The Impact of Family Business Governance on Environmental, Social, and Governance Performance

Abstract

This study examines the impact of family directors, family shareholding, and family control on the environmental and social dimensions of ESG in family business governance. Scholars debate whether family businesses prioritize short-term gains over long-term ESG issues or, due to their long-term focus, integrate ESG into their strategies. One group of scholars argues that family businesses tend to focus excessively on short-term financial performance, neglecting long-term non-financial performance. In contrast, another group contends that due to socioemotional wealth considerations, family businesses place particular emphasis on long-term non-financial performance. This study utilizes data from publicly listed companies in Taiwan to conduct relevant research. Furthermore, we incorporate external governance variables to examine their impact on environmental and social performance. The research data come from the TEJ database. The sample is the annual data of listed companies in Taiwan. The sample period covers 2015 to 2022, with a total of 4377 company-year observations. The study finds that the corporate governance mechanisms of family enterprises have a negative and significant impact on environmental and social performance. However, external governance factors, such as higher institutional investor shareholding ratios, third-party-verified sustainability reports, and corporate governance evaluations, help mitigate these negative effects. Future research could extend the study period and explore additional external governance variables or alternative datasets to enhance the robustness and generalizability of the findings.

1. Introduction

In recent years, the world has increasingly focused on ESG (environmental, social, and governance) issues, especially those related to climate change and human rights, as businesses are being increasingly pressured to adopt CSR strategies addressing both environmental and human rights issues [1]. However, pursuing sustainability has become the biggest challenge for enterprises, as they face difficulties integrating ESG practices and achieving long-term performance [2]. Family businesses play an essential role in the global economy. However, the attitudes of family businesses to ESG issues will vary depending on the characteristics of the family and the corporate governance structure. This study aims to explore the impact of the corporate governance mechanisms of family businesses on environmental and social performance.

The earliest literature on corporate social responsibility began in the 1950s. Bowen [3] pointed out that companies must pursue all activities that conform to social values and meet social needs. In 2004, the “Who Cares Wins” report of the United Nations Global Compact (UN Global Compact) proposed incorporating ESG into corporate evaluation criteria for the first time. ESG gained investors’ attention when the financial crisis broke out in 2008. The companies with higher ESG scores experienced a lower impact from the financial crisis [4]. A landmark moment for ESG was the Paris Summit in 2015. For the first time, countries worldwide gathered to sign an agreement to reduce greenhouse gas emissions. The United Nations also proposed and passed 17 sustainable development goals (SDGs) and millennium year development goals (MDGs). In recent years, the integration of sustainability and ESG accounting into corporate reporting practices has become increasingly significant, enhancing transparency, accountability, and stakeholder engagement [5].

Scholars have differing views on the relationship between family businesses and ESG practices. Some studies suggest that family businesses are more focused on long-term development and corporate social responsibility than non-family firms. For instance, Berrone [6] found that family-controlled companies tend to outperform non-family firms in terms of environmental performance, attributing this to the family’s desire to protect socioemotional wealth. Similarly, Block and Wagner [7] observed that family firms are more likely to adopt sustainable practices due to their long-term orientation.

However, contrary studies from Gillan [8] and Miroshnychenko [9] argue that family businesses are often more focused on short-term interests and may overlook long-term sustainability concerns like ESG. Gillan [8] provided empirical evidence indicating a negative relationship between family ownership and ESG performance, suggesting that family owners might underinvest in ESG initiatives due to concerns about immediate financial returns. Likewise, Miroshnychenko [9] found that family-controlled firms tend to receive lower environmental ratings, likely due to their emphasis on financial stability over ESG commitments.

Corporate governance manages enterprises by ensuring business operators fulfill their responsibilities and protect shareholders’ rights and stakeholders’ interests. ESG factors are crucial for stakeholders’ investment decisions [10]. Alsaadi [11] found that family ownership in European companies was negatively associated with CSR disclosure levels, suggesting a broader global pattern where family firms prioritize financial returns over social responsibility. Similarly, Lamb and Butler [12] demonstrated that family-controlled businesses often underperform in CSR efforts due to their focus on economic gains rather than long-term social impact.

Regarding external governance mechanisms, institutional investors usually have higher ESG requirements and standards. Therefore, the requirements of institutional investors can promote the improvement of a company’s ESG performance. Dyck, Lins, Roth, and Wagner [13] point out that when institutional investors hold a higher proportion of a company’s shares, the company’s environmental and social performance is generally better. This suggests that institutional investors, by exerting influence through their equity holdings, play a crucial role in shaping corporate ESG policies. In addition, institutional investors pay more attention to environmental and social aspects. Dyck, Lins, Roth, and Wagner [13] found that companies with a higher shareholding ratio of institutional investors have better ESG performance. Furthermore, their study highlighted that stronger external governance mechanisms contribute to enhanced ESG performance, reinforcing the role of institutional investors in corporate sustainability efforts. These results indicate that institutional investors’ requirements and standards for corporate ESG performance can affect a company’s ESG performance.

As the global market and investors place increasing emphasis on ESG, companies are under pressure to disclose ESG-related non-financial information. To enhance the quality of sustainability reporting, the Financial Supervisory Commission (FSC) in Taiwan has mandated third-party verification for listed companies’ sustainability reports since 2021. This regulation encourages companies to ensure the accuracy of their ESG disclosures, preventing misleading information from reaching stakeholders.

In addition, in recent years the corporate governance evaluation promoted by the Financial Supervisory Commission (FSC) in Taiwan has gradually increased the proportion of each business’s score that is determined by sustainability. This shift has encouraged listed family businesses to focus more on ESG development. The growing emphasis on sustainability in the evaluation framework has been observed in FSC’s annual reports, which show an increasing incorporation of ESG-related metrics into the governance criteria. This trend has prompted family businesses to align their operations with ESG principles, enhancing their overall governance structure and social responsibility initiatives. The emergence of ESG ratings has also been shown to incentivize firms to improve information transparency, strengthen internal corporate governance, and actively utilize corporate innovation to achieve sustainable development. The findings of Eccles and Serafeim [14] suggest that better ESG performance can help reduce agency problems and align corporate interests with those of shareholders, thereby fostering innovation and long-term sustainability. Family businesses pay attention to SEW (socioemotional wealth) in business strategy, including the inheritance of family identity, well-maintained family wealth, and social recognition of family businesses [15]. Therefore, family businesses participating in the corporate governance evaluation will pay more attention to their ESG performance.

