2022 年 19 巻 p. 91-112
The business succession of SMEs is becoming a serious issue, increasing number of business successions to women, which are often carried out with less management experience and no preparation period, so it is necessary to create an environment that promotes post-succession business growth. Preliminary research revealed inhibiting factors to include lack of management experience due to inadequate preparation time, limited time to manage the business due to juggling housework and childcare, and the scarcity of role models. An analysis of the differences in characteristics between male and female successors revealed significant differences in corporate age, number of employees, and managerial age. This study analyzed the financial data of 400 SMEs with female successors, using probit regression and multivariate analysis to measure the differences in corporate performance between intra-relative and non-relative succession and companies’ characteristics. Results showed that (1) companies succeeded to relatives were older in corporate and managerial age, and smaller (capital and employees); (2) sales and net income were lower, and profit margins tended to be negative, while the sales per employee tended to be higher; and (3) the higher the number of employees, the more profitable the company. In conclusion, female successors, who tend to be strong on increasing staff numbers and staff development, may be a positive for business growth.
Small and medium-sized enterprises (SMEs) account for 99.7% of Japanese companies, and they face several structural issues, including the aging of their owners and serious human resources shortages (Small and Medium Enterprise Agency, 2020). Therefore, succession is a significant concern for Japanese firms, and an increasing number of them are being dissolved because there are no successors available to lead them.
Business successions are commonly classified as intra-relative or non-relative succession. Succession by non-relatives can be further classified as succession by internal personnel, such as officers and employees, and mergers and acquisitions (M&A) to a third party that transfers or sells the business (Small and Medium Enterprise Agency, 2016).
Of all Japanese SMEs, 46% transfer their businesses to relatives (Small and Medium Enterprise Agency, 2017) as successors. The Teikoku Databank (2019) shows that 40.5% of SME owners consider their children as prime succession candidates, and 31.4% consider non-family members as prime succession candidates.
Only 8% of female business owners are company presidents, despite year-on-year increases. The Teikoku Databank (2019) shows that after the inauguration of a company, 35.3% of female business owners were entrepreneurial, and 50.8% were promoted into the position because they were family members of the previous CEO. In contrast, 41.0% of male business owners were entrepreneurial, and 38.8% were promoted because they were family members of the previous CEO. If this trend continues, the number of female successors will continue to rise; however, few studies on business succession among SMEs have focused on female successors. Furthermore, even fewer studies have conducted empirical data analyses on this topic (Yasuda, 2005).
In 2016, the Japanese government passed the Act on Promotion of Women’s Participation and Advancement in the Workplace. Although these government guidelines have strengthened support for female entrepreneurs and have considerably improved the business environment for them, the support system for female successors is comparatively lesser than that for female entrepreneurs.
1.2 Study ObjectivesThis study conducts an exploratory analysis of the growth factors of SMEs succeeded to women by evaluating the differences between corporate performances according to succession type, that is, intra-relative and non-relative succession. The latter is further categorized by succession to internal personnel, such as officers and employees, or through M&A to third parties who transfer or sell the business (Figure 1). Further, the study identifies the prominent factors that influence the post-succession corporate performances of companies succeeding to women. Apart from identifying the characteristics of successful female-owned companies, this study also contributes to the limited literature on female business successors in SMEs by speculating on other factors not included in those studies but that may influence corporate growth.
Source: Author flowchart adapted from Small and Medium Enterprise Agency (2014, 2016)
Most research on business succession in SMEs has been conducted outside of Japan. Gonzalez (2006) compared the companies’ performances in which sons were the successor owners to companies where non-relatives succeeded. His analysis showed that companies succeeded to sons performed worse than those companies where non-relatives took over. Similarly, Lauterbach et al. (1999) used a business succession case in the United States to clarify that succession to a person outside of the company improves business performance in the long run. Nakai (2009) analyzed the differences in corporate performances between a company that took over a business (second founding) and a company that started a business, highlighting the deciding factors for whether businesses should be taken over or dissolved. This study showed a high probability of succession between relatives within a company that has debt, lacks the relative strength to bring excess profitability, and has a smaller employee strength with a long term of office for the CEO.
Yasuda (2005) divided succession into two types, that is, succession by the sons of predecessor managers and third parties. He examined the relationship between succession types and corporate attributes and analyzed the determinants of corporate performance after the succession. Intra-relative and non-relative succession demonstrate considerably different attributes of the company’s performance post succession. Companies that are succeeded to relatives tend to be well-established and profitable, and the owner succeeds the company due to age. Despite differing determinants, performance levels of intra-relative and non-relative succession companies do not show significant differences. Succession entails an adjustment period, and the performance of both intra-relative and non-relative succession companies improves with time.
According to Yasuda and Kyo (2005), business succession has the following impacts on SME performance: (1) entrepreneurial attributes, such as the managerial age and educational level, determine corporate performance among both founder businesses and those that have undergone a succession; (2) in succeeded business, the influence of attributes on performance are different for succession by children and succession by a third party.
