This paper investigates the impact of the founding family’s presence on CEO turnover decisions. We find that family firms managed by CEOs outside the founding family (i.e., professional CEO family firms) have higher CEO turnover-performance sensitivity than family firms managed by family members (i.e., family CEO firms) or non-family firms. These results are robust to alternative performance measures and CEO turnover definitions. Additional analyses indicate that higher family ownership leads to even higher (lower) turnover-performance sensitivity in professional CEO family firms (family CEO firms). These results indicate that, with regard to CEO turnover decisions, better monitoring of CEOs by family owners leads to the alleviation of agency conflicts, but the power of family CEOs leads to potential family entrenchment.
family firms, CEO turnover, agency problems, family monitoring
Accounting | Corporate Finance | Human Resources Management
Corporate Reporting and Disclosure
Contemporary Accounting Research
CHEN, Xia; CHENG, Qiang; and DAI, Zhonglan.
Family Ownership and CEO Turnovers. (2013). Contemporary Accounting Research. 30, (3), 1166-1190. Research Collection School Of Accountancy.
Available at: http://ink.library.smu.edu.sg/soa_research/875