NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Adoptive Expectations: Rising Sons in Japanese Family Firms

Vikas Mehrotra, Randall Morck, Jungwook Shim, Yupana Wiwattanakantang

NBER Working Paper No. 16874
Issued in March 2011
NBER Program(s):   CF

The practice of adopting adults, even if one has biological children, makes Japanese family firms unusually competitive. Our nearly population-wide panel of postwar listed nonfinancial firms shows inherited family firms more important in postwar Japan than generally realized, and also performing well – an unusual finding for a developed economy. Adopted heirs’ firms outperform blood heirs’ firms, and match or nearly match founder-run listed firms. Both adopted and blood heirs’ firms outperform non-family firms. Using family structure variables as instruments, we find adopted heirs “causing” elevated performance. These findings are consistent with adult adoptees displacing blood heirs in the left tail of the talent distribution, with the “adopted son” job motivating star managers, and with the threat of displacement inducing blood heirs to invest in human capital, mitigating the so-called “Carnegie conjecture” that inherited wealth deadens talent.

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Document Object Identifier (DOI): 10.3386/w16874

Published: Mehrotra, Vikas & Morck, Randall & Shim, Jungwook & Wiwattanakantang, Yupana, 2013. "Adoptive expectations: Rising sons in Japanese family firms," Journal of Financial Economics, Elsevier, vol. 108(3), pages 840-854.

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