Nepotism or Stewardship? What CEO Successions in Family Firms Really Tell Investors

In June 2025, the Pinault family-controlled group Kering announced that Luca de Meo, then CEO of Renault, would take over as CEO, while François-Henri Pinault remained chair. The market read it as a governance change. Kering’s shares rose by 11% on the news. Four years earlier, the Ortega family-controlled retailer Inditex announced that Marta Ortega, the founder’s daughter, would replace Pablo Isla as non-executive chair, while Óscar García Maceiras, a non-family executive, became CEO. Inditex shares fell by more than 5%.

The contrast is irresistible. An outsider arrives, and the market sees professionalization. Family control becomes more visible, and the market sees dynastic risk. But when we examined more than a thousand successions in listed family firms worldwide, the data did not support such a simple pattern.

Why succession is never just a personnel decision

Succession in a family-controlled company is never simply a personnel decision. It reveals who is expected to exercise authority, how much discretion the family is willing to delegate, and whether the board is genuinely changing the governance of the firm or merely changing the name on the door. That’s why succession announcements can become tests of investor beliefs.

Two seminal studies explain why investors have reasons to be cautious about inherited leadership. Francisco Pérez-González showed that US firms appointing CEOs related to the founder, departing executive, or controlling shareholder subsequently experienced lower operating profitability and lower market-to-book valuations than firms choosing unrelated successors. A subsequent study by Morten Bennedsen, Kasper Meisner Nielsen, Francisco Pérez-González, and Daniel Wolfenzon provided even stronger evidence using Danish data. Their results indicated that family succession reduced operating profitability by at least four percentage points. The central concern of both studies is that limiting the CEO search to one family dramatically narrows the available talent pool.

Yet theory also points in the opposite direction. Family leaders can bring firm-specific knowledge, longer time horizons, and reputational skin in the game that hired managers may lack. They can preserve trust among employees, suppliers, customers, and long-term shareholders. What looks like nepotism from the outside can be stewardship.

What we actually found

In our paper presented at the 2026 Baltic Family Firm Institute–ECGI conference, we built a dataset of over 1,600 CEO appointments in listed family firms across the world. We focused primarily on two types of transitions: “professionalization,” in which a family CEO is succeeded by a non-family CEO, and “refamilisation,” where this change is reversed.

Our first finding is that CEO identity is remarkably sticky. Over half of all successions (55%) simply hand the role from one hired CEO to another. Family-to-hired transitions make up 36%; hired-to-family transitions, just 9%. Direct family-to-family handovers are almost nonexistent. The dynastic succession that dominates headlines is indeed a rare event.

The second finding challenges the popular narrative even more strongly. We find that professionalization more often happens through internal promotion than through outside recruitment. Nearly 60% of family-to-hired transitions promote an internal non-family executive who already knows the firm. And the family frequently doesn’t disappear from the scene — it often keeps the chair, the outgoing CEO frequently moves onto the board, and concentrated ownership or voting rights tend to persist. Swapping out the CEO’s surname is not the same as ending family control.

This changes how we should interpret the market’s reaction. Looking at share-price movements in the days surrounding each announcement, we find neither an average professionalization premium nor an average refamilization discount. Both types of appointment generate approximately the same small return. Investors, it appears, do not mechanically reward the label “professional” or penalize the label “family.” The striking reactions surrounding Kering and Inditex are real, but they should not be mistaken for a universal pattern.

The absence of an average effect does not mean that governance is irrelevant. On the contrary, it means that the transition label alone tells investors too little.

What matters is the control structure behind the appointment. The market reacts more positively to professionalization when the controlling family possesses substantial ownership or voting rights. In those firms, the family has the power to retain direct executive control but voluntarily chooses to delegate day-to-day management to a non-family CEO. The appointment therefore becomes a more credible signal that the family genuinely supports the transfer of executive authority, rather than merely making a symbolic change.

The market does not necessarily reward the retreat of the controlling family; it rewards evidence that a powerful family knows when to delegate.

The twist: a valuation–performance wedge

When we follow firms after refamilization, profitability improves over the subsequent three years, while valuation multiples decline. The evidence therefore points to a valuation–performance wedge: operating outcomes improve, but investors continue to attach a discount to the firm. One interpretation is that markets place considerable weight on the perceived risks surrounding family successors, the possibility of an underqualified heir, or a “Fredo effect”, even when the business subsequently performs better than investors expected.

Professionalization events show no such neat payoff either: we don’t find that swapping in a hired CEO mechanically improves return on assets, and family-to-hired transitions are, if anything, associated with lower valuation multiples and higher leverage afterward. Changing the name on the CEO’s door is not a substitute for changing how the organization runs.

What this means for boards and investors

The practical takeaway is uncomfortable but useful. Boards should stop treating succession as a binary choice between loyalty and competence. Families should stop assuming that keeping control requires retaining the CEO title. Investors should look past surnames and résumés to the architecture surrounding the appointment: Who controls the board? What authority has actually been delegated? Does the outgoing leader retain a shadow role? Can the board actually hold the new CEO accountable?

The real dividing line isn’t family versus professional management. It’s symbolic succession versus credible governance change. A family successor can be a capable steward, while a hired CEO can be little more than a figurehead. What creates value isn’t the absence of family influence — it’s the disciplined allocation of authority.

So judge every succession by one demanding test: does it make responsibility clearer and accountability more real? If it does, legacy becomes an asset. If it doesn’t, “stewardship” is just a polite word for entrenchment.

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Raul Barroso is a professor in Accounting at IÉSEG School of Management.

Oskar Kowalewski is professor of finance at the IESEG School of Management, member of LEM-CNRS 9221 and researcher at the Institute of Economics, Polish Academy of Science.

Prabesh Luitel is an Assistant Professor of Finance at IESEG School of Management and a member of CNRS-LEM research center. 

This blog is based on a paper presented at the 4th Baltic Family Firm Institute - ECGI Conference, held in Tallinn, Estonia and hosted by Estonian Business School, in collaboration with ECGI. Visit the event page, Steering the Legacy: Governance and Succession in Family Enterprises, to explore more conference-related blogs.

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