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Although family firms are common around the world, studies on family-controlled business are limited. Prior studies mainly focused on the influences of family ownership on overall firm performance, and the results were mixed. In this study we attempted to explore the impacts of family ownership on innovation by examining the association of family control and stock market reactions to innovation announcements. We found that firms with greater family control experienced significantly more negative stock market reactions to innovation announcements. The results further indicated that divergence of cash flow and voting rights was strongly and negatively correlated with announcement-period abnormal returns. In addition, the findings suggested a significantly positive moderating effect of institutional ownership. The conclusions were robust under various measures of family control, and remained valid after controlling other influential factors for stock market reactions to innovation announcements.