Mergers and acquisitions can transform a company’s future. For family businesses, those decisions hinge on more than financial calculations—they reflect how families balance control, identity, and risks.
Luiz Ricardo Kabbach, clinical associate professor of management at the Indiana University Kelley School of Business in Indianapolis, together with his research team, has published research related to how family control and ownership structures shape merger and acquisition decisions in emerging markets.
The article, “The Role of Family Control and Ownership in M&A Decisions: Evidence from an Emerging Market,” is published in Research in International Business and Finance.
“Family-controlled firms tend to be cautious about pursuing M&A transactions because they want to preserve control and reduce financial risk,” the researchers wrote. “However, this conservative behavior is not uniform. It depends on the governance structures families employ.”
Luiz collaborated with Mariana Martins Meirelles-de-Castro from the School of Education at IU Bloomington and Aquiles Kalatzis of the University of São Paulo.
Researchers found that family firms are less likely than non-family businesses to pursue mergers and acquisitions. Often, families prioritize preserving identity, control, and legacy over financial gains.
Ownership structure offers clues about how family-controlled businesses may approach mergers and activity.
Two common ownership structures are voting rights and cash flow rights. Voting rights reflect the percentage of control a shareholder has over the company’s strategic decisions, often giving families significant influence. Cash flow rights show a shareholder’s economic stake in the company, meaning profits or losses directly impact the family owners.
- Voting rights encourage M&A activity: Higher family voting rights reduce perceived risks, such as loss of control or identity dilution, making acquisitions more attractive.
- Cash flow rights discourage M&A activity: Greater cash flow rights increase financial exposure and loss aversion, amplifying risk perception and discourage acquisitions.
“This research explains how families make decisions on riskier investments. It shows us when businesses prioritize social attachment over economic profits and how some try to balance the two,” Kabbach explained.
To understand these dynamics, the researchers focused on Brazil—a country with many family-controlled firms and an emerging market environment that combines growth potential with uncertainty.
“Family business and corporate structure in emerging topics have been my focus for 15 years,” said Kabbach. “It helps us understand and explain the longevity of firms, especially during today’s demographic shifts.”
Kabbach hopes family businesses use this research to recognize that corporate ownership structure is a major influence whether a company lasts for generations.
“Family businesses that last longest have governance structures where generations work together. When one generation takes the baton, the previous stays along to guide,” Kabbach said. “Governance is not always a guarantee of success, but it can mitigate risk. Businesses need to recognize that.”
More information
Luiz Ricardo Kabbach-de-Castro et al, The role of family control and ownership in M&A decisions: Evidence from an emerging market, Research in International Business and Finance (2025). DOI: 10.1016/j.ribaf.2025.103125
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