Keeping it in the family: financial constraints and the succession intention of micro and small enterprises in China

Kong-lin Ke, Xiaohui Hou and Chun Liu

The European Journal of Finance, 2024, vol. 30, issue 3, 305-322

Abstract: Despite the significance of business succession in the family firm literature, few studies have paid attention to the role of financial constraints, a common feature of micro and small firms, in entrepreneurs’ succession intention. Using a nationally representative survey of micro and small firms in China, we find that a higher degree of financial constraints significantly strengthens the entrepreneur’s intention of passing the firm on to the next generation. Moreover, the effect of financial constraints works particularly for firms whose entrepreneurs possess lower levels of financial literacy and for firms in regions with less-developed financial markets. Our results still hold after addressing potential endogeneity problems and conducting a wide array of robustness checks.

Date: 2024
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DOI: 10.1080/1351847X.2023.2215827

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