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Transparency and Financing Choices of Family Firms

Published online by Cambridge University Press:  27 May 2014

Tai-Yuan Chen
Affiliation:
acty@ust.hk, Department of Accounting, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong
Sudipto Dasgupta
Affiliation:
dasgupta@ust.hk, Department of Finance, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong
Yangxin Yu
Affiliation:
yangxin.yu@cityu.edu.hk, Department of Accountancy, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong.

Abstract

While recent literature documents that U.S. family firms differ markedly from their nonfamily counterparts, there is a paucity of evidence on how these firms differ in terms of their cost of capital or financial structure. In this paper, we show that family and nonfamily firms differ in their debt maturity and leverage ratios in a manner consistent with the higher expropriation potential of family firms. Moreover, while more transparency causes both family and nonfamily firms to increase the maturity structure of their debt and reduce leverage ratios, the effects are stronger for family firms.

Type
Research Articles
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2014 

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