Dancing with giants: Contextualizing state and family ownership effects on firm performance in the Gulf Cooperation Council

While principal–principal problems are prevalent in emerging economies, the severity of these problems could vary based on the identity of shareholders and the institutional context. This study theoretically and empirically analyzes the effect of state and family blockholders as well as their possible interaction on financial firm performance in the Gulf Cooperation Council (GCC) countries. Using a dataset of 389 non-financial firms and 2607 observations (2009–2015), we found that ownership held by the state as the largest shareholder has a negative effect on firm performance, whereas this negative effect disappears when the state owns between 15 % and 50 % of shares and coexists with local families as other large shareholders. Our findings contribute to the nexus between the family business and corporate governance literature by studying principal–principal agency problems and the impact of owner combinations on firm performance in emerging economies in the GCC region.