Discussion of Separation of Ownership from Control and Acquiring Firm Performance: the case of Family ownership in Canada

1. The Theoretical Background
Announcement of mergers and acquisitions
§ Not wealth creating → transfer wealth from shareholder of bidder to target
§ Do pay for both sides
§ Not all mergers and acquisitions give long term negative return
Ben-Amar and Andre
§ Relating ownership structure → performance of bidders on announcement date
§ Review detailing cost and benefits of ownership
§ In Canada, Firms are closely-held mostly by families
§ Family ownership mitigates the agency conflicts as families are long-term investors and they are concerned with the wealth transfer to the next generation

2. The Data and the Methodology
Ben-Amar and Andre
§ 327 mergers ands acquisition announcements → by 232 Canadian → 1998-2002
§ Only completed mergers → acquisitions of majority interest
→ sample selection bias as non-completed mergers
§ The announcement dates are subject to a confounding event that may effect their methodology

3. Empirical Evidence
Boom (1998 to March 2000) ─ Bear (April to 2002)
Family Controlled Firms
§ Smaller
§ Average board size is 8.92 (median 8.0) → smaller
§ Domestically listed company (for general) → smaller
§ Rely on internal financing to finance their acquisitions
§ Faster return

Non-family Controlled Firms
§ Bigger
§ Average board size is 10.06 (median 9.0)
§ Cross-listed company (for general) → bigger
§ Less likely to use cash to finance acquisition → issue equity and bond
§ Slower return