Journal of Economics and Management Volume 21, No. 1 March, 2025

Post-Succession Performance of Family Firms and Its Determinants: Evidence from Taiwan

Hsu Junming

Finance, National Chung Hsing University, Taiwan

Yang Tung-Hsiao

Finance, National Chung Hsing University, Taiwan

Lu Pei-Chi

Finance, National Chung Hsing University, Taiwan

Abstract

This study investigates the long-run stock performance of Taiwanese family firms that undergo succession and identifies key factors affecting their post-succession performance. The results show that family firms tend to underperform their matching firms after succession, indicating that the drawbacks of familial inheritance outweigh the benefits. Key positive contributors to post-succession performance include heirs’ elite education, difference in intergenerational backgrounds, and direct lineage to the departing leader, highlighting the significance of heir traits in succession. In addition, the duration that heirs serve as CEOs before assuming chairman roles and top management turnover are positively associated with post-succession performance, emphasizing the importance of heirs’ experiences and effective personnel selection. Other factors impacting post-succession value include firms’ profitability, control right structure, and changes in institutional ownership. In sum, these results suggest that the success of family succession relies not only on heirs (the “jockey”) but also on firm fundamentals (the “horse”).

Keywords：Family Firms, Succession, Heir Traits, Long-Run Performance

JEL Classifications：G32, G34

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