Family firm governance and working capital management policy

Liu Hong, Bharat A. Jain and Yingying Shao

International Review of Financial Analysis, 2024, vol. 95, issue PB

Abstract: Drawing from agency and behavioral theories, we evaluate whether and how family firm governance influences working capital management policy and its contribution to shareholder value. Our results indicate that family firms pursue a conservative working capital management policy to capitalize on the competitive benefits of balance sheet liquidity. Moreover, we find that the market value of working capital investment is higher for family firms. Product market competition, financing constraints and capital market access, however, moderate the relationship between family governance and the market value of net working capital investment. Taken together, our results suggest that, relative to non-family firms, family firms pursue value-enhancing working capital management policies.

Keywords: Family firms; Working capital management; Valuation; Product market competition (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:95:y:2024:i:pb:s1057521924004204

DOI: 10.1016/j.irfa.2024.103488

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