The following post comes to us from Vikas Mehrotra, Professor of Finance at the University of Alberta; Randall Morck, Professor of Finance at the University of Alberta; Jungwook Shim of the Faculty of Economics at Kyoto Sangyo University; and Yupana Wiwattanakantang, Associate Professor of Finance at the National University of Singapore.
In our paper, Adoptive Expectations: Rising Sons in Japanese Family Firms, forthcoming in the Journal of Financial Economics, we examine a 40-year postwar panel of listed companies in Japan. In developed economies, inherited control is linked to poor firm performance (Morck, Stangeland, and Yeung, 2000; Smith and Amoako-Adu, 2005; Bertrand and Schoar 2006; Perez-Gonzalez, 2006; Bennedsen, Perez-Gonzalez, and Wolfenzon, 2007). Our panel of nearly all Japanese firms listed from 1949 (when markets reopened after World War II) to 1970, and followed until 2000, reveals inherited control more common than generally thought (Chandler, 1977; Porter, 1990) and heir-run firms performing well. These results are robust, and analysis of succession events shows heir control “causing” good performance.