Table 1 displays the relation between the outgoing CEO and his or her successor in family successions. Most successors (68%) are children of the outgoing CEO, and most of the children are sons.
Researchers have investigated what happens to performance in family firms after succession. Studies on, among others, Danish and U.S. firms have persistently showed that the average family-successor underperform the average unrelated successor (“professional CEO”).
Recent CCGR research has found that this underperformance is concentrated on family-successors that have worked in the family firm for a long time prior to succession. On average, such “inside family-successors” have worked close to 10 years in the family firm prior to taking over as CEO and only one-third of them have worked outside the family firm. Family successors that are recruited from external firms (“outside family-successor”), however, perform as well as unrelated CEOs. Figure 1 below displays the evolution in different measures of performance and profitability around the date of succession (date T=0) for the two types of family successors.