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Adoptive expectations: Rising sons in Japanese family firms

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

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.

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Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 108 (2013)
Issue (Month): 3 ()
Pages: 840-854

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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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