Family Ownership and Value of Takeover: Evidence from India

Author:

Dixit Jyoti1ORCID,Singh Poonam2

Affiliation:

1. National Institute of Industrial Engineering (NITIE), Mumbai 400087, Maharashtra, India

2. Department of Finance and Economics, National Institute of Industrial Engineering (NITIE), Mumbai 400087, Maharashtra, India

Abstract

We examine how family-ownership influences takeover probability and takeover public announcement abnormal return of Indian publicly traded firms between 2003 and 2019. We find that family ownership has a significantly negative effect on target takeover probability at various levels of family ownership, viz. 20%, 40%, and 51%. Announcement period abnormal returns for target firms are positive at a lower level of family ownership of 20% and negative at a higher level of family ownership of 51%. These results are consistent with the agency cost explanation where family ownership reduces owner-manager agency conflict but exacerbates conflict between majority and minority shareholders. Our results hold for Heckman two-stage model.

Publisher

World Scientific Pub Co Pte Ltd

Subject

Economics and Econometrics,Finance

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