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Passing the torch: Second-generation successor involvement and ESG performance of family firms

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  • Gao, Jie
  • Yan, Kexin
  • Tan, Qingmei

Abstract

As the initial stage of generational succession, second-generation successor involvement refers to successors entering the firm as non-core senior managers to gain operational experience and prepare for future leadership. This foundational step is vital for a smooth succession process. Using a sample of listed Chinese family firms from 2010 to 2023, this study shows that second-generation successor involvement significantly improves family firms’ ESG performance. However, this positive effect is attenuated when family members are heavily involved in strategic decision-making. Mechanism tests suggest that second-generation successor involvement enhances the preservation of extended socioemotional wealth and alleviates both type I and type II agency conflicts, thereby improving ESG performance. Further analysis reveals that the positive effect is more evident in the Social and Governance dimensions. Heterogeneity analysis indicates that the positive effect is amplified for family firms in highly dynamic environments marked by substantial uncertainty, rapidly shifting opportunities, and persistent competitive threats.

Suggested Citation

  • Gao, Jie & Yan, Kexin & Tan, Qingmei, 2026. "Passing the torch: Second-generation successor involvement and ESG performance of family firms," Journal of Behavioral and Experimental Finance, Elsevier, vol. 49(C).
    • Handle: RePEc:eee:beexfi:v:49:y:2026:i:c:s2214635026000225
    DOI: 10.1016/j.jbef.2026.101160
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