Post-succession performance of Philippine family corporate group firms: family CEO succession vs. professionalization

• Main Authors: Dedace,, Arturo M., III, Roque, Francis David M., Ysmael, Juan Leandro S.
• Format: text
• Language: English
• Published: Animo Repository 2010
• Subjects: Family-owned business enterprises > Succession; Executive succession; Economics
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/11291
• Institution: De La Salle University

Professionalization has been a growing trend among family firms that choose to succeed management. In support of this trend, recent theory suggests that professional managers outperform their family manger counterparts. However, previous studies have failed to empirically test the role of agency costs in post-succession performance and thus need further studies. The dominance of family-firms in the Philippines provides the rationale to determine whether or not family succession or succession to an unrelated manager is more beneficial to a family firm. Using a collected data set of various financial and non-financial control variables for 261 family firms in the Philippines from 2002-2009, we initially employ standard panel data econometric techniques to determine the effect of a family successor on post-succession performance. We then transform our panel data into a cross-section dataset to address the endogeneity issue and use the ordinary lest squares for estimation. In general, we find that professionalization is more beneficial for a family firm performance in the Philippines, due to the increase in agency costs and self-control problems encountered by family firms that succeed to family members.