Financing Decision in Acquisitions: The Role of Family Control

This paper investigates the impact of family control of the acquiring firm on acquisition financing decisions. We consider a sample of 265 acquisitions undertaken by French listed firms during the 1997-2008 period. We find that the likelihood to finance the acquisition with debt is high, compared to equity financing, when the family voting rights are high, which indicates that the control motives affect financing choices significantly. We also find that financing decision is affected by control-enhancing mechanisms. Study of determinants related to acquirer characteristics reveals that acquirer misevaluation, profitability and size have a significant impact on financing decisions.