Family Firms & Diversification Through M&A: Evidence From Norway

Abstract

This study examines the behavior of family firms on whether they are more inclined to engage in diversifying M&As than non-family firms due to their high value of control. To analyse this theory, data has been manually collected where ownership, deal, and financial data were available, for completed M&A transactions in Norway from 2000 through 2018. First, we find evidence that family firms are more inclined to pursue diversifying acquisitions. However, we find no significant evidence that family firms with a high value of control, proxied by their leverage, are more inclined to undertake diversifying M&As. Second, when restricting the transactions to only cash financing, it is clear that family firms are still willing to engage in diversifying acquisitions, and significant ly more inclined when the value of control increases. Third, we find no significant proof that family firms have a higher preference to issue long-term debt than short-term debt. Finally, we implement additional robustness regression, with an alternative family firm definition. Based on these results, the study shows an increase in significance for most of the findings, which provides a better understanding of family firm’s behavior in terms of their value of control. Keywords: Family firms, M&A, acquisitions, leverage, diversification, control motives, method of payment. JEL classification: G32, G34.