Ownership Matters: How Family Control Affects the Value of Board Chair Types After CEO Successions

CEO Successions and Board Chair Types

The literature offers two opposing perspectives regarding the performance effects of CEO successions: adaptation benefits and disruption costs. On the positive side, CEO successions can generate adaptation benefits for firms. New CEOs typically bring fresh perspectives, which can help realign firms with evolving technological landscapes, market trends, and/or shifting customer demands (Menon & Pfeffer, 2003; Wiersema & Bantel, 1993). When a new CEO is able to implement strategic change effectively, succession can enhance firm performance (Shen & Cannella, 2002).

However, on the negative side, CEO successions carry significant risks in the form of disruption costs. These costs arise since a new CEO disrupts established ways of working inside and outside the focal firm (Zhang & Rajagopalan, 2004). In particular, primary stakeholders—namely, those stakeholders who are directly involved in the firm’s value creation, such as employees, customers, and business partners (Bridoux & Stoelhorst, 2014)—often have hold-up fears after a succession (Schulze & Zellweger, 2021). Internally, a lack of support or outright resistance from employees can hinder the new CEO’s ability to steer the firm, resulting in operational inefficiencies (Denis et al., 2000). Externally, business partners and customers may perceive the succession as a source of uncertainty, fearing hold-up and shifts in strategic direction or priorities (Zhang & Rajagopalan, 2010). Thus, the new CEO’s unfamiliarity with existing stakeholder relationships or inability to manage stakeholder relationships can lead to negative sentiment from stakeholders, which has recently been identified as a major driver of poor postsuccession performance (Keil et al., 2022).

The CEO succession literature explores contingencies that explain when the balance between adaptation benefits and disruption costs tilts toward performance gains or losses. The primary focus of this literature is on a CEO’s origin from inside or outside the focal firm (Berns & Klarner, 2017; Schepker et al., 2017). Research indicates, for example, that an outside CEO succession can lead to performance gains when a CEO’s background aligns with firm characteristics (Keil et al., 2022) or when there is corporate stability, such as through a long-tenured CEO (Karaevli & Zajac, 2013) or in munificent environments (Georgakakis & Ruigrok, 2017). Conversely, performance losses are more likely when a new CEO, from inside or outside the focal firm, faces negative stakeholder sentiment (Keil et al., 2022).

Only a few studies investigate the governance context a new CEO steps into (Cummings et al., 2021). This oversight is problematic, though, as the type of board chair can affect postsuccession performance (Krause & Semadeni, 2013). Typically, the predecessor CEO or an independent individual is board chair after a CEO succession, since a new CEO is rarely appointed board chair (Krause & Semadeni, 2013). Both types of board chairs maintain different relationships with the focal firm (Banerjee et al., 2020) and bring distinct resources to the firm (Krause et al., 2016), which can tilt the balance between performance gains or losses after successions.

Family Control, Predecessor Retention, and Postsuccession Firm Performance

Firms with stronger family control are well positioned to better leverage predecessor retention and achieve more performance gains for at least two reasons. First, a key factor hindering performance gains from predecessor retention is self-serving behavior by predecessor CEOs serving as board chairs who aim to preserve their own strategic legacy against strategic change proposed by new CEOs, thereby reducing adaptation benefits from successions (Quigley & Hambrick, 2012). Family owners who exert stronger control are known to actively monitor their firms (Anderson & Reeb, 2004), especially due to their high concentration of wealth in their firms (Fama & Jensen, 1983). Indeed, empirical evidence shows a positive relationship between family control and firm performance, suggesting reduced agency costs through active family-owner monitoring (Anderson & Reeb, 2003). Family owners also occupy board positions when holding higher levels of control over their firms, giving them direct access to private information. For instance, family board members can directly observe the behavior of the CEO and board during board meetings (Anderson & Reeb, 2004), which helps curb opportunistic behavior by predecessor CEOs. In support, Cumming et al. (2021) show that predecessor retention relates to more strategic change when a board’s monitoring capacity is higher. Further, Zybura, Zybura, Ahrens, and Woywode (2021) find that predecessor retention in firms with stronger family control increases innovation outputs, suggesting adaptation benefits from CEO successions with predecessor retention.

