Abstract
We study successions from a non-family CEO back to a family CEO, which we label “Type-R” successions. In our sample of 489 Italian family firms experiencing the departure of nonfamily CEOs, these successions represent 42% of all cases. Our difference-in-differences results indicate that family firms undertaking Type-R successions experience an 18% improvement in profitability. Exploring the heterogeneity underlying this result, we find that Type-R successions produce weaker results in contexts that are highly volatile and that rely on innovative inputs before succession. Finally, in studying the drivers of the performance increase we find that Type-R successions reduce labor costs and spur efficiency. Collectively, our evidence suggests that Type-R successions improve performance by leveraging family assets while avoiding dysfunctional nepotism and other parochial family priorities.
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