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Capital Structure Determinants in Family Firms: An Empirical Analysis in Context of Crisis

Stefania Migliori, Fabrizio Maturo and Francesco Paolone

International Business Research, 2018, vol. 11, issue 4, 65-83

Abstract: The purpose of this paper is to investigate the capital structure of family firms in a context of crisis. Specifically, it aims to discover whether and how the determinants of their capital structure have a different impact on firms’ leverage before and during the recent global financial crisis. Considering the pecking order theory (POT), trade-off theory (TOT), and agency theory (AT), this study analyzes 1,502 Italian medium family firms comparing the pre-crisis (2005-2007) and crisis (2008-2010) periods. This research shows that that current liquidity, asset structure, and agency costs are the most important variables in influencing medium family firms' leverage, in both the pre-crisis and crisis periods. Moreover, during the crisis, agency costs increase and have a negative influence on the short-term leverage highlighting that crisis contingencies influence the agency-based effects on family firm's leverage. Furthermore, our findings highlight that a more exhaustive understanding of family firms’ capital structure can be achieved through the combined use of different theories.

Keywords: agency costs; capital structure; family firms; financial crisis (search for similar items in EconPapers)
JEL-codes: R00 Z0 (search for similar items in EconPapers)
Date: 2018
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