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Do Family CEOs “Dump” Firms with Declining Value to Professional CEOs?: Evidence from CEO Turnover

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  • Kang, Hyung Cheol
  • Lee, Ji Hye
  • Byun, Hee Sub

Abstract

Dividingchief executive officers (CEOs) into two distinct categories, family CEOs and professional CEOs, this study analyzes the value of family management based on an event study of CEO turnover. Empirical analysis on Korean firms reveals that stock price reaction to all events of CEO turnover is not significant. However, a significantly negative stock price reaction is observed only when a family CEO is replaced with a professional CEO. Additionally, we find that family ownership reduces significantly after this type of CEO turnover. These results suggest that family CEOs pursue private benefits rather than responsible management from a long-term perspective, thus “dumping” a firm with declining value to a professional CEO. We provide academic implications by findingnew empirical evidence that family management could hurt firm value.

Suggested Citation

  • Kang, Hyung Cheol & Lee, Ji Hye & Byun, Hee Sub, 2021. "Do Family CEOs “Dump” Firms with Declining Value to Professional CEOs?: Evidence from CEO Turnover," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 62(2), pages 74-100, December.
    • Handle: RePEc:hit:hitjec:v:62:y:2021:i:2:p:74-100
    DOI: 10.15057/hje.2021004
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    More about this item

    Keywords

    family management; private benefit; CEO turnover; dumping; shareholder wealth;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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