CEO Turnover in Family Firms: The Corporate Transparency Perspective

Abstract

Purpose-We investigate the relationship between family firms and Chief Executive Officer (CEO) turnover and the moderating role of corporate transparency in this association, using firms listed on the Taiwan Stock Exchange (TSE). 

Design/methodology/approach-Using a sample of 15,726 firm-year observations from 2002-2019, the study employs ordinary least squares (OLS) regression techniques to estimate the research models. Several methods are applied to address endogeneity issues in our findings. Additionally, the role of tax avoidance is analyzed as an underlying mechanism in the association between corporate transparency in family firms and CEO turnover.

Findings-We find a negative association between family firms and CEO turnover; however, this effect is weakened by corporate transparency. Consistent with the transparency hypothesis, corporate transparency mitigates the Type II agency problem. We also find that tax avoidance serves as an underlying mechanism in the association between corporate transparency in family firms and CEO turnover. 

Originality-Our results contribute to a better understanding of the moderating role of corporate transparency in mitigating the Type II agency problem, with implications for family firm owners and shareholders.

Keywords: CEO turnover, Family firms, Corporate transparency, Type II agency problem, Taiwan