For Love or Money? Family Versus Financial Blockholders in International Acquisitions

Corporate Governance: An International Review, Forthcoming

62 Pages Posted: 4 Jun 2021 Last revised: 16 May 2022

See all articles by Victor Zitian Chen, PhD, CFA

Victor Zitian Chen, PhD, CFA

Fidelity Investments; GoPeaks

Bersant Hobdari

Copenhagen Business School

Franz Kellermanns

University of North Carolina (UNC) at Charlotte - The Belk College of Business Administration; WHU - Otto Beisheim School of Management

Anne Sluhan

Texas A&M University (TAMU), Central Texas

Date Written: June 3, 2021

Abstract

Research Question/Issue: We study the relationship between family blockholding of voting rights and the relative size of international acquisitions, and the moderating effect of two types of financial blockholders (pressure-resistant and pressure-sensitive blockholders).

Research Findings/Insights: Employing an international sample of 8,687 nonfinancial cross-border acquisitions conducted by 4,630 acquirer firms from 40 home markets to 66 host countries between 2004 and 2013, we find a U-shaped relationship between family blockholding of voting rights and the relative size of international acquisitions. Further, we find evidence that this relationship is moderated by the presence and type of financial blockholders. While pressure-resistant financial blockholders shift this relationship downwards (due to intensified conflicts), pressure-sensitive financial blockholders shift it upwards.

Theoretical/Academic Implications: We contribute to the literature on family firm governance and internationalization on several fronts. First, we revisit the predominant logic of linear effects of the family blockholding. We suggest the family blockholding’s effects are related to nonlinear risk preferences of family owners, expressed through SEW slack. Second, we suggest that the “dominant shareholder interest” assumption of family firms, usually based on the controlling family’s SEW should be interpreted contingent upon the interests of other financial shareholders. Finally, using family-financial blockholder conflicts as the scenario, we suggest that principal-principal conflicts depend on the composition of the conflicting blockholders, specifically, upon the nature of their relations with the firm.

Practitioner/Policy Implications: This study offers insights to policymakers and those interested in incentivizing family ownership that family owners’ risk behaviors should be understood and discussed in the context of different financial blockholders as a reference group.

Keywords: family firms, financial blockholders, pressure-resistant, pressure-sensitive socioemotional wealth, international acquisitions

JEL Classification: F21, F23, M16, M21, G34

Suggested Citation

Chen, Victor Zitian and Hobdari, Bersant and Kellermanns, Franz and Sluhan, Anne, For Love or Money? Family Versus Financial Blockholders in International Acquisitions (June 3, 2021). Corporate Governance: An International Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3859749 or http://dx.doi.org/10.2139/ssrn.3859749

Victor Zitian Chen (Contact Author)

Fidelity Investments ( email )

United States

GoPeaks ( email )

Charlotte, NC 9808001123 28277
United States

HOME PAGE: http://www.GoPeaks.org

Bersant Hobdari

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Franz Kellermanns

University of North Carolina (UNC) at Charlotte - The Belk College of Business Administration ( email )

9201 University City Boulevard
Charlotte, NC 28223-0001
United States

WHU - Otto Beisheim School of Management

Burgplatz 2
Vallendar, 56179
Germany

Anne Sluhan

Texas A&M University (TAMU), Central Texas ( email )

1001 Leadership Place
Killeen, TX 76549
United States

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