Family Ownership and CEO Turnovers

38 Pages Posted: 2 May 2013 Last revised: 5 Mar 2014

See all articles by Xia Chen

Xia Chen

Singapore Management University

Qiang Cheng

Singapore Management University

Zhonglan Dai

University of Texas at Dallas - School of Management

Date Written: May 30, 2013

Abstract

This paper investigates the impact of the founding family’s presence on CEO turnover decisions. We find that family firms managed by CEOs outside the founding family (i.e., professional CEO family firms) have higher CEO turnover-performance sensitivity than family firms managed by family members (i.e., family CEO firms) or non-family firms. These results are robust to alternative performance measures and CEO turnover definitions. Additional analyses indicate that higher family ownership leads to even higher (lower) turnover-performance sensitivity in professional CEO family firms (family CEO firms). These results indicate that, with regard to CEO turnover decisions, better monitoring of CEOs by family owners leads to the alleviation of agency conflicts, but the power of family CEOs leads to potential family entrenchment.

Keywords: family firms, CEO turnover, agency problems, family monitoring

JEL Classification: G30, M41

Suggested Citation

Chen, Xia and Cheng, Qiang and Dai, Zhonglan, Family Ownership and CEO Turnovers (May 30, 2013). Contemporary Accounting Research 30 (3): 1166-1190, Fall 2013. Available at SSRN: https://ssrn.com/abstract=2258868

Xia Chen

Singapore Management University ( email )

60 Stamford Rd.
Singapore 178900
Singapore

Qiang Cheng (Contact Author)

Singapore Management University ( email )

60 Stamford Road
Singapore, 178900
Singapore

Zhonglan Dai

University of Texas at Dallas - School of Management ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

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