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This paper explores family business groups and their motivation for risk taking in each affiliate. We study whether the controlling family determines the level of risk taken by an affiliate in its business group based on the amount of family wealth that is invested in the affiliate. We find that the affiliates in which the controlling family has more (less) investment take less (more) risk. Our results indicate that the controlling family decides the riskiness of each affiliate based on the family’s interests at both the firm level and the business‐group level.

Purpose – This study aims to examine whether a switching decision between a family CEO and a non-family professional CEO has a different effect on firm performance and what determines such a decision by family firms. Design/methodology/approach – This study uses multiple regressions, Probit and univariate analyses, based the sample of family-controlled Chaebol firms in Korea for the 11-year period from 2001 to 2011. Findings – Evidence found was consistent with the family entrenchment hypothesis: firms experiencing declining Q value are more likely to replace family CEOs with non-family CEOs, and that these firms, having switched to non-family CEOs, exhibit an improvement in firm performance as measured by the change in Q value. On the other hand, for those firms that replace non-family CEOs with family member CEOs, no evidence was found that the switching decision either decreases or increases firm performance. The results of Probit and univariate analyses suggest that firms switching to family CEOs tend to be larger, stock-exchange listed and more “central”, with more cash flow rights held by the controlling families and with relatively more equity holdings in the other affiliated firms of the same Chaebol group. In contrast, firms switching to non-family CEOs tend to be smaller, unlisted and less “central”, with less equity holdings in the other affiliated firms of the same Chaebol group. Originality/value – This study sheds light on the different value implications and determinants of a decision between “family CEO” and “non-family CEO”.

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