Does family ownership matter? Evidence of the payment method and market reaction to M&A deals in Taiwan.

Purpose: This paper aims to examine 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. This study addresses the endogeneity concern using the two-stage least squares statistical technique and Heckman's two-step estimation method. Findings: This study finds 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. This study further finds that family firms receive a positive market reaction around the announcement of M&A deals relative to non-family counterparts. The empirical results support the notion that family ownership is a value-creation structure. Practical implications: The 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 the authors' 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. [ABSTRACT FROM AUTHOR]