The capital structure and the dividend policy of family firms

Helmut Pernsteiner

Abstract


This paper sheds light on the capital structure and the dividend policy of family firms. From a  theoretical point of view it can be shown that agency conflicts in family firms and therefore their financing decisions are affected by family specific factors. Our analysis, however, shows no clear evidence that family influence leads to (1) more or less leverage and (2) higher or lower dividend payments by family firms compared to their non-family  counterparts. The same holds true for empirical studies which present mixed results concerning the leverage and payout propensity of these companies. Finally, factors are addressed which could be held responsible for this ambiguous empirical evidence.

Keywords


family firms; divident policy; corporate finance

Full Text:

PDF

References


Ampenberger M., Schmid T., Achleitner A.-K., Kaserer C., Capital structure decisions in family firms: empirical evidence from a bank-based economy, “Review of Managerial Science”, 7, 2013, 247–275.

Anderson R.C., Reeb D.M., Founding-Family Ownership, Corporate Diversification, and Firm Leverage, “Journal of Law and Economics”, 46, 2003, 653–684.

Anderson R.C., Mansi S.A., Reeb D.M., Founding family ownership and the agency cost of debt, “Journal of Financial Economics”, 68, 2003, 263–285.

Andres C., Large shareholders and firm performance – An empirical examination of founding-family ownership, “Journal of Corporate Finance”, 14, 2008, 431–445.

Bjuggren P.-O., Duggal R., Giang D.T., Ownership Dispersion and Capital Structures in Family

Firms: A Study of Closed Medium-sized Enterprises, “Journal of Small Business and Entrepreneurship”, 25, 2012, 185–200.

Black F., The Dividend Puzzle, The harder we look at the dividend picture, the more it seems like a puzzle, with pieces that just don’t fit together, “The Journal of Portfolio Management”, 2 (2), 1976, 5–8.

Blanco-Mazagatos V., de Quevedo-Puente E., Castrillo L.A., The Trade-Off Between Financial Resources and Agency Costs in the Family Business: An Exploratory Study, “Family Business Review”, 20, 2007, 199–213.

Chen Z., Cheung Y.-L., Stouraitis A., Wong A.W.S., Ownership concentration, firm performance,

and dividend policy in Hong Kong, “Pacific-Basin Finance Journal”, 13, 2005, 431–449.

Cheng M.-C., Tzeng Z.-C., How Does Ownership Structure Affect Capital Structure and Firms Performance? Evidence from Taiwan, “Global Review of Accounting and Finance”, 2 (2), 2011, 61–81.

Coleman S., Carsky M., Sources of Capital for Small Family-Owned Businesses: Evidence from the National Survey of Small Business Finances, “Family Business Review”, 7, 1999, 73–86.

Corbetta G., Salvato C., Self-Serving or Self-Actualizing? Models of Man and Agency Costs in Different Types of Family Firms: A Commentary on “Comparing the Agency Costs of Family and Non-family Firms: Conceptual Issues and Exploratory Evidence”, “Entrepreneurship Theory and Practice”, 28, 2004, 355–362.

Croci E., Doukas J.A., Gonenc H., Family Control and Financing Decisions, “European Financial Management”, 17, 2011, 860–897.

De Cesari A., Expropriation of minority shareholders and payout policy, “Working Paper”, 2009.

DeAngelo H., DeAngelo L., Skinner D.J., Corporate Payout Policy, “Foundations and Trends in Finance”, 3 (2–3), 2009, 95–287.

Dyer W.G., Whetten D.A., Family Firms and Social Responsibility: Preliminary Evidence from the S&P 500, “Entrepreneurship Theory and Practice”, 30, 2006, 785–802.

Ellul A., Control Motivations and Capital Structure Decisions, “Working Paper”, 2010.

Faccio M., Lang L. H. P., & Young L., Dividends and Expropriation, “The American Economic Review”, 91, 2001, 54–78.

Fernández Z., Nieto M.J., Internationalization Strategy of Small and Medium-Sized Family Businesses: Some Influential Factors, “Family Business Review”, 18, 2005, 77–89.

Gallo M.A., Tàpies J., Cappuyns K., Comparison of Family and Nonfamily Business: Financial Logic and Personal Preferences, “Family Business Review”, 17, 2004, 303–318.

González M., Guzmán A., Pombo C., Trujillo M.-A., Family firms and debt: Risk aversion versus risk of losing control, “Journal of Business Research”, in press, 2012a.

González M., Guzmán A., Pombo C., Trujillo M.-A., Family Involvement and Dividend Policy in Listed and Non-Listed Firms, “Working Paper”, 2012b.

Gugler K., Corporate governance, dividend payout policy, and the interrelation between dividends, R&D, and capital investment, “Journal of Banking & Finance”, 27, 2003, 1297–1321.

Harijono, Ariff M., Tanewski G.A., The Impact of Family Control of Firms on Leverage: Australian Evidence, “Working Paper”, 2004.

James H.S., Jr., Owner as Manager, Extended Horizons and the Family Firm, “International Journal of the Economics of Business”, 6 (1), 1999, 41–55.

Jensen M.C., Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers, “American Economic Review”, 76, 1986, 323–329.

