Balancing continuity and change: performance effects of descendant leadership in family-influenced firms
Do descendants of founder(s) make good monitors (chairs) and managers (CEOs) in publicly traded firms? We use insights from agency theory and theory of altruism to develop testable propositions in this regard. We argue that descendant firms that are lead by a descendant chair, are driven by both economic incentives and positive altruism. This can facilitate lowering agency costs, continuity of the founders’ strategic vision, and therefore higher firm performance. On the other hand, descendant CEOs, responsible for executing the strategic vision, reflect an inefficient market for corporate control and negative altruism, lowering firm performance. Furthermore, takeover defenses reduce the positive performance effect of descendant chairs to a lesser extent than non-descendant chairs. Evidence from 124 manufacturing and shipping firms in Norway and Sweden largely support our hypotheses. In addition, the implications of application of altruism to a wider context of corporate governance are discussed.
Publisert i European Academy of Management- 3rd Annual Conference, 2003
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