The risk of CEO dismissal in family small and medium sized enterprises: An empirical analysis from Belgium*

Family firms represent the most common form of organizations across the world. Due to this predominance, family businesses play a central role in the economy by significantly contributing to the GDP and providing jobs to a large amount of workers. Given that chief executive officer (CEO) turnover may compromise the future of these companies by introducing discontinuity in management, family firms are very concerned with this issue. While numerous studies have investigated the parameters that explain the recruitment procedures of new CEOs in family businesses, a scarce amount of research has explored the antecedents of CEO turnover. More specifically, little attention has been dedicated to the factors that influence CEO dismissal in the context of family small and medium sized enterprises. Investigating this issue is critical as it enables family firms to detect the parameters that could predict the risks of discontinuity within the organization. Therefore, the aim of this study is to identify the determinants of CEO dismissal in Belgian family SMEs. More specifically, we try to understand whether specific CEO attributes and governance variables can have an impact on CEO dismissal. Based on a survey launched to 2.000 SMEs in Belgium, we identified 102 CEO dismissals in family SMEs. Logistic regressions have been used to explain CEO dismissal by several variables related to governance. Our findings reveal a significant influence of CEO attributes such as age and tenure on CEO dismissal. Furthermore, firm age appears to be postively related to CEO dismissal. The other governance variables (CEO duality, board size, board composition) are not found to impact the likelihood of CEO dismissal. Taken together, these results provide new insights on the role of managerial entrenchment to better understand CEO turnover in the context of family SMEs.