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The Impact of Family Ownership on Capital Structure and Business Performance

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  • Lenka Stryckova

    (Department of Finance and Accounting, Faculty of Economics, Technical University of Liberec, 460 01 Liberec, Czech Republic)

Abstract

Financial decision making in family companies is a topical issue that has arisen from an awareness of the significant impact of family businesses on the economies of individual countries. This article deals with the capital structure and business performance of family firms in the Czech Republic, as there is still a significant gap in family business research and empirical verification. This study aims to investigate Czech family businesses’ corporate financing practices and compare them with population data from all active companies. The literature distinguishes between the positive and negative impacts of family ownership on capital structure and performance. Our empirical findings hypothesise that family businesses are more leveraged than non-family firms and vice versa. At the same time, a slightly positive impact from family influence on firm financial performance is indicated. This study uses descriptive statistics to detect family influence on corporate capital structure and financial performance regarding business sectors. The results of this study indicate that Czech family firms are less indebted than all/non-family businesses, and that they have proved to be more profitable in terms of ROEs and ROAs. Furthermore, significant differences in financial characteristics have been identified not just between individual business sectors but also between sample family firms and all/non-family firms within one business sector.

Suggested Citation

  • Lenka Stryckova, 2023. "The Impact of Family Ownership on Capital Structure and Business Performance," IJFS, MDPI, vol. 11(4), pages 1-17, October.
    • Handle: RePEc:gam:jijfss:v:11:y:2023:i:4:p:121-:d:1256993
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    References listed on IDEAS

    as
    1. Miguel Angel Acedo-Ramirez & Juan Carlos Ayala Calvo & Ernesto Navarrete-Martinez, 2017. "Determinants of Capital Structure: Family Businesses versus Non-Family Firms," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 67(2), pages 80-103, April.
    2. Antoniou, Antonios & Guney, Yilmaz & Paudyal, Krishna, 2008. "The Determinants of Capital Structure: Capital Market-Oriented versus Bank-Oriented Institutions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 43(1), pages 59-92, March.
    3. Romano, Claudio A. & Tanewski, George A. & Smyrnios, Kosmas X., 2001. "Capital structure decision making: A model for family business," Journal of Business Venturing, Elsevier, vol. 16(3), pages 285-310, May.
    4. Johann Burgstaller & Eva Wagner, 2015. "How do family ownership and founder management affect capital structure decisions and adjustment of SMEs?: Evidence from a bank-based economy," Journal of Risk Finance, Emerald Group Publishing, vol. 16(1), pages 73-101, January.
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