• When do Family CEO Successors Perform Strategic Change Heterogeneously?

Abstract

Purpose – Based on the socioemotional wealth (SEW) perspective, this study investigates how family CEO successors affect strategic change. Additionally, by further incorporating behavioral agency theory, we discuss whether the relationship between a family successor and the degree of strategic change is altered by performance aspiration gaps and alignment of interests.

Design/methodology/approach – This study analyzes a sample set of CEO succession events of Taiwanese firms by adopting the least squares regression analysis to test our hypotheses.

Findings – The results show that family CEO successors have less intention to initiate strategic changes. However, when a firm’s performance is below the aspiration level, these successors increase their intention to raise the degree of strategic change. The mitigating effect of the performance below the aspiration level is further enhanced when a firm’s cash flow rights are aligned with its voting rights.

Research limitations/implications – This study complements the extant research by adopting the SEW perspective to illustrate why the intention to initiate strategic change by a family successor differs from non-family ones. Also, we complement the SEW perspective by incorporating behavioral agency theory to better reveal why heterogeneous strategic change behavior of family successors is observed. Furthermore, our research echoes the importance of corporate governance mechanisms to enhance the incentives of family firms properly to operate the firm in the interests of stakeholders.

Practical implications/social implications – Our findings indicate that family SEW is the predominant factor in family firms’ decision-making process and is affected by contextual situations leading to heterogeneous strategic behaviors, suggesting that we need to consider not only the successor but also the situations when evaluating a family business.

Originality/value – Our research highlights the complexity of family succession and provides managerial insights and recommendations.

Keywords – Family CEO Successor, Behavioral Agency Theory, Family Socioemotional Wealth, Strategic Change, Alignment of Interests