Firm Performance and Managerial Succession in Family Managed Firms

David Hillier · Patrick McColgan

87 citations0/0 files storedJournal of Business Finance &amp Accounting

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Family Business Performance and Succession Corporate Finance and Governance Human Resource and Talent Management

Abstract

Abstract: This paper investigates whether the family status of a company's top officer affects managerial replacement decisions. We report evidence that family‐managed companies are characterized by higher levels of board control and potentially weak internal governance systems. Family CEOs are less likely than non‐family CEOs to depart their position following poor performance. Stock prices react favorably and operating performance improves when companies announce the departure of a family CEO. Overall, our evidence suggests that shareholders benefit when a powerful CEO leaves their position in the company.

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References

1983Separation of Ownership and Control 1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1999Corporate Ownership Around the World 1996Agency costs of free cash flow, corporate finance, and takeovers 1996Higher market valuation of companies with a small board of directors 2003Founding‐Family Ownership and Firm Performance: Evidence from the S&P 500 1988Outside directors and CEO turnover 2005How do family ownership, control and management affect firm value?

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2019The Enigma of the Family Successor–Firm Performance Relationship: A Methodological Reflection and Reconciliation Attempt 2012Family Ownership and CEO Turnovers 2014Left in the dark: Family successors’ requirement profiles in the family business succession process 2018Non-family managers in family firms: review, integrative framework and future research agenda 2019Leadership succession in different types of organizations: What business and political successions may learn from each other

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