How family ownership shapes M&A decisions in emerging markets

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, recently 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,” was published in Research in International Business and Finance journal.

“Family-controlled firms tend to be cautious about pursuing M&A transactions because they want to preserve control and reduce financial risk,” Luiz and his colleagues 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.

Research Takeaways

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.

1. 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.

1. 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,” Luiz shared.

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,” Luiz shared. “It helps us understand and explain longevity of firms, especially during today’s demographic shifts.”

Luiz 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,” Luiz said. “Governance is not always a guarantee of success, but it can mitigate risk. Businesses need to recognize that.”

Prioritizing this type of research is vitally important for the Kelley School of Business, pointed out by Luiz who participates in Kelley’s Institute for Corporate Governance & Ethics. Its mission is to harness the best academic research to aid scholars, policymakers, and business leaders in advancing good corporate governance and ethical business practices.

“It highlights our school is investing in corporate governance and bringing together professors from different departments. We are not just disseminating research but actively trying to connect with firms, practitioners, and consultants to better understand challenges they face,” Luiz said.

Luiz Ricardo Kabbach joined the Kelley Indianapolis faculty in January 2025, and his research focuses on corporate governance, strategy, and entrepreneurship.