Seminarios académicos y conferencias
"The ties that bind: family CEOs, management practices and firing costs"
Coautorado con Renata Lemos
7 Marzo 2019 - 17:00 hrs.
Sala de Postgrado, Facultad de Ciencias Económicas y Administrativas UC
Abstract: Family firms are the most prevalent firm type in the world, particularly in emerging economies. Although dynastic family firms tend to have lower productivity, what explains their underperformance is still an open question. We collect new data on CEO successions for over 900 firms in Latin America and Europe to document their corporate governance choices and provide the first causal evidence on the negative effect of dynastic CEO successions on the adoption of managerial structures tied to improved productivity. Specifically, we establish two key resultsand propose a novel mechanism. First, there is a preference for male heirs: when the founding CEO steps down they are 30pp more likely to keep control within the family when they have a son. Second, instrumenting with the gender of the founder’s children, we estimate dynastic CEO successions lead to almost one standard deviations lower adoption of “best practices” managerial structures, suggesting an implied productivity decrease of up to 10%. To guide our discussion on mechanisms, we build a stylized model with two types of CEOs (family and professional) who decide whether to invest in better management practices. Family CEOs cannot credibly committo disciplining employees without incurring reputation costs. This induces lower worker effortand reduces the returns to investing in management structures. We find empirical evidence that, controlling for lower knowledge and skill levels of managers, reputational costs constrain investment in productivity-enhancing management structures