The financial structure of family businesses: an analysis based on the Pecking Order theory
DOI:
https://doi.org/10.59051/joaf.v7i2.71Keywords:
family business, pecking order theory, gapAbstract
This paper aims to analyze whether pecking order theory has a relevant application for family businesses. For this purpose, we compared two series of family and non-family unlisted firms in the French context. Our results indicate that generally the financial behavior of family businesses differs from non-family enterprises. Family business prefer internal financing to external financing and, in the case of external financing, debt is preferred to the capital increase. The Pecking order theory is more appropriate for family businesses than for non-family businesses.
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References
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Ampenberger, Markus, Thomas Schmid, Ann-Kristin Achleitner, and Christoph Kaserer. 2013. “Capital Structure Decisions in Family Firms: Empirical Evidence from a Bank-Based Economy.” Review of Managerial Science 7 (3): 247–275.
Anderson, Ronald C., and David M. Reeb. 2003. “Founding-Family Ownership and Firm Performance: Evidence from the S&P 500.” The Journal of Finance 58 (3): 1301–27. doi:10.1111/1540-6261.00567.
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McConaughy, Daniel L., Michael C. Walker, Glenn V. Henderson, and Chandra S. Mishra. 1998. “Founding Family Controlled Firms: Efficiency and Value.” Review of Financial Economics 7 (1): 1–19.
Modigliani, Franco, and Merton H. Miller. 1958. “The Cost of Capital, Corporation Finance and the Theory of Investment.” The American Economic Review 48 (3): 261–97.
———. 1963. “Corporate Income Taxes and the Cost of Capital: A Correction.” The American Economic Review, 433–443.
Myers, Stewart C., and Nicholas S. Majluf. 1984. “Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have.” Journal of Financial Economics 13 (2): 187–221. doi:10.1016/0304-405X(84)90023-0.
Rajan, Raghuram G., and Luigi Zingales. 1995. “What Do We Know about Capital Structure? Some Evidence from International Data.” The Journal of Finance 50 (5): 1421–1460.
Romano, Claudio A., George A. Tanewski, and Kosmas X. Smyrnios. 2001. “Capital Structure Decision Making: A Model for Family Business.” Journal of Business Venturing 16 (3): 285–310.
Schulze, William S., Michael H. Lubatkin, Richard N. Dino, and Ann K. Buchholtz. 2001. “Agency Relationships in Family Firms: Theory and Evidence.” Organization Science 12 (2): 99–116.
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Shyam-Sunder, Lakshmi, and Stewart C. Myers. 1999. “Testing Static Tradeoff against Pecking Order Models of Capital structure1.” Journal of Financial Economics 51 (2): 219–44. doi:10.1016/S0304-405X(98)00051-8.
Stiglitz, J. E. 2000. “The Contributions of the Economics of Information to Twentieth Century Economics.” The Quarterly Journal of Economics 115 (4): 1441–78. doi:10.1162/003355300555015.
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Ampenberger, Markus, Thomas Schmid, Ann-Kristin Achleitner, and Christoph Kaserer. 2013. “Capital Structure Decisions in Family Firms: Empirical Evidence from a Bank-Based Economy.” Review of Managerial Science 7 (3): 247–275.
Anderson, Ronald C., and David M. Reeb. 2003. “Founding-Family Ownership and Firm Performance: Evidence from the S&P 500.” The Journal of Finance 58 (3): 1301–27. doi:10.1111/1540-6261.00567.
Chibani-Ltaief, Faten, Jamel E Henchiri, and Jean-Guy Degos. 2016. “La Structure Financière Contrastée Des Entreprises Familiales Françaises : Une Approche Fondée Sur La Théorie Du Compromis.” La Revue Du Financier 38 (219): 30–50.
Daily, Catherine M., and Marc J. Dollinger. 1992. “An Empirical Examination of Ownership Structure in Family and Professionally Managed Firms.” Family Business Review 5 (2): 117–136.
Fama, Eugene F., and Kenneth R. French. 2002. “Testing Trade‐Off and Pecking Order Predictions About Dividends and Debt.” Review of Financial Studies 15 (1): 1–33. doi:10.1093/rfs/15.1.1.
