CEOs in family firms: Does junior know what he's doing?

B-Tier
Journal: Journal of Corporate Finance
Year: 2015
Volume: 33
Issue: C
Pages: 345-361

Score contribution per author:

1.005 = (α=2.01 / 2 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We model the evolution of CEO quality in family firms. When heirs work toward a common goal alongside an older generation, Bayesian updating attributes success mostly to the older (proven) agent. Thus, heirs learn little about their own skill. This effect is strongest after the founder, implying that family firms tend to either die immediately or be relatively long-lived. More generally, we obtain an even/odd fluctuation in generational quality. Because uncertainty breeds caution, our analysis points to a conservative managerial style in family firms and emphasizes the importance of external screening mechanisms, especially for heirs following a very successful generation.

Technical Details

RePEc Handle
repec:eee:corfin:v:33:y:2015:i:c:p:345-361
Journal Field
Finance
Author Count
2
Added to Database
2026-01-29