Not all crises are the same: the effects of crisis triggered successions in family firms

Abstract

PurposeAlthough succession planning can be important for the continuity of family firms, not all family business have the opportunity to engage in this planning. Sometimes, these organizations face crisis events that may trigger an intra-family succession. However, what happens when there is an unplanned succession? Are family businesses doomed to fail? This project aims to explore unplanned successions that are triggered by crisis and the impact that this can have on post-succession financial performance. The authors also examine the moderating role of successor characteristics (i.e. education and previous work experience) on this relationship.Design/methodology/approachThe ideas were tested using data from 151 publicly listed family firms in China.FindingsThe findings indicate that having a crisis driven intra-family succession does not always result in lower post-succession performance. It is only successions that are triggered by market crises that negatively impact financial performance after the unplanned succession. In these instances, the education and previous experience of the successor moderate the negative relationship between market crisis succession and financial performance such that having more experience and a college education diminishes these negative effects on performance.Practical implicationsThe results point to the importance of the preparation of the next generation in helping family firms navigate unplanned successions. The findings indicate that education and previous work experience of the successor can help a family firm manage a crisis.Originality/valueThis study continues to build the understanding about unplanned successions and the important role that successor preparation can have for the success of the family firm.

A Thematic Review on Successor Development in Chinese Family Business

“…Although the respondents in Deng (2015) were all female leaders who had taken over and received effective training and support from the founder during the succession process, for female successors, completing the handover of resources such as the founder's social relationships and Establishing self-authority remains a big challenge. Successor Development Ren et al (2023) expressed their opinion and emphasized the importance of succession planning for CFBs. And it focused on exploring unplanned inheritance situations caused by objective factors.…”