Does Family Ownership Matter? Evidence of the Payment Method and Market Reaction to M&A Deals in Taiwan

Purpose – This paper examines 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. We address the endogeneity concern using the two-stage least squares (2SLS) statistical technique and Heckman’s two-step estimation method.Findings – We find 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. We further find that family firms receive a positive market reaction around the announcement of M&A deals relative to non-family counterparts. Our empirical results support the notion that family ownership is a value-creation structure.Practical implications – Our 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 our 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