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Financing Decisions in Family Businesses: A Review and Suggestions for Developing the Field

December 2017
Family Business Review 30(4):369-399

Authors:

Hasselt University

Motivated by the growing attention to the financing decisions of family firms, this review brings together the two highly relevant research fields of family business and finance. This study critically reviews 131 articles on financing decisions in family businesses, published between 1977 and 2016 in 64 finance and management journals. We develop a state of the art on family business financing literature and present a model to guide extant and future research by identifying gaps across the theoretical perspectives and across context-specific elements such as family business heterogeneity and country-specific factors.

Framework for organizing research on financing decisions in family businesses.

…

. Methodological Parameters.

…

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https://doi.org/10.1177/0894486517736958

Family Business Review

2017, Vol. 30(4) 369 –399

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Article

Introduction

In their seminal work, Modigliani and Miller (1958)

declared financing decisions to be irrelevant in a perfect

capital market. Discussing and challenging their basic

assumption of a perfect capital market, many researchers

have shown that, in the real world, financing decisions

matter (e.g., Fama, 1978; Myers, 1984; Myers & Majluf,

1984; Stiglitz, 1969, 1974). In family firms, these deci-

sions may be more relevant for both practical and theo-

retical reasons. Practically, the importance given to family

business financing decisions has been demonstrated

through EU policies that consider access to finance as one

of the main challenges of family firms (European

Commission, 2015a). Benavides-Velasco, Quintana-

García, and Guzmán-Parra (2013) along with Voordeckers,

Le Breton-Miller, and Miller (2014) have highlighted the

theoretical importance, showing that finance is not only

one of the top areas in family business research but also a

growing area. This attention, both practically and theo-

retically, is warranted, since the availability of sufficient

financial resources is of critical importance for the family

firm’s survival and growth (Koropp, Kellermanns,

Grichnik, & Stanley, 2014). Financing, for example, has

been linked to strategic decisions such as the timing of

succession (Kimhi, 1997), the sale of the family business

(Bhattacharya & Ravikumar, 2001), and the international-

ization of the family firm (Benito-Hernández, Priede-

Bergamini, and López-Cózar-Navarro, 2014). Overall,

the aforementioned makes clear the significance of this

topic for family firms and that more research is needed in

this direction.

An understanding of financing decisions is clearly of

great importance for family firms and scholars as this is

considered along with the “peculiar financial logic” that

characterizes family firms (Gallo, Tàpies, & Cappuyns,

2004). Specifically, a review of the literature shows that

several inconsistencies can be found and that various

factors complicate a thorough understanding of family

business financing decisions. Therefore, our aim in this

article is to analyze and systematize prior work on

736958FBRXXX10.1177/0894486517736958Family Business ReviewMichiels and Molly

research-article2017

1Universiteit Hasselt, Research Centre for Entrepreneurship and

Family firms, Diepenbeek, Belgium

2KU Leuven, Brussels, Belgium

3Antwerp Management School, Antwerp, Belgium

The authors contributed equally to this article and are listed

alphabetically.

Corresponding Author:

Vincent Molly, Faculty of Economics & Business, KU Leuven,

Warmoesberg 26, 1000 Brussels, Belgium.

Email: vincent.molly@kuleuven.be

Financing Decisions in Family

Businesses: A Review and Suggestions

for Developing the Field

Anneleen Michiels1 and Vincent Molly2,3

Abstract

Motivated by the growing attention to the financing decisions of family firms, this review brings together the two

highly relevant research fields of family business and finance. This study critically reviews 131 articles on financing

decisions in family businesses, published between 1977 and 2016 in 64 finance and management journals. We

develop a state of the art on family business financing literature and present a model to guide extant and future

research by identifying gaps across the theoretical perspectives and across context-specific elements such as family

business heterogeneity and country-specific factors.

Keywords

family business, literature review, financing decisions

370 Family Business Review 30(4)

financing decisions in family firms, which will help

identify (theoretical) shortcomings and present a frame-

work for organizing (future) research in this field. We

focus in this review on articles dealing with “all” types

of family businesses, meaning that they can be charac-

terized by family involvement in various ways, and can

be private or public firms, small or large firms. Given

the dispersed nature of the family business financing lit-

erature and the gap that still exists between the family

business and finance field of research, we believe a thor-

ough review can bring a large contribution to both disci-

plines and will form a good basis to elaborate future

studies on finance in family businesses.

