Perhaps the most dramatic paper that electrifyingly shook age-old perceptions was the one presented in 2004 by stalwart professors Belen Villalonga (Harvard Business School) and Raphael Amit (Wharton), who analysed “all” Fortune 500 firms and proved unequivocally that “when ‘descendants’ (of founders or founding families) serve as CEOs, firm value ‘is’ destroyed!” Villalonga and Raphael further proved that descendant CEOs “destroy value whether or not the family has control-enhancing mechanisms.” If that wasn’t enough proof to convince why companies should believe in professional managers (called ‘outsiders’) beyond the fi rst generation, a 2003 research by London Business School proffered that family businesses “risk their growth potential if they fail to recruit from outside...” Amusingly, this fi nding gets tremendous support from the subsequent benchmark 2005 research paper titled ‘Firm Performance... In Family Managed Firms’ by David Hillier (Leeds University) and Patrick Mc- Colgan (Aberdeen University), which indisputably establishes how family CEO successions are almost always followed by dramatic declines in not only stock performance, but most dangerously, even operating performance!
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist)
