Family Ownership and CEO Turnovers
38 Pages Posted: 2 May 2013 Last revised: 5 Mar 2014
Date Written: May 30, 2013
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: Suggested Citation