There are many studies on family business and ESG [8,16,17]. However, research on the environmental and social performance of the corporate governance mechanisms of multinational family firms in Taiwan remains limited. Therefore, this study examines the impact of family business corporate governance on environmental and social performance. This research distinguishes between internal and external governance mechanisms, with a focus on the moderating effects of external governance on ESG outcomes.

2. Hypothesis Development

2.1. The Influence of Internal Corporate Governance of Family Business on Environmental and Social Performance

Currently, there is no consistent standard for the definition of a family business. Handler [18] defined family businesses across four dimensions: multiple conditions, ownership–management, generational transfer, and the interdependence of subsystems or the degree of family involvement in the business.

Chua, Chrisman, and Sharma [19] defined a family business as one where the family has significant influence over the business through ownership and management involvement, and there is an intention to maintain family control across generations. Additionally, Claessens [20] considered a company to be a family business when family members own a substantial portion of the voting rights or have significant control over the firm’s decisions. Furthermore, Anderson and Reeb [21] identified a firm as a family business if the founding family continues to hold positions on the board or maintains substantial ownership stakes.

Yeh [22] pointed out that 76% of listed companies in Taiwan are family-holding companies. Since the shareholding structure of an enterprise determines the shareholder structure, the degree of shareholding concentration will affect the way shareholders exercise their power, thereby affecting the operation of corporate governance. Family businesses often experience agency problems due to the separation of ownership and management rights, which can lead to conflicts of interest between ownership and management or between controlling and minority shareholders. The first type of agency problem occurs when managers, who hold less equity, pursue their personal interests rather than the company’s goals, resulting in decisions that benefit the managers at the expense of shareholders [23]. The second type of agency problem occurs between major and minority shareholders, where controlling shareholders may exploit the interests of minority shareholders through mechanisms like pyramid structures or cross-shareholding [24]. As the concentration of ownership increases, the agency problem shifts from one between ownership and management to one between controlling shareholders and minority shareholders [25].

The literature presents two opposing perspectives on the agency problem in family businesses: the convergence-of-interest hypothesis and the conflict-of-interest hypothesis. Jensen and Meckling [24] put forward the convergence-of-interest hypothesis. When the management class holds more equity, most of the decision-making consequences of the company will be borne by the management class. Therefore, the management class will aim to maximize the company’s overall interests. Jensen and Ruback [26] put forward the conflict-of-interest hypothesis. They pointed out that when the shareholding ratio of the management class is high to a certain extent, to pursue their interests, they may use their voting rights to veto decisions that are not beneficial to them.

Morck and Yeung [27] argued that family-controlled companies may lack incentives to improve the company’s social relations based on their interests. In the face of fierce industrial competition, family companies may take unfavorable measures to consolidate their position in the market, neglecting socially sustainable behaviors [28,29,30]. Since the controlling shareholder of a family business invests his wealth in the company, they have a strong motivation to protect the family’s private interests to ensure the smooth transfer of wealth between generations. In addition, family controlling shareholders will deliberately maintain the company’s operating control to strengthen its decision-making influence [24,31,32].

Furthermore, family controlling shareholders often perceive compliance with ESG standards as incurring additional costs that may reduce profits. However, empirical research indicates that family businesses’ efforts to maintain family reputation and accumulate social capital can positively impact ESG performance, particularly concerning environmental initiatives. For example, Berrone [6] has provided strong empirical evidence that family businesses tend to adopt proactive environmental strategies in order to preserve socioemotional wealth, which supports the hypothesis that governance mechanisms in family businesses impact ESG performance. Similarly, Block and Wagner [7] reported that family ownership is positively associated with environmental performance. More recent studies, such as Espinosa-Méndez [33], have also highlighted that strong bonding social capital within family firms enhances ESG performance. Moreover, cultural differences in Asian countries, where family businesses are particularly prominent, may significantly influence the approach to ESG issues. This necessitates further investigation into the regional nuances of family business governance in relation to environmental performance. Therefore, it remains important to investigate how family business governance impacts environmental performance in this region. Given the theoretical and empirical perspectives on family business governance, we hypothesize the following relationship:

H1. 

The corporate governance mechanisms of family businesses have a negative impact on environmental performance.

On the social dimension of ESG, family businesses often prioritize financial stability over social issues, such as labor rights, human rights, and industrial security [34]. Berrone [6] found a negative relationship between family business governance and social aspects of ESG performance. Family businesses tend to be less active in social responsibility initiatives, particularly concerning employee rights, social inclusion, and environmental protection. Considering the prioritization of financial stability over social concerns, we propose the following hypothesis to investigate the effect of family business governance on social performance:

H2. 

The corporate governance mechanisms of family businesses have a negative impact on social performance.

These hypotheses will be tested using a regression analysis to assess the impact of family business governance mechanisms on both environmental and social performance.

2.2. The Moderate Effect of External Governance on the Relationship Between Corporate Governance and the Environmental and Social Performance of Family Businesses

In pursuit of sustainable development, stakeholders play an important role in promoting ESG practices within enterprises. For example, Sparkes and Cowton [35] highlighted that stakeholders, including institutional investors, are concerned not only with the financial performance of businesses but also with their non-financial outcomes. Institutional investors, by investing in financial instruments such as stocks or bonds, become significant stakeholders who influence corporate policies and practices. Furthermore, Martínez-Ferrero and Lozano [36] examining firms in emerging countries found a U-shaped relationship between institutional ownership and ESG performance, suggesting that both low and high levels of institutional ownership can influence ESG outcomes. These findings underscore the importance of considering the diverse interests and influences of stakeholders, particularly institutional investors, in shaping corporate ESG policies and practices.

At present, institutional investors can understand the non-financial performance of companies through various channels, including sustainability reports and ESG ratings. A sustainability report refers to a report in which an enterprise actively discloses or is required by the competent authority to disclose its governance, environmental, and social aspects. By analyzing the sustainability report, institutional investors can assess the ESG performance and risks of the company, thereby influencing their investment decisions (KPMG, 2017 [37]). Institutional investors will be more inclined to invest if a company performs well in terms of ESG. They will consider ESG factors when evaluating the long-term investment value of the company [38]. Conversely, if a company performs poorly in terms of ESG, institutional investors may choose to exit or reduce investment.

In addition, institutional investors can use the sustainability report to evaluate the reputation and image of the company, as well as the risks and opportunities it faces in terms of ESG, and then affect its cooperation with the company. Suppose a company performs poorly in terms of ESG. In that case, it may suffer public criticism and social pressure, which will negatively impact the corporate image and reputation and affect the investment decisions of institutional investors.

