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

  • Shu-hui Lin
  • Shing-yang Hu

    (National Taiwan University in Taiwan)

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    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.

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    Article provided by Wiley Blackwell in its journal Corporate Governance: An International Review.

    Volume (Year): 15 (2007)
    Issue (Month): 6 (November)
    Pages: 1348-1362

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    Handle: RePEc:bla:corgov:v:15:y:2007:i:6:p:1348-1362
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