Firms with weaker or no family control typically have more dispersed ownership (Anderson & Reeb, 2003), which reduces individual shareholders’ incentives and capacity to monitor or intervene in a predecessor CEO’s behavior as board chair (Fama & Jensen, 1983). Thus, in line with prior research, predecessor retention in a firm with weaker or no family control likely limits a new CEO’s ability to implement change, thereby reducing the adaptation benefits from succession (Quigley & Hambrick, 2012). Hence, with increasing family control, firms can more effectively counter the agency costs tied to predecessor retention, giving new CEOs the leeway to question strategic preferences and conservative routines (Kotlar & De Massis, 2013) and thus increasing adaptation benefits with predecessor CEOs as board chairs. ¹

Second, another key factor enabling stronger performance gains from predecessor retention is that a firm needs to be highly dependent on strong stakeholder relationships for its performance advantage, thus making predecessor retention particularly valuable to mitigate otherwise very high disruption costs of a CEO succession. Empirical evidence shows that negative stakeholder sentiment is consequential for any firm’s postsuccession performance (Keil et al., 2022). However, firms with stronger family control are known to build their performance advantage more on strong stakeholder relationships (Miller & Le Breton-Miller, 2005). With increasing family control, firms disproportionally invest in strong stakeholder relationships that satisfy the socioemotional wealth goals of the controlling families (Berrone et al., 2012; Gómez-Mejía, Cruz, Berrone, & De Castro, 2011). As a result, these firms have close interactions with stakeholders, which in turn yield more in-depth knowledge of stakeholders (Miller & Le Breton-Miller, 2005), embed these firms more deeply in stakeholder networks (Daspit et al., 2016), and often develop into long-term and enduring relationships (Le Breton-Miller & Miller, 2006). For instance, a family owner of a listed firm described their trust-based relationships with distributors as follows: “The kind of company that we are . . . they can trust us, unlike some competitors who might say they have a new distributor now, so goodbye. It (family ownership) brings support and safety when we co-operate” (Heino, Tuominen, & Jussila, 2020, p. 8). Thus, increased interactions with stakeholders yield greater trust and more personal relationships that result in tangible performance advantages for firms with stronger family control.

These theoretical arguments are also supported by strong empirical evidence showing that with increasing family control, firms improve their efficiency through strong stakeholder relationships. In particular, it is well established that firms with stronger family control trade higher job security for employees in exchange for lower compensation (Bassanini, Breda, Caroli, & Rebérioux, 2013; Block, 2010; Neckebrouck, Schulze, & Zellweger, 2018; Sraer & Thesmar, 2007). Further, with increasing family control, firms benefit from higher consumer trust and loyalty (Beck & Prügl, 2018; Schellong, Kraiczy, Malär, & Hack, 2019), improve coordination and knowledge sharing (Uzzi, 1997), and attract better-quality business partners (Jones, Harrison, & Felps, 2018), all of which fuel collaboration (Miller & Le Breton-Miller, 2005) and co-creation (Heino et al., 2020) and reduce transaction costs (Dyer & Singh, 1998). Thus, it is crucial for firms with stronger family control to cultivate and sustain strong stakeholder relationships to ensure strong firm performance (Combs et al., 2023). Put differently, failure to sustain strong stakeholder relationships after successions can result in more severe performance losses for firms with stronger family control.

The value of strong stakeholder relationships typically lies with CEOs, particularly in public firms, and these relationships are not easily transferable to a successor (Berrone et al., 2013; Daspit et al., 2016). CEOs in firms with stronger family control often have longer tenures, gaining credibility and trust among stakeholders over time by honoring agreements (Corbetta & Salvato, 2004). CEO successions thus put the typically stronger stakeholder relationships and their value under more severe stress in firms with stronger family control (Berrone et al., 2013). Consistent with these arguments, predecessor retention should be more impactful in reducing the disruption costs of successions in firms with stronger family control.

