"This dissertation is composed of three essays related to the succession in family firms. The first essay documents a novel channel of transfer of control in family firms. I provide evidence, from a natural experiment, that avoiding inheritance tax is the motivation behind intra-group mergers. Due to tax reform that increases personal inheritance taxes by 25 percentage points, the firms burdened by a high personal inheritance tax are most likely to increase intra-group merger activities during post tax-reform period. This result suggests that firms with heavy inheritance tax burdens acquire smaller affiliates owned by the heirs. This way, heirs convert target shares to acquirer shares while avoiding inheritance tax. In my second essay, I identify succession as a novel determinant of risk-taking in family firms. I find significantly higher risk-taking (M&A and cash flow volatility) and lower operating efficiency in firms controlled by families with multiple sons during the pre- rather than the post-succession period compared to family firms with one or no sons. Pre-succession risk-taking by sons decreased after the instatement of inheritance legislation that required some sharing of wealth between them. An infusion of outside talent via daughters' marriages also alleviates sons' relative rank-seeking behaviors during succession tournaments. The third essay documents an unusual surge in fraud investigations for family firms with many sons prior to leadership successions, which are accompanied by negative shareholder reactions. Such fraud investigations are concentrated in firms run by families with extensive internal conflicts, including public feuds, as well as families with half-brothers. Using the sudden death of a chairman as an exogenous shock that increases conflicts inside the family, we find sharply increasing fraud investigations following the chair's death. Overall, our results shed new light on the significant spillover from family governance to corporate governance in family-run organizations."--Pages ii-iii.
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