Are Family Firms More Risk Averse Regarding M&A Transactions?

Bachelor Thesis from the year 2018 in the subject Business economics - General, grade: 1,0, Otto Beisheim School of Management Vallendar (Institut für Familienunternehmen), language: English, abstract: In line with the prevalent notion that family businesses are more risk averse than non-family firms when facing strategic decisions that impact the long-term survival of the business, I hypothesize that the risk behavior resulting from the ownership structure of a firm affects its M&A activity. However, in order to gain a deeper understanding of the underlying risk mechanisms and theories, I differentiate between true family firms and lone founder firms throughout the course of this thesis. In a study of 177 firms listed in the German Prime Standard, I found that that true family firms show a lower propensity towards large target firm sizes when engaging in M&As as they want to avoid large, potentially destabilizing transactions. Furthermore, the presence of a family CEO in the firm reinforces this general tendency towards risk aversion. Although I did not find a significant relation between lone founder firms and target firm sizes, I empirically show that the presence of a founder CEO in these firms is associated with larger target firm sizes. Therefore, firms that are run by the founders themselves show a comparatively risk seeking behavior.