How do Managerial Successions Shape Corporate Financial Policies in Family Firms?

Mario Daniele Amore, Alessandro Minichilli, Guido Corbetta

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Despite recent evidence on the importance of chief executive officer (CEO) successions in family firms, we still know little about the differences in corporate strategies entailed by family and professional managers around transition. We investigate the consequences of managerial successions for the financial policies of Italian family firms. Our findings indicate that the appointment of non-family professional CEOs leads to a significant increase in the use of debt, primarily driven by short-term maturities. We document substantial heterogeneity in the impact of professional successions on debt financing: the increase in debt is particularly pronounced for young firms, firms with a high level of investment, and firms in which the controlling family maintains a dominant representation on the board of directors. Examining the importance of financial flexibility, we find that the increase in debt occurs primarily when firms are cash-poor, and when incoming CEOs can exploit spare borrowing capacity.
Original languageEnglish
JournalJournal of Corporate Finance
Volume17
Issue number4
Pages (from-to)1016-1027
ISSN0929-1199
DOIs
Publication statusPublished - 2011

Keywords

  • Family Firms
  • Financial flexibility
  • Financial Policies
  • Professional Managers
  • CEO Succession

Cite this

Amore, Mario Daniele ; Minichilli, Alessandro ; Corbetta, Guido. / How do Managerial Successions Shape Corporate Financial Policies in Family Firms?. In: Journal of Corporate Finance. 2011 ; Vol. 17, No. 4. pp. 1016-1027.
@article{4fb77eb3be654b0690c5931146aa5158,
title = "How do Managerial Successions Shape Corporate Financial Policies in Family Firms?",
abstract = "Despite recent evidence on the importance of chief executive officer (CEO) successions in family firms, we still know little about the differences in corporate strategies entailed by family and professional managers around transition. We investigate the consequences of managerial successions for the financial policies of Italian family firms. Our findings indicate that the appointment of non-family professional CEOs leads to a significant increase in the use of debt, primarily driven by short-term maturities. We document substantial heterogeneity in the impact of professional successions on debt financing: the increase in debt is particularly pronounced for young firms, firms with a high level of investment, and firms in which the controlling family maintains a dominant representation on the board of directors. Examining the importance of financial flexibility, we find that the increase in debt occurs primarily when firms are cash-poor, and when incoming CEOs can exploit spare borrowing capacity.",
keywords = "Family Firms , Financial flexibility, Financial Policies, Professional Managers, CEO Succession",
author = "Amore, {Mario Daniele} and Alessandro Minichilli and Guido Corbetta",
year = "2011",
doi = "10.1016/j.jcorpfin.2011.05.002",
language = "English",
volume = "17",
pages = "1016--1027",
journal = "Journal of Corporate Finance",
issn = "0929-1199",
publisher = "Elsevier",
number = "4",

}

How do Managerial Successions Shape Corporate Financial Policies in Family Firms? / Amore, Mario Daniele; Minichilli, Alessandro; Corbetta, Guido.

In: Journal of Corporate Finance, Vol. 17, No. 4, 2011, p. 1016-1027.

Research output: Contribution to journalJournal articleResearchpeer-review

TY - JOUR

T1 - How do Managerial Successions Shape Corporate Financial Policies in Family Firms?

AU - Amore, Mario Daniele

AU - Minichilli, Alessandro

AU - Corbetta, Guido

PY - 2011

Y1 - 2011

N2 - Despite recent evidence on the importance of chief executive officer (CEO) successions in family firms, we still know little about the differences in corporate strategies entailed by family and professional managers around transition. We investigate the consequences of managerial successions for the financial policies of Italian family firms. Our findings indicate that the appointment of non-family professional CEOs leads to a significant increase in the use of debt, primarily driven by short-term maturities. We document substantial heterogeneity in the impact of professional successions on debt financing: the increase in debt is particularly pronounced for young firms, firms with a high level of investment, and firms in which the controlling family maintains a dominant representation on the board of directors. Examining the importance of financial flexibility, we find that the increase in debt occurs primarily when firms are cash-poor, and when incoming CEOs can exploit spare borrowing capacity.

AB - Despite recent evidence on the importance of chief executive officer (CEO) successions in family firms, we still know little about the differences in corporate strategies entailed by family and professional managers around transition. We investigate the consequences of managerial successions for the financial policies of Italian family firms. Our findings indicate that the appointment of non-family professional CEOs leads to a significant increase in the use of debt, primarily driven by short-term maturities. We document substantial heterogeneity in the impact of professional successions on debt financing: the increase in debt is particularly pronounced for young firms, firms with a high level of investment, and firms in which the controlling family maintains a dominant representation on the board of directors. Examining the importance of financial flexibility, we find that the increase in debt occurs primarily when firms are cash-poor, and when incoming CEOs can exploit spare borrowing capacity.

KW - Family Firms

KW - Financial flexibility

KW - Financial Policies

KW - Professional Managers

KW - CEO Succession

U2 - 10.1016/j.jcorpfin.2011.05.002

DO - 10.1016/j.jcorpfin.2011.05.002

M3 - Journal article

VL - 17

SP - 1016

EP - 1027

JO - Journal of Corporate Finance

JF - Journal of Corporate Finance

SN - 0929-1199

IS - 4

ER -