A Good Name Is Better Than Riches: Family Firms and Working Capital Management

Nilesh Sah (), Anandi Banerjee (), James Malm () and Anisur Rahman ()
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Nilesh Sah: Gary W. Rollins College of Business, University of Tennessee at Chattanooga
Anandi Banerjee: McColl School of Business, Queens University of Charlotte
James Malm: College of Charleston
Anisur Rahman: Westminster College, Fulton, MO

Discussion Paper Series from McColl School of Business, Queens University of Charlotte

Abstract: Several studies show that family firms avoid risky financial policies and value goals such as survival and reputation more than financial profits. Our study provides new evidence that extends the literature by showing that family firms exhibit conservative short-term investment policies by investing more in working capital. Notably, family firms hold more inventories and pay their suppliers promptly. The general notion that higher working capital investments debilitate profitability does not hold true for family firms. This paper is the first to explore the unique channel of working capital investments through which family firms may accomplish survival and reputation goals without hurting profitability.

Pages: 34 pages
Date: 2021
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Published 2022 in Behavioral and Experimental Finance 33 (March)

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Persistent link: https://EconPapers.repec.org/RePEc:msb:wpaper:2021-02

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