Jensen M.C., Meckling W.H., Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure, “Journal of Financial Economics”, 3, 1976, 305–360.

King M.R., Santor E., Family values: Ownership structure, performance and capital structure of Canadian firms, “Journal of Banking & Finance”, 32, 2008, 2423–2432.

López-Gracia J., Sánchez-Andújar A., Financial Structure of the Family Business: Evidence From a Group of Small Spanish Firms, “Family Business Review”, 20, 2007, 269–287.

Lybaert N., Vandemaele S., Voordeckers W., Agency problems and dividend policy in private family firms, “Working Paper”, 2006.

McConaughy D.L., Phillips G.M., Founders versus Descendants: The Profitability, Efficiency, Growth Characteristics and Financing in Large, Public, Founding-Family-Controlled Firms, “Family Business Review”, 12, 1999, 123–131.

McConaughy D.L., Matthews C.H., Fialko A.S., Founding family controlled firms: Performance,

risk, and value, “Journal of Small Business Management”, 39, 2001, 31–49.

Michaelas N., Chittenden F., Poutziouris P., A model of capital structure decision making in small firms, “Journal of Small Business and Enterprise Development”, 5, 1998, 246–260.

Miller D., Le Breton-Miller I., Family Governance and Firm Performance: Agency, Stewardship, and Capabilities, “Family Business Review”, 19, 2006, 73–87.

Mishra C.S., McConaughy D.L., Founding Family Control and Capital Structure: The Risk of Loss of Control and the Aversion to Debt, “Entrepreneurship Theory and Practice”, 23, 1999, 54–64.

Myers S.C., The Capital Structure Puzzle, “The Journal of Finance”, 39, 1984, 575–592.

Myers S.C., Majluf N.S., Corporate financing and investment decisions when firms have information that investors do not have, “Journal of Financial Economics”, 12, 1984, 187–221.

Palepu K.R., Healy P., Bernard V., Peek E., Business Analysis and Valuation, IFRS Edition, Thomson, London, 2007.

Pernsteiner H., Familienunternehmen und Finanzmanagement, in: B. Feldbauer-Durstmüller, H. Pernsteiner, R. Rohatschek, M. Tumpel (Eds.), Familienunternehmen, Linde, Wien, 2008, 53–79.

Pindado J., Requejo I., de la Torre C., Do Family Firms Use Dividend Policy as a Governance Mechanism? Evidence from the Euro zone, Corporate Governance, “An International Review”, 20, 2012, 413–431.

Poutziouris P.Z., The Views of Family Companies on Venture Capital: Empirical Evidence from the UK Small to Medium-Size Enterprising Economy, “Family Business Review”, 14, 2001, 277–291.

Poutziouris P.Z., The financial affairs of smaller family companies, in: D.E. Fletcher (Ed.), Understanding the Small Family Business, Routledge, London, 2002, 111–125.

Romano C.A., Tanewski G.A., Smyrnios K.X., Capital structure decision making: A model for family business, “Journal of Business Venturing”, 16, 2000, 285–310.

Salvato C., Predictors of Entrepreneurship in Family Firms, “The Journal of Private Equity”, 7 (3), 2004, 68–76.

Schmid T., Control considerations, creditor monitoring, and the capital structure of family firms, “Journal of Banking & Finance”, 37, 2013, 257–272.

Schmid T., Ampenberger M., Kaserer C., Achleitner A.-K., Controlling shareholders and payout policy: Do founding families have a special “taste for dividends”?, “Working Paper”, 2010.

Setia-Atmaja L., Tanewski G.A., Skully M., The Role of Dividends, Debt and Board Structure in the Governance of Family Controlled Firms, “Journal of Business Finance & Accounting”, 36, 2009, 863–898.

Shleifer A., Vishny R.-W., A Survey of Corporate Governance, “The Journal of Finance”, 52, 1997, 737–783.

Strebulaev I.A., Yang B., The mystery of zero-leverage firms, “Journal of Financial Economics”, 109, 2013, 1–23.

Villalonga B., Amit R., How do family ownership, control and management affect firm value?, “Journal of Financial Economics”, 80, 2006, 385–417.

Wei Z., Wu S., Li C., Chen W., Family control, institutional environment and cash dividend policy, “Evidence from China”, 4, 2011, 29–46.

Wu Z., Chua J.H., Chrisman J.J., Effects of family ownership and management on small business equity financing, 22, 2007, 875–895.

Yoshikawa T., Rasheed A.A., Family Control and Ownership Monitoring in Family-Controlled Firms in Japan, “Journal of Management Studies”, 47, 2010, 274–295.

Zellweger T.M., Risk, Return and Value in the Family Firm, Dissertation, University of St. Gallen, 2006.




DOI: http://dx.doi.org/10.17951/h.2013.47.4.95
Date of publication: 2015-07-23 22:45:59
Date of submission: 2015-07-23 20:00:51


Statistics


Total abstract view - 444
Downloads (from 2020-06-17) - PDF - 0

Indicators



Refbacks

  • There are currently no refbacks.


Copyright (c) 2015 Helmut Pernsteiner

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.