Employment policies in private loss firms: Return to profitability and the role of family CEOs

Jukka Kettunen, Minna Martikainen, Georgios Voulgaris*

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

3 Citations (Scopus)

Abstract

We study employment policies in private loss firms and their impact on loss reversal. We show that employee retention positively affects the likelihood of a return to profitability in firms with family CEOs, who are typically averse to employee dismissals for reasons mainly related to preserving socioemotional wealth. This effect is more pronounced for firms with transitory (i.e., less severe) losses. Further analysis suggests that productivity improvement following employee retention is the main economic channel of our results. A lack of socioemotional wealth also helps explain the negative association between employee retention and loss reversal in firms with outside CEOs. This pronounced duality of performance responses to employee retention supports prior findings on the importance of socioemotional wealth for family firms. In light of the crisis induced by COVID-19, our findings can provide insights that may enhance the efficacy of employee retention-related government schemes assisting firm recovery.
Original languageEnglish
Peer-reviewed scientific journalJournal of Business Research
Volume135
Pages (from-to)373-390
Number of pages18
ISSN0148-2963
DOIs
Publication statusPublished - 01.10.2021
MoE publication typeA1 Journal article - refereed

Keywords

  • 512 Business and Management
  • loss persistence
  • loss reversal
  • employee retention
  • family CEO
  • socioemotional wealth

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoS: Financial management, accounting, and governance

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