Do mothers-in-law matter?

Whenever a man waxes lyrical to me how good it would be to have more than one wife, I tell them what a friend of mine once told me. In Saudi Arabia, men are allowed to have up to four wives, but that also means you have four mothers-in-law.

Now, I love my mother-in-law dearly and I don’t want anything to happen to her, but I recently got sent an old study that I had not known. This study looked at the importance of CEOs and directors of a company by investigating if the death of these senior executives or the death of one of their family members affected the company’s performance.

As you might have guessed, the sudden death of a CEO has a significantly negative impact on a company’s profitability, while the death of a director is more easily digested. Where things got interesting is with the death of family members of CEOs.

One would expect that CEOs who suddenly lose close family members are emotionally distraught and cannot focus on their jobs to the same degree as before. Hence, losing a family member should lead to lower company performance as well.

Indeed, as the chart below shows, if the CEO of a company loses a close family member, operating return on assets drops between 1% and 4% depending on which family member passes. Except for one. I will let the chart speak for itself and only mention that I have added asterisks where the results are statistically significant. If a bar does not have asterisks on top, the result is statistically not different from zero.

Impact of death of relatives of CEO on company profitability

Source: Bennedsen et al. (2008). **/*** = Statistically significant at the 5%/1% level.