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Adoptive expectations: Rising sons in Japanese family firms

Author

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  • Mehrotra, Vikas
  • Morck, Randall
  • Shim, Jungwook
  • Wiwattanakantang, Yupana

Abstract

We find inherited family firms more important in postwar Japan than generally realized, and also performing well on average. Non-consanguineous heir-run firms outperform blood heirs' firms, and roughly match founder-run listed firms, while blood heirs surpass professional managers at running family firms. Further, succession events suggest that adopted heirs “cause” elevated performance. We suggest that heir-run firms do well because non-consanguineous heirs displace the least talented blood heirs, the non-consanguineous heir “job” motivates professional managers, and the threat of displacement encourages blood heirs' effort and human capital accumulation, mitigating the “Carnegie conjecture” that inherited wealth deadens talent.

Suggested Citation

  • Mehrotra, Vikas & Morck, Randall & Shim, Jungwook & Wiwattanakantang, Yupana, 2013. "Adoptive expectations: Rising sons in Japanese family firms," Journal of Financial Economics, Elsevier, vol. 108(3), pages 840-854.
  • Handle: RePEc:eee:jfinec:v:108:y:2013:i:3:p:840-854
    DOI: 10.1016/j.jfineco.2013.01.011
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    More about this item

    Keywords

    Adoptions; Corporate governance; Family business; Inherited ability; Japan; Succession;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

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