No Successor, No Success? Impact of a Little Son on Business Performance

Naomi Kodama, Yoshiaki Murakami and Mari Tanaka

Journal of the Japanese and International Economies, 2021, vol. 62, issue C

Abstract: The dynasty model, which assumes the presence of intergenerational altruism, implies that business owners will have more incentive to improve the firm’s performance if they expect their children to take over the firms. This study empirically examines how top managers’ expectations about future family succession affect the performance of small family firms. Exploiting the sex of the top manager’s first-born child as an instrumental variable for the manager’s expectations about business succession by his child, we find that the existence of a potential family successor has a positive effect on profit. We also find that the presence of a potential family successor induces business expansion and the managers’ actions to enhance performance, such as improving operational efficiency and investing in information technology.

Keywords: Expectation; Small and medium enterprises; Succession decision; Firm performance; Corporate decision-making (search for similar items in EconPapers)
JEL-codes: D25 D84 D91 E22 L25 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jjieco:v:62:y:2021:i:c:s0889158321000484

DOI: 10.1016/j.jjie.2021.101169

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