An ESG evaluation refers to an evaluation by independent evaluation agencies or investment companies of the performance of enterprises in terms of environmental, social, and governance factors. The results of the appraisal can help investors and other stakeholders evaluate the risks and opportunities of the enterprise. Taiwanese companies participate in international ESG evaluations such as MSCI, DJSI, and ISS. Eccles and Serafeim [14] pointed out that companies with better ESG ratings also performed better than others regarding financial performance, stock price performance, and dividend distribution and could attract long-term investors. In addition, Friede, Busch, and Bassen [39] argued that institutional investors view companies with strong ESG performance as vehicles for promoting sustainable development and advancing environmental and social responsibility. These studies collectively offer compelling evidence of the positive correlation between ESG performance and long-term financial success, underscoring the importance of ESG considerations in investment decision-making.

Due to the characteristics of the governance structure of family businesses, there needs to be more ESG risk management. However, institutional investors’ attention to ESG ratings and investment decisions has positively impacted the ESG performance of family businesses.

Liu, Xiong, Gao, and Zhang [40] conducted a study of Chinese enterprises, examining the impact of institutional investors on ESG performance. Their findings revealed that the higher the proportion of shares held by institutional investors, the better the ESG performance. Long-term holders are more likely to exert a greater influence on the company’s future ESG performance. Therefore, this study suggests that the higher the proportion of institutional investors’ holdings, the better the ESG performance of family-owned businesses, with significant improvements in environmental and social outcomes. This indicates that institutional investors are increasingly stringent in their expectations and requirements for ESG performance, and companies must prioritize ESG efforts to gain market and societal recognition.

Therefore, companies should pay attention to the impact of institutional investors’ shareholding ratio on their ESG performance. At the same time, institutional investors should also play an active role in actively guiding companies to achieve higher ESG standards, thereby improving the ESG performance and value of companies.

H3a. 

The shareholding ratio of institutional investors has a moderating effect on the negative relationship between family directors and environmental performance

H3b. 

The shareholding ratio of institutional investors has a moderating effect on the negative relationship between family shareholding and environmental performance.

H3c. 

The shareholding ratio of institutional investors has a moderating effect on the negative relationship between family control and environmental performance.

H3d. 

The shareholding ratio of institutional investors has a moderating effect on the negative relationship between family directors and social performance.

H3e. 

The shareholding ratio of institutional investors has a moderating effect on the negative relationship between family shareholding and social performance.

H3f. 

The shareholding ratio of institutional investors has a moderating effect on the negative relationship between family control and social performance.

The sustainability report is an important medium to provide corporate stakeholders with information about ESG policies, commitments, and highlights. Therefore, the accuracy of the content of the sustainability report is crucial. At present, the sustainability reports of most listed companies in Taiwan are verified by third-party verification agencies or the Big Four accounting firms. A few companies have done so.

Kolk and Perego’s [41] research results showed that enterprise size, industry, national policy, and stakeholder pressure are important factors that affect the third-party verification of an enterprise’s sustainability report. Hodge, Subramaniam, and Stewart [42] further pointed out that a sustainability report verified by a third party can increase the confidence of stakeholders in the report and increase stakeholders’ understanding of the reliability and correctness of the information in the sustainability report. In addition, Kolk and Perego [41] also pointed out that third-party verification can help improve the quality and reliability of sustainability reports and increase the trust of stakeholders in the reports.

H4a. 

Sustainability report verification has a moderating effect on the negative relationship between family directors and environmental performance.

H4b. 

Sustainability report verification has a moderating effect on the negative relationship between family ownership and environmental performance.

H4c. 

Sustainability report verification has a moderating effect on the negative relationship between family control and environmental performance.

H4d. 

Sustainability report verification has a moderating effect on the negative correlation between family directors and social performance.

H4e. 

Sustainability report verification has a moderating effect on the negative correlation between family ownership and social performance.

H4f. 

Sustainability report verification has a moderating effect on the negative correlation between family control and social performance.

The corporate governance evaluation system promoted by the Financial Supervisory Commission is expected to have four types of positive impacts on the corporate governance mechanisms and environmental and social performance of family businesses. First of all, it can improve the transparency of corporate information because corporate governance evaluation requires companies to disclose more information, including corporate governance structure, board operations, and senior management compensation, which will help improve the transparency of family businesses. Second, corporate governance assessment usually encourages family businesses to increase the number of independent directors and supervisors, thereby reducing the influence of family members on the board of directors and only increasing the independence and impartiality of corporate governance. The third is to optimize the corporate governance structure. Through corporate governance evaluation, family businesses can find and improve weaknesses in the corporate governance structure. Finally, the corporate governance evaluation considers ESG, meaning family businesses will pay more attention to sustainable development in the company’s operations. Therefore, corporate governance evaluation positively impacts the sustainable performance of family businesses.

In addition, according to SEW (socioemotional wealth) theory, family businesses pay more attention to socioemotional wealth in terms of business strategy, especially the social recognition of family businesses [15]. Corporate governance and foreign investment evaluations such as MSCI and DJSI are all evaluations that external stakeholders pay attention to, so they positively impact the environmental and social performance of family businesses.

Although scholars have yet to research the environmental and social performance underpinning ESG ratings in the past, He [43] pointed out that the ESG ratings of Chinese companies have a significant positive relationship with corporate value. Furthermore, Chen and Fan [44] pointed out that the ESG ratings and corporate performance of Chinese companies are positively correlated. It can be said that ESG ratings have a positive impact on companies.

H5a. 

Corporate governance evaluation has a moderating effect on the negative relationship between family directors and environmental performance.

H5b. 

Corporate governance evaluation has a moderating effect on the negative relationship between family ownership and environmental performance.

H5c. 

Corporate governance evaluation has a moderating effect on the negative relationship between family control and environmental performance.

H5d. 

Corporate governance evaluation has a moderating effect on the negative correlation between family directors and social performance.

H5e. 

Corporate governance evaluation has a moderating effect on the negative correlation between family ownership and social performance.

H5f. 

Corporate governance evaluation has a moderating effect on the negative correlation between family control and social performance.

The conceptual framework of this study is illustrated in Figure 1. It outlines the relationship between family business governance and environmental and social performance, with external governance acting as a moderating factor. Control variables are also included to account for firm-specific characteristics.

3. Variables and Statistics

3.1. Data and Setting

The samples of this study are from the ESG, corporate governance, and corporate financial databases of Taiwan Economic News (TEJ), and the sample period is from 2015 to 2022. TEJ is available through a subscription service and is widely used in academic research. The disclosure score, including the company’s environmental, social, and governance performance, was selected from the TEJ ESG database. The shareholding ratio of institutional investors was selected from the TEJ corporate governance database. The data for calculating the financial ratios of enterprises were all selected from TEJ’s financial database. The final dataset includes 4377 firm-year observations, with 1691 from family firms and 2686 from non-family firms.