To the best of our knowledge, this is the first study

that gives a state of the art on family business financing

literature. Based on a comprehensive literature review,

we synthesize existing evidence on financing decisions

in family businesses and present a framework for orga-

nizing and better understanding extant and future

research on financing decisions in family firms. It struc-

tures current theoretical thinking and sets a research

agenda for the future, containing several suggestions on

theoretical integration, sampling, and study design. This

way, we articulate and spotlight areas where family

business scholars may most fruitfully direct their atten-

tion, which will in turn advance our knowledge of

financing decisions in family businesses.

Method and Sample

Review Method

In this article, we follow the systematic review method

of David and Han (2004), which is explicit in its selec-

tion of studies and employs quantitative methods of

evaluation. First, we searched for journal articles pub-

lished in peer-reviewed journals until December 31,

2016, written in English language, thereby excluding

book chapters or unpublished work. Second, we ori-

ented our search toward the following two databases,

which cover major journals in the area of finance and

business/management: Business Source Premier and

Academic Search Elite. Third, to find relevant articles,

we looked for the combination of a finance entity and a

family business entity in the title and/or the abstract

(Pukall & Calabrò, 2014; Salvato & Moores, 2010).

With respect to the latter, we focus on articles dealing

with companies that are characterized by family involve-

ment in various ways. This is also visible from the

choice of our search keywords being used in the search

engine: ((financ*) OR (debt) OR (equity) OR (stock) OR

(capital) OR (leverag*) OR (IPO) OR (bank*) OR

(investor*) OR (dividend*) OR (borrow*) OR (lend*)

OR (loan*) OR (credit) OR (collateral)) AND ((“family

firm*”) OR (“family business*”) OR (“family enter-

prise*”) OR (“family influenc*”) OR (“family con-

trol*”) OR (“family owner*”) OR (“family manag*”)

OR (family govern*) OR (“founding family”)).

An article had to provide conceptual advancements

in the understanding of financing decisions in family

firms or empirically test propositions regarding financ-

ing decisions within a family business context.

Therefore, in a fourth step, the relevance was checked

by reading all the abstracts. The remaining articles were

read completely to ensure substantive relevance for this

study. Finally, to ensure that no relevant article was

missed, additionally the major outlets for family busi-

ness research were scanned individually. They were

selected from previous literature reviews in the field

(Kontinen & Ojala, 2010; Pukall & Calabrò, 2014;

Siebels & zu Knyphausen-Aufseß, 2012; Zahra &

Sharma, 2004). We manually checked the indexes of

Family Business Review, Journal of Business Venturing,

Entrepreneurship: Theory and Practice, and Journal of

Small Business Management. Additionally, we checked

for studies in Journal of Family Business Strategy,

which first appeared in 2010. Using the method and cri-

teria described, a total of 868 articles were identified and

evaluated with 131 articles retained for review.

In a next phase, both authors independently screened

the articles following a predefined coding scheme. In

case of disagreement, a third family business scholar

was asked to code the concerning article, after which a

common understanding was reached. The following

aspects were considered as important in analyzing the

content of the articles: (a) focal topic area, (b) theoreti-

cal approaches (theories used, family business definition

used), (c) methods (country of research, sample size,

data source, period of research, quantitative or qualita-

tive, analytical approach, temporal dimension, public or

private or both, family versus nonfamily or within fam-

ily), (d) main findings, and (e) journal in which the arti-

cle was published.

The review of these 131 articles was supplemented

with data collected from an expert panel, consisting of

prominent scholars in the family business field. The use

of an expert panel can be considered as a qualitative way

to explore and identify key themes in the literature and

Michiels and Molly 371

thus to provide additional insights (Jones & Gatrell,

2014). Additionally, this approach allows us to integrate

the most recent thoughts on family business financing,

and thus reduces the potential limitation of publication

time lag in some scholarly journals. We e-mailed all

associate editors of the two SSCI-ranked family busi-

ness journals (Family Business Review and Journal of

Family Business Strategy), together with some promi-

nent family business and/or finance scholars. In total,

nine scholars cooperated and provided us with valuable

additional insights. We provided them with three ques-

tions on promising research topics, promising theoreti-

cal frameworks, and other suggestions on finance for

family business scholars. We first interpreted the

answers to these questions for each scholar individually,

followed by a comparison of the insights from all the

scholars to find the most relevant suggestions.

General Sample Characteristics

The articles on financing decisions in family firms

accepted for the analysis are published in a wide variety

of management/business, finance, and economics jour-

nals, and they have taken a rapid growth after the year

2000, especially in the management/business and the

finance fields. Appendix A contains a detailed descrip-

tion of the distribution of the sample across journals and

their impact factors.

Our review further indicates that most studies on

financing decisions in family firms are based on

European data, followed by Asia and North America,

while analyses on South American, African, or

Australian samples are rare. Eighty-one percent of the

studies focus on one single country, while in 19% of the

articles, data on multiple countries are included. Table 1

gives an overview of the most important methodological

parameters of the selected articles.

