Professor of Economics
CEO Succession; Family Business; Leadership; Performance;
Research Summary - the authors study successions from a non‐family CEO back to a family CEO, which they label “Type‐R" successions. In the authors' sample of 489 Italian family firms experiencing the departure of non‐family CEOs, these successions represent 42% of all cases.The authors difference‐in‐differences' results indicate that family firms undertaking Type‐R successions experience an 18% improvement in profitability. Exploring the heterogeneity underlying this result, the authors find that Type‐R successions produce weaker results in contexts that are highly volatile and that rely on innovative inputs before succession.Finally, in studying the drivers of the performance increase the authors find that Type‐R successions reduce labor costs and spur efficiency. Collectively, the authors' evidence suggests that Type‐R successions improve performance by leveraging family assets while avoiding dysfunctional nepotism and other parochial family priorities.Managerial Summary - how does CEO succession affect family business performance? In this paper, the authors study an unexplored yet common succession pattern in mature family firms - the appointment of a family member following the tenure of an outside CEO.Surprisingly, the authors find that when, after a period of professional leadership, a family CEO returns to lead the company, the firm exhibits an 18% advantage in profitability. This result is more prevalent in stable industries, where traditional family assets prove especially valuable.A key takeaway of the authors' study is that family leadership can enhance performance in companies that have already professionalized their governance, and thus have learned to reconcile meritocratic principles with family‐based assets.