Can the findings obtained from previous research be the same with women successors in the SMEs? Compared to large companies, SMEs have a smaller scale of sales and profits, making managing profits more difficult. It is difficult to use return on assets (ROA) or return on equity (ROE) as an index to measure the performance of a company. Female successors often do not have a preparation period and may experience difficulties due to a lack of business experience and management know-how. Based on the findings obtained in previous studies, companies that have succeeded to women possibly do not perform very well. This study will clarify the type of index that reflects the actual situation where women succeeded their businesses in SMEs to measure the performance of such enterprises. We further assess whether there is a difference between those who succeed to relatives and those who succeed to non-relatives.
2.2 Analytical FrameworkStorey’s (1994) framework for corporate performance analysis contains three elements: (1) entrepreneurial attributes, (2) corporate attributes, and (3) corporate strategy. Entrepreneurial attributes refer to personal attributes determined before an individual becomes a manager, such as a gender, age, educational background, and work history. Corporate attributes include company size, corporate age, industry type, and location. The corporate strategy includes factors decided by corporate management, such as educational levels required for CEOs and employees, shareholders, technology, and market position.
This study used Storey’s (1994) framework to examine (1) the relationship between the type of succession and company attributes and (2) the factors that influence business growth post-succession. Further, this study analyzed the relationship between succession type and performance indicators by focusing on (1) entrepreneurial attributes and (2) corporate attributes.
As a preliminary survey, using the individual data (n=4,110) of the “Internet Survey on Business Succession of SMEs” conducted by the Japan Finance Corporation Research Institute in 2015, between male and female successors, F-test and t-test were performed to see if there was a significant difference between the two. As a result, it is known that there are significant differences in corporate age, number of employees, managerial age, and inauguration age. There was no significant difference between the male successor and the female successor companies in sales trends and business potential (Table 1).
| Male successors (n=1,253) |
Female successors (n=173) |
F-test (p value) |
t test*5 (t value) |
||
|---|---|---|---|---|---|
| Corporate age | Mean | 48 | 28.72 | 0.000063 | 4.90*** (2) |
| Median | 44 | 20 | |||
| Standard deviation | 59.29 | 46.83 | |||
| Number of employees*1 | Mean | 2.95 | 2.45 | 0.1579 | 3.44*** (1) |
| Median | 2 | 2 | |||
| Standard deviation | 1.78 | 1.88 | |||
| Managerial age | Mean | 52.20 | 47.07 | 0.000061 | 5.16*** (2) |
| Median | 51 | 46 | |||
| Standard deviation | 10.17 | 12.52 | |||
| Inauguration age | Mean | 42.10 | 37.10 | 0.0346 | 5.30*** (2) |
| Median | 41 | 35 | |||
| Standard deviation | 10.64 | 11.77 | |||
| Sales trends (Year-on-year)*2 | Mean | 2.20 | 2.32 | 0.2931 | −1.94* (1) |
| Median | 2 | 2 | |||
| Standard deviation | 0.79 | 0.81 | |||
| Sales trends (Compared to other companies)*3 | Mean | 2.66 | 2.62 | 0.0386 | 0.50 (2) |
| Median | 3 | 3 | |||
| Standard deviation | 0.77 | 0.84 | |||
| Business potential*4 | Mean | 2.43 | 2.43 | 0.0200 | −0.07 (2) |
| Median | 2 | 2 | |||
| Standard deviation | 0.84 | 0.94 | |||
(Note)
*1 1: 1 (person only), 2: 2–4, 3: 5–9, 4: 10–19, 5: 20–29, 6: 30–49, 7: 50–99, 8: 100–299, 9: 300–499, 10: 500–999, 11: 1,000 people or more
*2 1: Increase, 2: Immutable, 3: Decrease, 4: 1 I didn’t start a business a year ago
*3 1: Good, 2: Somewhat good, 3: Somewhat bad, 4: Bad
*4 1: Growth can be expected, 2: Growth cannot be expected, but the status quo can be maintained, 3: Business can be continued, but it will shrink as it is, 4: Business must be stopped
*5 (1) As a result of the test, when p value> significance level 0.05, it can be said that there is homoscedasticity, so a t-test using two samples assuming homoscedasticity was performed. (2) As a result of the F-test, when the p-value <significance level 0.05, it cannot be said that there is homoscedasticity, so a t-test was performed using two samples, assuming that the variances were not equal.
Source: Author.
This study included two models (Table 2). Model I was used to perform a probit regression analysis of the relationship between corporate attributes of the company and the succession type. Model II was used to analyze the corporate attributes and corporate performance of succeeded businesses. In Model I, succession type (intra-relative or non-relative succession) represents the explained variable in the relationship with company attributes (e.g., corporate age, company size, and managerial age). The succession type of the company (explained variable) is determined as intra-relative succession if the successor is a relative of the predecessor and as non-relative succession in other cases. Intra-relative succession has a value of 1 and non-relative succession has a value of 0. The intra-relative succession dummy variable is used as the explained variable related to the corporate attributes, which are the explanatory variables.
| Model I | Model II | |
|---|---|---|
| Corporate age (Natural logarithm) | Y | Y |
| Number of employees (Natural logarithm) | Y | Y |
| Capital (Natural logarithm) | Y | Y |
| Managerial age (Natural logarithm) | Y | Y |
| Surplus trend dummy | Y | |
| Sales increase trend dummy | Y | |
| Intra-relative succession dummy | Y(*) | |
| industry dummy | Y | Y |
| Sales (Natural logarithm) | Y | Y |
| Sales per employee (Natural logarithm) | Y | Y |
| Capital adequacy ratio (Natural logarithm) | Y | Y |
(Note) Model II will be verified separately for the whole, within relatives, and outside relatives.
