Family influence in Maltese listed companies : the implications on corporate governance

Abstract

The Maltese market is and has always been, dominated by Family Businesses (FB) to the extent that such entities are vital to the resilience of our economy. There tends to be the presupposition that as soon as FBs convert to a public listing, they start implementing rational governance mechanisms, contrasting with the "non-rational behaviour" which is normally associated with the dynamics of running an FB. With this study the authors focus on equity-listed Maltese companies on the Malta Stock Exchange (MSE) and aim to build an understanding on the current situation of such entities’ GC structures to possibly conclude on whether Maltese LFBs are taking the initiative to apply appropriate governance measures which meet their strategic needs, even though there are no obligatory regulations or recommendations on the matter. Moreover, they will shed light on (i) the characteristics of LFBs; (ii) the family governance structures (‘FGS’) in such companies including the role of family institutions as well as the family influence on executive appointments and top positions; and (iii) recommend regulatory and other improvements. Authors carried out semi-structured with 18 participants in charge of corporate governance in Maltese listed companies (MLCs) and conclude that Maltese LFBs do not as yet acknowledge the significance of their distinctive features and the implications of such features on their CG structures. As a result, the application of specific structures related to FBs, in particular, the family constitution and the family institutions are as yet not to be found.