From continuity to change: Executive team restructuring in family firms during succession events

This study provides new insights into the structural changes in family firm executive teams around succession events. Specifically, we analyze the probability of hirings and turnover of executives in family firms with planned succession events compared to those without a succession. We distinguish furthermore between family-internal or family-external succession arrangements and analyze the hired and dismissed executives’ personal characteristics. We use data on 70,421 executive observations primarily working in SMEs (German “Mittelstand”) from the German Linked Employer-Employee Panel (LIAB) in the period 2009–2019. Applying probit regression models, we find that succession arrangements in family firms exhibit strong differences depending on the occasion, especially in terms of preparation for the type of succession. Family-internal successions are associated with greater continuity among executives, as the probabilities to leave the firms are generally lower. If executives leave a company before internal succession arrangements, they are typically of older age, suggesting a retirement-motivated dismissal. Furthermore, we find evidence that both the qualification profile of executives and their compensation vary depending on the path chosen for the longevity of the firm. Our study aims to establish an empirically strong foundation for future research on the effects of succession events on family firm executives and the resulting changes in firm behavior.

JEL: M12, D22, G32, & C23