Family Feud: Succession Tournaments and Risk-taking in Family Firms

68 Pages Posted: 14 Dec 2015 Last revised: 8 Sep 2021

See all articles by Jongsub Lee

Jongsub Lee

Seoul National University; University of Florida - Warrington College of Business Administration

Hojong Shin

California State University, Long Beach

Hayong Yun

Michigan State University - Department of Finance

Date Written: January 11, 2021

Abstract

We identify succession as a novel determinant of risk-taking in family firms. We find significantly higher risk-taking (M&A and cash flow volatility) and lower operating efficiency in firms controlled by families with multiple sons during the pre- rather than the post-succession period compared to family firms with one or no sons. Pre-succession risk-taking by sons decreases following inheritance law amendments that require sharing of wealth among heirs, bolstering the causal interpretation of our findings. An infusion of outside talent via daughters’ marriages also alleviates sons’ relative rank-seeking behaviors during succession tournaments.

Keywords: succession tournaments, business group, risk shifting, family composition, sons, daughters, sons-in-law, sudden death of a group chairman, inheritance law

JEL Classification: G30

Suggested Citation

Lee, Jongsub and Shin, Hojong and Yun, Hayong, Family Feud: Succession Tournaments and Risk-taking in Family Firms (January 11, 2021). 11th Annual Mid-Atlantic Research Conference in Finance (MARC), Available at SSRN: https://ssrn.com/abstract=2703571 or http://dx.doi.org/10.2139/ssrn.2703571

Jongsub Lee (Contact Author)

Seoul National University ( email )

Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)

University of Florida - Warrington College of Business Administration ( email )

Department of Finance Insurance & Real Estate
P.O. Box 117168
Gainesville, FL 32611-7168
United States
352-273-4966 (Phone)
352-392-0301 (Fax)

Hojong Shin

California State University, Long Beach ( email )

1250 Bellflower Boulevard
Long Beach, CA 90840
United States
562.985.7996 (Phone)

Hayong Yun

Michigan State University - Department of Finance ( email )

645 N Shaw Lane, Room 339
East Lansing, MI 48824-1122
United States
517-884-0549 (Phone)

HOME PAGE: http://https://sites.google.com/site/hayongy/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
169
Abstract Views
1,517
rank
219,552
PlumX Metrics