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All in the family: The effect of family ownership on acquisition performance

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  • Adhikari, Hari P.
  • Sutton, Ninon K.

Abstract

We examine the acquisition performance of family and non-family firms in the S&P 500 universe. Using style-adjusted and market-adjusted buy-and-hold returns (BHAR) and controlling for firm and merger characteristics, we find that the post-merger performance of family firms is significantly better than that of non-family firms. In particular, the mean one-year style-adjusted buy-and hold abnormal return is around 17% higher for family acquirers than for non-family acquirers. Further, contrary to the argument that founding family members make value-destroying diversifying acquisitions to minimize the risk of their personal portfolio, we do not find that family firms lose value in diversifying acquisitions. This result is consistent with Stein’s model (1997) showing that diversification helps to reduce the cost of capital of the firm.

Suggested Citation

  • Adhikari, Hari P. & Sutton, Ninon K., 2016. "All in the family: The effect of family ownership on acquisition performance," Journal of Economics and Business, Elsevier, vol. 88(C), pages 65-78.
    • Handle: RePEc:eee:jebusi:v:88:y:2016:i:c:p:65-78
    DOI: 10.1016/j.jeconbus.2016.08.001
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    7. Moritz Belling & Ulrich Pidun & Dodo zu Knyphausen-Aufseß, 2021. "Unbundling Strategic Change in Family Firms: the Influence of Familiness on the Strategic Change Process," Schmalenbach Journal of Business Research, Springer, vol. 73(3), pages 381-411, December.
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    9. Nilesh B. Sah & Anandi Banerjee & James Malm & Anisur Rahman, 2021. "A Good Name Is Better Than Riches: Family Firms and Working Capital Management," Discussion Paper Series 2021-02, McColl School of Business, Queens University of Charlotte.

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    More about this item

    Keywords

    Family and non-family firms; Diversification; Mergers and Acquisitions;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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