Capital structure decisions in family firms: empirical evidence from a bank-based economy

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. 2 Capital structure decisions in family firms -empirical evidence from a bankbased economy Terms of use: Documents in Abstract:This study examines how family firm characteristics affect capital structure decisions. In our analysis we disentangle the influence of three distinct components of a family firm: ownership, supervisory and management board activities by the founding family. Thereby, we use a unique panel dataset of 660 publicly listed companies (5,135 firm years) in the broadest German stock index CDAX from 1995 to 2006. This paper is motivated by hitherto inconclusive empirical findings on capital structure decisions in family firms from AngloSaxon countries. We provide new evidence for a bank-based economy. In this sense, Germany provides a very fruitful research environment as it (i) traditionally has a bank-based financial system and (ii) family firms are considered to be the backbone of the economy.We find that family firms have significantly lower leverage ratios than non-family firms, independent of the definition of leverage applied. Among the three dimensions of a family firm, management board involvement by the founding family has a consistently negative influence on leverage across all our models. In contrast, the influence of ownership and supervisory board representation is insignificant in almost all of our models. In line with agency theory, we can show that the leverage level is the lowest if the founding family is simultaneously a large shareholder with monitoring incentives and involved in firm management with convergence-of-interest effects. Finally, we detect that the presence of a founder CEO in firm management has a significant negative effect on the leverage ratio. Our results prove to be stable against a battery of robustness tests including a matching estimator technique to demonstrate causal effects. JEL Classification: G 32, G 34

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

“…Kumar et al, 2017;Rajan & Zingales, 1995) and we give particular attention to previous empirical research on capital structure determinants in family, unlisted, and small and medium firms (e.g. Ampenberger et al, 2013;Cassar & Holmes, 2003;Coleman & Carsky, 1999;Gonzá lez et al, 2013;Gottardo and Moisello, 2014;Lopez-Gracia & Sá nchez-Andùjar, 2007). Following this literature, we indentified the most commonly adopted determinants of medium family firms' capital structure as follows: firm size, firm age, profitability, asset structure, and current liquidity.…”

Ownership and Debt Financing: Indonesia Evidence

“…The alignment of interest between shareholders and managers being a family-owned firm minimizes the agency cost and thus makes issuing debts as manager's disciplinary tool less crucial. Studies like [19,21] confirm the negative relationship between family owned and leverage. This study therefore hypothesizes that H 2 : ownership identity has significant influence on debt financing.…”

“…In contrast, there are studies that reveal positive relationships, indicating that family-owned firms are more leveraged than the non-family-owned firms [14,22,23]. Looking at the financial behavior of the firms, [21] depict family management as the main determinant of lower debt level of family-owned firms. Gottardo and Moisello [22] on the other hand report active family management as the major determinant of high debt level.…”

“…They find no distinctive difference between family owned and non-family owned, and the founder does not influence debt level of the US industrial firms. Ampenberger et al [21] discovered that family-owned firms in Germany have a negative impact on the capital structure and this is perhaps due to the involvement of the founder CEO in the management.…”

“…For instance, [19,21] find family-owned firms are considerably underleveraged comparative to the non-family-owned firms. In contrast, there are studies that reveal positive relationships, indicating that family-owned firms are more leveraged than the non-family-owned firms [14,22,23].…”