The Role of Information Asymmetry for the Choice between Family External and Internal Exit Routes

In our quantitative study we investigate the antecedents of two distinct exit routes. Building on information asymmetry theory, we discuss that the owner's inferior knowledge about the ability of potential family external (in contrast to family internal) successors renders a family internal transition more likely. However, this information asymmetry can be mitigated by activities such as owners' screening and successors' signaling efforts to unveil the successor's ability. Our data exhibits a positive effect of signaling and an inverted u-shaped effect of screening on the probability of an external succession. Socioemotional wealth, generated by long ownership duration, moderates these effects.