Ownership Structure, Family Control, and Acquisition Decisions

Abstract:     
We investigate how ownership (cash-flow rights held by the largest shareholder) and ownership identity (family control vs. non-family) influences the decision to take part in M&As as an acquirer or as an acquired company. We study a comprehensive sample of 777 Continental European companies in the period 1998-2002. We find that ownership is negatively correlated with the probability of launching a takeover bid, and family firms are less likely to make acquisitions. CARs around the announcement of an acquisition are positively associated with the cash-flow rights of the largest shareholder and with family control. On the passive side of M&A deals, a big stake of the largest shareholder makes the acceptance of an acquisition proposal less likely, and the same is true for family control, at least when heirs are involved in the company as managers and/or directors.

Keywords: family firms, acquisitions, shareholder's identity, bidder returns

JEL Classifications: G34

Working Paper Series