When are family firms more likely to make acquisitions? A behavioural agency approach to the role of family involvement

This study aims to explore the effect of family firms’ corporate governance characteristics on their acquisition propensity: as the extant literature is increasingly emphasizing the heterogeneity of family firms and is calling for further insights into the peculiarities affecting their decision-making processes, our objective lies in identifying corporate governance mechanisms that influence their acquisition attitude. Thus, building on the behavioural agency theory, we investigate the effect of family members’ ownership stake, their involvement in the board of directors (BoD), the family versus non-family chief executive officer (CEO), and the generational step on the propensity to execute acquisitions. We test our framework on a sample of 207 acquisitions executed by Italian listed family firms in the 2014–2020 period. In line with our prediction, we find evidence that family members sitting on the board of directors are negatively associated with acquisitions. However, when family firms are guided by a family versus a non-family CEO, the willingness to embark on acquisitions increases. Family ownership is a non-significant driver of the propensity to acquire, which further confirms the importance of decision-making bodies. Finally, the propensity to acquire does not appear to be driven by whether the firm is still in its first versus later generations. Overall, our study contributes to the ongoing conversations on the heterogeneity of family firms and offers several implications for both theory and practice.