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Firm Performance and Managerial Succession in Family Managed Firms

Authors

  • David Hillier,

    1. The authors are respectively from Leeds University Business School and the Department of Accounting and Finance, University of Strathclyde. They would like to thank an anonymous referee, Silvia Gomez Anson, Oyvind Bohren, Clara Graziano, Kevin Keasey, Peter Pope (editor), Taeyoon Sung, Steen Thomsen, Josep Tribo, Pauline Weetman, and seminar participants at the Centre for Economics and Business Research conference on Corporate Governance in Closely Held Firms, 2005, the European Financial Management Association symposium on European Corporate Governance, 2005, the Institut fur Finanzmanagement conference on Corporate Governance in Family/Unlisted Firms, 2006, the JBFA Capital Markets Conference, 2008, the University of Glasgow, and the University of Strathclyde for their valuable comments on earlier drafts of this paper. They would also like to thank Martin Kemmitt for helpful research assistance. All errors remain the authors own.
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  • Patrick McColgan

    Corresponding author
    1. The authors are respectively from Leeds University Business School and the Department of Accounting and Finance, University of Strathclyde. They would like to thank an anonymous referee, Silvia Gomez Anson, Oyvind Bohren, Clara Graziano, Kevin Keasey, Peter Pope (editor), Taeyoon Sung, Steen Thomsen, Josep Tribo, Pauline Weetman, and seminar participants at the Centre for Economics and Business Research conference on Corporate Governance in Closely Held Firms, 2005, the European Financial Management Association symposium on European Corporate Governance, 2005, the Institut fur Finanzmanagement conference on Corporate Governance in Family/Unlisted Firms, 2006, the JBFA Capital Markets Conference, 2008, the University of Glasgow, and the University of Strathclyde for their valuable comments on earlier drafts of this paper. They would also like to thank Martin Kemmitt for helpful research assistance. All errors remain the authors own.
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* Address for correspondence: Patrick McColgan, Department of Accounting and Finance, University of Strathclyde, Glasgow, G4 0LN, UK.
e-mail: patrick.mccolgan@strath.ac.uk

Abstract

Abstract:  This paper investigates whether the family status of a company's top officer affects managerial replacement decisions. We report evidence that family-managed companies are characterized by higher levels of board control and potentially weak internal governance systems. Family CEOs are less likely than non-family CEOs to depart their position following poor performance. Stock prices react favorably and operating performance improves when companies announce the departure of a family CEO. Overall, our evidence suggests that shareholders benefit when a powerful CEO leaves their position in the company.

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