Trust, family firms, and M&A quality

Abstract

This paper examines the effect of trust on the quality of M&A across family and non-family firms. We find that family firms are associated with better M&A quality than non-family firms and that M&A deals involving high trust are of better quality. When we consider the association of trust, family firms and their interaction, we find that trust is the channel/mechanism through which family firms are associated with better M&A quality. Collectively, these results suggest that trust enables family firms to build long-term relationships with employees, suppliers and customers, and potentially mitigate the Type I agency problems