3.2. Variables Definition and Descriptive Statistics

Table 1. Definitions of variables.

Variables	Definition
Environmental Performance (EP)	This variable represents a comprehensive score measuring a company’s environmental performance. The score encompasses various environmental issues and the completeness of corporate information disclosure. The scoring methodology applies different weights to companies from different industries, ensuring that the total score is calculated in accordance with industry-specific characteristics
Social Performance (SP)	This variable represents a comprehensive score measuring a company’s social performance. The score encompasses various environmental issues and the completeness of corporate information disclosure. The scoring methodology applies different weights to companies from different industries, ensuring that the total score is calculated in accordance with industry-specific characteristics
Family Directors (FD)	The ratio of individual board seats of the ultimate controller of the family business to the total number of board members
Family Share (FS)	This variable measures the ownership of family businesses. It is calculated by aggregating the total shareholding percentage of the ultimate controller of the family business, the shareholding percentage of the group’s unlisted company, the shareholding percentage of the group foundation, and the shareholding percentage of the group’s listed company
Family Control (FC)	This variable is a dummy variable that takes the value of 1 if family ownership exceeds 10%; otherwise, it is 0
Institutional Investors’ Shareholding Ratio (INS)	This variable represents the shareholding ratio of institutional investors. It is calculated by aggregating the shareholdings of both domestic and foreign institutional investors
VERIFICATION	Dummy for verification; 1 = yes, 0 = no
EVALUATION	Dummy for evaluation; 1 = yes, 0 = no
ROA	Profit or loss after deducting non-recurring gains/losses/total assets in the previous year
SG	(Net sales revenue − Last year’s net sales revenue)/(Last year’s net sales revenue)
LEV	Book value of liabilities/Book value of assets at the end of the period
SIZE	ln (total assets)
AGE	Duration of the company

presents the definitions of key variables used in this study, covering aspects such as corporate governance, financial performance, institutional investment, and family control. Environmental performance (EP) and social performance (SP) are scored based on various issues and disclosures, with industry-specific weighting adjustments to ensure fairness and comparability. Family governance variables (FD, FS, FC) measure the influence of family members, including board seat proportion, ownership percentage, and control status.

Table 2. Descriptive statistics.

	N	Mean	SD	Min	Max
EP	4377	22.823	12.269	0.214	67.017
SP	4377	22.897	12.068	0.279	76.169
FD	4377	0.337	0.119	0.000	0.667
FS	4377	24.445	18.539	0.000	97.400
FC	4377	0.976	0.152	0.000	1.000
INS	4377	70.850	43.146	0.000	98.19
VERIFICATION	4377	0.193	0.395	0.000	1.000
EVALUATION	4377	0.543	0.498	0.000	1.000
ROA	4377	0.108	0.536	−0.776	1.141
SG	4377	0.030	0.305	−0.993	1.856
LEV	4377	1.018	2.823	0.003	69.24
SIZE	4377	15.316	1.490	10.485	22.038
AGE	4377	26.103	12.503	0.000	75.000
N	4377

shows the descriptive statistics of the total variables. The average value of the independent variable EP is 22.823, and the standard deviation is 12.269. The mean value of the independent variable SP is 22.897, the standard deviation is 12.068, and the mean values of EP and SP are very close.

As for the corporate governance structure of family businesses, the variables in this study include family directors (FD), family shareholding (FS), and family control (FC). Table 2 shows that the average value of FD is 0.337, and the standard deviation is 0.119. The average value of the share held by the FS is 24.445, and the standard deviation is 18.539, which shows that families occupy a relatively important position in the ownership structure of the enterprises. Finally, for FC, the mean is 0.976, and the standard deviation is 0.152. It is clear from the data that families significantly influence decision-making and governance.

3.3. Correlation Coefficient Analysis

Table 3. Correlation coefficient.

Panel A
Variables	EP	FD	FS	FC	ROA	SG	LEV	SIZE	AGE
EP	1.000
FD	−0.111 ***	1.000
	(0.000)
FS	−0.021	0.015	1.000
	(0.169)	(0.332)
FC	−0.047 ***	−0.084 ***	0.193 ***	1.000
	(0.002)	(0.000)	(0.000)
ROA	−0.028 *	0.024	0.043 ***	0.009	1.000
	(0.060)	(0.112)	(0.005)	(0.546)
SG	−0.055 ***	−0.008	−0.074 ***	−0.012	0.016	1.000
	(0.000)	(0.612)	(0.000)	(0.410)	(0.297)
LEV	0.896 ***	−0.079 ***	0.035 **	−0.067 ***	−0.040 ***	−0.078 ***	1.000
	(0.000)	(0.000)	(0.019)	(0.000)	(0.008)	(0.000)
SIZE	0.624 ***	−0.108 ***	−0.104 ***	−0.125 ***	0.004	0.011	0.471 ***	1.000
	(0.000)	(0.000)	(0.000)	(0.000)	(0.816)	(0.455)	(0.000)
AGE	0.173 ***	−0.181 ***	0.063 ***	0.034 **	−0.048 ***	−0.132 ***	0.137 ***	0.261 ***	1.000
	(0.000)	(0.000)	(0.000)	(0.024)	(0.002)	(0.000)	(0.000)	(0.000)
N	4377
Panel B
Variables	SP	FD	FS	FC	ROA	SG	LEV	SIZE	AGE
SP	1.000
FD	−0.114 ***	1.000
	(0.000)
FS	−0.007	0.015	1.000
	(0.655)	(0.332)
FC	−0.076 ***	−0.084 ***	0.193 ***	1.000
	(0.000)	(0.000)	(0.000)
ROA	−0.026 *	0.024	0.043 ***	0.009	1.000
	(0.086)	(0.112)	(0.005)	(0.546)
SG	−0.030 *	−0.008	−0.074 ***	−0.012	0.016	1.000
	(0.050)	(0.612)	(0.000)	(0.410)	(0.297)
LEV	0.902 ***	−0.079 ***	0.035 **	−0.067 ***	−0.040 ***	−0.078 ***	1.000
	(0.000)	(0.000)	(0.019)	(0.000)	(0.008)	(0.000)
SIZE	0.647 ***	−0.108 ***	−0.104 ***	−0.125 ***	0.004	0.011	0.471 ***	1.000
	(0.000)	(0.000)	(0.000)	(0.000)	(0.816)	(0.455)	(0.000)
AGE	0.193 ***	−0.181 ***	0.063 ***	0.034 **	−0.048 ***	−0.132 ***	0.137 ***	0.261 ***	1.000
	(0.000)	(0.000)	(0.000)	(0.024)	(0.002)	(0.000)	(0.000)	(0.000)
N	4377

* p < 0.1, ** p < 0.05, *** p < 0.01.

reports the use of the Pearson correlation coefficient to assess the relationships between key variables. Pearson correlation was chosen because our variables are continuous and approximately normally distributed, making it suitable for measuring linear relationships.

