Family firms are a common organizational
form in emerging economies. Almost 80% of firms are controlled by families and
40% of them are controlled by founder CEOs in Taiwan. Thus, family founders
play an important role in complex financial decisions. In addition, the average
age of family CEOs is around 60 years old, so now is a big time for the
succeeding generation to make the right decisions leading to a successful
family business. However, prior studies have contradictory conclusions about
the relationship between family firms and investment policies. The sample is
based on data from Taiwan family firms for whom the data was manually collected
on annul reporting over a period of 2009-2015. Unlike the expectation of the
entrenchment effect, we find that both family founder and family descendant
CEOs have a propensity to undertake efficient investment decisions, which
supports the socioemotional wealth perspective.
JEL classification numbers: G11, D61, J12.
Keywords: Investment efficiency, Over-investment, Family Founder,