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Financing constraints and growth of private family firms: Evidence from different legal origins

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  • Doucet, Pablo
  • Requejo, Ignacio

Abstract

We investigate whether family control informs the extent to which business growth depends on internal finance. Our results are based on a sample of private firms from two regions in which family ownership prevails: Western Europe and East Asia. The countries covered nonetheless differ from each other in their legal origin. We find that the growth of private family firms is less reliant on internal finance. The beneficial effect of family control is especially pronounced in countries where external lenders are more protected. Family control and a protective institutional environment therefore complement each other to facilitate business growth.

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  • Doucet, Pablo & Requejo, Ignacio, 2022. "Financing constraints and growth of private family firms: Evidence from different legal origins," Finance Research Letters, Elsevier, vol. 44(C).
    • Handle: RePEc:eee:finlet:v:44:y:2022:i:c:s154461232100115x
    DOI: 10.1016/j.frl.2021.102034
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    More about this item

    Keywords

    Business growth; Financing constraints; Family control; Institutional environment; Private firms;
    All these keywords.

    JEL classification:

    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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