۱- Introduction

۲- Theoretical bases and hypotheses

۳- Methodology

۴- Results

۵- Discussion

۶- Conclusion

References

Abstract

Using a comprehensive database of Taiwanese family-owned business, this study investigates chief executive officer (CEO) selection decisions in family-owned businesses. Our data sample is composed of 129 listed family businesses from 1998 to 2008. By employing theories of family-owned business succession and corporate governance, the study examines the influence of chairman of the board (COB) and CEO duality, current CEO/family relations, and shareholding ratio of outside directors on CEO-selection decisions in family-owned businesses. The results demonstrate that a family-owned business is more likely to select an intra-firm member as the new CEO when the incumbent CEO is a family member. Moreover, a family-owned businesses are prone to selecting new CEOs from external sources when the shareholding ratio of outside directors is greater. Based on the findings, the study can contribute to CEO succession research and family-business research in emerging economies.

Introduction

The objective of business-succession planning aims at a smooth transition in the top management position. Within family-owned businesses, CEO succession planning is complicated due to the intertwining of management and ownership (Sharma, 2004). Benson (1990) also found that only 30 percent of family businesses succeed in subsequent generations. Both the family’s needs and business requirements influence the CEO succession decision. A serious conflict arises when the interests of both parties are not compatible. In addition, the business’s stakeholders also exert a great influence over succession decisions in which the family business is a listed company. This implies difficulty in smooth succession in family businesses. Among the transition of top management positions, the CEO succession decision is pivotal in family businesses. In fact, the process and result of CEO selection is a signal to business stakeholders who are concerned about the stability, competitiveness, and growth of the business. The essential issue for CEO selection is related to the decision of whether candidates will be from inside or outside of the family-owned firm. In other words, a family business may confront a dilemma in deciding to choose from family members or non-family members or an employee promotion or recruited outside the firm when choosing the new CEO to meet both the family needs and business requirements. The reasons for an insider succession decision include an increase in employee loyalty and the board of directors’ acquaintance with the candidates. However, the major reason for an outsider succession decision is the employment of a new leadership style that may lead to transformation for the company. For example, Delta Air Lines, the third largest U.S. airline, recruited Leo Mullins, who has no prior experience in the airline business, to revamp Delta Air Lines. The purpose in making such a decision was the consideration of a new mindset and leadership style introduced into the conventional airline business. Friedman and Singh (1989) and Datta and Guthrie (1994) stated that the new strategic planning, organizational structure, and resources required of an organization may also follow the inauguration of a new CEO.