Do the Choices of Family Business CEOs Affect Investment Decisions?

Abstract

Abstract Family firms are a common organizational form in emerging economies. Almost 80% of firms are controlled by families and 40% of them are controlled by founder CEOs in Taiwan. Thus, family founders play an important role in complex financial decisions. In addition, the average age of family CEOs is around 60 years old, so now is a big time for the succeeding generation to make the right decisions leading to a successful family business. However, prior studies have contradictory conclusions about the relationship between family firms and investment policies. The sample is based on data from Taiwan family firms for whom the data was manually collected on annul reporting over a period of 2009-2015. Unlike the expectation of the entrenchment effect, we find that both family founder and family descendant CEOs have a propensity to undertake efficient investment decisions, which supports the socioemotional wealth perspective. JEL classification numbers: G11, D61, J12. Keywords: Investment efficiency, Over-investment, Family Founder, Family Descendants.