Financial conservatism of private firms

Marco Bigelli, Juan Francisco Martín-Ugedo and F. Javier Sánchez-Vidal

Journal of Business Research, 2014, vol. 67, issue 11, 2419-2427

Abstract: The aim of this paper is to analyze the factors that motivate private firms to follow a conservative financial policy. Using a new definition of financial conservatism, we investigate a sample of 21,959 Italian private firms for the 1998–2006 period and look for the determinants of financial conservatism according to the main theories of capital structure and financing policy. Our findings show that financially conservative firms are smaller, with more intangible and less tangible assets, lower effective tax rates and follow a pecking order style financial policy. As has been found for their public counterparts, financially conservative private firms seem to pile up cash and their leverage potential before undertaking future investments.

Keywords: Private firms; Financial conservatism; Net Financial Position; Leverage; Capital structure (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:67:y:2014:i:11:p:2419-2427

DOI: 10.1016/j.jbusres.2014.02.009

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