Value of Control in Family Firms: Evidence from Mergers and Acquisitions

Nihat Aktas, WHU Otto Beisheim School of Management, Germany
Santo Centineo, WHU Otto Beisheim School of Management, Germany
Ettore Croci, Universita’ Cattolica del Sacro Cuore, Italy

This article studies European acquisitions in the period 1990-2013 to examine the relationship between family ownership and the propensity to undertake diversifying acquisitions. We show that family firms, especially those highly leveraged, tend to make more cross-industry acquisitions as this allows the owners to effectively diversify their wealth without selling their shares. Our results also indicate that family firms that value control high (i.e., family firms with high leverage) appear not to diversify at the detriment of minority shareholders.

Keywords: family firms; leverage; control motives; acquisitions

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Valuation Efficiency of Secondary Markets for Formerly Illiquid Assets: The Case of German KG Ship Funds

André Küster Simic, HSBA Hamburg School of Business Administration, Germany
Philipp Lauenstein, Helmut Schmidt University Hamburg, Germany
Stefan Prigge, HSBA Hamburg School of Business Administration, Germany

Until the outbreak of the most recent shipping crisis in late 2008, German KG ship funds had been a prominent vehicle for investing in, and financing of, global shipping operations. Given that KG shares are not designed to be traded, investors are expected to require higher returns as compensation for illiquidity. Since the early 2000s, secondary market platforms for trading of shares in ship funds emerged. If investors could sell their shares at prices reflecting the fundamentals of their asset, lower returns would be demand. Making use of a novel methodological approach, 341 transactions of container ship funds executed from 2007 through 2012 are analyzed. The results reveal a surprisingly high fundamental-valuation efficiency: The identified pricing-relevant variables explain about 86% of the variations in the secondary market valuations of the ship funds. However, it is documented that shares in ship funds trade at discount relative to fundamental asset values.

Keywords: ship finance; KG funds; secondary markets; informational efficiency; market microstructure

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