Adoptive Expectations: Rising Sons in Japanese Family Firms
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.
We are grateful for helpful comments from Joseph Fan, Masaharu Hanazaki, Katsuyuki Kubo, Rafael La Porta, Alice Nakamura, Seki Obata, Hernán Ortiz-Molina, Hugh Patrick, Juro Teranishi sensei, Belen Villalonga, Bernard Yeung, and from seminar and conference participants at the University of Alberta, the University of Calgary, the Chinese University of Hong Kong, Columbia University, Dartmouth's Tuck Business School, Hitotsubashi University, IIM-Bangalore, the Indian School of Business, Kobe University, Kyoto University, London School of Economics, London Business School, the University of Lugano, the National University of Singapore, Osaka University, Purdue University, the 2010 Western Finance Association meetings in Victoria, and the 2010 NBER summer workshop in corporate finance. We acknowledge financial support from the Grant-in-Aid for Scientific Research (the grant number 18203022) provided by the Japanese Ministry of Education, Culture, Sports, Science and Technology (MEXT), the Murata Foundation, the Japanese Bankers Association Foundation, the Social Sciences and Humanities Research Council, and the Ishii Memorial Securities Research Promotion Foundation. All remaining errors are the authors' responsibility. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
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. citation courtesy of