Ownership Structure and Mergers and Acquisitions Decisions: Do Family Firms Acquire Differently?

64 Pages Posted: 20 Aug 2015 Last revised: 11 Oct 2017

See all articles by Nicolas Eugster

Nicolas Eugster

Catholic University of Lille - IESEG School of Management

Date Written: October 10, 2017

Abstract

This study investigates the relationship between ownership structure and mergers and acquisitions (M&A) decisions for a comprehensive sample of 195 companies listed on the Swiss Exchange for the period 2003-2013. It examines: whether different ownership structures influence the probability of engaging in M&A, whether different ownership structures influence the characteristics of M&A deals, and the value assigned to such operations surrounding the announcement date. This paper focuses on family firms and analyzes the association between several characteristics (generation, involvement in the management, and the presence of just one family member as shareholder) and the M&A.

The results show that family firms engage less in M&A and prefer cash deals and diversified deals. This result is driven mainly by family firms whose power is the least contested. Moreover, family firms at the descendant stage care more about diversification than those at the founder stage. Family firms have a nonlinear (convex) association with value creation when it comes to M&A and only those with significant family ownership generate higher abnormal returns. However, investment decisions made by some types of family firms (i.e. those with several members or those not involved in management) are negatively perceived by market participants.

Keywords: mergers and acquisitions, value creation, ownership structure, family firms, widely held firms, generation, active family, lone member

JEL Classification: G14, G32, G34

Suggested Citation

Eugster, Nicolas, Ownership Structure and Mergers and Acquisitions Decisions: Do Family Firms Acquire Differently? (October 10, 2017). 28th Australasian Finance and Banking Conference. Available at SSRN: https://ssrn.com/abstract=2647878 or http://dx.doi.org/10.2139/ssrn.2647878

Nicolas Eugster (Contact Author)

Catholic University of Lille - IESEG School of Management ( email )

3 rue de la Digue
Lille, Lille 59000
France

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