Succession: The Roles of Specialized Assets and Transfer Costs

1 Pages Posted: 30 Jan 2008

See all articles by Joseph P. H. Fan

Joseph P. H. Fan

The Chinese University of Hong Kong (CUHK) - School of Accountancy

Ming Jian

Nanyang Technological University (NTU)

Yin-Hua Yeh

Fu-Jen Catholic University - Department of International Trade and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: December 6, 2007

Abstract

This paper reports an average negative 56 percent buy-and-hold market-adjusted stock return of emerging market entrepreneurial/family firms during a 5-year period in which their controlling owners pass on ownership and control to their successors. The value destruction is importantly attributable to the difficulties in partitioning and transferring specialized assets across individuals and/or firm boundaries, including intangible assets such as relationships with employees and banks, or assets jointly controlled by family members and/or co-founders. The existence of these specialized assets also explains why firm ownership is concentrated and why heirs or close relatives are chosen as successors in most of the succession events. During and after the successions, the firms and successors more subject to stakeholder conflicts and credibility losses are more likely to improve their corporate governance quality and dividend payouts.

Keywords: Succession, Family firms, Asia

JEL Classification: G32, L21, M13

Suggested Citation

Fan, Po Hung Joseph P. H. and Jian, Ming and Yeh, Yin Hua, Succession: The Roles of Specialized Assets and Transfer Costs (December 6, 2007). Second Singapore International Conference on Finance 2008, Available at SSRN: https://ssrn.com/abstract=1088287 or http://dx.doi.org/10.2139/ssrn.1088287

Po Hung Joseph P. H. Fan

The Chinese University of Hong Kong (CUHK) - School of Accountancy ( email )

Shatin, N.T.
Hong Kong
(852) 26097839 (Phone)
(852) 26035114 (Fax)

Ming Jian (Contact Author)

Nanyang Technological University (NTU) ( email )

Nanyang Business School
Singapore, 639798
Singapore

Yin Hua Yeh

Fu-Jen Catholic University - Department of International Trade and Finance ( email )

510, Zhongzheng Rd.
Xinzhuang Dist.
New Taipei County, 24205
Taiwan
+886-2-2903-1111 (Phone)
+886-2-2901-9779 (Fax)

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