Exploring the link between family ownership and leverage: a mediating pathway through socioemotional wealth objectives

Fernando Muñoz-Bullón, Maria J. Sanchez-Bueno () and Pilar Velasco ()
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Maria J. Sanchez-Bueno: Universidad Carlos III de Madrid
Pilar Velasco: Universidad de Valladolid

Review of Managerial Science, 2024, vol. 18, issue 11, No 4, 3203-3252

Abstract: Abstract This paper explores the relationship between family ownership and a firm’s leverage from the socioemotional wealth (SEW) theory. We propose that SEW objectives (i.e., family control, long-term horizon, and family firm reputation) might have a mediating effect on the family ownership-leverage link. In addition, we argue that an internal contingency—such as below aspiration performance—may moderate SEW’s influence on the family ownership-leverage relationship as a result of a shift in focus from non-economic to economic goals. Using a sample of European listed firms from 2011 to 2018, we find that the negative impact of family ownership on a firm’s leverage is mediated through SEW objectives. Moreover, our evidence suggests that a negative performance-aspiration gap weakens the mediating influence of these SEW objectives on leverage. Over all, our study reveals that SEW is a key channel which drives family firms’ reluctance to leverage.

Keywords: Leverage; Family control; Long-term horizon; Family firm reputation; Performance aspiration gap; Mediating effect (search for similar items in EconPapers)
JEL-codes: G32 M10 M21 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11846-023-00713-1

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