Do Family CEOs “Dump” Firms with Declining Value to Professional CEOs?: Evidence from CEO Turnover

Hyung Cheol Kang, Ji Hye Lee and Hee Sub Byun

Hitotsubashi Journal of Economics, 2021, vol. 62, issue 2, 74-100

Abstract: Dividingchief executive officers (CEOs) into two distinct categories, family CEOs and professional CEOs, this study analyzes the value of family management based on an event study of CEO turnover. Empirical analysis on Korean firms reveals that stock price reaction to all events of CEO turnover is not significant. However, a significantly negative stock price reaction is observed only when a family CEO is replaced with a professional CEO. Additionally, we find that family ownership reduces significantly after this type of CEO turnover. These results suggest that family CEOs pursue private benefits rather than responsible management from a long-term perspective, thus “dumping” a firm with declining value to a professional CEO. We provide academic implications by findingnew empirical evidence that family management could hurt firm value.

Keywords: family management; private benefit; CEO turnover; dumping; shareholder wealth (search for similar items in EconPapers)
JEL-codes: G32 G34 L22 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hitjec:v:62:y:2021:i:2:p:74-100

DOI: 10.15057/hje.2021004

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