant negative associated with firm performance measured by both Tobin's q and ROE. This is consistent with the results by Garcia-Ramos and Garcia-Olalla (2011) in the European context. Our result suggests that the incremental effect of the board index score, for family firms with respect to nonfamily firms, is having a negative impact on the firm performance. When we segregate the firms based on the family CEO and professionally managed firms, we do not find any significant difference in the relationship between board structure and firm performance. We obtained similar results with subsample analysis containing only the family firms. This result is consistent with the results of Daily and Dalton (1992) and Willard et al. (1992) confirming the irrelevance of the management structure but contrary to the studies by Gomez-Mejia et al. (2001) and Singell (1997) which find that family firms managed by family CEO tend to be less profitable than professionally managed firms. Our results also contradict the studies that show CEO's who are family members had a positive relationship with accounting measures of performance (Anderson and Reeb, 2003; McConaughy et al., 1998). In the sub-sample analysis containing only the family firms, having a higher proportion of family ownership, family representative directors and having professional CEO for family firms did not show any significant impact on board structure and the firm performance. This result implies that family management and family ownership are irrelevant to the value of the firm. The impact of the recession on family firms was also not found to be significant compared to non-recession period. Contrary to the popular belief, we find that having an independent board and independent chairman does not improve firm performance. Results for the subsample based on above and below the median proportion of independent directors do not show any significant relationship with firm performance. The results were similar for subsamples of board size and firms having an independent chairman. Thus, this study does not find any evidence that having a higher proportion of independent directors, board size or an independent chairman, improves the firm performance in a family firm. The research has several limitations that need to be kept in mind while interpreting the results. This study is limited to the analysis of publically listed top Indian firm and hence further research needs to be conducted on a sample having a mix of large and small firms to improve the generalizability of the results. The difficulty in obtaining reliable data on exhaustive governance variables limits this study to board parameters. A natural extension of this study would be to include a larger number of governance parameters. The widespread pyramiding in Indian family firms makes it difficult to ascertain the quantum of actual family ownership and hence limits the accuracy of any study on family ownership. A cross-country research can also be conducted to analyze how the legal and regulatory institutional differences impact the findings presented in this study. The future extension of this study may analyze the family firms based on the founder led family firms and firms led by the subsequent generation of the founder family.
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The sample consists of top-listed firms in India for the period 2002 to 2012. Board index was constructed to capture the governance quality of the firm. The authors also study the relationship between board structure and firm performance by segregating the sample based on family management, family ownership and family representative directors. Random effects model was used for the regression analysis in the study.
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"[SECTION: Findings] Family businesses are the most dominant among publically traded firms across th(...TRUNCATED)
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"[SECTION: Value] Family businesses are the most dominant among publically traded firms across the w(...TRUNCATED)
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"[SECTION: Purpose] Unstable and dynamic societal and business environments are making it more imper(...TRUNCATED)
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"[SECTION: Method] Unstable and dynamic societal and business environments are making it more impera(...TRUNCATED)
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