Adoptive Expectations: Rising Sons in Japanese Family Firms
University of Alberta - Department of Finance and Statistical Analysis
National Bureau of Economic Research (NBER); University of Alberta - Department of Finance and Statistical Analysis
National University of Singapore - Department of Finance/Strategy and Policy
February 28, 2011
The practice of adopting adults, even if one has biological children, makes Japanese family firms unusually competitive. Our nearly population-wide panel of postwar listed non-financial firms shows inherited family firms more important in postwar Japan than generally realized, and also performing well – an unusual finding for a developed economy. Adopted heirs’ firms outperform blood heirs’ firms, and match or nearly match founder-run listed firms. Both adopted and blood heirs’ firms outperform non-family firms. Using family structure variables as instruments, we find adopted heirs “causing” elevated performance. These findings are consistent with adult adoptees displacing blood heirs in the left tail of the talent distribution, with the “adopted son” job motivating star managers, and with the threat of displacement inducing blood heirs to invest in human capital, mitigating the so-called “Carnegie conjecture” that inherited wealth deadens talent.
Number of Pages in PDF File: 42
Keywords: Adoption, Corporate Governance, Family Business, Inherited Ability, Japan, Succession
JEL Classification: G32, G34, M13, O53
Date posted: March 7, 2011
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