4. Empirical Results

4.1. Main Hypothesis Testing

Table 4. Results for the impact of family governance on environmental and social performance.

Variables	H1: EP	H2: SP
FD	−9.693 ***	−8.156 ***
	(−7.302)	(−6.363)
FS	−0.025 ***	−0.017 **
	(−3.022)	(−2.116)
FC	−9.482 ***	−10.918 ***
	(−10.791)	(−12.870)
ROA	−0.486 *	−0.407
	(−1.782)	(−1.545)
SG	−0.561	0.761
	(−1.132)	(1.589)
LEV	1.160 ***	1.066 ***
	(21.953)	(20.906)
SIZE	2.499 ***	2.563 ***
	(36.350)	(38.624)
AGE	0.003	0.024 *
	(0.225)	(1.766)
Transportation	−1.354 *	0.757
	(−1.656)	(0.958)
Traditional	4.393 ***	6.709 ***
	(3.444)	(5.448)
Oil	−1.528 **	−2.214 ***
	(−2.342)	(−3.514)
Technology	−5.420 ***	−6.323 ***
	(−5.352)	(−6.467)
Biotechnology	−3.355 ***	−4.162 ***
	(−6.032)	(−7.749)
Others	−5.606 ***	−6.331 ***
	(−7.443)	(−8.706)
R2	0.848	0.858
adj. R2	0.848	0.858
F	1280.112	1386.539

t-statistics in parentheses. * p < 0.1, ** p < 0.05, *** p < 0.01.

presents the regression results examining the effects of family governance on environmental performance (EP) and social performance (SP), testing hypotheses H1 and H2. The values in parentheses represent t-statistics. The symbols *, **, and *** indicate significance levels of 10%, 5%, and 1%, respectively. Column (1) uses environmental performance as the dependent variable, while Column (2) uses social performance as the dependent variable.

The regression results indicate that regardless of whether environmental or social performance is used as the dependent variable, the three variables measuring family business governance—FD, FS, and FC—exhibit a negative and significant relationship. This finding supports H1 and H2, suggesting that the corporate governance mechanisms of family businesses have a negative impact on non-financial performance, such as environmental and social performance. This result is also consistent with prior literature, which suggests that family businesses prioritize short-term financial performance over environmental and social considerations

4.2. Additional Analysis

Table 5. The moderating effect of institutional investors’ shareholding ratio on the relationship between family business governance and environmental and social performance.

Variables	EP	H3a: EP	H3b: EP	H3c: EP	SP	H3d: SP	H3e: SP	H3f: SP
FD	−9.544 ***	−13.761 ***	−9.352 ***	−5.076 ***	−8.080 ***	−13.088 ***	−7.862 ***	−3.854 ***
	(−7.165)	(−6.057)	(−7.000)	(−3.826)	(−6.282)	(−5.968)	(−6.095)	(−3.005)
FS	−0.027 ***	−0.026 ***	−0.053 ***	−0.015 *	−0.018 **	−0.017 **	−0.048 ***	−0.006
	(−3.196)	(−3.095)	(−3.187)	(−1.789)	(−2.201)	(−2.079)	(−2.945)	(−0.802)
FC	−9.142 ***	−8.472 ***	−9.201 ***	−25.768 ***	−10.744 ***	−9.948 ***	−10.810 ***	−26.467 ***
	(−10.000)	(−8.829)	(−10.060)	(−18.922)	(−12.170)	(−10.739)	(−12.242)	(−20.105)
ROA	0.005	−0.017	−0.002	−0.215 ***	0.003	−0.023 **	−0.006	−0.205 ***
	(1.342)	(−1.601)	(−0.402)	(−15.136)	(0.712)	(−2.331)	(−1.057)	(−14.978)
SG	−0.498 *	−0.503 *	−0.487 *	−0.466 *	−0.413	−0.419	−0.401	−0.383
	(−1.824)	(−1.844)	(−1.784)	(−1.752)	(−1.567)	(−1.592)	(−1.521)	(−1.489)
LEV	−0.610	−0.665	−0.582	−0.576	0.736	0.669	0.767	0.767
	(−1.227)	(−1.338)	(−1.170)	(−1.191)	(1.533)	(1.394)	(1.599)	(1.640)
SIZE	1.162 ***	1.160 ***	1.159 ***	1.108 ***	1.067 ***	1.065 ***	1.064 ***	1.016 ***
	(21.986)	(21.950)	(21.928)	(21.478)	(20.917)	(20.877)	(20.853)	(20.382)
AGE	2.437 ***	2.487 ***	2.470 ***	3.357 ***	2.532 ***	2.590 ***	2.569 ***	3.402 ***
	(29.549)	(29.182)	(29.250)	(34.080)	(31.788)	(31.491)	(31.506)	(35.722)
INS	0.008	0.008	0.008	−0.005	0.026 *	0.026 *	0.027 *	0.015
	(0.520)	(0.524)	(0.567)	(−0.348)	(1.880)	(1.887)	(1.935)	(1.064)
FD × INS		0.062 **				0.074 ***
		(2.291)				(2.819)
FS × INS			0.000 *				0.000 **
			(1.812)				(2.119)
FC × INS				0.219 ***				0.207 ***
				(16.138)				(15.787)
Transportation	−1.305	−1.226	−1.277	−0.105	0.782	0.875	0.812	1.916 **
	(−1.595)	(−1.497)	(−1.561)	(−0.131)	(0.989)	(1.108)	(1.028)	(2.476)
Traditional	4.361 ***	4.504 ***	4.301 ***	4.318 ***	6.693 ***	6.862 ***	6.624 ***	6.652 ***
	(3.419)	(3.528)	(3.371)	(3.475)	(5.433)	(5.568)	(5.378)	(5.538)
Oil	−1.452 **	−1.404 **	−1.381 **	−0.527	−2.174 ***	−2.118 ***	−2.095 ***	−1.300 **
	(−2.216)	(−2.144)	(−2.106)	(−0.823)	(−3.439)	(−3.351)	(−3.308)	(−2.100)
Technology	−5.436 ***	−5.456 ***	−5.436 ***	−4.553 ***	−6.331 ***	−6.355 ***	−6.331 ***	−5.496 ***
	(−5.368)	(−5.390)	(−5.369)	(−4.609)	(−6.474)	(−6.503)	(−6.476)	(−5.755)
Biotechnology	−3.226 ***	−3.207 ***	−3.172 ***	−2.284 ***	−4.095 ***	−4.072 ***	−4.034 ***	−3.204 ***
	(−5.716)	(−5.683)	(−5.612)	(−4.131)	(−7.514)	(−7.476)	(−7.393)	(−5.995)
Others	−5.501 ***	−5.413 ***	−5.448 ***	−4.080 ***	−6.277 ***	−6.173 ***	−6.217 ***	−4.933 ***
	(−7.265)	(−7.143)	(−7.192)	(−5.493)	(−8.586)	(−8.438)	(−8.501)	(−6.871)
R2	0.848	0.849	0.849	0.856	0.858	0.859	0.859	0.865
adj. R2	0.848	0.848	0.848	0.856	0.858	0.858	0.858	0.865
F	1222.211	1170.333	1169.770	1243.538	1323.401	1268.038	1266.977	1342.123

