Do Family Successions (Really) Reduce Firm Performance? Evidence from Large US Firms

40 Pages Posted: 15 Jun 2021

See all articles by Murali Jagannathan

Murali Jagannathan

SUNY at Binghamton - School of Management

Brett W. Myers

Texas Tech, Rawls College of Business

Xu Niu

Sacred Heart University - Jack Welch College of Business

Date Written: June 11, 2021

Abstract

This paper examines whether founder family successions lower performance in large US firms. We find no significant decreases in either accounting performance or firm value, and instead find evidence that both are improved. Consistent with this, we present evidence that family successions are associated with higher levels of employee trust, and that employee's human capital is not as easily transferable at family firms. Consistent with the literature, we find that the decision to appoint a founder family member as a successor CEO is not random, and occurs in low-growth, yet profitable firms. To mitigate these endogeneity problems, we first propensity match founder family firms with non-founder firms and examine the change in performance around founder successions relative to the matched firms. We also use two instruments of founder family successions in our analysis.

Keywords: founding family firm, family CEO succession, operating performance

JEL Classification: G32, G34

Suggested Citation

Jagannathan, Murali and Myers, Brett W. and Niu, Xu, Do Family Successions (Really) Reduce Firm Performance? Evidence from Large US Firms (June 11, 2021). Available at SSRN: https://ssrn.com/abstract=3865081 or http://dx.doi.org/10.2139/ssrn.3865081

Murali Jagannathan

SUNY at Binghamton - School of Management ( email )

P.O. Box 6015
Binghamton, NY 13902-6015
United States
607-777-4639 (Phone)

Brett W. Myers

Texas Tech, Rawls College of Business ( email )

Lubbock, TX 79407
United States

Xu Niu (Contact Author)

Sacred Heart University - Jack Welch College of Business ( email )

5151 Park Avenue
Fairfield, CT 06825

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

Paper statistics

Downloads
137
Abstract Views
366
rank
267,214
PlumX Metrics