Does family ownership matter? Evidence of the payment method and market reaction to M&A deals in Taiwan

Yousry Ahmed, Mohamed Elsayed and Yuru Chen

International Journal of Accounting & Information Management, 2023, vol. 31, issue 3, 440-454

Abstract: Purpose - This paper aims to examine the effect of family ownership on the payment method of mergers and acquisitions (M&A) deals. It also investigates the market reaction around the announcement of these M&A deals. Design/methodology/approach - Archival data of M&A deals of a sample of Taiwanese listed firms during 2008–2018 are collected and examined using probit, event study and OLS models. This study addresses the endogeneity concern using the two-stage least squares statistical technique and Heckman’s two-step estimation method. Findings - This study finds that family firms are more likely to use cash as an exchange medium in M&A deals to avoid the problem of diluting control rights. This study further finds that family firms receive a positive market reaction around the announcement of M&A deals relative to non-family counterparts. The empirical results support the notion that family ownership is a value-creation structure. Practical implications - The findings provide additional evidence-based insights into the debate about family ownership with the aim of informing policy and offering practical recommendations to expand the US-based literature. Originality/value - To the best of the authors’ knowledge, this is the first study to provide empirical evidence on the impact of family ownership on payment method choice in M&A activities in Taiwan. It also provides novel evidence that family firms experience value gains when taking M&A investment decisions relative to non-family firms.

Keywords: Family firm; Family ownership; Cash acquisitions; Cumulative abnormal returns (CARs); Mergers and acquisitions; G16; G30; G32; G34 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijaimp:ijaim-10-2022-0231

DOI: 10.1108/IJAIM-10-2022-0231

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