DO FAMILY CEOS "DUMP" FIRMS WITH DECLINING VALUE TO PROFESSIONAL CEOS?: EVIDENCE FROM CEO TURNOVER

Hyung Cheol Kang; Ji Hye Lee; Hee Sub Byun

doi:10.15057/hje.2021004

DO FAMILY CEOS "DUMP" FIRMS WITH DECLINING VALUE TO PROFESSIONAL CEOS? EVIDENCE FROM CEO TURNOVER

Hyung Cheol Kang, Ji Hye Lee, Hee Sub Byun

School of Business Administration

Research output: Contribution to journal › Article › peer-review

Abstract

Dividingchief executive officers (CEOs) into two distinct categories, family CEOs and professional CEOs, this study analyzes the value of family management based on an event study of CEO turnover. Empirical analysis on Korean firms reveals that stock price reaction to all events of CEO turnover is not significant. However, a significantly negative stock price reaction is observed only when a family CEO is replaced with a professional CEO. Additionally, we find that family ownership reduces significantly after this type of CEO turnover. These results suggest that family CEOs pursue private benefits rather than responsible management from a long-term perspective, thus "dumping"a firm with declining value to a professional CEO. We provide academic implications by findingnew empirical evidence that family management could hurt firm value.

Original language	English
Pages (from-to)	74-100
Number of pages	27
Journal	Hitotsubashi Journal of Economics
Volume	62
Issue number	2
DOIs	https://doi.org/10.15057/hje.2021004
State	Published - Dec 2021

Keywords

CEO turnover
dumping
family management
private benefit
shareholder wealth

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10.15057/hje.2021004

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title = "DO FAMILY CEOS {"}DUMP{"} FIRMS WITH DECLINING VALUE TO PROFESSIONAL CEOS?: EVIDENCE FROM CEO TURNOVER",

abstract = "Dividingchief executive officers (CEOs) into two distinct categories, family CEOs and professional CEOs, this study analyzes the value of family management based on an event study of CEO turnover. Empirical analysis on Korean firms reveals that stock price reaction to all events of CEO turnover is not significant. However, a significantly negative stock price reaction is observed only when a family CEO is replaced with a professional CEO. Additionally, we find that family ownership reduces significantly after this type of CEO turnover. These results suggest that family CEOs pursue private benefits rather than responsible management from a long-term perspective, thus {"}dumping{"}a firm with declining value to a professional CEO. We provide academic implications by findingnew empirical evidence that family management could hurt firm value.",

keywords = "CEO turnover, dumping, family management, private benefit, shareholder wealth",

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year = "2021",

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T1 - DO FAMILY CEOS "DUMP" FIRMS WITH DECLINING VALUE TO PROFESSIONAL CEOS?

T2 - EVIDENCE FROM CEO TURNOVER

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AU - Byun, Hee Sub

PY - 2021/12

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N2 - Dividingchief executive officers (CEOs) into two distinct categories, family CEOs and professional CEOs, this study analyzes the value of family management based on an event study of CEO turnover. Empirical analysis on Korean firms reveals that stock price reaction to all events of CEO turnover is not significant. However, a significantly negative stock price reaction is observed only when a family CEO is replaced with a professional CEO. Additionally, we find that family ownership reduces significantly after this type of CEO turnover. These results suggest that family CEOs pursue private benefits rather than responsible management from a long-term perspective, thus "dumping"a firm with declining value to a professional CEO. We provide academic implications by findingnew empirical evidence that family management could hurt firm value.

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DO FAMILY CEOS "DUMP" FIRMS WITH DECLINING VALUE TO PROFESSIONAL CEOS? EVIDENCE FROM CEO TURNOVER

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