The influence of the CEO in listed family businesses

Abstract

Purpose: Our objective is to analyze the influence that the type of CEO has on the management of listed family businesses in Spain, distinguishing between whether the CEO is a family member or not. The study mainly focuses on his/her influence on levels of profitability. Design/methodology: During de period from, 2012 to 2016, with data coming from Iberian Balance Sheet Analysis System (SABI) database. To analyze the effects of the CEOs on family businesses, we carried out two kinds of analyses. First, a univariate analysis that allowed us to identify differences regarding profitability, financial structure, growth, and dividend payout policies, and secondly, a linear regression model to see the influence-as well as the effect and significance-that variables, including the type CEO, had on profitability. Findings: Our results show the existence of a double effect on the profitability of family businesses of having an outside CEO. First, there is a statistically significant negative effect that is derived from the non-family CEOs' increased propensity to take on debt, and secondly, there is a positive causal effect on businesses' profitability that has to do with the different management styles that outside CEOs bring to the table, as they are more focused on profits. The results support the importance of having non-family CEOs in listed family businesses in Spain. Research limitations/implications: Our study focused on family businesses listed on the Spanish stock market, which means that the number of companies that were analyzed was reduced and the results cannot be extended to other kinds of businesses. However, this fact did enable us to get more high-quality data and focus on a specific field that was appropriate for considering the problem we proposed. Originality/value: While many studies have compared the performance of family businesses with that of non-family businesses, few have considered that family businesses are not homogeneous and that they have different management styles. And, These styles are determined by the type of CEO that is leading the company; this fact is analyzed empirically in this article.

Intergenerational Differences in Family Business Management and Their Influence on Business Profitability

“…These results confirmed that there are activities where it is easier for companies to obtain higher levels of profitability than in others. This result has also been reported in previous studies [45,79].…”

“…The results obtained demonstrate that the characteristics of the CEO, both his origin (family or external) or his level of studies, do not exert a statistically significant influence on the economic profitability of any group of family business. Previous works, such as that of Sánchez et al [45], already observed the absence of a significant influence that is derived from the origin of the CEO, indicating that the external CEO generates both positive and negative effects on profitability, which mutually counteract each other. If the absence of statistical significance on the part of the educational level is more pronounced, then this training is traditionally associated with (1) a greater capacity to process information and make quick decisions [80], (2) the ability to face scenarios of uncertainty [81], or (3) a greater adaptability to change [82].…”

“…Studies on Stewardship theory in family businesses implicitly suggested that shared leadership, collective responsibility, and intrinsic rewards will enable pro-organisational individuals to navigate and overcome problems of limited rationality and information asymmetry, and naturally align their interests with the organisation at the time they become a part of it [44]. Other recent works have already shown that in listed family companies, the presence of an external CEO at the head of the company has both negative and positive repercussions on the economic profitability of those companies [45]. To delve into the study of the differences, in terms of the CEO of the family business according to the generation that runs the company, the educational profile of the CEO was also analysed, observing whether the CEO of the company engaged in studies in the field of business economics (value 1) or, on the contrary, whether the CEO did not engage in such studies (value 0).…”