Firms with no or lower levels of family control can also build strong stakeholder relationships, but due to their stronger focus on short-term shareholder value creation (Sirmon & Hitt, 2003) and on the needs of investors and financial markets (Bushee, 1998; Miller & Le Breton-Miller, 2005) combined with their less frequent interactions with nonfinancial stakeholders (Gómez-Mejía et al., 2011), they have difficulties developing and maintaining the same level of strength in stakeholder relationships (Combs et al., 2023). Thus, while capable of building strong relationships, firms with weaker or no family control may not always prioritize personal and trust-based relationships with stakeholders to build their performance advantage. Further, as illustrated by the quote above, firms with weaker or no family control may struggle more to credibly signal to employees or business partners that their firm-specific investments, which are needed to co-create value, are safe (Hoskisson, Gambeta, Green, & Li, 2018). Thus, the disruption of stakeholder relationships is more consequential for postsuccession performance in firms with stronger family control.

In sum, we propose that with increasing family control, owners’ closer monitoring and firms’ stronger reliance on strong stakeholder relationships for their performance advantage make predecessor retention more likely to positively relate to postsuccession performance. In contrast, in firms with weaker or no family control, predecessor retention is likely to maintain or even reduce firm performance after a succession, in accordance with previous literature (Quigley & Hambrick, 2012), due to the high agency costs of predecessor retention that reduce adaptation benefits as well as the less severe disruption costs of CEO successions. Stated formally,

Family Control, Board Chair Independence, and Postsuccession Firm Performance

Firms with stronger family control likely struggle more with performance losses after a succession with an independent board chair for at least two reasons. First, compared to other types of board chairs, an independent board chair can give greater leeway to a new CEO to initiate strategic change and monitor a new CEO—without conflicts of interest—to ensure the board’s mandate is implemented (Krause & Semadeni, 2013). With lower levels of family control, shareholders rely more strongly on an independent board chair to monitor a new CEO’s behavior since individual shareholders have fewer incentives and less capacity to monitor their firms (Anderson & Reeb, 2004). However, with increasing family control, controlling family owners often exercise their control rights using board seats (Anderson & Reeb, 2004; Fama, 1980) and can thus personally monitor a new CEO to ensure they implement the board’s change mandate. Hence, with increasing family control, the benefits of board chair independence to achieve adaptation benefits decrease.

Second, as we argued above, firms with stronger family control rely more on strong stakeholder relationships for their performance advantage (e.g., Berrone et al., 2013) and thus face more severe disruption costs from successions. Independent board chairs are known to have less firm-specific knowledge since they never worked in the focal firm (Levit & Malenko, 2016; Osterloh & Frey, 2006). However, in firms with increasing family control, a high degree of understanding of the focal firm’s inner workings is important to effectively assess the disruptive nature of a new CEO’s strategic decisions for stakeholders (Khanna et al., 2014). The lack of in-depth, firm-specific knowledge, which is most often beyond the capacity of independent directors (Makri et al., 2006), is thus more detrimental to postsuccession performance in firms with stronger family control.

Further, due to pressure from financial markets (Cabrera-Suárez et al., 2001), independent board chairs in firms with stronger family control are typically appointed to protect the interests of minority shareholders (García-Ramos & García-Olalla, 2011; Jones et al., 2008). Thus, independent board chairs in firms with high levels of family control likely focus their attention on the demands of minority shareholders and potential conflicts of interest with controlling family owners, thereby further distracting attention away from the concerns of stakeholders and increasing the disruption costs of successions. Thus, in firms with stronger family control, board chair independence likely increases the disruption costs of successions. Firms with lower or no family control—as we argued in detail above—may not always prioritize personal and trust-based relationships with stakeholders to build their performance advantage, but instead focus more on shareholder value and needs (Bushee, 1998; Miller & Le Breton-Miller, 2005; Sirmon & Hitt, 2003). Thus, disruption of stakeholder relationships in these firms should be less consequential for postsuccession performance.

