Succession Concern and Acquisitions of Family Firms

Although succession concern is important for family firms, identifying its effect is challenging because it’s often confounded with the effect of family firms’ other inherent characteristics. Leveraging China’s one-child policy reform, we investigate how succession needs affect family firms’ acquisitions. Using data on Chinese listed firms, we find with difference-in-differences analyses that the policy reform significantly increased the number of acquisitions undertaken by family firms compared with non-family firms. The effect is stronger when board chair is at the age affected most by the policy and for firms in regions with stricter policy enforcement. But firms with owners’ children already in the management are affected less. Finally, family firms undertook more unrelated acquisitions than other types after the reform, which helps mitigate infighting in succession.