Gender effect, family characteristics and firm performance on succession decisions - Evidence from Finnish family firms

Abstract

PURPOSE OF THE STUDY This thesis investigates the impact of family characteristics in corporate decision making and the consequences of these decisions on firm performance. The main objective is to find evidence on whether the gender of the company CEO’s children and other family characteristics have an impact on succession decisions and whether the gender of the company CEO has an impact on the company performance. The empirical study of the thesis concentrates on the gender effect in family firms especially when generation transfer occurs. I will also examine the effect of family and firm characteristics, such as the number of children and firm size, to the succession decision.

DATA & METHODOLOGY I use data covering an 11 year period between 1994 and 2005 consisting of 196 family companies. The data is a combination of information from different sources. Financial data is collected from Voitto+ database as well as from the archives of the National Board of Patents and Registration of Finland and statutory releases of the companies. CEO transition data is hand-collected from the National Board of Patents and Registration of Finland’s KATKA-database. Personal data is collected from the database of the Population Register Center of Finland. The analyses are performed using univariate analysis and multivariate OLS and IV 2SLS-regressions with STATA program.

RESULTS According to the results, family successions are more likely to take place in smaller and more profitable companies than those with unrelated successions. Firms facing family transitions are also slightly younger. In addition, the results imply that when the CEO’s first child is male, the likelihood of appointing a family member as CEO decreases by 11.5%. The study also shows that the gender of the CEO makes no difference when it comes to company performance, and that family firms prefer children over outside CEOs and also over other relatives. All types of transitions result in a decrease of performance, according to my findings. However, the decrease is not that drastic in firms where the successor comes from inside the owner family.