Family Control, CEO Power and CEO Succession in Taiwan's Public Companies

Abstract

The literature on CEO succession is quite rich and varied given a very long research tradition in the west. However, little is known about the determinants of CEO succession in countries outside the developed western world. In attempting to fill this gap, this study, set in Taiwan, examines the relationship between the turnover and tenure of CEO and the board of directors, using a longitudinal data set on 198 Taiwan public traded corporations over a 21-year period (1981-2001). The findings indicate that the CEO's relative power plays an important role in explaining variations in CEO turnover and the duration of tenure. When the CEO acquires more power through kinship tie with the largest family or the family with effective control power through ownership, the CEO turnover is significantly lower and the tenure is longer. The paper also investigates if poor firm performance may trigger the replacement and decrease tenure of CEO. The results show that the corporate performance is strong negatively related to the CEO turnover and positively related to the tenure; furthermore the relationship is moderated by CEO power and the presence of a controlling family shareholder.