Abstract

We study the relationship between family ownership and the performance of newly public family firms around founder resignations. We find some preliminary evidence that founder resignations are a part of his or her exit strategy that involves an exit from the equity position as well. In particular, founders who completely resign from all positions in their firms do so after a relatively good performance. Our results also suggest an entrenchment at low levels of family ownership and a better alignment of family's interests with those of minority shareholders at high levels of family ownership. First, we find a non-linear and concave relationship between family ownership and the market reaction upon the founder resignation announcements. Second, we find the same non-linear and concave relationship between changes in the operating performance after founder resignations and ownership of the founding family. Finally, we find a bell-shaped relationship between family ownership and the likelihood of a family succession and a convex relationship between family ownership and the likelihood of a founder's complete exit from management and governance roles.