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All in the family? CEO succession and firm organization

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  • Renata Lemos
  • Daniela Scur

Abstract

Family firms are the most prevalent type of firm in the world and account for a large proportion of the economic activity and employment, especially in developing countries. We consider firms to be “family controlled” when the founding family owns over 25% of shares and the CEO is a family member. In this paper we investigate the relationship between family control and firm organization and performance in the manufacturing sector of primarily emerging economies. To do this we collect a new detailed dataset of the succession history in terms of ownership (who owns the shares) as well as control (who is the CEO) for over 800 firms in Latin America, Africa and Europe. We merge this with a unique dataset on firm performance and organizational structures, including on quality of managerial practices. We exploit exogenous variation in the composition of the family CEO’s children, and use it as an instrumental variable for family ownership and control. Our results suggest that family-owned-and-controlled firms are worse managed, with coefficients being over twice larger under 2SLS than OLS. In general the negative link seems to stem from the family vs non-family control rather than simply family or non-family ownership. Firms owned by families but with non-family CEOs do not suffer from the deficit in management quality.

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  • Renata Lemos & Daniela Scur, 2016. "All in the family? CEO succession and firm organization," CSAE Working Paper Series 2016-29, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2016-29
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    File URL: https://ora.ox.ac.uk/objects/uuid:dd3f9add-a221-4c44-8da5-27d621b744bd
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    Cited by:

    1. Maloney, William F. & Sarrias, Mauricio, 2017. "Convergence to the managerial frontier," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 284-306.
    2. Oriana Bandiera & Renata Lemos & Andrea Prat & Raffaella Sadun, 2018. "Managing the Family Firm: Evidence from CEOs at Work," The Review of Financial Studies, Society for Financial Studies, vol. 31(5), pages 1605-1653.
    3. Chen, Cheng & Steinwender, Claudia, 2021. "Import competition, heterogeneous preferences of managers, and productivity," Journal of International Economics, Elsevier, vol. 133(C).
    4. Shu-Fen Chuah & Swee-Sim Foong, 2019. "Managerial Ability and Firm Performance in Malaysia: Do Familiness and Foreignness of the CEOs Matter?," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 22(03), pages 1-31, September.
    5. Rahmouni, Mohieddine, 2023. "Corruption and corporate innovation in Tunisia during an economic downturn," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 314-326.

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