The impact of family ownership on capital structure of firms: Exploring the role of zero-leverage, size, location and the global financial crisis

Ramalho, Joaquim J.S.; Rita, Rui Ms; Silva, Jacinto Vidigal da

doi:10.1177/0266242617753050

Cited by 56 publications

(49 citation statements)

References 115 publications

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“…Furthermore, following previous studies Barth et al, 2005;Amore et al, 2011;Croci et al, 2011;Dìaz-Dìaz et al, 2016), ownership is considered to identify family firms. Specifically, similar to Ramalho et al (2018) and depending on data availability, family firms are referred to herein as firms with one or more named individuals or families jointly owning at least 50% of the equity. The use of the percentage of 50% for ownership depends on the fact that most firms in the sample are privately owned, in other words unlisted, as indicated later on.…”

Section: Methodsmentioning

confidence: 99%

Sovereign debt crisis and capital structure decisions of firms in GIPSI countries

Domenichelli¹

2020

Afr. J. Bus. Manage.

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This quantitative study examines the reasons for changes in the leverage levels of the firms in GIPSI countries (Greece, Ireland, Portugal, Spain, and Italy), following the development of the sovereign debt crisis that began in 2009. This research belongs to the empirical literature studying the effects on firm leverage of reduced bank credit supply caused by that crisis. For all the sample firms and for each firm typology, that is, unlisted, listed, unlisted family, unlisted nonfamily, listed family and listed nonfamily, and for the entire period being analysed, the sample means of the debt-to-assets ratio in each year were calculated. The results show that owing to the lack of bank credit, unlisted firms reduced their leverage, whereas listed companies generally maintained their indebtedness, thanks to their access to financial markets. In spite of their orientation to socio-emotional wealth and its protection, unlisted family firms could not decrease their debt-to-assets ratio significantly less than unlisted nonfamily firms, due to the restriction of capital offered by banks. In contrast, the inclination toward the consolidation of socioemotional wealth possibly enabled listed family firms to take advantage of the scarcity in bank capital to increase their leverage via bond issues, while listed nonfamily firms reduced the proportion of debt they employed, as the perpetuation of the business for future generations is not an issue for them.

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Section: Methodsmentioning

confidence: 99%

Sovereign debt crisis and capital structure decisions of firms in GIPSI countries

Domenichelli¹

2020

Afr. J. Bus. Manage.

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“…Family ownership is the most predominant structure of business establishment throughout the world [58] and occurs in diverse sizes and sectors in both developed and developing countries [59]. It has been contended that a FAOWN structure has distinctive characteristics which offer potential benefits over other types of ownership with regards to performance and effectiveness [60], persistence and durability [61,62].…”

Section: Family Ownershipmentioning

confidence: 99%

Impact of Ownership Characteristics on Modified Audit Opinion in Jordan

Alkilani¹,

Hussin²,

Salim³

2019

IJAFRM

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It is well established that ownership characteristics are impacted by the quality of financial reporting. The purpose of this work is to examine the role of ownership characteristics in minimising the prospect of corporates obtaining a modified audit opinion in Jordan. Three ownership characteristics [family ownership (FAOWN), institutional ownership (INOWN) and foreign ownership (FAOWN)] and modified audit opinion were studied. The study used 117 samples of corporates listed on the Amman Stock Exchange (ASE). Logistic regression was employed to analyse the association between the modified audit opinions as a dependent variable and ownership characteristics as independent variables. Ownership characteristics are anticipated to be more successful in improving the quality of financial statement, and thus, reduce the prospect of firm obtaining a modified audit opinion. The analysed results from 2012 to 2016 periods of these corporates in Jordan showed that FAOWN and FOOWN validated this projection. Interestingly, the effect of family and FOOWN improve the quality of financial statement, thereby, reduce the cases of a modified audit opinion. Additionally, the study could not find any association impact between the INOWN and modified audit opinion.

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“…Moreover, they revealed the effect of corporate social responsibility on the leverage level, which verifies the results of Xu et al (2015). The importance of the ownership structure, capital structure and cost of capital is analysed in the studies of Rajverma et al (2019) and Ramalho et al (2018), whereas the effect of national culture on the corporate performance is depicted in the research of Andrijauskiene & Dumciuviene (2018). These capital structure studies were conducted at both local and international levels and depict different results.…”

Section: Literature Reviewmentioning

confidence: 55%

How Capital Structure Affects Business Valuation: A Case Study of Slovakia

Valášková¹,

Lăzăroiu²,

Oláh³

et al. 2019

CEBR

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A company's capital structure is a significant factor in valuing its business. The relative levels of equity and debt affect risk and cash flow and, therefore, the amount an investor would be willing to pay for the company or an interest in it. Capital structure matters because it influences the cost of capital. Therefore, this paper aims to quantify the effect of the capital structure on the cost of capital of Slovak enterprises and to suggest an effective way of financial decision-making. The data used in the study was gained from the Bratislava Stock Exchange because publicly available information on enterprises issuing their shares on the stock exchange was needed to calculate the cost of capital. Due to the underdeveloped capital market of Slovakia, we chose 17 stock companies (except for commercial banks) operating on the Slovak market having all the data required. The financial data of companies were obtained from their financial statements spanning 2013 to 2017. The impact of the capital structure on the cost of capital was investigated by the Pearson correlation coefficient, regression analysis and Mann-Whitney U-test. The study found that there is an indirect relationship between the capital structure, the cost of capital and the size of the company. We also conclude that the growing volume of debt may result in a decline in the corporate costs of capital. These findings concerning Slovak enterprises incline to the respected compromise theory.

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The impact of family ownership on capital structure of firms: Exploring the role of zero-leverage, size, location and the global financial crisis

Cited by 56 publications

References 115 publications

Sovereign debt crisis and capital structure decisions of firms in GIPSI countries

Sovereign debt crisis and capital structure decisions of firms in GIPSI countries

Impact of Ownership Characteristics on Modified Audit Opinion in Jordan

How Capital Structure Affects Business Valuation: A Case Study of Slovakia

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