All in the family: The effect
of family ownership on acquisition performance
The company
where proven to improve the performance of the company but the cost becomes
greater agency because the agency problem between majority and minority
shareholders who asserted that the entrenchment effect is more dominant. The
implications of this research, the company would be more efficient to invest
and be more careful in taking decisions.The argument that founding family members make value-destroying diversifying acquisitions to minimize the risk of their personal portfolio, we do not find that family firms lose value in diversifying acquisitions. This result is consistent with Stein’s model (1997) showing that diversification helps to reduce the cost of capital of the firm.
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