Why do family firms dismiss their family CEOs? A perspective on kinship ties

Abstract

Existing studies have suggested that nonfamily CEOs are more likely to be fired from family firms, while we focus on why family CEOs are also fired from family firms. Using data from 455 listed Chinese family firms, we find that family CEOs with affinity ties are more likely to be dismissed as they are not genetically related to the family. The difference becomes greater when firm performance is poor or family ownership is high. These findings elaborate that business-owing family is not a group with aligned interests, that is, family members with different family identities are treated differently within family. Besides, existing studies have emphasized that the preservation of socioemotional wealth in family firms can affect firms’ operations, while this study further proposes that the preservation of socioemotional wealth can also have an impact on the business-owning families themselves.