Managing the Family Firm: Evidence from CEOs at Work

Oriana  Bandiera; Renata  Lemos; Andrea  Prat; Raffaella  Sadun

Article | Review of Financial Studies | May 2018

Managing the Family Firm: Evidence from CEOs at Work

by Oriana Bandiera, Renata Lemos, Andrea Prat and Raffaella Sadun

Abstract

We present evidence on the labor supply of CEOs and on whether family and professional CEOs differ on this dimension. We do so through a new survey instrument that allows us to codify CEOs’ diaries in a detailed and comparable fashion and to build a bottom-up measure of CEO labor supply. The comparison of 1,114 family and professional CEOs reveals that family CEOs work 9% fewer hours relative to professional CEOs. Hours worked are positively correlated with firm performance, and differences between family and non-family CEOs account for approximately 18% of the performance gap between family and non-family firms. We investigate the sources of the differences in CEO labor supply across governance types by exploiting firm and industry heterogeneity and quasi-exogenous meteorological and sport events. The evidence suggests that family CEOs value—or can pursue—leisure activities relatively more than professional CEOs.

Keywords: Performance Productivity; Family Ownership; Management;

Format: Print

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Citation:

Bandiera, Oriana, Renata Lemos, Andrea Prat, and Raffaella Sadun. "Managing the Family Firm: Evidence from CEOs at Work." Review of Financial Studies 31, no. 5 (May 2018): 1605–1653. (Lead article.)

We investigate whether top managers affect the performance of large public sector organizations. As our case study we examine CEOs of English public hospitals, which are large, complex organizations with multi-million turnover. We study the impact of individual CEOs on a wide set of measures of hospital performance, intermediate operational outcomes and inputs. We adopt two econometric approaches: a parametric approach that exploits the movement of CEOs across different hospitals and a non-parametric difference-in-difference matching estimator. Overall, we find little evidence that individual CEOs have an impact on a large set of measures of hospital performance. This result is not due to the allocation of good performers to poorly performing hospitals.

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Managing the Family Firm: Evidence from CEOs at Work

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