Source: Author.
Model II was used to analyze corporate performance and its determinants, with explained variables of sales growth rate (increase/decrease), net income, return on sales, net income growth rate (increase/decrease), and the number of employees. Sales per employee, number of employees, employee growth rate (increase/decrease), ROE, and ROA were also considered. However, of these indicators, ROE and ROA were unsuitable for evaluating the performance of SMEs, as these companies often lack the managerial and financial resources available to large enterprises. Moreover, there was a lack of sufficient data on ROA and ROE. Therefore, the explained variables used in the present study were the surplus trend dummy and the sales increase trend dummy based on the sales and net income collected by SMEs.
(1) Corporate ageCorporate age is the number of years that a company has been established for. Because the sample includes companies over 80 years old, the variable of natural logarithm display was used. A simple comparison is not possible; however compared to the results of Yasuda’s (2005) survey, which does not distinguish between male and female successors, the corporate age is lower for female successors1. Looking at the difference in corporate age between the male successor company and the female successor company shown in 2.2, the female successor company is about 20 years younger than the male successor company (Table 1).
Corporate age is an indicator of whether a company is well-established. According to the Tokyo Shoko Research “Well-established Companies Survey,” the number of Well-established Companies that have been in business for over 100 years exceeded 30,000 in 2017, an increase of 20% from 2012. Well-established companies tend to operate as a family business, and when they plan for succession, they often want succession through their relatives, mainly their sons2. Well-established companies tend to operate as family businesses, and when there is succession, it is majorly CEOs’ sons who succeed. Therefore, corporate age affects the form of business succession.
In addition, corporate age increase is considered a negatively impacting factor on the growth rate of companies3. Classen et al. (2012) pointed out that innovation tends to be sluggish in family succession. The Japanese companies do not easily reform management after succession because management inertia continues making innovation difficult (Sakano and Lewin, 1999). In other words, inertia works in well-established companies and is a variable used for analyzing business performance after succession.
Corporate age was used as the explanatory variable in both models, and the predicted sign of the coefficient of this variable was positive in Model I, related to the determination of the succession type (the older the company, the more likely it is to be inherited by relatives). It was negative in Model II, related to business performance post-succession.
(2) Number of employees and capitalThe number of employees and capital are indicators of company size and are also used to determine whether a company is an SME. SMEs vary in their number of employees and capital, so the study used variables in the natural logarithm representation. Although it is not possible to make a simple comparison, the number of employees of female successors is relatively smaller than that of Yasuda (2005), who does not distinguish between male and female successors4. Looking at the average number of employees of male and female successors shown in 2.2, male successors have 5 to 9 employees, while female successors have 2 to 9 employees. It is the scale (Table 1), and the mode is 1 person (only the owner). Among the female successor firms, the number of employees and capital are larger in the non-relative successor firms than in the relative successor firms (Table 5).
The relationship between company size and type of succession has not been fully explored in previous studies (Yasuda, 2005). However, interviews with companies that have taken over businesses in the course of our research have shown that it is not easy for companies with many employees to choose to close their businesses, and that they continue to operate for the sake of their employees. From the perspective of the successor, the larger the company, the more attractive the company will look and the more likely it is to motivate the successor.
This study considered that company size influences type of succession to some extent, so the number of employees was used as the explanatory variable for both models. The predicted sign of the coefficient of this variable was negative for Model I (smaller companies are more likely to succeed to relative successors), and it was positive for Model II.
(3) Managerial ageThe age of business owners is recognized as a structural problem for SMEs. In business succession, as the age of the manager increases, it is more likely that the business will be dissolved, and the older the manager, the more likely it is that a relative will succeed (Nakai, 2010). Managerial age may be one of the factors that determine intra-relative succession and non-relative succession. As the age group for managers was wide, the variable of natural logarithm display was used. In all SMEs, the successor company within the relatives is lower than the successor company outside the relatives; however, the successor company within the relatives is higher than the successor company outside the relatives among the female successor companies5. Looking at the difference in the managerial age between the male successor company and the female successor company shown in 2.2, the female successor is about 5 years younger than the male successor (Table 1).
There is a concerning relationship between corporate performance and managerial age. Yasuda (2005) found that corporate performance can be classified by age such that a company founded by the current owner will be more successful, and the younger the founding owner, the more likely it is that the company will succeed. It follows that when a new CEO is appointed through succession, their age influences the business’s performance.
Therefore, managerial age was used as an explanatory variable for the two models, and the predicted sign of the coefficient for this variable was positive for Model I (the older the manager, the more likely there will be intra-relative succession), and it was negative for Model II.
