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Capital Structure Determinants in Family Firms: An Empirical Analysis in Context of Crisis

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  • Stefania Migliori
  • Fabrizio Maturo
  • Francesco Paolone

Abstract

The purpose of this paper is to investigate the capital structure of family firms in a context of crisis. Specifically, it aims to discover whether and how the determinants of their capital structure have a different impact on firms’ leverage before and during the recent global financial crisis. Considering the pecking order theory (POT), trade-off theory (TOT), and agency theory (AT), this study analyzes 1,502 Italian medium family firms comparing the pre-crisis (2005-2007) and crisis (2008-2010) periods. This research shows that that current liquidity, asset structure, and agency costs are the most important variables in influencing medium family firms' leverage, in both the pre-crisis and crisis periods. Moreover, during the crisis, agency costs increase and have a negative influence on the short-term leverage highlighting that crisis contingencies influence the agency-based effects on family firm's leverage. Furthermore, our findings highlight that a more exhaustive understanding of family firms’ capital structure can be achieved through the combined use of different theories.

Suggested Citation

  • Stefania Migliori & Fabrizio Maturo & Francesco Paolone, 2018. "Capital Structure Determinants in Family Firms: An Empirical Analysis in Context of Crisis," International Business Research, Canadian Center of Science and Education, vol. 11(4), pages 65-83, April.
    • Handle: RePEc:ibn:ibrjnl:v:11:y:2018:i:4:p:65-83
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    2. Strike Mbulawa & Nathan F. Okurut & Mogale Ntsosa & Narain Sinha, 2020. "Optimal Capital Structure and Speed of Adjustment under Hyperinflation and Dollarization," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 12(2), pages 158-177, May.
    3. Nizar Dwaikat & Mohamed Imen Gallali & Mohammed Saadeh, 2021. "The Impact of Family Ownership on the Capital Structure of Palestinian Firms," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 32-52.
    4. Antonio D’Amato, 2020. "Capital structure, debt maturity, and financial crisis: empirical evidence from SMEs," Small Business Economics, Springer, vol. 55(4), pages 919-941, December.

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    More about this item

    Keywords

    agency costs; capital structure; family firms; financial crisis;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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