Inherited corporate control and returns on investment

This paper contributes to the literature on management in family firms by investigating how succession in family firms affects returns on investment. The identities of the chief executive officer (CEO) and the chairman of the board (COB) were used to establish whether the management of the firm can...

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Bibliographic Details
Published in:Small business economics 2013-08, Vol.41 (2), p.419-431
Main Authors: Eklund, Johan, Palmberg, Johanna, Wiberg, Daniel
Format: Article
Language:English
Subjects:
Boards of directors
Business and Management
Business economics
Business management
Business structures
Chairman of the board
Chief executive officers
Corporate governance
Descendants
Economic development
Economic models
Economic statistics
Economic theory
Entrepreneurship
Executives
External management
Family firms
Family owned businesses
Family ownership
Financial investments
Financial management
Industrial Organization
Investment management companies
Investment strategies
Management
Microeconomics
Performance evaluation
Return on investment
Returns on investment
Small and medium sized enterprises
Strategic management
Studies
Succession
Voting
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Summary:This paper contributes to the literature on management in family firms by investigating how succession in family firms affects returns on investment. The identities of the chief executive officer (CEO) and the chairman of the board (COB) were used to establish whether the management of the firm can be characterized as founder, descendant, or external management. A unique, unbalanced panel data set on listed Swedish firms covering the period from 1990 to 2005 was used in the analysis. The results show that founder management has a positive effect on the returns on investment in family firms, whereas descendant management has a negative impact. An external CEO as a successor in family firms leads to more efficient investment policies with increased firm value as a result. That is, when studying corporate governance in family firms it is important to account for what type of management the firm has. Further studies are required to understand the relationship between ownership, control, management, and firm performance.
ISSN:0921-898X
1573-0913
1573-0913
DOI:10.1007/s11187-012-9432-1