Nepotism or Stewardship? Successor CEOs and Firm Performance

CEO succession is one of the most significant governance events in family-controlled firms as it is
a decision about control and whether the family delegates authority to professional management or reasserts direct leadership. This paper investigates how the stock markets respond to CEO transitions in family firms and whether these responses align with what happens with firms’ performance after the transition. Using a unique dataset we focus in the study on two transitions that shifts control within the family. Professionalization, when a family CEO is replaced by a hired CEO,
and re-familization, when a hired CEO is replaced by a family CEO. We find that CEO identity is
highly stable, making boundary-crossing successions rare, but when they occur market reactions
are strongly asymmetric. Professionalization is welcomed, while re-familization is penalized by the
stock market. Importantly, the operating picture does not reflect the response of the stock market. In re-familization transitions, profitability improves after the handover even as valuation multiples fall, creating a valuation–performance wedge. Taken together, the evidence is consistent with investors pricing the perceived agency risks of family successors more heavily than the subsequent fundamentals justify, and it highlights conditions under which family stewardship can look operationally resilient even when it is discounted in market prices.