Are financing decisions of family-owned SMEs different? Empirical evidence using panel data

Abstract

This paper analyses if ownership structure is an important determinant of capital structure decisions, on the basis of two sub-samples of family-owned and non-family owned SMEs, and using panel data models. The results suggest that family ownership is an important determinant for: i) the variations of short and long-term debt stimulated by the financial deficit; and ii) the speed of adjustment of short and long-term debt toward the respective target levels; and iii) the relationships between determinants and short-term debt and long-term debt. In general, the capital structure decisions of family-owned SMEs are closer to what is forecast by trade-off theory than those non-family owned SMEs, whereas the capital structure decisions of non-family owned SMEs are closer to forecast of pecking order theory than those family-owned SMEs.