t-statistics in parentheses. * p < 0.1, ** p < 0.05, *** p < 0.01.

presents the regression results examining the moderating effect of institutional investors’ shareholding ratio on the relationship between family business governance and environmental and social performance, testing hypotheses H3a, H3b, H3c, H3d, H3e, and H3f. The values in parentheses represent t-statistics. The symbols *, **, and *** indicate significance levels of 10%, 5%, and 1%, respectively.

The regression analysis indicates that when institutional ownership is included as an external governance variable, the interaction between institutional ownership and family business governance shows a positive and statistically significant relationship. This suggests that a higher proportion of institutional investors within a company’s shareholder base can help mitigate the negative effects of family business governance on environmental and social performance. These findings provide support for hypotheses H3a, H3b, H3c, H3d, H3e, and H3f, and are consistent with existing literature, which posits that institutional investors positively influence corporate environmental, social, and governance (ESG) performance.

Table 6. The moderating effect of sustainability report verification on the relationship between family business governance and environmental and social performance.

Variables	EP	H4a: EP	H4b: EP	H4c: EP	SP	H4d: SP	H4e: SP	H4f: SP
FD	−7.214 ***	−9.337 ***	−7.209 ***	−6.770 ***	−5.623 ***	−7.606 ***	−5.616 ***	−5.159 ***
	(−5.509)	(−6.559)	(−5.502)	(−5.193)	(−4.459)	(−5.549)	(−4.451)	(−4.114)
FS	−0.022 ***	−0.021 ***	−0.022 **	−0.019 **	−0.013 *	−0.013 *	−0.014	−0.011
	(−2.612)	(−2.598)	(−2.434)	(−2.360)	(−1.662)	(−1.648)	(−1.593)	(−1.385)
FC	−6.135 ***	−5.796 ***	−6.142 ***	−9.649 ***	−7.499 ***	−7.182 ***	−7.508 ***	−11.175 ***
	(−6.900)	(−6.494)	(−6.897)	(−9.611)	(−8.759)	(−8.357)	(−8.755)	(−11.573)
ROA	6.023 ***	2.395 **	5.954 ***	−9.887 ***	6.154 ***	2.765 ***	6.064 ***	−10.493 ***
	(14.710)	(2.294)	(9.537)	(−4.514)	(15.609)	(2.750)	(10.087)	(−4.981)
SG	−0.524 **	−0.520 *	−0.523 *	−0.534 **	−0.445 *	−0.442 *	−0.445 *	−0.456 *
	(−1.963)	(−1.952)	(−1.960)	(−2.012)	(−1.734)	(−1.723)	(−1.730)	(−1.787)
LEV	−1.123 **	−1.151 **	−1.126 **	−1.429 ***	0.186	0.160	0.183	−0.133
	(−2.309)	(−2.370)	(−2.313)	(−2.943)	(0.398)	(0.342)	(0.390)	(−0.286)
SIZE	1.148 ***	1.152 ***	1.147 ***	1.129 ***	1.054 ***	1.058 ***	1.053 ***	1.035 ***
	(22.207)	(22.312)	(22.156)	(21.940)	(21.180)	(21.280)	(21.128)	(20.899)
AGE	2.014 ***	2.042 ***	2.015 ***	2.222 ***	2.068 ***	2.094 ***	2.070 ***	2.286 ***
	(26.901)	(27.179)	(26.765)	(27.918)	(28.689)	(28.947)	(28.548)	(29.857)
VERIFICATION	0.016	0.015	0.016	0.010	0.037 ***	0.036 ***	0.037 ***	0.031 **
	(1.136)	(1.078)	(1.134)	(0.754)	(2.768)	(2.714)	(2.765)	(2.362)
FD * VERIFICATION		11.055 ***				10.327 ***
		(3.778)				(3.665)
FS * VERIFICATION			0.003				0.004
			(0.146)				(0.199)
FC * VERIFICATION				15.999 ***				16.740 ***
				(7.393)				(8.042)
Transportation	−0.814	−0.662	−0.814	−0.582	1.308 *	1.450 *	1.308 *	1.550 **
	(−1.017)	(−0.826)	(−1.017)	(−0.731)	(1.696)	(1.881)	(1.696)	(2.022)
Traditional	5.250 ***	5.289 ***	5.250 ***	5.190 ***	7.584 ***	7.621 ***	7.584 ***	7.521 ***
	(4.202)	(4.240)	(4.202)	(4.178)	(6.305)	(6.344)	(6.305)	(6.294)
Oil	−0.332	−0.293	−0.326	−0.160	−0.992	−0.955	−0.984	−0.811
	(−0.516)	(−0.455)	(−0.506)	(−0.249)	(−1.601)	(−1.543)	(−1.585)	(−1.317)
Technology	−4.930 ***	−4.957 ***	−4.928 ***	−4.806 ***	−5.822 ***	−5.848 ***	−5.820 ***	−5.692 ***
	(−4.973)	(−5.007)	(−4.970)	(−4.874)	(−6.100)	(−6.134)	(−6.096)	(−6.002)
Biotechnology	−1.714 ***	−1.801 ***	−1.710 ***	−1.512 ***	−2.484 ***	−2.566 ***	−2.480 ***	−2.273 ***
	(−3.085)	(−3.244)	(−3.076)	(−2.734)	(−4.644)	(−4.799)	(−4.632)	(−4.273)
Others	−3.931 ***	−3.876 ***	−3.928 ***	−3.595 ***	−4.620 ***	−4.568 ***	−4.616 ***	−4.268 ***
	(−5.273)	(−5.205)	(−5.267)	(−4.839)	(−6.436)	(−6.371)	(−6.427)	(−5.973)
R2	0.855	0.855	0.855	0.857	0.865	0.866	0.865	0.867
adj. R2	0.854	0.855	0.854	0.856	0.865	0.865	0.865	0.866
F	1286.549	1234.632	1230.362	1246.734	1401.434	1344.556	1340.236	1361.084

t-statistics in parentheses. * p < 0.1, ** p < 0.05, *** p < 0.01.

presents the regression results examining the moderating effect of sustainability report verification on the relationship between family business governance and environmental and social performance, testing hypotheses H4a, H4b, H4c, H4d, H4e, and H4f. The values in parentheses represent t-statistics. The symbols *, **, and *** indicate significance levels of 10%, 5%, and 1%, respectively.

