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Are small family firms financially sophisticated?

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  • Di Giuli, Alberta
  • Caselli, Stefano
  • Gatti, Stefano

Abstract

We study the drivers of financial sophistication in small family firms. Sophistication is defined as the use of non-basic financial products such as options, swaps, debt restructuring, and mergers and acquisitions (M&A) advisory services. Our analysis is based on a unique dataset with detailed information on 187 Italian family firms. We find that the main drivers of financial sophistication are: (1) the generation that currently owns the firm; (2) the presence of a non-family CFO; and (3) the existence of a non-family shareholder. We analyze the impact of these factors on the following four classes of non-basic financial products: corporate finance, cash management, corporate lending and risk management. Our results can be used to determine the characteristics of financially sophisticated family firms and whether their corporate governance and ownership structure increase the use of non-basic financial products.

Suggested Citation

  • Di Giuli, Alberta & Caselli, Stefano & Gatti, Stefano, 2011. "Are small family firms financially sophisticated?," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 2931-2944, November.
  • Handle: RePEc:eee:jbfina:v:35:y:2011:i:11:p:2931-2944
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    References listed on IDEAS

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    Cited by:

    1. repec:mje:mjejnl:v:12:y:2017:i:2:p:129-140 is not listed on IDEAS
    2. Kamil Dobe? & Zuzana Virglerová, 2015. "An Analysis of SME's Attitudes to the Business Environment in the Czech Republic," Proceedings of International Academic Conferences 2805178, International Institute of Social and Economic Sciences.
    3. Jozef Habanik & Petr Novak & Jaroslav Belas & Eva Cipovova, 2014. "Actual Trends in Business Risks for Small and Medium Enterprises. Case Studies from the Czech Republic and Slovakia," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 159-181.
    4. repec:mje:mjejnl:v:13:y:2017:i:2:p:129-140 is not listed on IDEAS
    5. Jaroslav BELAS & Yuriy BILAN & Aleksandr Kljucnikov & Zuzana Vincurova & Jiri Machacek, 2015. "Actual Problems Of Business Risk In Sme Segment. Case Study From Slovakia," International Journal of Entrepreneurial Knowledge, VSP Ostrava, a. s., vol. 3(1), pages 46-56, June.
    6. Whitaker, Stephan, 2014. "Financial Innovations and Issuer Sophistication in Municipal Securities Markets," Working Paper 1404, Federal Reserve Bank of Cleveland.
    7. Jaroslav Belás & Yuriy Bilan & Valér Demjan & Juraj Sipko, 2015. "Entrepreneurship in SME Segment: Case Study from the Czech Republic and Slovakia," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 17(38), pages 308-308, February.
    8. Lutz, Eva & Schraml, Stephanie & Achleitner, Ann-Kristin, 2010. "Loss of control vs. risk reduction: decision factors for hiring non-family CFOs in family firms," CEFS Working Paper Series 2010-04, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).

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