Adoptive Expectations: Rising Sons in Japanese Family Firms

43 Pages Posted: 14 Mar 2011 Last revised: 16 Mar 2011

See all articles by Vikas Mehrotra

Vikas Mehrotra

University of Alberta - Department of Finance and Statistical Analysis

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Jungwook Shim

Independent

Yupana Wiwattanakantang

National University of Singapore - Department of Finance

Multiple version iconThere are 3 versions of this paper

Date Written: March 2011

Abstract

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 nonfinancial 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.

Suggested Citation

Mehrotra, Vikas and Morck, Randall K. and Shim, Jungwook and Wiwattanakantang, Yupana, Adoptive Expectations: Rising Sons in Japanese Family Firms (March 2011). NBER Working Paper No. w16874. Available at SSRN: https://ssrn.com/abstract=1784152

Vikas Mehrotra (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

School of Business
University of Alberta
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Randall K. Morck

University of Alberta - Department of Finance and Statistical Analysis ( email )

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Jungwook Shim

Independent ( email )

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Yupana Wiwattanakantang

National University of Singapore - Department of Finance ( email )

Business School
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Singapore, 117592
Singapore
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