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Inherited Control and Firm Performance

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Author Info
Francisco Pérez-González
Abstract

I use data from chief executive officer (CEO) successions to examine the impact of inherited control on firms? performance. I find that firms where incoming CEOs are related to the departing CEO, to a founder, or to a large shareholder by either blood or marriage underperform in terms of operating profitability and market-to-book ratios, relative to firms that promote unrelated CEOs. Consistent with wasteful nepotism, lower performance is prominent in firms that appoint family CEOs who did not attend ?selective? undergraduate institutions. Overall, the evidence indicates that nepotism hurts performance by limiting the scope of labor market competition. (JEL G32, G34, L25, M13)

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File URL: http://hdl.handle.net/10.1257/aer.96.5.1559
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File URL: http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=96&issue=5&article=7&issue_date=December2006
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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 5 (December)
Pages: 1559-1588
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Handle: RePEc:aea:aecrev:v:96:y:2006:i:5:p:1559-1588

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  1. Lauren Cohen & Andrea Frazzini & Christopher Malloy, 2007. "The Small World of Investing: Board Connections and Mutual Fund Returns," NBER Working Papers 13121, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Marianne Bertrand & Simon Johnson & Krislert Samphantharak & Antoinette Schoar, 2008. "Mixing Family With Business: A Study of Thai Business Groups and the Families Behind Them," NBER Working Papers 13738, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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This page was last updated on 2009-12-13.

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