All in the family? CEO succession and firm organization
This paper is work in progress. If you would like to see the latest version of the paper, please contact me for the draft at firstname.lastname@example.org. An early version of this paper has been released as a working paper in the Centre for Study of African Economies series.
Abstract: Family ownership is the most prevalent type of firm ownership around the world and accounts for a large proportion of the economic activity and employment, especially in developing countries. In this paper we investigate the relationship between family control and firm organization and performance in the manufacturing sector of primarily emerging economies. To do this we collect a new detailed dataset of firm ownership and control history for over 800 firms in Latin America, Africa and Europe and merge this data with a unique dataset on firm performance and organizational structures, including on quality of managerial practices. We exploit exogenous variation in the composition of the family CEO’s children, and use it as an instrumental variable for family ownership and control. Our results suggest that family-owned-and-controlled firms are worse managed, with coefficients being over twice larger under 2SLS than OLS. In general the negative link seems to stem from the family or non-family relationship between the firm’s CEO and the owners, rather than simply family or non-family ownership.