(4) Sales and profitFor SMEs, sales and net income are not comparable to those of large companies. According to the Ministry of Finance’s Quarterly Report on Corporate Enterprise Statistics, sales6 in 2020 was 144.7 trillion yen for large enterprises and 135.3 trillion yen for SMEs7. Comparing the ordinary income in the same year, the scale of large companies was 11.5 trillion yen, while that of SMEs was less than half at 5.8 trillion yen. The median net profit (median) of SMEs in 2015 was 1.5 million yen. The sales per SME is 176 million yen; however, the average sales of the female successor company is 1.08 billion yen (Table 7). The data shown in 2.2 does not have numerical data on sales. Looking at the sales situation of the previous year and comparing it to other companies, there was no significant difference between the male successor and the female successor company (Table 1).
The natural logarithm was used as the financial index to measure business performance. In addition, because there are many companies in debt, the study used a surplus trend dummy to determine whether the business performance was in surplus or deficit and used a sales increase trend dummy to indicate whether sales were increasing year-on-year.
The income and expenditure of a company may influence its succession type. If the management is stable and the business is surplus, it will be easier to find a successor. However, if this is not the case, it may be hard to find a successor. Therefore, in Model I, the balance tone (surplus trend dummy) of the succeeded company was added as an explanatory variable, and the predicted code of the coefficient was positive in Model I (the company with the surplus tone is more likely to succeed to a relative).
(5) Sales per employee and capital adequacy ratioSales per employee is a component of labor productivity. In FY2018, in the manufacturing industry, the labor productivity of large enterprises was 13.67 million yen, while that of SMEs was 5.43 million yen. This is an urgent issue that needs improvement in the changing market structure, and it is thought that increasing labor productivity leads to business sustainability. Japan’s labor productivity is extremely low8 compared to that of OECD (Organisation for Economic Co-operation and Development) countries, and this needs to be urgently addressed for Japan to compete on the global stage.
The capital adequacy ratio is generally an indicator of corporate safety. It is the only index that can measure safety in SMEs when financial information is not disclosed. Therefore, as an index to measure the business condition of a company, the natural logarithm of sales per employee and capital adequacy ratio were used as explanatory variables.
(6) Industry typeThere are industries with many successions within relatives depending on the type of business, and outside relatives. For instance, in the construction industry, succession within relatives is 8% higher than succession outside relatives. The business performance post succession may differ depending on the industry.
Both models used the industry dummy variables for major industrial categories (manufacturing, construction, wholesale, retail and restaurant, service and other industries).
2.4 Data and SourcesThis study used randomly selected data from 400 SMEs with female successors who were not founders of their companies as of October 2020. Data on “small and medium-sized enterprises” whose representatives are “female” is extracted from the approximately 1.16 million corporate data recorded in Teikoku Databank COSMOS II, regardless of industry, region, capital, sales, etc. The cases were randomly selected9 and 400 SMEs were analyzed. SME classification was defined by Article 2 of the basic law on SMEs, and the company had to conform to the guidelines on (1) amount of capital and (2) number of employees by industry (Table 3).
| Industry | SME |
|---|---|
| Manufacturing and other | Capital: 300 million yen or less. Number of employees: 300 or less |
| Wholesale | Capital: 100 million yen or less. Number of employees: 100 or less |
| Retail | Capital: 50 million yen or less. Number of employees: 50 or less |
| Service | Capital: 50 million yen or less. Number of employees: 100 or less |
Source: Author.
Table 4 contains a breakdown of 400 data points from the companies’ post-inauguration histories. The data from Teikoku Databank’s (2019) “Women President Analysis” is similar and is included in the table for comparison. In addition, cases of internal promotion in family succession are included in both family succession and internal promotion categories.
| Study data | Data from “Women President Analysis” (TDB, 2020) |
||
|---|---|---|---|
| Number of companies | Composition ratio | Composition ratio | |
| Family successions | 308 | 77.00% | 78.33% |
| Non-family successions | 92 | 23.00% | 21.67% |
| Mergers and acquisitions | 9 | 2.25% | 2.48% |
| Internal promotion | 72 | 18.00% | 12.85% |
| Invitation to outsiders | 8 | 2.00% | 2.32% |
| Temporary transfers | 3 | 0.75% | 4.02% |
| 400 | |||
Source: Author.
