Pecking order, Trade-off, Capital structure, Small- and Medium-Sized Enterprises, G32, C33, L26,

This article presents empirical evidence on the determinants of the financial behavior of small family businesses and their differences from nonfamily small businesses. Taking into account two consolidated financial approaches, (1) the trade‐off theory and (2) the pecking order theory, several hypotheses on the financial behavior of both groups of firms have been tested. By estimating these models through panel data methodology, using a sample of Spanish family businesses together with another control group of nonfamily businesses, we have obtained results confirming that a business's family nature does lead it to employ financial policy different from the rest of businesses. Furthermore, results indicate that growth opportunities, financial distress costs, and internal resources appear to be the main factors that differentiate the financial behavior of family firms from their nonfamily counterparts.

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This study explores the relationship between capital structure and corporate governance using a data panel of Spanish listed firms over the period 2005 to 2011. Specifically, two notable conflicts in the area of corporate governance have been analysed: (i) managerial ownership; and (ii) controlling shareholders ownership. Our findings confirm a non‐monotonic relationship between both managerial ownership and ownership concentration, and capital structure. In order to mitigate endogeneity concerns, a number of robustness tests have been performed. The empirical evidence obtained yields a number of implications such as the shareholders' need to monitor entrenched managers, the insufficient protective legislation to prevent the expropriation of minority shareholders and the desirability of examining corporate governance factors in order to better understand a firm's financial policy.

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