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Increased non‐family ownership in family‐owned firms: How does it affect CEO turnover‐performance sensitivity?

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  • Shuping Li

Abstract

Research Summary: This article investigates the impact of the increase in non‐family ownership in family‐owned firms on CEO turnover‐performance sensitivity. Longitudinal analyses based on 717 family‐owned Taiwanese public firms from 1997 to 2011 demonstrate a positive relationship between CEO turnover and poor firm financial performance (or CEO turnover‐performance sensitivity). This positive relationship is stronger when non‐family ownership is higher in the firms. Further, the positive effect of non‐family ownership on CEO turnover‐performance sensitivity is stronger when the lack of governance transparency or a higher deviation between control rights and cash flow rights enables entrenchment of families. The study contributes to the family business literature while also exploring the implications of corporate governance, particularly on CEO turnover. Managerial Summary: Corporate control in many economies, including emerging markets, has gradually transitioned from a family‐dominated structure to one with substantial non‐family ownership. How does the increase of non‐family ownership influence the monitoring effectiveness in family‐owned firms? To address this question, this study assesses the impact of non‐family ownership on CEO turnover‐performance sensitivity and its boundary conditions among 717 family‐owned firms in Taiwan from 1997 to 2011. The findings show that CEO turnover‐performance sensitivity increases with non‐family ownership, especially in firms with weak governance conditions. The study highlights the key role of non‐family owners for the best corporate governance design.

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  • Shuping Li, 2018. "Increased non‐family ownership in family‐owned firms: How does it affect CEO turnover‐performance sensitivity?," Strategic Management Journal, Wiley Blackwell, vol. 39(13), pages 3434-3457, December.
    • Handle: RePEc:bla:stratm:v:39:y:2018:i:13:p:3434-3457
    DOI: 10.1002/smj.2955
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    Cited by:

    1. Hanqing “Chevy” Fang & Kulraj Singh & Taewoo Kim & Laura Marler & James J. Chrisman, 2022. "Family business research in Asia: review and future directions," Asia Pacific Journal of Management, Springer, vol. 39(4), pages 1215-1256, December.
    2. Nikola Rosecká & Ondřej Machek, 2022. "Non-family members and conflict processes in family firms: a systematic review of literature," Journal of Business Economics, Springer, vol. 92(2), pages 235-281, February.
    3. Jana Oehmichen & Sebastian Firk & Michael Wolff & Franz Maybuechen, 2021. "Standing out from the crowd: Dedicated institutional investors and strategy uniqueness," Strategic Management Journal, Wiley Blackwell, vol. 42(6), pages 1083-1108, June.
    4. Jiaying Fan & Kai Wang & Lidong Wu, 2023. "Monitoring the Type I Agency Problem or the Type II Agency Problem? Directors Appointed by Non-State Shareholders and the CEO Turnover–Performance Sensitivity," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(7), pages 2160-2189, May.
    5. Caselli, Stefano & Gatti, Stefano & Chiarella, Carlo & Gigante, Gimede & Negri, Giulia, 2023. "Do shareholders really matter for firm performance? Evidence from the ownership characteristics of Italian listed companies," International Review of Financial Analysis, Elsevier, vol. 86(C).
    6. Byungjun Yu & Saixing Zeng & Hongquan Chen & Xiaohua Meng & Chiming Tam, 2021. "Doing more and doing better are two different entities: Different patterns of family control and environmental performance," Business Strategy and the Environment, Wiley Blackwell, vol. 30(1), pages 1-20, January.
    7. Du, Shanzhong & Cao, June, 2023. "Non-family shareholder governance and green innovation of family firms: A socio-emotional wealth theory perspective," International Review of Financial Analysis, Elsevier, vol. 90(C).
    8. Du, Shanzhong & Ma, Lianfu & Li, Zhuo, 2022. "Non-family shareholder governance and corporate risk-taking: Evidence from Chinese family-controlled businesses," Journal of Business Research, Elsevier, vol. 145(C), pages 156-170.
    9. Ting Qian & Caoyuan Yang, 2023. "State-Owned Equity Participation and Corporations’ ESG Performance in China: The Mediating Role of Top Management Incentives," Sustainability, MDPI, vol. 15(15), pages 1-21, July.
    10. Gupta, Parul & Chauhan, Sumedha, 2023. "Dynamics of corporate governance mechanisms - family firms’ performance relationship- a meta-analytic review," Journal of Business Research, Elsevier, vol. 154(C).
    11. Ho, Joanna & Huang, Cheng Jen & Karuna, Christo, 2020. "Large shareholder ownership types and board governance," Journal of Corporate Finance, Elsevier, vol. 65(C).

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