Companies that have successors of the same family were classified as intra-relative succession, and those having non-relative successors were classified as non-relative succession. Tables 4 to 6 present the differences between companies inherited by relatives and companies inherited by non-relatives. Companies succeeded by relatives have more capital and employees than those by non-relatives. Companies succeeded by relatives of the predecessor have few employees, and their corporate and managerial age are higher (Table 5). The number of inheritances within relatives is higher than that of non-relatives in the manufacturing, construction, and retail/restaurant industries; however, there is no significant difference (Table 6). This study used multivariate analysis to avoid the possibility of spurious correlations between individual variables that could not be excluded from a simple comparison of statistics. The correlation coefficient between sales and the number of employees is 0.66 and VIF is 1.76, and they were not affected by multicollinearity. Both Model I and II will be verified using the data after the succession.
| Intra-relative successions (n=308) | Non-relative successions (n=92) | Total (n=400) | ||
|---|---|---|---|---|
| Corporate age | Mean | 41.06 | 30.36 | 38.60 |
| Median | 40.00 | 29.50 | 38.00 | |
| Standard deviation | 0.892 | 1.802 | 0.833 | |
| Number of employees | Mean | 23.84 | 62.79 | 32.80 |
| Median | 11.50 | 11.50 | 11.5 | |
| Standard deviation | 2.850 | 21.030 | 5.357 | |
| Managerial age | Mean | 52.75 | 44.51 | 50.85 |
| Median | 59.00 | 56.00 | 58.00 | |
| Standard deviation | 1.340 | 2.913 | 1.240 | |
| Capital | Mean | 45,410 | 252,747 | 93,098 |
| Median | 13,750 | 10,000 | 12,000 | |
| Standard deviation | 12,207.477 | 88,176.067 | 22,698.407 | |
Source: Author.
| Industry | Intra-relative successions (n=308) | Non-relative successions (n=92) | Total (n=400) | ||
|---|---|---|---|---|---|
| Number of companies | Manufacturing | 49 (15.9%) | 13 (14.1%) | 62 (15.5%) | |
| Construction | 82 (26.6%) | 17 (18.5%) | 99 (24.8%) | ||
| Wholesale | 59 (19.2%) | 21 (22.8%) | 80 (20.0%) | ||
| Retail/Restaurant | 23 (7.5%) | 6 (6.5%) | 29 (7.3%) | ||
| Service | 48 (15.6%) | 19 (20.7%) | 67 (16.8%) | ||
| Others | 47 (15.3%) | 16 (17.4%) | 63 (15.8%) | ||
| Capital | Manufacturing | Mean | 65,604 | 382,953 | 132,145 |
| Median | 13,000 | 20,000 | 17,000 | ||
| Standard deviation | 322,993 | 1,098,069 | 579,872 | ||
| Construction | Mean | 22,122 | 92,609 | 34,226 | |
| Median | 20,000 | 35,000 | 20,000 | ||
| Standard deviation | 17,254 | 174,670 | 77,078 | ||
| Wholesale | Mean | 56,907 | 288,834 | 117,788 | |
| Median | 20,000 | 10,000 | 18,000 | ||
| Standard deviation | 122,732 | 1,033,428 | 540,349 | ||
| Retail/Restaurant | Mean | 205,480 | 183,463 | 172,914 | |
| Median | 16,250 | 10,000 | 10,000 | ||
| Standard deviation | 890,566 | 840,045 | 810,455 | ||
| Service | Mean | 21,529 | 153,409 | 58,928 | |
| Median | 18,000 | 10,000 | 15,000 | ||
| Standard deviation | 18,669 | 592,129 | 315,369 | ||
| Others | Mean | 85,550 | 203,201 | 115,429 | |
| Median | 10,000 | 11,000 | 10,000 | ||
| Standard deviation | 416,350 | 528,726 | 445,994 | ||
Source: Author.
| Intra-relative successions (n=308) | Non-relative successions (n=92) | Total (n=400) | ||
|---|---|---|---|---|
| Sales (million yen) | Mean | 816.17 | 1,966.66 | 1,080.78 |
| Median | 330.00 | 337.50 | 333.50 | |
| Standard deviation | 89.995 | 700.053 | 176.333 | |
| Sales growth rate (%) | Mean | 1.25 | 1.52 | 1.31 |
| Median | −0.31 | 1.52 | 0.03 | |
| Standard deviation | 1.547 | 2.966 | 1.371 | |
| Net income (million yen) | Mean | 18.61 | 57.38 | 27.536 |
| Median | 4.90 | 6.18 | 5.00 | |
| Standard deviation | 4.164 | 27.476 | 7.109 | |
| Profit margin on sales (%) | Mean | −3.81 | 0.07 | −2.92 |
| Median | 1.44 | 2.24 | 1.57 | |
| Standard deviation | 4.969 | 3.293 | 3.900 | |
| Sales per employee (million yen) | Mean | 47.52 | 43.65 | 46.63 |
| Median | 27.72 | 22.48 | 26.83 | |
| Standard deviation | 3.883 | 6.927 | 3.385 | |
| Capital adequacy ratio (%) | Mean | 16.72 | 17.15 | 16.82 |
| Median | 0.00 | 0.00 | 0.00 | |
| Standard deviation | 1.496 | 2.964 | 1.337 | |
Source: Author.
