Hsiangtsai Chiang

Among the founders of family firms, succession is the greatest challenge to long-term success. According to The Family Firm Institute (n.d.), only about 30% of family businesses survive into the second generation, 12% are still viable into the third generation, and only about 3% of all family businesses operate into the fourth generation or beyond. In contrast to Western countries, the sustainable development of family-owned enterprises within Chinese society must rely on the operation of enterprises. Succession, being inevitable, can reduce the value of a company. This study sought to identify the appropriate succession plan to maintain business value and family’s wealth. The main purpose of this study is to discuss the relationship between a family’s succession, the successor, and firm performance. The sample is comprised of listed firms in Taiwan with necessary data from the Taiwan Economic Journal Database (TEJ). The period extends from 1996 till 2016. Securities, financial firms, and other elements of incomplete information are excluded from the sample. The research sample including 1,286 firms and 13,849 firm-year data, 2,918 of which indicate succession issues. This study employed regression model and investigated the relationships between family succession, the successor, and corporate performance. The main findings indicate that succession negatively influences corporate performance. However, an internal successor is better than an external one, and children successors are better than other relatives.