The Capital Structure of Family Firms

Ampenberger, Markus; Bennedsen, Morten; Zhou, Haoyong

doi:10.1093/oxfordhb/9780195391244.013.0007

Cited by 7 publications

(6 citation statements)

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“…This literature shows that small family firms pursue different financial policies from their non-family peers. Large-scale evidences on private family firms' capital structure choices are missing (Ampenberger et al, 2012), given the difficulty to obtain reliable data on private firms. It is therefore desirable to develop studies in this area.…”

Section: Introductionmentioning

confidence: 99%

The capital structure choices of family firms

Gottardo

Moisello

2014

Managerial Finance

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Purpose – This paper aims to examine the determinants of capital structure of unlisted firms and how family governance-related factors impact on them. Design/methodology/approach – The authors analyze the relation between a set of capital structure determinants and leverage in a unique dataset of 3,006 family and non-family Italian medium-large firms (26,210 obs.), and a control sample of 2,730 small firms (14,780 obs.), using cross-section and panel procedures during 2001-2010. Findings – Capital structure choices of medium-large family firms are linked to balance-sheet variables not used in previous studies, i.e. net working capital and capital turnover, and are significantly affected by the need to maintain control and influence, a relevant dimension of family socioemotional wealth. Family firms are more levered than non-family firms, but the difference is economically and statistically significant only for medium-large companies. The presence of the family in active management increases leverage, as the family endowment in the firm is higher. Research limitations/implications – This research could be developed through an international comparison to check the influence of country-related regulatory issues and of national cultural aspects on family control and influence. Practical implications – The results can give public authorities important insights in order to facilitate firms funding specially in the current critical economic scenario and provide managers useful suggestions to support financial decisions. Originality/value – To the best of the authors' knowledge, this is the first paper to explore the financial choices of a large dataset of medium-large private firms in a bank-based economy.

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Section: Introductionmentioning

confidence: 99%

The capital structure choices of family firms

Gottardo

Moisello

2014

Managerial Finance

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“…A statistically significant difference between the mean values of both groups was demonstrated at a level of significance α = 0.05. From a capital structure point of view, some researchers suggest that family firms prefer internal and family sources and carry less debt than non-family firms (e.g., Ampenberger et al 2012), while others tend to claim the opposite (e.g., Gallo et al 2004;Keasey et al 2015;Burgstaller and Wagner 2015): that family firms carry similar or even higher debt. The comparison of the debt ratios of the two samples from 2018 implies the first option-the debt ratio is slightly lower in the sample of family firms; the value was 52.59 for family firms and 53.68 for all/non-family companies.…”

Section: Resultsmentioning

confidence: 99%

“…Nevertheless, equity is less likely to be used by older family businesses and owners who prefer retaining family control. Ampenberger et al (2012) analysed questions on whether and how founding families influence the capital structure decisions of their firms. A panel dataset of 660 listed German companies from 1995 to 2006 showed that family firms have significantly lower leverage ratios than non-family firms.…”

Section: Impact On the Capital Structurementioning

confidence: 99%

“…In the entire body of publications on this topic, only a limited number of studies on capital structure have been conducted on family firms (Romano et al 2001;Gottardo and Moisello 2014;Acedo-Ramirez et al 2017). Whereas some researchers have suggested that family firms prefer internal or family funds (e.g., Romano et al 2001) and carry less debt than non-family firms (e.g., McConaughy et al 2001;Ampenberger et al 2012), others indicate that family firms accept similar debt (e.g., Anderson and Reeb 2003;Gallo et al 2004) or even more debt than non-family firms (e.g., Callimaci et al 2011;Gottardo and Moisello 2014;Burgstaller and Wagner 2015).…”

Section: Introductionmentioning

confidence: 99%

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The Impact of Family Ownership on Capital Structure and Business Performance

Stryckova

2023

IJFS

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Financial decision making in family companies is a topical issue that has arisen from an awareness of the significant impact of family businesses on the economies of individual countries. This article deals with the capital structure and business performance of family firms in the Czech Republic, as there is still a significant gap in family business research and empirical verification. This study aims to investigate Czech family businesses’ corporate financing practices and compare them with population data from all active companies. The literature distinguishes between the positive and negative impacts of family ownership on capital structure and performance. Our empirical findings hypothesise that family businesses are more leveraged than non-family firms and vice versa. At the same time, a slightly positive impact from family influence on firm financial performance is indicated. This study uses descriptive statistics to detect family influence on corporate capital structure and financial performance regarding business sectors. The results of this study indicate that Czech family firms are less indebted than all/non-family businesses, and that they have proved to be more profitable in terms of ROEs and ROAs. Furthermore, significant differences in financial characteristics have been identified not just between individual business sectors but also between sample family firms and all/non-family firms within one business sector.

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“…Type II agency problem occurs when a conflict exists between majority and minority shareholders (Cheng, 2014). Shareholders face a clear trade‐off: issue more shares to finance the company's investment by facing the risk of losing (or diluting) their control or retain their control but have insufficient internal fund (Ampenberger, Bennedsen, & Zhou, 2012). However, not all shareholders attach the same importance to control motives.…”

Section: Introductionmentioning

confidence: 99%

Nonlinear impacts of board independence on debt financing: Contingent on the shareholdings of the largest shareholder

et al. 2020

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Shareholder interest is unprotected until and unless precise financial decision making is in place. Although literature supports the independent directors' monitoring function in a decision‐making process, for a controversial debt financing issue, the influence of the largest shareholders may hinder such an action. This study aims to delineate the association between board independence and debt financing when the largest shareholders are likely to play a significant role between them. With a sample of Vietnamese listed companies from 2007 to 2016, our regression analyses show that a nonlinear U‐shaped relationship between level of board independence and debt financing is stronger among the largest shareholders with a high level of shareholdings in their shareholding group than the full sample. This finding implies the determining influence of the largest shareholders with a high level of shareholdings in a company. However, this association is not found in companies with a low level of shareholdings by the largest shareholders. Results reveal that the largest shareholders have the incentive to influence the decision making of independent directors about debt financing when their shareholdings are high. Specifically, issuing more debt to raise capital for business reduces the risk of the largest shareholders losing their controlling rights. The results are further supported by several robustness checks and controlling for economic events such as the global financial crisis and ASEAN Economic Community.

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The Capital Structure of Family Firms

Cited by 7 publications

References 0 publications

The capital structure choices of family firms

The capital structure choices of family firms

The Impact of Family Ownership on Capital Structure and Business Performance

Nonlinear impacts of board independence on debt financing: Contingent on the shareholdings of the largest shareholder

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