– This paper aims to examine the determinants of capital structure of unlisted firms and how family governance-related factors impact on them.
– The authors analyze the relation between a set of capital structure determinants and leverage in a unique dataset of 3,006 family and non-family Italian medium-large firms (26,210 obs.), and a control sample of 2,730 small firms (14,780 obs.), using cross-section and panel procedures during 2001-2010.
– Capital structure choices of medium-large family firms are linked to balance-sheet variables not used in previous studies, i.e. net working capital and capital turnover, and are significantly affected by the need to maintain control and influence, a relevant dimension of family socioemotional wealth. Family firms are more levered than non-family firms, but the difference is economically and statistically significant only for medium-large companies. The presence of the family in active management increases leverage, as the family endowment in the firm is higher.
– This research could be developed through an international comparison to check the influence of country-related regulatory issues and of national cultural aspects on family control and influence.
– The results can give public authorities important insights in order to facilitate firms funding specially in the current critical economic scenario and provide managers useful suggestions to support financial decisions.
– To the best of the authors' knowledge, this is the first paper to explore the financial choices of a large dataset of medium-large private firms in a bank-based economy.
