WHY TURNOVERS? EXAMINING THE DRIVERS OF CEO TURNOVER IN FAMILY FIRMS

Abstract

I examine the potential drivers for replacement of CEOs in privately held firms in Norway emphasizing on family firms. I studied how different family-related characteristics and change in firm performance are related to CEO turnover. On average, turnover events follow a trend of deteriorating performance. Turnovers are more likely in family firms in two specific circumstances; firstly in the presence of large non-family shareholders and secondly, when the incumbent CEO does not belong to the family. The likeliness of turnover after a period of declining performance increases in non-family firms but decreases in family firms. This positive relationship between prior-performance and turnover in family firms holds even in the presence of outside shareholders or a non-family CEO. My analysis suggests that turnover decisions in family firms are driven differently than in non-family firms.