The impact of market and industry risk on family succession

Yin-Hua Yeh*, Chen Chieh Liao

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

4 Scopus citations


This study investigates the succession decision of family firms in connection with the risk environment faced by the firm. Succession itself can rightly be considered a risk event due to managerial uncertainty. This uncertainty coupled with a high risk operating environment magnifies the critical importance of making a correct succession decision. In this paper, the primary focus is on how market and industry risk influence the selection of either a family member or a family external professional as the successor, and how this decision impacts post-succession firm performance. Our sample is comprised of 383 succession events in Taiwanese listed companies over a twenty-year period (1997–2016). Using industrial profitability risk and systematic risk as the risk measures, we find that firms operating in a high-risk environment tend to employ a non-family member as the successor which on average leads to superior post-succession performance compared to firms that choose a family member as the successor. This result particularly holds when the non-family successor is able to successfully reduce firm-level risk. Overall, our results demonstrate that the risk condition of a firm is an important determinant of the succession decision of family firms, and that a non-family successor is more competent in managing a high-risk operating environment.

Original languageEnglish
Article number101021
JournalNorth American Journal of Economics and Finance
StatePublished - Jan 2021


  • Corporate governance
  • Family firms
  • Succession


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