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Influence of family ownership on the industry-diversifying nature of a firm’s M&A strategy: Empirical evidence from Continental Europe

Corneel Defrancq, Nancy Huyghebaert and Mathieu Luypaert

Journal of Family Business Strategy, 2016, vol. 7, issue 4, 210-226

Abstract: We investigate how family ownership influences the industry-diversifying nature of M&As by listed companies in Continental Europe and the corresponding shareholder value effects at deal announcement. For a large sample of 3485 M&As during 2005–2013, we observe that acquirers having a family as the largest shareholder are less inclined to take over an unrelated target firm than lone-founder and other types of non-family firms. However, as the size of the family ownership stake increases, family firms become more eager to follow an industry-diversifying M&A strategy. While industry-diversifying M&As are associated with lower abnormal returns for acquirer shareholders on average, we also observe that family ownership fully reverses this negative effect. We therefore conclude that those unrelated M&As, although still representing a conflict of interest with the family firm’s minority investors, do not destroy shareholder value on average.

Keywords: Mergers and acquisitions; Diversification; Ownership; Family firms; Lone-founder firms; Corporate governance; Europe (search for similar items in EconPapers)
JEL-codes: G34 G32 L25 (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:eee:fambus:v:7:y:2016:i:4:p:210-226