Model I was used to examine the relationship between companies’ attributes and succession type (intra-relative and non-relative). Table 8 shows the results of the probit regression analysis for Model I, which measured the relationship between companies’ attributes and succession type. Intra-relative succession was set to 1, and non-relative succession was set to 0.
| Coefficient | Standard error | |
|---|---|---|
| Corporate age (natural logarithm) | 0.258*** | (0.038) |
| Number of employees (natural logarithm) | −0.025* | (0.015) |
| Capital (natural logarithm) | −0.019* | (0.011) |
| Managerial age (natural logarithm) | 0.031** | (0.013) |
| Constant term | −0.007 | (0.159) |
| F value | 14.701*** | — |
| Adjusted R2 | 0.121 | — |
| Surplus trend dummy | −0.051 | (0.054) |
| Sales increase trend dummy | −0.022 | (0.043) |
| Constant term | 0.822 | (0.049) |
| F value | 0.706 | — |
| Adjusted R2 | 0.001 | — |
| Industry dummy | ||
| Manufacturing | 0.201*** | (0.064) |
| Construction | 0.164*** | (0.055) |
| Wholesale | 0.171*** | (0.059) |
| Retail/Restaurant | 0.077* | (0.045) |
| Constant term | 0.654 | (0.036) |
| F value | 3.974*** | — |
| Adjusted R2 | 0.029 | — |
| Sales (natural logarithm) | −0.019 | (0.016) |
| Sales per employee (natural logarithm) | 0.024 | (0.022) |
| Capital adequacy ratio (natural logarithm) | 0.003 | (0.012) |
| Constant term | 0.795 | (0.098) |
| F value | 0.592 | — |
| Adjusted R2 | −0.003 | — |
(Note) *: p<0.1, **: p<0.05, ***: p<0.01
Source: Author.
Even after considering the effects of multiple variables, the older the company and its CEO, the higher the probability of intra-relative succession; in contrast, the larger the company size, represented by the number of employees and capital, the lower the probability of intra-relative succession. The results of the surplus and sales increase trends based on sales and profits were contrary to what we expected. However, because it was not statistically significant, it was unclear whether companies in surplus were less unlikely to succeed to their relatives; companies that increased sales are unlikely to succeed to their relatives.
By industry type, the study shows that the manufacturing, construction, wholesale, retail, and restaurant industries were more likely to have intra-relative succession, a different result from that of the basic statistics. In the basic statistics, non-relative succession was more common than intra-relative succession in the wholesale industries. Especially in the construction industry, the number of intra-relative successions was 8% higher than that of non-relative successions. Intra-relative succession in the construction industry could not be confirmed to be statistically significant.
Furthermore, regarding performance indicators and succession types, companies with higher sales are less likely to exhibit intra-relative succession, and companies with higher sales per employee and adequate capital ratios are more likely to exhibit intra-relative succession. However, it cannot be said that the performance indicators and succession types were significant. When succession takes place, new CEOs want to turn a profit.
3.2 Performance Evaluation of the Intra-relative Succession IndexModel II was used to find the relationship between companies’ corporate attributes and performance. Tables 8 to 10 show the results of dividing the surplus trend and sales increase trends in all the samples’ intra-relative and non-relative successions as the explained variables. The results show that even within the same succession type, the variables affecting corporate performance differed depending on whether it was intra-relative or non-relative.
Table 9 shows the relationship between corporate attributes and their overall impact on business performance, the greater the number of employees and the older the manager, the more profitable the company. Furthermore, the higher the sales, the sales increase trend, more profitable the company was; however, no significant results were obtained for different industry types.
| Surplus trend | Sales increase trend | |||
|---|---|---|---|---|
| Coefficient | Standard error | Coefficient | Standard error | |
| Corporate age (natural logarithm) | −0.047 | (0.037) | −0.007 | (0.047) |
| Number of employees (natural logarithm) | 0.065*** | (0.015) | 0.010 | (0.019) |
| Capital (natural logarithm) | −0.001 | (0.011) | 0.003 | (0.014) |
| Managerial age (natural logarithm) | 0.025* | (0.013) | −0.013 | (0.016) |
| Surplus trend dummy | 0.660 | (0.156) | 0.330 | (0.204) |
| Sales increase trend dummy | 7.919*** | — | 3.265*** | — |
| Constant term | 0.080 | — | 0.028 | — |
| F value | −0.047 | (0.037) | −0.007 | (0.047) |
| Adjusted R2 | 0.065*** | (0.015) | 0.010 | (0.019) |
| Industry dummy | ||||
| Manufacturing | −0.060 | (0.062) | 0.010 | (0.077) |
| Construction | −0.047 | (0.054) | 0.092 | (0.067) |
| Wholesale | −0.072 | (0.057) | 0.014 | (0.071) |
| Retail/restaurant | −0.014 | (0.043) | −0.006 | (0.054) |
| Constant term | 0.835 | (0.035) | 0.474 | (0.044) |
| F value | 0.502 | — | 0.582 | — |
| Adjusted R2 | 0.005 | — | −0.004 | — |
| Sales (natural logarithm) | 0.088*** | (0.015) | 0.042** | (0.020) |
| Sales per employee (natural logarithm) | −0.006 | (0.020) | 0.005 | (0.026) |
| Capital adequacy ratio (natural logarithm) | −0.003 | (0.011) | −0.017 | (0.014) |
| Constant term | 0.308 | (0.090) | 0.260 | (0.116) |
| F value | 12.686*** | — | 2.178* | — |
| Adjusted R2 | 0.081 | — | 0.009 | — |
(Note) *: p<0.1, **: p<0.05, ***: p<0.01
Source: Author.
