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Family firm governance and working capital management policy

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  • Hong, Liu
  • Jain, Bharat A.
  • Shao, Yingying

Abstract

Drawing from agency and behavioral theories, we evaluate whether and how family firm governance influences working capital management policy and its contribution to shareholder value. Our results indicate that family firms pursue a conservative working capital management policy to capitalize on the competitive benefits of balance sheet liquidity. Moreover, we find that the market value of working capital investment is higher for family firms. Product market competition, financing constraints and capital market access, however, moderate the relationship between family governance and the market value of net working capital investment. Taken together, our results suggest that, relative to non-family firms, family firms pursue value-enhancing working capital management policies.

Suggested Citation

  • Hong, Liu & Jain, Bharat A. & Shao, Yingying, 2024. "Family firm governance and working capital management policy," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    • Handle: RePEc:eee:finana:v:95:y:2024:i:pb:s1057521924004204
    DOI: 10.1016/j.irfa.2024.103488
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    More about this item

    Keywords

    Family firms; Working capital management; Valuation; Product market competition;
    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

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