Why do Shareholders Value Marriage?

Abstract

This paper shows that marriage can function in a similar way as mergers and acquisitions. To set up alliances that would benefit the firms, a controlling family would encourage their children to marry a person from a politically or economically powerful family. To test this hypothesis, we collect wedding announcements for the offspring of big-business owners in Thailand. The results from the event study show positive abnormal returns when the partner is from a well-connected family. The probit analysis shows that offspring are more likely to choose their partner from a well-connected family when the family's businesses are in the property and construction industries, based on state contracts, more diversified and heavily in debt. Overall, the results suggest that family networks might provide reputation capital, reliable information, and enforce contracts, thus reducing market frictions faced by entrepreneurs in weak institutional environments.

Keywords: family firms, business groups, governance, emerging economies, marriage, networks

JEL Classification: G15, G32, G34, G38, K23, M13