Ownership Structure, Family Control, and Acquisition Decisions

Journal of Corporate Finance, Vol. 17, No. 5, pp. 1636-1657

54 Pages Posted: 3 Nov 2008 Last revised: 27 Nov 2011

See all articles by Lorenzo Caprio

Lorenzo Caprio

Università Cattolica del Sacro Cuore, Milano

Ettore Croci

Catholic University of the Sacred Heart of Milan

Alfonso Del Giudice

Catholic University of the Sacred Heart of Milan

Date Written: September 22, 2011

Abstract

We investigate how ownership and family control influence the decision to take part in M&As as an acquirer or as an acquired company in a sample of 777 large Continental European companies in the period 1998–2008. We find that ownership is negatively correlated with the probability of launching a takeover bid, and family firms are less likely to make acquisitions, especially when the stake held by the family is not large enough to assure the persistence of family control. On the passive side of M&A deals, the effect of the largest shareholders’ ownership on the decision to accept an acquisition proposal depends non-linearly on the voting rights they hold, and family control reduces the probability of being acquired by an unrelated party. We do not find evidence that family-controlled firms destroy wealth when they acquire other companies. Finally, we document that ownership and family control, while being negatively correlated with M&A activity, are not negatively correlated with growth in firm size.

Keywords: family firm, acquisition, shareholder identity, bidder return

JEL Classification: G34

Suggested Citation

Caprio, Lorenzo and Croci, Ettore and Del Giudice, Alfonso, Ownership Structure, Family Control, and Acquisition Decisions (September 22, 2011). Journal of Corporate Finance, Vol. 17, No. 5, pp. 1636-1657. Available at SSRN: https://ssrn.com/abstract=1293853

Lorenzo Caprio

Università Cattolica del Sacro Cuore, Milano ( email )

Largo Gemelli, 1
Milan, Milan 20122
Italy
02 7234.2768 (Phone)

Ettore Croci (Contact Author)

Catholic University of the Sacred Heart of Milan ( email )

Largo Gemelli, 1
Via Necchi 9
Milan, MI 20123
Italy

Alfonso Del Giudice

Catholic University of the Sacred Heart of Milan ( email )

Largo Agostino Gemelli 1
Milano, 20123
Italy

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