Family firms and debt: Risk aversion versus risk of losing control

González, Maximiliano; Guzmán, Alexander; Pombo, Carlos; Dávila, María Andrea Trujillo

doi:10.1016/j.jbusres.2012.03.014

Cited by 147 publications

(87 citation statements)

References 42 publications

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“…Effectively, an increase of sales may probably generate an increase of illiquidity in a context of crisis because small and medium firms generally exert a minor pressure in collecting payments from customers, and late payments are often financed by trade credit, which is the first preference for the POT (Degryse et al, 2012). These findings confirm the conclusions of previous studies on family firms' financial behaviors which have highlighted that the picking order framework appears to fit better with family firms' financial decisions (Croci et al, 2011;Gonzalez et al, 2013;Mahé rault, 2004;Romano et al, 2000;Poutziouris, 2001;Wu et al, 2007).…”

Section: Discussionsupporting

confidence: 81%

“…Specifically, existing empirical research on family firms' capital structure has highlighted that: a) both economic and non-economic reasons influence their financial decisions (Gallo et al, 2004;Koropp et al 2013); b) they are strongly dependent on self-financing and adopt conservative financial strategies (Romano et al, 2000); and c) they often forgo growth opportunities due to their reluctance in issuing new external resources to safeguard family control on the business (Croci et al, 2011;Gonzalez et al, 2013;Mahé rault, 2004;Romano et al, 2000;Wu et al, 2007). However, these empirical studies on family firms have given mixed results about the main determinants of their capital structure (Coleman & Carsky, 1999;Romano et al, 2000;Lopez-Garcia et al, 2007).…”

Section: Theoretical Framework For Family Firms' Capital Structurementioning

confidence: 99%

“…This theory is particularly appropriate to explain the debt-equity choice of family firms. Indeed, several studies have highlighted their reluctance to use debt or new external equity due to their intention to safeguard the family control on the business and protect the business for future generations (Croci et al, 2011;Gonzalez et al, 2013;Mahé rault, 2004;Romano et al, 2000;Wu et al, 2007). Hence, family firms' financial behavior appears to fit with the POT framework (Poutziouris, 2001).…”

Section: Theoretical Framework For Family Firms' Capital Structurementioning

confidence: 99%

“…Family firms are strongly dependent on self-financing, and they often forgo growth opportunities due to their reluctance to issue external funds in order to safeguard family control (Croci et al, 2011;Gonzalez et al, 2013;Mahé rault, 2004;Romano et al, 2000;Wu et al, 2007) and protect their socioemotional wealth (GomezMejìa et al, 2007). Family firms' financial choices appear to be the result of a trade-off between the need to increase debt for reducing the risk of losing control and the need for reducing debt to minimize the risk of failure (Gottardo & Moisello, 2014).…”

Section: Introductionmentioning

confidence: 99%

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Capital Structure Determinants in Family Firms: An Empirical Analysis in Context of Crisis

Migliori¹,

Maturo²,

Paolone³

2018

IBR

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The purpose of this paper is to investigate the capital structure of family firms in a context of crisis. Specifically, it aims to discover whether and how the determinants of their capital structure have a different impact on firms' leverage before and during the recent global financial crisis. Considering the pecking order theory (POT), trade-off theory (TOT), and agency theory (AT), this study analyzes 1,502 Italian medium family firms comparing the pre-crisis (2005)(2006)(2007) and crisis (2008)(2009)(2010) periods. This research shows that that current liquidity, asset structure, and agency costs are the most important variables in influencing medium family firms' leverage, in both the pre-crisis and crisis periods. Moreover, during the crisis, agency costs increase and have a negative influence on the short-term leverage highlighting that crisis contingencies influence the agency-based effects on family firm's leverage. Furthermore, our findings highlight that a more exhaustive understanding of family firms' capital structure can be achieved through the combined use of different theories.

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Section: Discussionsupporting

confidence: 81%

Section: Theoretical Framework For Family Firms' Capital Structurementioning

confidence: 99%

Section: Theoretical Framework For Family Firms' Capital Structurementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Capital Structure Determinants in Family Firms: An Empirical Analysis in Context of Crisis

Migliori¹,

Maturo²,

Paolone³

2018

IBR

View full text Add to dashboard Cite

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“…One paper draws on data from two continents (North America (USA) and Europe (Switzerland)) (Welsh and Zellweger, 2010). Only three papers use data from countries that may be regarded as emerging economies (Colombia - González et al, 2012;Taiwan -Su and Lee, 2012;Turkey -Yildirim and Saygin, 2011;Hoskisson et al, 2000). This underrepresentation of studies on emerging countries is regrettable, as another paper included in the review (Castañeda, 2006) highlights, using a theoretical model, that the risk aversion of family firms may interfere with the successful development of a local stock market in an emerging economy.…”

Section: Risk Aversion In Family Firmsmentioning

confidence: 99%

Risk aversion in family firms: what do we really know?

Hiebl

2012

The Journal of Risk Finance

122

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Purpose -Risk aversion is an important characteristic associated with family firms. Despite growing literature in recent years, a consistent picture of what we know about the risk aversion of family firms has not evolved. Thus, this paper presents a systematic overview of whether family firms are found to be more risk averse than non-family firms, the factors influencing the risk aversion of family firms and the outcomes of risk aversion. Design/methodology/approach -This paper follows the tenets of Tranfield et al. for conducting a systematic literature review. Following a keyword search and an assessment of fit for this review, 29 papers were analyzed with respect to bibliographical information, research design and findings. Findings -Most studies find that family firms are indeed more risk-averse than non-family firms. However, some findings advance the notion that this phenomenon strongly depends on the situation of the family firm and that the controlling family may take irrational risks to secure control over the firm. From content analysis, five clusters of factors increasing or decreasing the risk aversion of family firms and six clusters on the outcomes of risk aversion are derived. Research limitations/implications -A broad array of potentially fruitful research directions is presented. Specifically, more qualitative research on risk aversion in family firms is needed, as well as research that takes into account the situational factors and the reactions of the financial services industry to the risk-avoiding behavior of family firms. Originality/value -This paper represents the first comprehensive literature review on risk aversion in family firms.

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Family ownership and M&A payment method

2020

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We investigate the effects of family ownership on the choice between cash and stock payment in M&A operations. On a sample of 269 M&A transactions performed by Italian listed bidders over the period 2008-2015, we demonstrate that families are more inclined to pay in cash in order to avoid dilution. We also find that the influence of family ownership on the choice of the payment method is stronger for intermediate levels of control than for other levels. Furthermore, we document that financial structure considerations, bidder growth opportunities and deal specific characteristics influence the choice of payment method.

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Family firms and debt: Risk aversion versus risk of losing control

Cited by 147 publications

References 42 publications

Capital Structure Determinants in Family Firms: An Empirical Analysis in Context of Crisis

Capital Structure Determinants in Family Firms: An Empirical Analysis in Context of Crisis

Risk aversion in family firms: what do we really know?

Family ownership and M&A payment method

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