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Cash Holdings, Use of Debt and Dividend Structure of Family Firms

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  • Elena Smirnova
  • Sirousse Tabriztchi
  • Cary Lange

Abstract

In this study we examine the relation between firm’s financial structure and family ownership. We develop a theoretical model of the precautionary cash holdings. Our empirical results show that the fraction of a company’s shares that are held by the founding family members or their descendants influences the use of cash and equivalents, dividend policy and debt structure of a firm. Our results are robust to different estimation methods and alternative model specifications. We find that family firms tend to rely less on long-term debt financing, pay fewer dividends and carry higher precautionary cash balances.

Suggested Citation

  • Elena Smirnova & Sirousse Tabriztchi & Cary Lange, 2015. "Cash Holdings, Use of Debt and Dividend Structure of Family Firms," American Journal of Economics and Business Administration, Science Publications, vol. 7(1), pages 1-10, May.
    • Handle: RePEc:abk:jajeba:ajebasp.2015.1.10
    DOI: 10.3844/ajebasp.2015.1.10
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