As shown in Table 10, for intra-relative succession, indicators such as the number of employees, capital, and the age of the manager had a positive effect on the surplus trend, but only the number of employees showed a significant influence. The results for intra-relative succession firms are the same as those for all successor firms; the higher the sales and profits, the higher the trend in sales increase.
| Surplus trend | Sales increase trend | |||
|---|---|---|---|---|
| Coefficient | Standard error | Coefficient | Standard error | |
| Corporate age (natural logarithm) | −0.053 | (0.051) | −0.004 | (0.065) |
| Number of employees (natural logarithm) | 0.083*** | (0.018) | −0.024 | (0.024) |
| Capital (natural logarithm) | 0.017 | (0.014) | −0.011 | (0.018) |
| Managerial age (natural logarithm) | 0.020 | (0.016) | −0.008 | (0.020) |
| Surplus trend dummy | — | — | 0.243*** | (0.071) |
| Sales increase trend dummy | 0.152*** | (0.045) | — | — |
| Constant term | 0.475 | (0.212) | 0.504 | (0.269) |
| F value | 7.309*** | — | 2.402** | — |
| Adjusted R2 | 0.093 | — | 0.022 | — |
| Industry dummy | ||||
| Manufacturing | −0.038 | (0.072) | 0.046 | (0.087) |
| Construction | 0.009 | (0.064) | 0.155** | (0.077) |
| Wholesale | −0.036 | (0.067) | 0.060 | (0.081) |
| Retail/restaurant | 0.032 | (0.050) | 0.026 | (0.061) |
| Constant term | 0.793 | (0.044) | 0.425 | (0.054) |
| F value | 0.349 | — | 1.045 | — |
| Adjusted R2 | −0.009 | — | 0.001 | — |
| Sales (natural logarithm) | 0.105*** | (0.019) | 0.009 | (0.024) |
| Sales per employee (natural logarithm) | −0.006 | (0.025) | 0.035 | (0.033) |
| Capital adequacy ratio (natural logarithm) | 0.000 | (0.013) | −0.030* | (0.016) |
| Constant term | 0.193 | (0.109) | 0.357 | (0.140) |
| F value | 12.769*** | — | 1.625 | — |
| Adjusted R2 | 0.103 | — | 0.006 | — |
(Note) *: p<0.1, **: p<0.05, ***: p<0.01
Source: Author.
In non-relative succession in Table 11, the higher the number of employees, the higher the sales trend, but there was no significant variable to explain the surplus trend. The results for non-relative succession firms are the same as those for all successor firms; the higher the sales and profits, the higher the trend in sales increase. Although the significance could not be confirmed, the number of employees and managerial age had a positive effect on the surplus trend, whereas corporate age and capital had a negative effect, which was the same for all succeeding companies. Significantly, the number of employees has a positive effect on the increasing sales trend, corporate age also has a positive effect, but capital and managerial age have negative effects. Therefore, the results are different.
| Surplus trend | Sales increase trend | |||
|---|---|---|---|---|
| Coefficient | Standard error | Coefficient | Standard error | |
| Corporate age (natural logarithm) | −0.005 | (0.059) | 0.063 | (0.078) |
| Number of employees (natural logarithm) | 0.027 | (0.028) | 0.087** | (0.036) |
| Capital (natural logarithm) | −0.018 | (0.017) | 0.002 | (0.023) |
| Managerial age (natural logarithm) | 0.032 | (0.021) | −0.013 | (0.028) |
| Surplus trend dummy | — | — | 0.297** | (0.139) |
| Sales increase trend dummy | 0.170** | (0.079) | — | — |
| Constant term | 0.909 | (0.232) | −0.127 | (0.333) |
| F value | 2.057* | — | 2.897** | — |
| Adjusted R2 | 0.055 | — | 0.094 | — |
| Industry dummy | ||||
| Manufacturing | −0.024 | (0.054) | −0.009 | (0.186) |
| Construction | −0.191* | (0.134) | −0.065 | (0.142) |
| Wholesale | −0.127 | (0.102) | −0.065 | (0.156) |
| Retail/restaurant | −0.157* | (0.112) | −0.083 | (0.120) |
| Constant term | 0.913 | (0.086) | 0.565 | (0.075) |
| F value | 1.570 | — | 0.168 | — |
| Adjusted R2 | 0.024 | — | −0.038 | — |
| Sales (natural logarithm) | 0.044* | (0.027) | 0.114*** | (0.035) |
| Sales per employee (natural logarithm) | −0.002 | (0.034) | −0.043 | (0.044) |
| Capital adequacy ratio (natural logarithm) | −0.018 | (0.022) | 0.026 | (0.028) |
| Constant term | 0.605 | (0.157) | −0.038 | (0.202) |
| F value | 1.227 | — | 4.367*** | — |
| Adjusted R2 | 0.007 | — | 0.099 | — |
(Note) *: p<0.1, **: p<0.05, ***: p<0.01
Source: Author.
