Leadership succession and corporate sustainability: international evidence from family firms

Donghyeok Jang and Sahar Darehshiri

Social Responsibility Journal, 2025, vol. 22, issue 2, 465-482

Abstract: PurposeThis study aims to investigate whether leadership succession in family firms influences corporate sustainability outcomes, focusing on environmental, social and governance (ESG) performance. It examines generational transitions as internal governance changes that may enhance sustainability engagement.Design/methodology/approachThe authors use a global panel of publicly listed family firms from 2008 to 2021 and estimate fixed-effects regressions to test the hypotheses. To address potential endogeneity related to leadership succession, the authors implement a difference-in-differences framework that compares ESG outcomes before and after generational transitions.FindingsESG scores improve significantly following generational transitions, particularly in governance and environmental dimensions. These effects are most pronounced in less regulated industries, where firms have greater discretion to shape sustainability strategy.Research limitations/implicationsThis study focuses on publicly listed family firms, so the findings may not generalize to private or smaller family companies that have different ESG dynamics. Future research could examine whether similar patterns hold in private firms and explore the mechanisms and institutional conditions that shape ESG outcomes during succession.Practical implicationsLeadership succession offers a strategic opportunity to improve ESG engagement, particularly in sectors with fewer regulatory mandates such as retail, technology and manufacturing. Boards in these industries should treat leadership transitions as pivotal points to integrate sustainability goals into long-term planning. In contrast, firms in highly regulated sectors may focus on maintaining continuity in governance to uphold compliance standards.Originality/valueThis study contributes to the sustainability and governance literature by offering international evidence that internal leadership change can serve as a driver of improved ESG performance. It highlights the importance of governance evolution in promoting long-term corporate responsibility.

Keywords: ESG; Sustainability; Family firms; Generational transitions (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:srjpps:srj-04-2025-0388

DOI: 10.1108/SRJ-04-2025-0388

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