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.
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.
| Original language | English |
|---|---|
| Pages (from-to) | 440-454 |
| Journal | International Journal of Accounting & Information Management |
| Volume | 31 |
| Issue number | 3 |
| Early online date | 23 Mar 2023 |
| DOIs | |
| Publication status | Published - 04 Jul 2023 |
Keywords
- Family firm
- Family ownership
- Cash acquisitions
- Cumulative abnormal returns (CARs)
- Mergers and acquisitions