Succession and performance of family firms listed on the mexican stock exchange

Abstract

This paper analyzes the impact of Chief Executive Officers´ (CEOs´) turnovers on the profitability of family businesses listed on the Mexican Stock Exchange, during the period 2009-2016. A panel database is built, consisting of 69 non-financial family firms. It is found that financial performance falls once the transfer of command occurs, which is not fully recovered in the years following this change. This shows important weaknesses in the process of succession of family businesses. It investigates the moderating and aggravating effects on business profitability of certain characteristics of these new CEOs. Variables such as the family nature of the new CEO, his age, number of years working in the company, education and presence in business networks are studied. The findings indicate the convenience of hiring non-family CEOs, who have extensive business ties. The education and experience of CEOs have no impact on business profitability, from the moment the transfer of command takes place. This has important implications for succession plans, to increase the chances of success and survival over time of these companies.