Abstract

We examine the factors that influence family firms that are no longer run by the founder, to appoint a chief executive officer from the family rather than from outside the family. Based on agency and signaling theories, we hypothesize that the concentration of family ownership and the presence of the founder increase the likelihood of appointing a family CEO, whereas the gap between voting rights and cash-flow rights (excess voting rights) decreases it. Our regression analyses of Canadian S&P/TSX family firms over the 2002–2008 period confirm our theory that contextual governance factors are good predictors of the type of CEO chosen in family firms.

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