Fama, Eugene F., and Michael C. Jensen. 1983. “Separation of Ownership and Control.” Journal of Law and Economics, 301–325.
Koropp, Christian, Dietmar Grichnik, and Franz Kellermanns. 2013. “Financial Attitudes in Family Firms: The Moderating Role of Family Commitment.” Journal of Small Business Management 51 (1): 114–137.
Leary, Mark T., and Michael R. Roberts. 2010. “The Pecking Order, Debt Capacity, and Information Asymmetry.” Journal of Financial Economics 95 (3): 332–55. doi:10.1016/j.jfineco.2009.10.009.
Mas-Colell, Andreu, Michael Dennis Whinston, Jerry R. Green, and others. 1995. Microeconomic Theory. Vol. 1. Oxford university press New York. http://www.hawkinqian.com/uploads/media/2014/09/Microeconomic_Theory.pdf.
McConaughy, Daniel L., Michael C. Walker, Glenn V. Henderson, and Chandra S. Mishra. 1998. “Founding Family Controlled Firms: Efficiency and Value.” Review of Financial Economics 7 (1): 1–19.
Modigliani, Franco, and Merton H. Miller. 1958. “The Cost of Capital, Corporation Finance and the Theory of Investment.” The American Economic Review 48 (3): 261–97.
———. 1963. “Corporate Income Taxes and the Cost of Capital: A Correction.” The American Economic Review, 433–443.
Myers, Stewart C., and Nicholas S. Majluf. 1984. “Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have.” Journal of Financial Economics 13 (2): 187–221. doi:10.1016/0304-405X(84)90023-0.
Rajan, Raghuram G., and Luigi Zingales. 1995. “What Do We Know about Capital Structure? Some Evidence from International Data.” The Journal of Finance 50 (5): 1421–1460.
Romano, Claudio A., George A. Tanewski, and Kosmas X. Smyrnios. 2001. “Capital Structure Decision Making: A Model for Family Business.” Journal of Business Venturing 16 (3): 285–310.
Schulze, William S., Michael H. Lubatkin, Richard N. Dino, and Ann K. Buchholtz. 2001. “Agency Relationships in Family Firms: Theory and Evidence.” Organization Science 12 (2): 99–116.
Seidler, John. 1974. “On Using Informants: A Technique for Collecting Quantitative Data and Controlling Measurement Error in Organization Analysis.” American Sociological Review, 816–831.
Serrasqueiro, Zélia, Paulo Maçãs Nunes, and Jacinto Vidigal da Silva. 2012. “Are Financing Decisions of Family-Owned SMEs Different? Empirical Evidence Using Panel Data.” Journal of Management & Organization 18 (03): 363–382. doi:10.1017/S1833367200000857.
Shyam-Sunder, Lakshmi, and Stewart C. Myers. 1999. “Testing Static Tradeoff against Pecking Order Models of Capital structure1.” Journal of Financial Economics 51 (2): 219–44. doi:10.1016/S0304-405X(98)00051-8.
Stiglitz, J. E. 2000. “The Contributions of the Economics of Information to Twentieth Century Economics.” The Quarterly Journal of Economics 115 (4): 1441–78. doi:10.1162/003355300555015.
Titman, Sheridan, and Roberto Wessels. 1988. “The Determinants of Capital Structure Choice.” The Journal of Finance 43 (1): 1–19.
Ward, John L. 2011. Keeping the Family Business Healthy: How to Plan for Continuing Growth, Profitability, and Family Leadership. Palgrave Macmillan. https://books.google.fr/books?hl=fr&lr=&id=uVnuBQAAQBAJ&oi=fnd&pg=PP1&dq=Ward+JL+(1987).+Keeping+the+family+business+healthy:+How+to+plan+for+continuing+growth,+profitability+and+family+leadership,+Jossey-+Bass,San+Francisco.&ots=F0qNCNtv0N&sig=aJKlV09ZH9f40kzelG0_sbC-H7c.
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Published
2016-11-17
How to Cite
CHIBANI LTAIEF, faten, & HENCHIRI, jamel E. (2016). The financial structure of family businesses: an analysis based on the Pecking Order theory. Journal of Academic Finance, 7(2), 84–97. https://doi.org/10.59051/joaf.v7i2.71
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