Leaving a Legacy of Transgenerational Success: The Effect of Socioemotional Wealth on CEO Career Horizons in Family Firms

This paper challenges the predominant view that as CEOs near retirement they forgo risky long-term investments, preferring instead to make decisions that enhance their short-term self-interests. Using the socioemotional wealth literature we argue that in family firms, near-retiring CEOs are more concerned about the family¿s socioemotional wealth and the legacy they pass to future generations. Consequently, CEOs in family firms approaching retirement differ from other CEOs by making decisions with long-term payoffs despite potential short-term risks. Although we find socioemotional wealth does impact the CEO career horizon problem, this effect differs for family and non-family CEOs in family firms. This study therefore suggests an important role in strategic decision-making for the emerging concepts related to socioemotional wealth.