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How do managerial successions shape corporate financial policies in family firms?

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  • Amore, Mario Daniele
  • Minichilli, Alessandro
  • Corbetta, Guido

Abstract

Despite recent evidence on the importance of chief executive officer (CEO) successions in family firms, we still know little about the differences in corporate strategies entailed by family and professional managers around transition. We investigate the consequences of managerial successions for the financial policies of Italian family firms. Our findings indicate that the appointment of non-family professional CEOs leads to a significant increase in the use of debt, primarily driven by short-term maturities. We document substantial heterogeneity in the impact of professional successions on debt financing: the increase in debt is particularly pronounced for young firms, firms with a high level of investment, and firms in which the controlling family maintains a dominant representation on the board of directors. Examining the importance of financial flexibility, we find that the increase in debt occurs primarily when firms are cash-poor, and when incoming CEOs can exploit spare borrowing capacity.

Suggested Citation

  • Amore, Mario Daniele & Minichilli, Alessandro & Corbetta, Guido, 2011. "How do managerial successions shape corporate financial policies in family firms?," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 1016-1027, September.
  • Handle: RePEc:eee:corfin:v:17:y:2011:i:4:p:1016-1027
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    References listed on IDEAS

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    Cited by:

    1. Caprio, Lorenzo & Croci, Ettore & Del Giudice, Alfonso, 2011. "Ownership structure, family control, and acquisition decisions," Journal of Corporate Finance, Elsevier, pages 1636-1657.
    2. Lardon, Andy & Deloof, Marc & Jorissen, Ann, 2017. "Outside CEOs, board control and the financing policy of small privately held family firms," Journal of Family Business Strategy, Elsevier, pages 29-41.
    3. repec:eee:jbvent:v:32:y:2017:i:6:p:674-693 is not listed on IDEAS
    4. Cucculelli, Marco & Marchionne, Francesco, 2012. "Market opportunities and owner identity: Are family firms different?," Journal of Corporate Finance, Elsevier, pages 476-495.
    5. Pinheiro, Roberto & Yung, Chris, 2015. "CEOs in family firms: Does junior know what he's doing?," Journal of Corporate Finance, Elsevier, pages 345-361.
    6. Keasey, Kevin & Martinez, Beatriz & Pindado, Julio, 2015. "Young family firms: Financing decisions and the willingness to dilute control," Journal of Corporate Finance, Elsevier, pages 47-63.
    7. Lin, Tsui-Jung & Tsai, Han-Fang & Imamah, Nur & Hung, Jung-Hua, 2016. "Does the identity of multiple large shareholders affect the value of excess cash? Evidence from China," Pacific-Basin Finance Journal, Elsevier, pages 173-190.
    8. Marco Cucculelli & Lidia Mannarino & Valeria Pupo & Fernanda Ricotta, 2014. "Owner-management, firm age and productivity in Italian family firms," Mo.Fi.R. Working Papers 99, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.

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