Desmarais Global Finance Research Centre (DGFRC) Seminar
Daniel Wolfenzon
Columbia University
The Talent Gap in Family Firms
Date: Friday, October 10, 2025
Time: 10:30-11:45 am
Location: Bronfman Bldg. (1001 Sherbrooke St. West), Room 046
All are cordially invited to attend.
Abstract:
We investigate whether family firms attract talented employees using comprehensive Danish administrative data including IQ scores from mandatory military draft sessions and high school grades. We document a substantial talent gap: family firm employees have lower IQ scores and lower academic achievement. This gap is most pronounced among senior managers and high-skill workers. Using event studies around CEO successions and instrumental variables, we establish that family control causally reduces employee talent. We identify two mechanisms driving this gap. First, nepotism reduces the available promotion opportunities for nonfamily members, causing high-ability individuals to avoid family firms. Second, family firms pay lower wages for equivalent talent, with compensation penalties particularly severe for high-ability workers. Our findings demonstrate that family governance imposes significant costs on firms’ ability to compete for human capital.
