Are Family Firms More Risk Averse Regarding M&A Transactions?

Bachelor Thesis , 2018 , 46 Pages , Grade: 1,0

Business economics - General

In line with the prevalent notion that family businesses are more risk averse than non-family firms when facing strategic decisions that impact the long-term survival of the business, I hypothesize that the risk behavior resulting from the ownership structure of a firm affects its M&A activity. However, in order to gain a deeper understanding of the underlying risk mechanisms and theories, I differentiate between true family firms and lone founder firms throughout the course of this thesis. In a study of 177 firms listed in the German Prime Standard, I found that that true family firms show a lower propensity towards large target firm sizes when engaging in M&As as they want to avoid large, potentially destabilizing transactions. Furthermore, the presence of a family CEO in the firm reinforces this general tendency towards risk aversion. Although I did not find a significant relation between lone founder firms and target firm sizes, I empirically show that the presence of a founder CEO in these firms is associated with larger target firm sizes. Therefore, firms that are run by the founders themselves show a comparatively risk seeking behavior.

Table of Contents

Abstract.

Table of Contents

Table of Tables

Table of Abbreviations

1 Introduction

2 Theoretical Background and Hypothesis Development
2.1 Risk Behavior of TFFs and LFFs
2.2 M&A Behavior of TFFs and LFFs
2.3 Target Firm Size as a Proxy for the Acquirer’s Risk
2.4 Influence of Family and Founder CEOs on Risk and M&A Behavior

3 Methodology
3.1 Sample
3.2 Data
3.3 Dependent Variable
3.4 Independent Variables
3.5 Control Variables
3.6 Analytical Approach

4 Results
4.1 First Regression: M&A Behavior of TFFs and LFFs
4.2 Second Regression: Influence of Family and Founder CEOs

5 Discussion
5.1 Theoretical Implications
5.2 Practical Implications
5.3 Limitations
5.4 Avenues for Future Research

6 Conclusion

References

Appendix

Affirmation in lieu of oath

• College: Otto Beisheim School of Management Vallendar (Institut für Familienunternehmen)
• Grade: 1,0
• Author: Thilo Wenig (Author)
• Publication Year: 2018
• Pages: 46
• Catalog Number: V491544
• ISBN (eBook): 9783668961722
• ISBN (Book): 9783668961739
• Language: English
• Tags: Familienunternehmen, Family Business, M&A, Risiko, Risk