Family firms, debtholder–shareholder agency costs and the use of covenants in private debt

Bagnoli, Mark; Liu, Hsin-Tsai; Watts, Susan G.

doi:10.1007/s10436-009-0127-9

Cited by 18 publications

(6 citation statements)

References 52 publications

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“…A limited number of studies deepen the understanding of the shareholder–bondholder agency relationship by taking collateral or guarantees into consideration. Bagnoli, Liu, and Watts (2011) find that listed family firms use financial covenants more intensively than nonfamily firms. Steijvers and Voordeckers (2009) and Steijvers, Voordeckers, and Vanhoof (2010) further point to the use of personal collateral to reduce agency problems in private family firms.…”

Section: Where Are We Now?mentioning

confidence: 90%

Financing Decisions in Family Businesses: A Review and Suggestions for Developing the Field

Michiels

Molly

2017

Family Business Review

107

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Motivated by the growing attention to the financing decisions of family firms, this review brings together the two highly relevant research fields of family business and finance. This study critically reviews 131 articles on financing decisions in family businesses, published between 1977 and 2016 in 64 finance and management journals. We develop a state of the art on family business financing literature and present a model to guide extant and future research by identifying gaps across the theoretical perspectives and across context-specific elements such as family business heterogeneity and country-specific factors.

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Section: Where Are We Now?mentioning

confidence: 90%

Financing Decisions in Family Businesses: A Review and Suggestions for Developing the Field

Michiels

Molly

2017

Family Business Review

107

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“…According to Bagnoli, Liu & Watts (2011), family firms are surprisingly common. Indeed, in Europe and Asia family firms are at least as common as non-family firms (La Porta, Lopez- de-Silanes, & Shleifer, 1999).…”

Section: Family Firms and Tax Aggressivenessmentioning

confidence: 99%

Family Firms and Tax Aggressiveness in Brazil

Martinez

Ramalho²

2014

IBR

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This article investigates whether family firms are more aggressive in terms of tax planning than non-family firms in Brazil, based on a sample of firms listed on the BMF&Bovespa from 2001 to 2012. Chen, Chen, Cheng, & Shevlin (2010) define tax aggressiveness as management to reduce taxable income through tax planning activities. Of the sample of companies, 23% are considered to be family firms. We found a significant relationship between classification as a family firm and tax aggressiveness, based on two metrics. The first, effective tax rate (ETR), captures the actual taxes paid in relation to pre-tax earnings, while the second, book-tax differences (BTD), reflects the differences between accounting income and taxable income. The family firms in the sample were more tax aggressive than the non-family firms. For the variable BTD, family firms presented a positive sign, indicating a tendency for higher BTD. In turn, ETR had a negative sign, identifying a tendency for family firms to pay lower taxes.

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“…The resulting sample is then merged with the December 2012 update of the Loan Pricing Corporation's DealScan Database, which includes historic data on the private loan agreements of 67,669 U.S. companies collated from SEC filings (e.g., Dichev & Skinner, 2002) or Loan Pricing Corporation's own data-gathering process. 8 When defining our debt contract strictness measure, we consider information on private covenants as opposed to just bond covenants because private loans dominate the market for corporate debt (e.g., Bagnoli, Liu, & Watts, 2011) and private debt usually includes more restrictive covenants than public debt contracts (e.g., Mather & Peirson, 2006).…”

Section: Methodsmentioning

confidence: 99%

Pound of Flesh? Debt Contract Strictness and Family Firms

Hillier¹,

Martínez

Patel

et al. 2017

Entrepreneurship Theory and Practice

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While past work finds support for both higher and lower cost of debt among family firms, whether lower shareholder-creditor agency conflicts in family firms translate into greater exante contracting efficiency (i.e., lower debt contract strictness) remains unexplored. Drawing on a shareholder-creditor agency framework and costly contracting theory, creditors, expecting firm value maximization rather than shareholder value maximization from family firms, may offer less strict debt contracts to increase contracting efficiency. We find in a sample of 716 publicly traded US firms (2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)) that family firms have less strict debt contracts, which are even less strict when family firms have higher asset tangibility. Although increases in R&D investments could lead to more pronounced shareholder-creditor agency conflicts, given family firms' preferences for lower risk and growth, debt contract strictness among family firms is not positively associated with higher R&D intensity.

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Family firms, debtholder–shareholder agency costs and the use of covenants in private debt

Abstract: Debt covenants, Private debt, Family firms, Agency costs, Dealscan, G21, G34, M41,

Cited by 18 publications

References 52 publications

Financing Decisions in Family Businesses: A Review and Suggestions for Developing the Field

Financing Decisions in Family Businesses: A Review and Suggestions for Developing the Field

Family Firms and Tax Aggressiveness in Brazil

Pound of Flesh? Debt Contract Strictness and Family Firms

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