Are non-family successors all the same? Inside-promoted vs. outside-sourced

Yin-Hua Yeh and Chen-Chieh Liao

Journal of Corporate Finance, 2021, vol. 71, issue C

Abstract: This paper studies the differences in post-succession changes in managerial styles and operating performance among three types of successors, namely family successors, inside-promoted non-family successors and outside non-family successors. The data is drawn from Taiwan, where family firms dominate the domestic stock market and there exists a rich, lengthy data set available for analysis. We find that firms having undergone outside non-family successions increase operating performance. This result, however, comes with the cost of managerial short-termism, leading to a reduction in long-term investment. On the other hand, outside non-family successors also improve investor relationships while impairing employee and bank relationships. In contrast, inside-promoted non-family successors tend to increase long-term investment, which differentiates them from family successors who do not adjust investment policies after successions; elsewhere these two types of successors' managerial styles appear to be relatively similar.

Keywords: Family business; Succession; Long-term investment; Management styles (search for similar items in EconPapers)
JEL-codes: G3 M2 O3 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:71:y:2021:i:c:s0929119921002443

DOI: 10.1016/j.jcorpfin.2021.102122

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