Financial Decision-Making Beyond Economic Considerations: A Strategic View for Family Firms in India

Manpreet Kaur Khurana, Muhammad Shahin Miah () and Shweta Sharma
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Manpreet Kaur Khurana: Department of Management Studies, Symbiosis Centre for Management Studies, Pune Symbiosis International (Deemed University), Pune 412115, India
Muhammad Shahin Miah: Department of International Business, Faculty of Business Studies, University of Dhaka, Dhaka 1000, Bangladesh
Shweta Sharma: Department of Management Studies, Malaviya National Institute of Technology, Jaipur 302017, India

JRFM, 2025, vol. 18, issue 8, 1-22

Abstract: The study examines economic and non-economic endeavors to explore the association between family involvement and financial decisions within family firms. The non-economic factors of a family drive the need to analyze the impact of socioemotional factors on the financial policies of the family firms. The study explores the impact of family ownership, family management, and family control drawn from agency theory and socioemotional wealth perspectives on the financial decisions of family firms. Our findings in support of the socioemotional wealth perspective show a positive relationship between family ownership and debt financing with a desire to finance growth and avoid control dilution, with an increase in the level of debt. However, the involvement of family members in management and the top management team leads to an adverse relationship between family ownership and debt level, exhibiting the risk-averse behavior of a firm, which drives firms to reduce debt levels. Overall, our findings suggest that the perceptions of the socioemotional wealth theoretical paradigm are important in determining capital structure decisions in family enterprises. The results are resilient to potential endogeneity and heterogeneity difficulties, which may assist scholars and practitioners in assessing capital structure decisions in emerging economies.

Keywords: family ownership; family management; family control; financial decision; India (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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