The majority of studies applied regression tech-

niques, followed by categorical dependent variable anal-

yses (logit, probit, tobit). The data mainly come from

(public) databases, and in only 21 out of 131 articles are

analyses based on survey information. Qualitative stud-

ies based on interviews or case studies are quite excep-

tional. Most of the studies are oriented toward public

family firms. The dominance of samples of public fam-

ily firms might be explained by the widespread reliance

on commercial databases and other secondary data

sources. About 70% of the articles includes the criteria

on how to identify family firms, meaning that almost

one out of three studies lacks a clear family business

definition. Finally, two thirds of the studies in our sam-

ple makes the traditional comparison between family

and nonfamily businesses without taking into account

family business heterogeneity. When further examining

this subsample of articles, we find no differences with

regard to type of journal or date of publishing. Yet arti-

cles that ignore family business heterogeneity use public

databases more often as compared with the full sample

of articles and make less use of survey data. Thus,

although numerous scholars have stressed the impor-

tance to acknowledge the heterogeneity of family busi-

nesses, data limitations might be one explanation as to

why the minority of financing studies actually takes this

heterogeneity into account.

More than 40% of the articles in our sample discuss

issues concerning debt decisions (e.g., leverage, debt

maturity, or target debt rate). Decisions regarding equity

(e.g., buyouts, private equity, venture capital, or initial

public offerings [IPOs]) are discussed in 34% of the

articles. Decisions related to retained earnings (e.g.,

dividend payout) are examined in 22% of the articles.

Finally, other alternative financing decisions such as

leasing, factoring, or crowdfunding, are discussed in

about 2% of the articles.

When looking at the applied theoretical framework,

we see a clear dominance of agency theory. In about half

of the articles agency theoretical arguments are used for

developing the hypotheses and explaining the results.

Pecking order theory and the socioemotional wealth

(SEW) perspective close the ranks in the top three of

most frequently used theories. It is also remarkable that

in almost one out of five articles, no theoretical argu-

ments are specified. When further investigating the

characteristics of the articles that are not using a clear

theoretical framework, we find that they are published in

finance journals more often than in our full sample of

articles. Articles without a theoretical framework are

also generally older than studies that have a (partial)

theoretical foundation.

Where Are We Now?

Theoretical Foundations

Our survey of the literature on financing decisions in

family firms shows that several traditional capital struc-

ture theories have been used. As described by Titman and

Wessels (1988), Harris and Raviv (1991), Fama and

372

Table 1. Methodological Parameters.

Data source Sample size Temporal dimension Analytical approach Public versus private FB definition FB/NFB versus within FB

Databases 98 (73%) <100 19 (16%) Cross-sectional 57 (48%) Regression 81 (60%) Public firms 68 (53%) Yes 89 (70%) FB versus NFB 79 (65%)

Mailed/delivered

survey

21 (16%) 100-400 44 (38%) Longitudinal 62 (52%) Logit/probit/tobit 29 (21%) Private firms 36 (28%) No 38 (30%) Within FB 33 (27%)

Interviews 4 (3%) 400-1,000 25 (21%) Theoretical 4 (3%) Both 7 (5%) Both 10 (8%)

Case studies 5 (4%) >1,000 29 (25%) Descriptive

statistics

8 (6%) Not specified 17 (13%)

No data 7 (5%) Qualitative 7 (5%)

SEM 2 (1%)

CFA 1 (1%)

Matched pairs 2 (1%)

Difference-in-

differences

2 (1%)

Note. FB = family business; NFB = nonfamily business; SEM = structural equation modeling; CFA = confirmatory factor analysis. As some articles use multiple data sources or analytical approaches, theories,

the number of articles in this table does not add up to the total sample size of 131.

Michiels and Molly 373

French (2002), and Frank and Goyal (2003), most capital

structure theories start from the trade-off or pecking

order approach, both of which are inspired by agency

theory (Jensen & Meckling, 1976). Agency theory points

to the information asymmetries and conflicts of interests

between shareholders and bondholders, between share-

holders and managers (principal–agent), and among

shareholders (principal–principal). Trade-off theory

(Modigliani & Miller, 1958; Myers, 1989) focuses on

costs resulting from information asymmetries between

shareholders and bondholders and on benefits such as a

reduction of the free cash flow agency costs (principal–

agent) resulting from the use of debt. Next to that, poten-

tial bankruptcy costs and deductibility of interest

payments are considered to trade-off the costs and bene-

fits related to debt financing to determine the optimal

capital structure in a company. An alternative capital

structure theory, known as the pecking order model, has

been developed by Myers (1984). This model is based on

information asymmetries between the firm and the capi-

tal supplier. As transaction costs arise for each new issue

of securities or debt, firms will prefer to finance their

investments first with retained earnings, then with debt,

and finally with equity. In this way, the financing choice

is driven by the firm’s desire to minimize information

asymmetry costs in raising external finance.

