Testing the capital structure of Portuguese family businesses

Abstract

The main objective of this study is to empirically test capital structure decisions in Portuguese family-owned businesses under trade-off theory (TOT) and pecking order theory (POT) and attend to the relationships between family/business interaction and agency conflicts. Family-owned businesses are essential for the development of economies, but the financing logic they adopt is not yet adequately clarified by scientific research, especially as they are more exposed to the constraints of markets imperfections. The specific pattern of business ownership may affect the financing decision and the ability to obtain funds externally. This issue is more relevant in economies where family business initiatives and less sophisticated management strategies are expressive. The greater convergence of interests in family businesses and the consequent decrease in agency costs may lead to higher levels of recognized reputation and thus easier access to indebtedness. The empirical study uses static models and dynamic panel models in order to analyze data from 4,952 Portuguese family-owned firms over the period from 2009 to 2016: the TOT following the partial debt adjustment model, and the POT following the model of the impact of the deficit of funds on debt and the model of the relationship between debt and the determinants of financing. The results of the individual tests suggest that Portuguese family-owned businesses adjust debt at the target ratio, albeit influenced by adjustment costs that keep them distant from the optimal, as well as use sources other than debt when a financial deficit occurs. Although the impact of the financial deficit is greater in total debt ratio, the velocity of adjustment to the optimal level is higher in short-term debt. Evidence from a joint test confirms that both theories explain part of the capital structure of Portuguese family-owned businesses.

Family businesses and sustainable development goals

“…However, this behavior is not the most common in family businesses since the family tends to occupy senior management positions in the company. The main purpose of the presence of family members in the company's senior management is to ensure the continuity of the company, especially since the company is a family asset in the current generation and, when considering the objectives of the family that owns the company, it must be transferred in the current or better conditions to the next generations (Monteiro et al, 2019;Pestana et al, 2021). Consequently, in family businesses, some behaviors are different from non-family companies.…”

“…This is because family members tend to establish actions that positively impact the company in the medium and long term. They seek to maintain the continuity of the company as a way to preserve the family's assets, especially in the company's transition to the next generations (Monteiro et al, 2019;Pestana et al, 2021). For this reason, implementing efficiently developed socio-environmental plans can be a way out of achieving these objectives, largely because they make it possible to achieve both economic benefits (Mason, 2021) as well as corporate reputation (Long & Mathews, 2011) and company survival (Ferasso et al, 2020;Ferreira et al, 2021).…”

“…Although it can be understood that family businesses tend to adopt more intensified socio-environmental practices, these companies relate differently to the family. Some companies, for example, despite being family-owned, do not have a majority of the voting capital controlled by family members; others do not have members who participate in the senior executive (Pestana et al, 2021). These aspects directly impact family businesses' decisions for profit from short, medium, and long-term goals.…”

Pengaruh Faktor Eksternal dan Internal Terhadap Dinamika Struktur Modal Perusahaan Retail Trade yang Terdaftar di Indonesia

“…Berdasarkan (Shaik, et al, 2022) menyatakan bahwa tangibilitas suatu perusahaan dapat ditentukan dengan membandingkan jumlah total aset tetap dengan seluruh nilai aset yang dikendalikan atau dimiliki oleh organisasi. Rasio tangibilitas juga dapat dinilai dengan menjumlahkan aktiva tetap dengan persediaan barang dagang lalu membandingkannya dengan total nilai aktiva (Pestana, Gomes, & Lopes, 2021). Peneliti akan menentukan rasio tangibilitas dengan turut memperhatikan nilai tanah dan bangunan yang ditahan untuk tujuan tidak dijual kembali, nilai persediaan barang dagangan serta kas dan setara kas.…”

“…Oleh karena itu, profitabilitas diukur dengan menggunakan rumusan sebagai berikut: PRO = Net income / Total Aset Sumber: (Shaik, et al, 2022) c. Firm size atau ukuran perusahaan dapat ditentukan dengan mengambil logaritma dari seluruh nilai aset perusahaan. SIZE = Log Total Aset Sumber: (Dotun, Tanko, Siyanbola, & Bako, 2021) d. Laju pertumbuhan pendapatan (GRW) dapat dihitung dengan menggunakan rumus sebagai berikut: GRW = [Sales t -Sales (t-1)]/Sales (t-1) Sumber: (Pestana, Gomes, & Lopes, 2021) e. Rasio tangibilitas (TANG) disebut sebagai harta berwujud adalah harta yang benar-benar memiliki wujud fisik. Contoh aset berwujud antara lain tanah dan bangunan, uang, barang dagangan, dan aset tetap lain dengan tujuan untuk tidak dijual kembali.…”