Taken together, board chair independence is likely to reduce postsuccession performance in firms with stronger family control due to the lower adaptation benefits that an independent board chair brings to these firms, and the higher disruption costs of successions. In sum, we propose that with increasing family control, owners’ closer monitoring and firms’ stronger reliance on strong stakeholder relationships for their performance advantage make board chair independence more likely to negatively relate to postsuccession performance. Put formally,

Heterogeneity Within Family-Controlled Firms

While our predictions above align with the existing CEO succession literature regarding firms with weaker or no family control, the novelty of our study lies in explaining the different performance effects of board chair types in firms with higher levels of family control. Focusing on family-controlled firms, we go back to the core debate in the CEO succession literature about the higher disruption costs but also the higher adaptation benefits of outside CEO successions (Karaevli, 2007; Minichilli et al., 2014; Shen & Cannella, 2002; Zhang & Rajagopalan, 2003). In particular, our arguments offer novel insights into the performance effects of outside CEOs in combination with board chair types in family-controlled firms. ²

Regarding predecessor retention, we propose that postsuccession performance gains in family-controlled firms are more pronounced for outside than inside CEO successors. Under the vigilant oversight of family owners, which effectively limits agency costs from predecessor retention, a predecessor CEO as board chair can be particularly valuable to reduce the higher disruption costs of outside CEO successions. While outside CEOs bring fresh perspectives and new ideas to initiate strategic change, they typically lack support from employees to successfully implement change (Shen & Cannella, 2002). With profound knowledge of firm-specific stakeholder contributions and deep embeddedness in the existing stakeholder network of the focal family-controlled firm, a predecessor CEO as board chair can help an outside CEO become embedded in the firm’s stakeholder network more quickly. In addition, predecessor CEOs can promote support for proposed change by an outside CEO among employees, highlighting the benefits for employees and the firm alike. Relatedly, predecessor CEOs possess deep firm-specific knowledge and trust from stakeholders and can provide their nuanced view when assessing proposed strategic change, challenging an outside CEO to consider existing stakeholders’ contributions to the focal firm’s value creation. For instance, an outside CEO might favor a cheaper supplier for cost savings, potentially overlooking the current supplier’s role in developing tailor-made solutions for previous product development. The predecessor CEO as board chair can probe the outside CEO to ensure they have thoroughly discussed cost-reduction alternatives with the existing supplier, thus potentially preserving valuable relationships before making a final decision. Thus, the combination of predecessor retention and outside CEO successors can be particularly valuable to enhance postsuccession performance in family-controlled firms.

Inside CEOs can better integrate stakeholder considerations into their strategic decisions (Dorobantu, Henisz, & Nartey, 2017) due to their previous roles in family-controlled firms (Daspit et al., 2016). Thus, the combination of an inside CEO with predecessor retention is likely less valuable for reducing the disruption costs of successions than that with an outside CEO. Nevertheless, we expect some benefits from this combination as negative stakeholder sentiment affects all new CEOs (Keil et al., 2022). For instance, inside CEOs may have limited exposure to all stakeholder groups, potentially favoring those they are familiar with (Xuan, 2009). For example, chief operating officers likely know suppliers well but are less familiar with demands from important customers, while chief finance officers may have established ties with shareholders but fewer interactions with suppliers or customers. In sum, we contend that within family-controlled firms, predecessor CEO retention is more beneficial with an outside than an inside CEO successor.

Regarding board chair independence, we propose that the postsuccession performance disadvantages in family-controlled firms are more pronounced for outside than inside CEO successors. As we argued above, the vigilant oversight of family owners reduces the benefits of an independent board chair to monitor a new CEO, and their effort to implement the board’s change mandate, and thus reduces the benefits of board chair independence to achieve adaptation benefits from successions in family-controlled firms.