In addition to these traditional theoretical frame-

works that mainly focus on the optimization of the firm’s

capital structure to maximize firm value, the literature

gives evidence of nontraditional approaches to financ-

ing decisions in family firms. For example, Barton and

Matthews (1989), Hutchinson (1995), and Romano,

Tanewski, and Smyrnios (2001) take into account

owner/manager preferences for understanding the capi-

tal structure of these firms. They point to the importance

of control retention, risk aversion, and nonfinancial val-

ues and goals in the owners’/managers’ financial deci-

sion making. This usually results in a higher preference

for internally generated funds rather than external

sources, or debt financing rather than external equity

funding. Recently, these approaches and arguments have

been linked to theoretical frameworks such as the stew-

ardship theory (Davis, Schoorman, & Donaldson, 1997),

the SEW perspective (Gómez-Mejía, Haynes, Núñez-

Nickel, Jacobson, & Moyano-Fuentes, 2007), and the

theory of planned behavior (Ajzen, 1991). Stewardship

theory starts from the idea that individuals in a company

are not predominantly self-serving but that their motives

support those of the company and go beyond purely

economic goals (Zahra, Hayton, Neubaum, Dibrell, &

Craig, 2008). As opposed to agency theory, which

focuses on extrinsic motivation of individuals serving

themselves, stewardship theory stresses their intrinsic

motivation. The SEW perspective is rooted within the

behavioral agency model (Wiseman & Gomez-Mejia,

1998) and refers to the firm’s nonfinancial aspects that

meet the family’s affective needs, such as identity, exer-

cising family influence, and perpetuating the family

dynasty (Gómez-Mejía et al., 2007). According to this

perspective, family firms are expected to pay significant

attention to maintaining family control and are loss

averse when their SEW is threatened. Finally, the theory

of planned behavior considers the family’s attitudes and

values, preferences and norms, and behavioral control as

determining factors of behavioral intentions, which

eventually influence behavioral decisions and choices

(Koropp et al., 2014).

What Do We Know About Financing

Decisions in Family Firms?

In this section, we discuss family business financing

studies in detail, by categorizing them into three groups,

based on the source of financing they deal with.

Debt. When family businesses consider using external

sources of financing, leverage remains by far the most

preferred funding option for family firms (Burgstaller &

Wagner, 2015; Croci, Doukas, & Gonenc, 2011; Koropp,

Grichnik, & Kellermanns, 2013; Poutziouris, 2001;

Romano et al., 2001). As indicated by Blanco-Mazaga-

tos, Quevedo-Puente, and Castrillo (2007), research

findings give evidence of a pecking order in financing

family firms, where debt instead of new equity is pre-

ferred when additional external financing is sought.

However, other studies find evidence of a negative effect

of family ownership on the use of debt financing in both

private (Gallo & Vilaseca, 1996) and public (Mishra &

McConaughy, 1999) family firms. This negative relation

is explained by the dominance of control risk motiva-

tions, the fear of bankruptcy costs, and the bank’s credit

underwriting policy, which concentrates on owners’

wealth instead of the repayment capability of the family

firm (Gallo & Vilaseca, 1996; Mishra & McConaughy,

1999). An interesting phenomenon that has further been

linked to the lower leverage in many family businesses

concerns the zero-leverage company, which tends to

occur more often in family than in nonfamily firms,

374 Family Business Review 30(4)

explained by a stronger aversion in family firms to the

risks linked to financial distress (Strebulaev & Yang,

2013). Finally, studies of Coleman and Carsky (1999)

and Bjuggren, Duggal, and Giang (2012), both focusing

on privately held firms, contradict the aforementioned

findings, as they were not able to find significant differ-

ences in the level of debt used by family versus nonfam-

ily firms.

This overview shows that the literature still remains

inconclusive on the level of debt used in family firms.

