2017
DOI: 10.1177/1042258717748933
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Pound of Flesh? Debt Contract Strictness and Family Firms

Abstract: 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 contract… Show more

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Cited by 20 publications
(19 citation statements)
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References 121 publications
(167 reference statements)
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“…Second, family firms are controlled by owner-managers rather than professional managers who do not have significant ownership (Stewart & Hitt, 2012). This source of control can sometimes reduce agency problems between owners and managers (Pollak, 1985) and between owner-managers and lenders (Hillier, Martinez, Patel, Pindado, & Requejo, 2018) but at the price of sometimes creating agency problems among owners (Peng, Sun, Vlas, Minichilli, & Corbetta, 2018; Villalonga & Amit, 2006) and between family owner-managers and family members who do not directly participate in the governance of the firm (Villalonga, Amit, & Guzman, 2015). 4 Third, sometimes the pursuit of solutions to these problems can generate unique double-agency costs through the creation of intermediary governance mechanisms (Zellweger & Kammerlander, 2015).…”
Section: Governance Mechanisms and Family Firmsmentioning
confidence: 99%
See 1 more Smart Citation
“…Second, family firms are controlled by owner-managers rather than professional managers who do not have significant ownership (Stewart & Hitt, 2012). This source of control can sometimes reduce agency problems between owners and managers (Pollak, 1985) and between owner-managers and lenders (Hillier, Martinez, Patel, Pindado, & Requejo, 2018) but at the price of sometimes creating agency problems among owners (Peng, Sun, Vlas, Minichilli, & Corbetta, 2018; Villalonga & Amit, 2006) and between family owner-managers and family members who do not directly participate in the governance of the firm (Villalonga, Amit, & Guzman, 2015). 4 Third, sometimes the pursuit of solutions to these problems can generate unique double-agency costs through the creation of intermediary governance mechanisms (Zellweger & Kammerlander, 2015).…”
Section: Governance Mechanisms and Family Firmsmentioning
confidence: 99%
“…(2018) study situations where the responses of internal governance are more discretionary and selective. By contrast, Hillier et al. 's (2018) article on debt financing deals with the collision of formal internal and external governance mechanisms.…”
Section: Contributions Of the Articles And Commentariesmentioning
confidence: 99%
“…In a principal-agent perspective, where the family is the principal and nonfamily executives are agents, a number of relational problems can occur: different preferences, knowledge asymmetry and risk discrepancy (Bosse and Phillips 2016). For example, Hillier et al (2018) found that family firms have less strict debt contracts, which are even less strict when family firms have higher asset tangibility. Mazzelli et al (2018) found that family firms align with their closest peers to avoid social losses.…”
Section: Discussionmentioning
confidence: 99%
“…The socialization in families shapes the rules, values, and norms of individuals and the next generation. Hillier et al (2018) proposed that agency conflicts between shareholders and creditors are lower in family firms than in non-family firms. Yuan and Wu (2018) placed this study into a wider context and proposed to include values when studying family firms, emphasizing values as the "key determinant of family heterogeneity and family firm behavior" (Yuan & Wu, 2018, p. 284).…”
Section: Information Asymmetries In the Family-internal Succession Prmentioning
confidence: 99%