The purpose of this proposed thesis is to investigate merger and acquisition (M&A) behavior of family firms. While theory predicts that family firms should rarely be involved in these types of risky activities, reality shows that family owned companies are quite involved in M&As and innovation. Drawing from prospect theory and behavioral agency models, this thesis will develop a theoretical framework that improves our understanding of this phenomenon and provide empirical tests. In particular, I plan to investigate the determinants of M&As, the implications of M&As on family firms’ innovation activities and the company culture. I will employ quantitative and qualitative methods in order to test my hypotheses. The quantitative part will be based on a new database that I will construct for the thesis. Based on this database I will investigate M&A determinants and innovation effects. The qualitative study will be concerned with a in-depth case study to analyze the effects of M&A on family firms’ culture. The results of the thesis will be informative for academic scholars and practitioners. The thesis will help academic understanding the conditions under which family firms engage in risky activities and the implications thereof. Practitioners will be informed about potential pitfalls for firms’ organizational culture. Since large shares of companies are owned by families so that they contribute to employment and wealth creation, the results will also be of interest for policy makers.