The regression analysis reveals that when VERIFICATION is included as an external governance variable, the interaction term between VERIFICATION and family business governance is generally positive and statistically significant. This suggests that third-party assurance of a company’s sustainability report can help mitigate the negative effects of family business governance on environmental and social performance. These findings support hypotheses H4a, H4c, H4d, and H4f, and are consistent with prior literature, which asserts that third-party assurance enhances the quality of sustainability reports, thereby improving corporate environmental and social performance.

Table 7. The moderating effect of corporate governance evaluation on the relationship between family business governance and environmental and social performance.

Variables	EP	H5a: EP	H5b: EP	H5c: EP	SP	H5d: SP	H5e: SP	H5f: SP
FD	−9.004 ***	−13.061 ***	−8.788 ***	−7.523 ***	−7.576 ***	−11.907 ***	−7.269 ***	−6.086 ***
	(−6.862)	(−7.208)	(−6.690)	(−5.712)	(−5.963)	(−6.788)	(−5.721)	(−4.775)
FS	−0.015 *	−0.013	−0.039 ***	−0.010	−0.008	−0.007	−0.042 ***	−0.004
	(−1.760)	(−1.603)	(−3.237)	(−1.237)	(−0.986)	(−0.813)	(−3.635)	(−0.439)
FC	−8.990 ***	−8.535 ***	−8.865 ***	−14.665 ***	−10.510 ***	−10.025 ***	−10.332 ***	−16.218 ***
	(−10.336)	(−9.697)	(−10.185)	(−13.077)	(−12.479)	(−11.765)	(−12.271)	(−14.943)
ROA	3.076 ***	0.415	1.949 ***	−11.623 ***	2.608 ***	−0.232	1.011 **	−12.178 ***
	(9.865)	(0.473)	(3.826)	(−6.192)	(8.638)	(−0.274)	(2.051)	(−6.704)
SG	−10.407 ***	−10.654 ***	−10.407 ***	−10.732 ***	−9.187 ***	−9.451 ***	−9.187 ***	−9.514 ***
	(−8.262)	(−8.452)	(−8.268)	(−8.571)	(−7.532)	(−7.744)	(−7.545)	(−7.850)
LEV	−0.577	−0.652	−0.633	−0.912 *	0.760	0.680	0.680	0.423
	(−1.173)	(−1.325)	(−1.287)	(−1.860)	(1.596)	(1.428)	(1.429)	(0.891)
SIZE	1.157 ***	1.155 ***	1.164 ***	1.138 ***	1.063 ***	1.061 ***	1.073 ***	1.043 ***
	(22.105)	(22.095)	(22.234)	(21.857)	(20.969)	(20.959)	(21.183)	(20.710)
AGE	2.383 ***	2.449 ***	2.414 ***	2.693 ***	2.470 ***	2.540 ***	2.513 ***	2.781 ***
	(32.970)	(32.653)	(33.038)	(32.953)	(35.285)	(34.983)	(35.557)	(35.166)
EVALUATION	0.003	−0.000	0.005	0.001	0.024 *	0.020	0.026 *	0.022
	(0.241)	(−0.033)	(0.368)	(0.094)	(1.742)	(1.438)	(1.930)	(1.601)
FD × EVALUATION		7.784 ***				8.310 ***
		(3.243)				(3.576)
FS × EVALUATION			0.045 ***				0.063 ***
			(2.798)				(4.098)
FC * EVALUATION				14.782 ***				14.870 ***
				(7.940)				(8.253)
Transportation	−1.624 **	−1.600 **	−1.604 **	−1.224	0.522	0.547	0.550	0.924
	(−2.012)	(−1.985)	(−1.989)	(−1.524)	(0.668)	(0.700)	(0.705)	(1.188)
Traditional	4.034 ***	4.039 ***	3.574 ***	3.965 ***	6.396 ***	6.401 ***	5.744 ***	6.327 ***
	(3.205)	(3.212)	(2.817)	(3.170)	(5.247)	(5.258)	(4.680)	(5.226)
Oil	−1.373 **	−1.370 **	−1.422 **	−1.088 *	−2.090 ***	−2.087 ***	−2.159 ***	−1.803 ***
	(−2.130)	(−2.128)	(−2.207)	(−1.696)	(−3.348)	(−3.347)	(−3.463)	(−2.903)
Technology	−5.201 ***	−5.233 ***	−5.315 ***	−4.994 ***	−6.137 ***	−6.172 ***	−6.299 ***	−5.929 ***
	(−5.204)	(−5.242)	(−5.318)	(−5.028)	(−6.342)	(−6.386)	(−6.515)	(−6.168)
Biotechnology	−3.232 ***	−3.264 ***	−3.266 ***	−2.875 ***	−4.063 ***	−4.097 ***	−4.110 ***	−3.704 ***
	(−5.882)	(−5.945)	(−5.945)	(−5.248)	(−7.635)	(−7.708)	(−7.736)	(−6.985)
Others	−6.111 ***	−6.100 ***	−6.219 ***	−5.589 ***	−6.782 ***	−6.770 ***	−6.935 ***	−6.257 ***
	(−8.184)	(−8.177)	(−8.324)	(−7.505)	(−9.380)	(−9.375)	(−9.595)	(−8.680)
R2	0.853	0.853	0.853	0.855	0.862	0.862	0.862	0.863
adj. R2	0.852	0.852	0.852	0.854	0.861	0.861	0.861	0.863
F	1261.791	1209.782	1208.989	1225.281	1356.765	1301.521	1302.778	1318.891

t-statistics in parentheses. * p < 0.1, ** p < 0.05, *** p < 0.01.

presents the regression results examining the moderating effect of corporate governance evaluation on the relationship between family business governance and environmental and social performance, testing hypotheses H5a, H5b, H5c, H5d, H5e, and H5f. The values in parentheses represent t-statistics. The symbols *, **, and *** indicate significance levels of 10%, 5%, and 1%, respectively.

