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A Family Member or Professional Management? The Choice of a CEO and Its Impact on Performance

Author

Listed:
  • Shu-hui Lin
  • Shing-yang Hu

    (National Taiwan University in Taiwan)

Abstract

In this study, we explore what kinds of family firms are more likely to have a family CEO or professional CEO, and investigate the performance of CEOs from different backgrounds. The results show that firms with low requirements in managerial skills and a high potential for expropriation are more likely to choose a CEO from the controlling family (nepotism). Our investigation, furthermore, shows that when a firm requires high managerial skills, using a professional CEO can help firm performance, especially if the family has low cash-flow rights and weak control. When there is large opportunity for expropriation in a family firm, the firm's performance will be better if the CEO is a family member and the family has highly persuasive cash-flow rights. Copyright (c) 2007 The Authors; Journal compilation (c) 2007 Blackwell Publishing Ltd.

Suggested Citation

  • Shu-hui Lin & Shing-yang Hu, 2007. "A Family Member or Professional Management? The Choice of a CEO and Its Impact on Performance," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(6), pages 1348-1362, November.
  • Handle: RePEc:bla:corgov:v:15:y:2007:i:6:p:1348-1362
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    References listed on IDEAS

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    Cited by:

    1. De Cesari, Amedeo & Gonenc, Halit & Ozkan, Neslihan, 2016. "The effects of corporate acquisitions on CEO compensation and CEO turnover of family firms," Journal of Corporate Finance, Elsevier, vol. 38(C), pages 294-317.
    2. Lucrezia Songini & Paola Vola, 2015. "The Role of Professionalization and Managerialization in Family Business Succession," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2015(1), pages 9-43.
    3. repec:spr:manint:v:52:y:2012:i:6:d:10.1007_s11575-012-0148-x is not listed on IDEAS
    4. Fabio Zona, 2016. "CEO leadership and board decision processes in family-controlled firms: comparing family and non-family CEOs," Small Business Economics, Springer, vol. 47(3), pages 735-753, October.
    5. repec:eee:fambus:v:8:y:2017:i:4:p:237-247 is not listed on IDEAS
    6. Roman Alberto Quijano & Deneb Eli Magaña, 2014. "Succession Model for Family Businesses in the Highway-Building Field," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 4(1), pages 31-47, January.
    7. Webb, Justin W. & Ketchen Jr., David J. & Ireland, R. Duane, 2010. "Strategic entrepreneurship within family-controlled firms: Opportunities and challenges," Journal of Family Business Strategy, Elsevier, vol. 1(2), pages 67-77, June.
    8. William S. Schulze & Eric R. Gedajlovic, 2010. "Whither Family Business?," Journal of Management Studies, Wiley Blackwell, vol. 47(2), pages 191-204, March.

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