Discussion of Separation of Ownership from Control and Acquiring Firm Performance: The Case of Family Ownership in Canada

I. Theoretical Background
a. Traditional Paradigm; agents are fully rational.
b. In Particular, on the announcement date of mergers and acquisitions, we should expect share prices

of both bidder and the target to increase proportionally.
c. The interest in relationship between ownership structure and the value-creation through mergers and

acquisitions.
d. Mergers and acquisitions do pay for both target and bidder shareholders.
e. Not all mergers and acquisitions generate negative long-term return.
f. Ben-Amar and Andre
i. To expand the agency arguments by relating the ownership structure to the performance of the

bidders on the announcement date.
ii. Use the market reaction to mergers and acquisitions as an example of financial decision that will

highlight whether family-controlled firms destroy value.
iii. Detailing cost and benefits of ownerships concentration.
g. In Canada, most firms are closely-held by family
i. Because they want to reduce agency problem.
ii. As a Dominant shareholder that can make decisions.
iii. Link between ownership concentration and firm value is mixed partly.
iv. Easier to transfer wealth to the next generation.

II. The Data and The Methodology
a. Data have to represent all nature.
b. Data selections only in completed bids may result bias as the non-completed one.
c. They consider companies with several mergers and acquisitions during the period, but they do no

specify whether the announcement dates are subject to a confounding event that may affect their

methodology.

III. Empirical Evidence
a. Use size as an explanatory variables
b. The result events study affected by the size of bidder
c. Since the family owned companies appear to be much smaller than the non-family control firms, the

size impact is likely to drive the observed relative over-performance of the family controlled firms.
d. Larger companies are likely to have larger board
e. Cross-listed companies are significantly larger than domestically listed companies
f. Canadian firm is family owned using fundamental variables such as size, profitability, market-to-book

and leverage.
g. Family controlled firms are smaller than the controlled firm; they are more likely to rely on internal

financing to finance their acquisitions.
h. Non-family firms are likely to use cash to finance their acquisitions because they can issue equity or

bonds.