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A good name is better than riches: Family firms and working capital management

Nilesh B. Sah, Anandi Banerjee, James Malm and Anisur Rahman

Journal of Behavioral and Experimental Finance, 2022, vol. 33, issue C

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.

Keywords: Family firms; Working capital management; Financial performance (search for similar items in EconPapers)
JEL-codes: G30 G32 G40 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.jbef.2021.100599

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Journal of Behavioral and Experimental Finance is currently edited by Michael Dowling and Jürgen Huber

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