CEO Succession: Choosing Between Family Member or Outsider?

Abstract

Studies discussing on having a family chief executive officer (CEO) or outsider to manage family companies are widely discussed in overseas but little research that actually taking place in Malaysia. Thus, this study examines the relationship between the choices of family or outside CEO with company performance. The sample size of this study was 888 family companies listed on Bursa Malaysia from 2003 to 2007. Interestingly, the findings indicate as expected that family CEO enhanced company performance greater than outside CEO. Within the family company, CEO-successor enhanced the firm value greater than the CEO-founder. More importantly, family companies prefer to have family CEO to manage the company because of strong family cultures, high sense of family unity and belongings within the companies.