The Effectiveness of Board Monitoring in Listed Family Firms

This study investigates the impact of family ownership on the CEO turnover-performance sensitivity, examining two potential internal and external factors that may compromise the prompt replacement of an underperforming executive. First, at firm-level, I examine whether the CEO turnover-performance sensitivity is weakened by the existence of family ties between family owners and CEOs. Second, at country-level, I investigate whether the CEO turnover-performance sensitivity for professional CEO is weakened by the cultural propensity to distrust a stranger. Findings reveal that, within family firms, the likelihood of CEO turnover after poor performance is lower when the CEO is a family member rather than a professional manager. Findings also show that the likelihood of dismissal of a poorly-performing professional CEO is lower in environments characterized by the cultural propensity to distrust a stranger.