Corporate age had a positive effect on sales growth in non-relative succession, but all other variables had a negative effect. Yasuda’s (2005) findings contradict ours; in his study, corporate age had a negative impact on performance after succession. However, our results are similar to those of other studies on corporate performance. Regarding the managerial age, while this had a positive effect on the surplus trend, it had a negative effect on the increasing sales trend; however, there was no difference between intra-relative and non-relative succession. Regarding the successor, younger CEOs become better at increasing sales and profits as they gain experience. Female successors with little management experience may improve the company’s profitability by gaining management experience.
No significant relationship was found between corporate age and business performance, which may be due to the sample bias pointed out by Yasuda (2005). The current study’s sample consisted of succession companies only, and no dissolved companies were included. Some companies may have a long business succession and some companies a short one, so unusual results may have been obtained.
The relationship between company size and performance indicators has been confirmed in previous studies. However, the present study’s results indicate that although the relationship between the number of employees and business performance was significant, no significant relationship was found between capital stock and business performance. The number of employees had a positive impact on the surplus trend in intra-relative succession and on the sales increase trend in non-relative succession. The higher the number of employees, the more profitable the business, which has shown to be statistically significant overall and for intra-relative succession. Regarding capital, it was negative overall, and for non-relative succession; however, it was positive for intra-relative succession. In companies that have intra-relative succession, the greater the capital, the more profitable the company; however, for companies with non-relative succession, there is no direct relationship between capital and surplus trends. However, no statistical significance was found in this respect.
The effect of managerial age on intra-relative and non-relative succession may be explained by the differences in the appointment process between the two categories. In contrast with intra-relative succession, where a successor comes from a relatively shallow candidate pool, non-relative successors are selected from a deeper pool. Female business owners, especially female successors, prioritize taking over the business to keep it alive and not consider the managerial age. In addition, male successors are often second- or third-generation successors to the family business. Thus, they often receive sufficient preparation time for succession. In contrast, female successors too often take over the business suddenly and with insufficient preparation periods. Therefore, corporate age is not a crucial factor for the success of companies succeeded by women.
The present study considered the succession of women in Japanese SMEs and analyzed the relationship between corporate attributes and succession type, the performance indicators.
Compared to non-relative succession to women, companies with intra-relative succession tended to be smaller and had fewer employees; these companies were also older and had higher managerial age. Additionally, intra-relative successor companies had lower sales and net income, low sales growth and capital adequacy, and negative profits. However, their sales per employee were relatively high, so the number of employees could have indirectly affected sales.
Older companies with older CEOs, as well as smaller companies are more likely to have intra-relative succession. These results are similar to those found by Nakai (2015), who concluded that there is a high probability of succession between relatives in a company with a small number of employees. In the business succession of SMEs, even if a woman is appointed as successor, the smaller the company, the greater the corporate age, and the greater the managerial age, the more likely it is that intra-relative succession will be successful.
Regarding the relationship between corporate attributes and business performance, for intra-relative and non-relative succession, the more the employees, the more likely the company will grow. This is consistent with Gonzalez (2006), who concluded that the performance of the successor company to the son is worse when combined with a smaller number of employees and the easier it is for succession within relatives.
Yasuda and Kyo (2005) stated that the company attributes to be succeeded and the determinants of performance post succession differ considerably between the sons and that of a third party. Although no significance was confirmed, both intra-relative succession and non-relative succession showed the same trends in corporate age, managerial age, and the number of employees.
As an index to measure business growth, the number of employees is an indicator of business growth within SMEs. Onose (2013) found that female successors have strengths in employee education. This is a positive factor for female succession, and the results of this research may persuade companies to consider it. Onose (2014) also states that “innovation is indispensable for business survival” and mentions the relationship between innovation and labor productivity. Innovation tends to be sluggish in intra-relative succession (Classen, et al., 2012), while per capita sales tend to be high for female successors who succeeded within relatives. If the sales do not change, the sales per person will decrease as the number of employees increases, so the female successor company that succeeded to relatives may have increased the number of employees and further increased the sales.
This exploratory study had several limitations that can be addressed by future research. First, SMEs are not obliged to disclose their financial information, making it difficult to obtain an adequate sample size of companies that succeeded to women. Due to insufficient data, this study could not account for factors such as the preparation period for succession, number of post-succession years, employee numbers’ growth rates, debt, and management strategy. Nevertheless, I intend to continue collecting data and conducting further investigations and analyses. In particular, the variables used in the statistical analysis were derived using general indicators. In the future, we will conduct interview surveys using questionnaires to determine the behavioral changes of female successors and the company. A future study would be to clarify the impact on business performance.
In addition, the analysis framework for business succession is more complex than that for a new business (Yasuda, 2005). When evaluating company performance after succession, the predecessor may have played a role in the successor’s ability to perform, not factored into the present study’s analysis.
It is recommended that future studies on business succession in Japan include more companies and industries to obtain comparative data on performance factors.
The data for this secondary analysis, “name of the survey, name of the depositor,” was provided by the Social Science Japan Data Archive, Center for Social Research and Data Archives, Institute of Social Science, The University of Tokyo.