However, the disruption costs of successions in family-controlled firms with an independent board chair are likely higher for outside than inside CEO successions. Having an independent board chair who lacks familiarity with the focal family-controlled firm’s inner workings (Zeitoun & Pamini, 2017), and an outside CEO without firm-specific knowledge (Coles & Hesterly, 2000), creates a disadvantageous combination as both the new CEO and board chair lack in-depth firm-specific knowledge to reduce the severe disruption costs of successions in family-controlled firms. For instance, if an outside CEO proposes divestitures, an independent board chair may focus on the narrow interests of minority shareholders (Cabrera-Suárez et al., 2001) instead of considering the broader impact on supplier and customer relationships for the focal family-controlled firm (Bettinazzi & Feldman, 2021). In this case, suppliers providing equipment to the divesting family-controlled firm and the to-be-divested business likely have to renegotiate contracts, while customers need to establish separate relationships, incurring costs that may inadvertently harm the family-controlled firm’s stakeholder relationships (Bettinazzi & Feldman, 2021). Such situations can lead to reduced effort and disengagement, worsening postsuccession performance declines in family-controlled firms with an outside CEO successor. Thus, although outside CEOs may offer new strategic direction, the benefits likely do not outweigh the disruption costs in family-controlled firms with independent board chairs.

Inside CEO successors, in contrast, typically pursue more nuanced and less radical strategic change than outside CEO successors, generally lowering the disruption costs of successions (Shen & Cannella, 2002). In family-controlled firms, independent board chairs typically prioritize the interests of minority shareholders (Jones et al., 2008). Inside CEO successors can help provide a more balanced perspective between stakeholder concerns and minority shareholders’ interests using their firm-specific knowledge and embeddedness in their firms’ existing stakeholder networks from their previous roles. Thus, an independent board chair combined with an inside CEO successor likely reduces the disruption costs of a CEO succession. In sum, in family-controlled firms, board chair independence combined with an outside CEO is likely to result in worse postsuccession performance declines than board chair independence combined with an inside CEO.

Data and Sample

Our dataset consists of the S&P 1500 over a 20-year period from 2003 to 2022. We identified 1,183 CEO successions, including 135 within family-controlled firms. ³ We obtained CEO and board data from BoardEx; financial data from Thomson Reuter’s Compustat; and family ownership data from NRG Metrics, which collects family ownership and board membership data using documents like annual reports, SEC filings, and press releases (e.g., Gómez-Mejía, Sanchez-Bueno, Miroshnychenko, Wiseman, Muñoz-Bullón, & De Massis, 2024). The board chair’s influence may extend beyond the succession year (Yi et al., 2020), so we created a panel dataset to capture postsuccession performance effects (Quigley & Hambrick, 2012). We coded the CEO succession year as Year 0 and the subsequent years as Years 1, 2, and 3, respectively. If the board chair or the new CEO departed before Year 3, the dataset includes the observation up to the departure year. This approach resulted in a panel dataset comprising 3,894 succession-year observations, including 454 succession-year observations in family-controlled firms. Robustness tests excluding the succession year (Year 0) and using different timespans show consistent results.

Dependent Variable

Independent Variables

Control Variables

We controlled for predecessor CEO characteristics that may affect postsuccession firm performance: predecessor CEO founder status, coded 1 if the predecessor CEO was also the founder of the firm and −1 otherwise, as the founder may hold pronounced firm-specific resources (Wasserman, 2003); predecessor CEO firm tenure, measured as the number of years since the predecessor CEO joined the firm, since CEOs with longer tenures may have deeper firm-specific knowledge; predecessor CEO career horizon, measured as the difference between 65 and the predecessor CEO’s age in Year 0, since CEOs with shorter career horizons may have different risk preferences that may affect performance (Krause & Semadeni, 2014); and predecessor CEO duality, coded 1 if the predecessor CEO was also board chair in the year before succession and −1 otherwise, since whether the predecessor CEO already held the board chair position prior to CEO succession may influence firm performance (Krause & Semadeni, 2013).

