Family Feud: Succession Tournaments and Risk-Taking in Family Firms*

We identify succession as a novel determinant of risk-taking in family firms. We find significantly higher risk-taking (mergers and acquisitions and cash flow volatility) and lower operating efficiency in firms controlled by families with multiple sons during the pre- rather than the postsuccession period compared to family firms with one or no sons. Presuccession risk-taking by sons decreases the following inheritance law amendments that require sharing of wealth among heirs, bolstering the causal interpretation of our findings. An infusion of outside talent via daughters' marriages also alleviates the relative rank-seeking behaviors of sons during succession tournaments.