Title: Finance in family firms: generation does matter

Authors: Virginia Blanco-Mazagatos, Juan Manuel De la Fuente-Sabate, Esther De Quevedo-Puente

Addresses: Departamento de Economia y Administracion de Empresas, Area de Organizacion de Empresas, Facultad de CC.EE. y Empresariales, C/Parralillos s/n, 09001-Burgos, Spain. ' Departamento de Economia y Administracion de Empresas, Area de Organizacion de Empresas, Facultad de CC.EE. y Empresariales, C/Parralillos s/n, 09001-Burgos, Spain. ' Departamento de Economia y Administracion de Empresas, Area de Organizacion de Empresas, Facultad de CC.EE. y Empresariales, C/Parralillos s/n, 09001-Burgos, Spain

Abstract: This paper analyses the effect of the desire to perpetuate family control on the financial structure of family firms across generations. We test this effect in a sample where both family and non-family firms have the same level of ownership concentration. We verify that the desire for family control gives rise to financing preferences in line with the pecking order theory. Since the desire for family control persists across generations, these financing preferences remain the same. However, we find that generational transitions weaken family bonds, and thus reduce the family members| capacity for sacrifice, leading to variations in their weighting of the financing sources.

Keywords: generational transition; generational succession; ownership concentration; family control; financial structures; pecking order; generations; financing preferences; family bonds; family members; sacrifice; small and medium-sized enterprises; SMEs; entrepreneurs; entrepreneurship; family firms; corporate governance; succession issues.

DOI: 10.1504/IJESB.2010.035822

International Journal of Entrepreneurship and Small Business, 2010 Vol.11 No.3, pp.338 - 352

Published online: 05 Oct 2010 *

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