We also controlled for successor CEO characteristics: successor CEO heir apparent, coded 1 if the new CEO held the title of president or chief operating officer prior to the CEO appointment and was at least 4 years younger than the incumbent CEO and −1 otherwise (Minichilli et al., 2014), since the benefits of predecessor retention may be reduced for an heir apparent, who has already learned about stakeholder relationships prior to succession (Hambrick & Cannella, 2004); successor CEO-board chair, coded 1 if the new CEO was also the board chair and −1 otherwise; and successor CEO position tenure, calculated as the CEO’s number of years in the CEO position, to account for potential learning effects of the new CEO. We also included board independence, measured as the percentage of directors on the board who were independent in Year t − 1, to control for the board’s level of oversight and responsiveness to performance issues (Krause et al., 2014) and lead independent director, coded 1 if the board had a lead independent director in Year t − 1 and −1 otherwise, since lead independent directors are often a compromise between the board’s control and collaboration functions (Krause, Withers, & Semadeni, 2017). We also controlled for firm characteristics in Year t – 1: firm size (log) in terms of the number of employees; firm age, measured as the number of years since founding; firm leverage, measured as the ratio of total debt to total assets; firm sales growth, measured as the change in total sales between the focal Year t and Year t – 1; and a firm’s total corporate diversification based on Palepu’s (1985) measurement. Lastly, we used three-digit industry dummies to control for general industry trends and calendar-year dummies to control for general economic conditions.

Estimation and Endogeneity

Our empirical design addresses endogeneity potentially stemming from family control, since differences in postsuccession performance may be driven by systematic differences between firms with and without family control and not from the treatment effect of the board chair type. Further, we accounted for the nonrandom event of the appointment of predecessor CEOs as board chairs. To safeguard against these two selection biases, we took three steps.

Robustness Checks

Additional Analyses

Contributions and Implications

Our study makes three main contributions. First, our study contributes to the CEO succession literature by showing that the value of different types of board chairs after CEO successions varies with firm ownership. Our study is aligned with prior research on the negative performance effects of predecessor retention after CEO successions (Cummings et al., 2021; Krause & Semadeni, 2013; Quigley & Hambrick, 2012; Yi et al., 2020), but only in firms without family control. In contrast, with increasing family control, we found more positive firm performance effects from predecessor retention, which demonstrates the importance of taking firms’ ownership structures into account when studying CEO successions. Thus, our study demonstrates the importance of considering the governance context a new CEO steps into when taking over a firm to explain the performance effects of CEO successions.

Further, we add to and expand the stakeholder-centric perspective on CEO successions (Keil et al., 2022). Our supplementary analyses suggest that a predecessor CEO is better able to reduce stakeholder conflicts after a CEO succession than other types of board chairs, supporting our theoretical claim that predecessor retention is an effective governance mechanism to prevent negative stakeholder reactions after a CEO succession in firms with increasing family control.

Second, we provide a novel theoretical lens to study the choice of board chair. Organizational theory advocates for new CEOs as board chairs (Krause et al., 2014), and agency theory advocates for independent board chairs (Coles & Hesterly, 2000). We build on the family business literature (e.g., Berrone et al., 2013; Daspit et al., 2016) to explain the conditions under which predecessor CEOs—a large but often overlooked group of board chairs (Krause et al., 2016)—outperform other board chairs after CEO successions. Our findings thus add to our limited understanding of how inside board chairs contribute value (Banerjee et al., 2020), and corroborate the importance of considering ownership structures when studying the (in)effectiveness of governance mechanisms, particularly the choice of board chair (Connelly et al., 2010).

One may ask whether a novel conceptual lens on board chair types is warranted or whether our findings could be explained by agency theory alone. From an agency perspective, family control should align interests equally well for all types of board chairs since ownership and control are concentrated (Fama & Jensen, 1983). Thus, we should have found no effect for predecessor retention. However, our findings reveal better firm performance with stronger family control for predecessor CEOs compared to other board chairs. For independent board chairs, firms with stronger family control report increasing performance declines after CEO successions, which runs counter to agency predictions. We further ruled out the agency explanation that firms with stronger family control combined with predecessor CEOs as board chairs perform better simply because they maintain the status quo by showing that increasing family control combined with predecessor retention results in more (not less) postsuccession strategic change. Our study thus provides a more nuanced understanding of predecessor CEOs as board chairs and underlines the importance of fit between the type of board chair and firm ownership.

