Family firms and access to credit. Is family ownership beneficial?

This paper investigates the effect of family ownership on credit rationing using a rich sample of Italian manufacturing firms. We find that family ownership increases the probability of credit rationing. Conflicts between large and minority shareholders, family firms’ lack of competencies and conservatism appear to be the main determinants of this result. By contrast, family owners’ long-termism, risk aversion, and relationship lending mitigate the adverse impact of family ownership on firms’ credit availability. Finally, we find that family businesses are more likely to be rationed in provinces with high level of social capital and judicial efficiency, suggesting that delegation problems are mitigated by personal relationships in areas where cooperation mechanisms are weaker.