Are family owners averse to cross-border acquisitions?
In the paper “For Love or Money? Family versus Financial Blockholders in International Acquisitions” forthcoming in Corporate Governance: An International Review, CBS-EGB authors Bersant Hobdari and Anne Sluhan (also of Texas A&M University – Central Texas), together with colleagues at the University of North Carolina, Charlotte, Victor Chen and Franz Kellermanns study the relationship between family blockholding of voting rights and the relative size of international acquisitions, and the moderating effect of two types of financial blockholders (pressure-resistant and pressure sensitive blockholders).
The authors find that the relationship between family blockholding and relative acquisition size is not monotonous: it is U-shaped. The exact size of the effect is determined by the type of financial blockholders present. Pressure-resistant financial blockholders shift the relationship downwards (due to intensified conflicts) and while pressure-sensitive financial blockholders shift it upwards. Overall, the findings illustrate the role of nonlinear risk preferences of family owners, expressed through socioemotional wealth (SEW) slack.
Further, the findings challenge the assumption that family firms’ behavior can be modeled through the lens of “dominant shareholder interest.” Instead, the study suggests that it should be seen as contingent upon the interests of other financial shareholders.