The regression analysis indicates that when EVALUATION is introduced as an external governance variable, the interaction term between EVALUATION and family business governance is consistently positive and statistically significant. This suggests that when a company undergoes sustainability report evaluations, the negative impact of family business governance on environmental and social performance can be mitigated to some extent. These findings support hypotheses H5a, H5b, H5c, H5d, H5e, and H5f, and align with prior literature, which suggests that sustainability performance evaluations are important to investors and are positively associated with corporate financial and market performance. As such, these evaluations can enhance the focus that family businesses place on improving their environmental and social performance.

4.3. Robustness Checks

Table 8. Robustness checks.

	H1: EP	H2: SP
main
FD	−11.017 ***	−0.081 ***
	(−8.002)	(−2.760)
FS	−0.007	−0.000
	(−0.720)	(−0.227)
FC	−9.479 ***	−0.140 ***
	(−9.610)	(−6.517)
ROA	−11.495 ***	0.202 ***
	(−8.178)	(6.691)
SG	−0.088	0.049 ***
	(−0.162)	(4.190)
LEV	1.146 ***	−0.011 ***
	(22.345)	(−10.500)
SIZE	2.652 ***	0.007 ***
	(31.580)	(3.774)
AGE	0.003	0.001 *
	(0.222)	(1.866)
select_age10
_cons	0.490 ***	0.491 ***
	(11.405)	(11.441)
employeenumber	−0.000	−0.000
	(−1.489)	(−1.478)
indgroup	0.074 ***	0.074 ***
	(7.457)	(7.493)
Mills
lambda	−10.235 ***	−0.291 ***
	(−3.608)	(−4.564)
N_selected	4008	4008

t-statistics in parentheses. * p < 0.1, *** p < 0.01.

presents the outcome equation of the Heckman model, using the same variables as the main regression in Table 4. The second part represents the selection equation, which mitigates potential selection bias by filtering based on industry classification and employee count. The Mills lambda refers to the inverse Mills ratio, indicating whether the original data exhibit potential selection bias.

This study employs the Heckman two-step selection model to correct for potential sample selection bias. Table 8 presents the estimation results, where the first stage represents the selection equation, estimating the likelihood of a firm’s survival beyond five years, while the second stage represents the outcome equation, examining the impact of family ownership on environmental performance.

In the selection equation, the dependent variable select_age10 is a dummy variable that equals 1 if the firm’s age is greater than 10; otherwise, it equals 0. Industry classification variable (indgroup) has a significant and positive effect on firm survival (p < 0.01), indicating that survival rates vary significantly across industries. However, although the coefficient for the number of employees (employeenumber) is negative, it is not statistically significant, suggesting that its influence on firm survival is less pronounced. Overall, the results of the selection equation are reasonable and support the role of industry factors in firm survival. Notably, the inverse Mills ratio (IMR, lambda) is significantly negative (p < 0.01), indicating the presence of sample selection bias. This finding suggests that failing to account for such bias could lead to distorted regression results. Therefore, the application of the Heckman two-step model is appropriate, as it enhances the reliability of the estimation results and strengthens the overall robustness and completeness of the study.

In the outcome equation, even after applying the Heckman two-step selection model, FD and FC continue to exhibit a significant negative impact on EP (p < 0.01), consistent with the main regression results. The results indicate that even after avoiding the potential selection bias, family business governance still has a negative impact on environmental and social performance, thus enhancing the robustness of this study.

5. Conclusions

This study has investigated the impact of the corporate governance structure of family businesses on environmental and social performance, focusing on listed family enterprises in Taiwan, excluding the financial and securities industries. The results indicate that family business governance mechanisms—specifically, family directors, family shareholding, and family control—have a significantly negative impact on the environmental and social performance of these companies.

Additionally, this research has examined the role of external governance mechanisms, such as institutional investors’ shareholding, sustainability report verification, and corporate governance evaluations, in moderating the relationship between family business governance and environmental and social performance. The findings show that institutional investors play a crucial positive moderating role. As the shareholding ratio of institutional investors increases, the negative impact of family governance structures on environmental and social performance is significantly mitigated. Furthermore, family businesses with third-party-verified sustainability reports experience a notable reduction in the negative impacts from family control over governance. However, the interaction between sustainability report verification and family ownership does not produce a statistically significant positive effect. Finally, corporate governance evaluations contribute positively by enhancing environmental and social performance, as family businesses are motivated by the desire for positive evaluation outcomes.

This study contributes to the literature in several ways. First, it expands the theoretical understanding of the relationship between family business governance and environmental and social performance, particularly within the context of emerging markets like Taiwan. The research underscores the central role of family business governance structures—such as family control and family shareholding—in shaping the sustainability performance of these companies. From a practical standpoint, it highlights the importance of addressing potential governance challenges posed by family control and balancing them with external governance mechanisms to improve long-term sustainability outcomes.

The theoretical implications of this study include a deeper understanding of how family governance structures impact corporate sustainability performance, and how they can be moderated by external governance mechanisms. Practically, the results call for enhanced policy focus on institutional investor engagement and third-party sustainability report verification as tools to mitigate the negative effects of family control on corporate performance.

This study also provides actionable recommendations for improving governance transparency in family businesses, emphasizing the integration of sustainability into core strategic objectives. To strengthen the environmental and social performance of family businesses, reinforcing external governance mechanisms is essential—particularly through active engagement with institutional investors and the widespread adoption of third-party-verified sustainability reports. At the same time, increasing governance transparency by balancing family control with external management can lead to fairer decision-making and better long-term sustainability outcomes. Beyond external governance, family businesses should integrate sustainability into their core strategic objectives, fostering a culture of accountability and long-term environmental and social responsibility.

For future research, extending the study period and incorporating a broader range of external governance variables—including cross-national data—could enhance the robustness and generalizability of the findings. Moreover, exploring the impact of family business governance on other dimensions of corporate performance would offer valuable insights.

This study has two main limitations. First, the period covered by the research was relatively short, which may affect the generalizability of the findings. Future studies could extend the observation period to better assess long-term relationships. Second, the secondary data used in this study were sourced from Taiwan Economic News, and the accuracy of the data depends on the reliability of the information provided by the companies. Missing or inaccurate data could affect the empirical results. Future research could employ more diverse datasets to enhance the validity and reliability of the findings.