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The relationship between financial risk management and succession planning in family businesses

George Mihaylov (Business School, The University of Adelaide, Adelaide, Australia)
Ralf Zurbruegg (Business School, The University of Adelaide, Adelaide, Australia)

International Journal of Managerial Finance

ISSN: 1743-9132

Article publication date: 27 July 2020

Issue publication date: 29 April 2021




This article examines the relationship between financial risk management and succession planning in family businesses. Motivated by the Theory of Planned Behaviour, we hypothesize that the use of professional risk management practices is associated with an increased likelihood that businesses adopt professionalized approaches to succession planning. We then investigate if succession planning professionalization is, in turn, positively related to the financial performance of family businesses.


We apply binary probit and ordered dependent variable regressions to unique data generated from a survey sample of Australian family businesses. To check the robustness of our results to potential endogeneity concerns we apply difference tests to propensity score matched sub-samples from our original cohort of respondents.


The results show that, in contrast to verbal or absent succession arrangements, formal written succession plans are both positively associated with the use of financial risk management practices and with superior financial performance in family businesses.


Our arguments and findings suggest that active financial risk management provides a platform for planning succession in family businesses, and that this links with improved short-term financial performance. In light of the critical role that succession plays in ensuring long-term business sustainability, our findings provide important and novel insights into the conditions under which family businesses are most likely to use formal professionalized succession planning.



The authors wish to thank the Australian Research Council [grant number LP0990421], ANZ, Rural Bank, and the RFCS for financial and operational support enabling this research. We are also grateful to the editor, Alfred Yawson, and to Jean Canil, Chris Graves, and an anonymous referee for their helpful comments and suggestions on earlier versions of this article. Andrew Harrison provided excellent research assistance.


Mihaylov, G. and Zurbruegg, R. (2021), "The relationship between financial risk management and succession planning in family businesses", International Journal of Managerial Finance, Vol. 17 No. 3, pp. 438-454.



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