Family businesses are the engine of economic growth in many countries. Italy, in particular, is characterized by a high presence of listed and unlisted family- controlled companies. Managerial turnover is recognized as an important moment of corporate discontinuity especially in family firms. In this context, previous literature has investigated the motivation behind the choice to replace the chief executive officer (CEO), internal to the family. A traditionalist and conservative corporate culture leads firms to preserve the family character of ownership and governance, favoring managerial succession to family members who lack adequate professional training. In this case, external managers, with their high level of professional expertise, could ensure business continuity, guaranteeing the recovery of a potential or previous state of crisis. However, it is not possible to generalize this circumstance as, in some cases, family managers show better performance than professional managers. In sum, the results regarding the performance of external or internal managers are mixed. Since there is still a limited amount of work testing the impact of a turnover of family members in the role of CEO, this paper intends to fill this gap by analyzing two distinct aspects of managerial turnover. First, the paper aims at examining the market reaction to the announcement of the opening of the company management to CEOs belonging or not belonging to the family, using the event study methodology. Secondly, through an exploratory investigation, the paper aims at verifying how the trend of the economic and financial performance, in the period preceding the announcement of the managerial change, has influenced the stock market reaction, in order to capture whether the possible appreciation of investors about the managerial turnover is also a consequence of unsatisfactory corporate results. The results show that managerial turnover towards an external manager elicits a reaction from the financial market. On the contrary, no reaction emerged following the replacement of the CEO in favor of an internal member. Furthermore, the findings suggests that the financial market appreciates the choice of implementing managerial turnover by companies that presented negative economic and financial performance, in the three years prior to the announcement. The paper extends the previous literature on governance changes in family firms, by proposing an exploratory investigation on the market reaction to the replacement of the CEO in favor of internal and external managers. In particular, the study provides useful insights for family firms by showing the effects on stock prices in case of the announcement of the departure of a family CEO.
KEYWORDS: family business, event study, firm’s performance, CEO turnover
Di Martino, G., Dicuonzo, G., Galeone, G., Ranaldo S. (2021). Gli effetti del cambio manageriale nelle imprese familiari italiane quotate, RIREA n.2, pp. 229-249. DOI: 10.17408/RIREAGDMGDGGSR050607082021