Lastly, our study speaks to research on CEO successions in family firms (Amore et al., 2021; Gedajlovic et al., 2012; Minichilli et al., 2014; Querbach et al., 2020). In public family firms, minority shareholders often favor an independent board chair to preserve their interests (Cabrera-Suárez et al., 2001; Jones et al., 2008). However, our findings show a stronger negative effect of board chair independence on postsuccession performance in firms with stronger family control, thereby questioning the effectiveness of independent board chairs (Veltrop et al., 2021). In contrast, we show that predecessor retention not only has a stronger positive effect on firm performance with increasing family control (for the benefit of shareholders) but also a stronger effect on reducing conflicts with employees, suppliers, and customers (i.e., preserves relationships for the benefit of stakeholders). Thus, while predecessor retention may incur agency costs related to the lower adaptation benefits of CEO successions, in family-controlled firms, the adaptation benefits outweigh the disruption costs.

Further, our results show that family-controlled firms particularly benefit from outside CEO successions in combination with predecessor retention. This finding is interesting because it shows a little-used but viable way for family-controlled firms to bring in an outsider to the CEO position and thereby prevent firm performance declines. We add to prior studies on outside CEO successions in family-controlled firms (Miller, Breton-Miller, Minichilli, Corbetta, & Pittino, 2014; Minichilli et al., 2014) by suggesting that the high performance variance of outside CEO successions may be explained by the type of board chair, which tends to tilt the balance toward performance gains with predecessor retention but not with board chair independence. In particular, our findings support the notion that firms with stronger family control do not aim to “preserve the status quo” but aim to move forward after a CEO succession. We found that the combination of an outside CEO with fresh ideas and new perspectives and the predecessor CEO as board chair with in-depth knowledge about and relationships with important stakeholders can result in performance improvements under the close watch of controlling family owners.

Limitations and Future Research Implications

As with any study, ours has limitations. First, our study focuses on family control, but other types of controlling owners might have an equally strong ability to reduce the self-serving behavior of predecessor CEOs as board chairs, build their firms’ competitive advantage on strong stakeholder relationships, and thus generate benefits from predecessor retention. Thus, expanding the analysis to other controlling owners constitutes an interesting avenue for future research. Second, predecessor CEOs in firms with weaker or stronger family control may differ in their attachment to, or benevolence toward, these firms as well as their involvement in the choice of successor, which might be alternative explanations for the positive performance effects of predecessor retention in firms with stronger family control. While we controlled for unobserved heterogeneity in our empirical study and showed in our ICTV tests that our results are unlikely to be overturned by an omitted variable, future research could use qualitative or survey-based methods to get to these alternative mechanisms. Third, our study context comprises U.S. firms, so future studies can expand into other institutional contexts outside the United States. Fourth, we acknowledge that we were unable to disentangle the performance effects of specific stakeholder groups and heterogeneity within stakeholder groups. Future studies could investigate how exactly individual stakeholder groups impact postsuccession performance and how this impact differs depending on the board chair type. Fifth, our study builds on robust evidence that pursuing strong stakeholder relationships contributes to family-controlled firms’ performance advantage (Gómez-Mejía et al., 2011; Neckebrouck et al., 2018; Sraer & Thesmar, 2007). We did not measure the strength of stakeholder relationships pre- and postsuccession directly. While stakeholder relationships as part of socioemotional wealth have long served as an unmeasured theoretical concept in family business research (Gómez-Mejía et al., 2011), we used databases to approximate the disruption of stakeholder relationships by measuring the number of reported stakeholder conflicts after CEO successions. Future research may continue this endeavor to get closer to the theoretical construct.