Family ownership and M&A propensity in emerging market firms: playing along the “rules of the game”

The literature is ambivalent about the impact of family ownership on Mergers and Acquisitions (M&A) undertaken by family firms with prior studies arguing that family Socio-Emotional Wealth (SEW) may either promote or dissuade M&A. To investigate this ambivalence, we combine SEW and institutional perspectives to examine the influence of family ownership, institutional shareholding, and board composition, on M&A propensity of family firms, in the emerging market of India. On a sample of 3,209 Indian firms (of which 1,824 are family firms) in the 2006-2017 time-period, we find that family ownership positively impacts M&A propensity of family firms. However, ownership by domestic financial institutions negatively moderates the relationship between family ownership and M&A propensity in these firms. We also find that the presence of family directors and independent directors on the board is instrumental in promoting family firm M&A. Our findings enhance the understanding of M&A propensity in family firms within a specific emerging market and illustrate how this propensity is influenced by the corporate governance characteristics in these firms.