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A good name is better than riches: Family firms and working capital management

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  • Sah, Nilesh B.
  • Banerjee, Anandi
  • Malm, James
  • Rahman, Anisur

Abstract

Several studies show that family firms avoid risky financial policies and value goals such as survival and reputation more than financial profits. Our study provides new evidence that extends the literature by showing that family firms exhibit conservative short-term investment policies by investing more in working capital. Notably, family firms hold more inventories and pay their suppliers promptly. The general notion that higher working capital investments debilitate profitability does not hold true for family firms. This paper is the first to explore the unique channel of working capital investments through which family firms may accomplish survival and reputation goals without hurting profitability.

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  • Sah, Nilesh B. & Banerjee, Anandi & Malm, James & Rahman, Anisur, 2022. "A good name is better than riches: Family firms and working capital management," Journal of Behavioral and Experimental Finance, Elsevier, vol. 33(C).
    • Handle: RePEc:eee:beexfi:v:33:y:2022:i:c:s221463502100143x
    DOI: 10.1016/j.jbef.2021.100599
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    More about this item

    Keywords

    Family firms; Working capital management; Financial performance;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G40 - Financial Economics - - Behavioral Finance - - - General

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