This is no surprise, since, according to González,

Guzmán, Pomp, and Trujillo (2013), Schmid (2013),

and Burgstaller and Wagner (2015), a trade-off needs to

be made in family firms between retention of control,

which favors the use of debt financing over external

equity, and risk aversion, which stimulates the company

to adopt more cautious attitudes toward debt. These non-

traditional, behavioral aspects illustrate the complexity

of the leverage decision in family firms. Another factor

that further complicates the debt choice analysis con-

cerns the wide array of leverage alternatives. Although

most studies focus on the total debt rate, the work of

Chaganti and Damanpour (1991), Al-Ajmi, Abo

Hussain, and Al-Saleh (2009), Mishra and McConaughy

(1999), Shyu and Lee (2009), Croci et al. (2011),

Poutziouris (2011), and Segura and Formigoni (2014)

considers the distinction between short- and long-term

debt financing, where findings are mainly explained

through agency, pecking order, and trade-off theories.

Since information asymmetry and transaction costs dif-

fer according to the debt maturity structure, this compli-

cates the comparison between studies and the search for

consistent results.

Furthermore, most studies in our literature review

focus on the comparison between family and nonfamily

businesses. In almost two out of three studies that were

reviewed, a comparison is explicitly made between

these two types of organization. The heterogeneity

among family businesses is therefore often neglected.

However, the differences within the group of family

firms may potentially be even larger than the differences

between family and nonfamily firms (Chua, Chrisman,

Steier, & Rau, 2012), and researchers have therefore

called to focus on the heterogeneous nature of family

businesses (Chua et al., 2012; Nordqvist, Sharma, &

Chirico, 2014). Some studies on capital structure do take

this into consideration by integrating the family’s role in

management (Schmid, 2013), the difference between

owner-managed and non–owner-managed companies

(Batten & Hettihewa, 1999), or the presence of indepen-

dent outside directors in the governance of the firm

(Napoli, 2012). It is clear that these differences in the

management, ownership, and governance structure can

influence the relationship and information asymmetries

between shareholders and bondholders. Other authors

consider family ownership by focusing on the distinc-

tion between cash-flow and control rights, and the pres-

ence of principal–principal agency problems, and how

this influences the family firm’s leverage (King &

Santor, 2008; Shyu & Lee, 2009). Also, Bjuggren et al.

(2012) focus on ownership and find evidence of a

U-shaped relation between ownership dispersion and

debt in private family businesses, which confirms the

earlier work on private family firms of Schulze,

Lubatkin, and Dino (2003). Schulze et al. (2003) found

evidence that the risk attitude of private family firms

changes due to the ownership dispersion in family busi-

nesses. Especially sibling partnerships were found to

use less debt, and thus willing to bear less risk, com-

pared with controlling owners and cousin consortiums,

since they are characterized by increased levels of loss

aversion and misalignment among family members.

A number of authors further stress the importance of

the generational effect on a family firm’s capital struc-

ture. While most of these studies exclusively focus on

privately held firms (Blanco-Mazagatos et al., 2007;

Burgstaller & Wagner, 2015; Koropp, Grichnik, &

Gygax, 2013; Molly, Laveren, & Deloof, 2010; Molly,

Laveren, & Jorissen, 2012), others include both public

and private firms in their sample (Amore, Minichilli, &

Corbetta, 2011; González et al., 2013). Findings indicate

that family generation negatively affects debt financing

(Molly et al., 2010; Molly et al., 2012), while Blanco-

Mazagatos et al. (2007) and González et al. (2013) come

to the opposite conclusion. Burgstaller and Wagner

(2015) were not able to confirm a generational effect on

the use of debt in the family firm. Finally, Koropp,

Grichnik, and Gygax (2013) and Amore et al. (2011)

investigate the impact of succession on the firm’s financ-

ing policies, where the latter study, for example, finds

that nonfamily CEOs stimulate the use of leverage. It is

also important to stress that inconsistent findings can

partly result from the focus in different studies either on

behavioral aspects (retention of control and risk aver-

sion), or on agency theoretical aspects (free cash flow

problems and shareholder–bondholder agency prob-

lems), or on both. In addition, some studies only indi-

rectly measure a generation effect through the firm’s

Michiels and Molly 375

age, or only make a comparison between founders and

descendants without discerning between first-, second-

or later-generation family firms.

Where most of the studies on debt policy in family

businesses take into account the demand side of financ-

ing, other studies mainly focus on the banks’ point of

view and the applied debt conditions toward family

businesses (supply side). Overall, these studies find that

banks generally have a positive feeling toward family

businesses, reducing potential shareholder–bondholder

agency problems. They are considered to be better bor-

rowers with less moral hazard problems (Bopaiah,

1998). This higher trust of banks in family firms results

in easier access to credit in general (Bopaiah, 1998), and

more long-term debt in particular (Croci et al., 2011). In

addition, the easier access to debt financing enables

family firms to adjust faster toward their target leverage

(Pindado, Requejo, & la Torre, 2015). With respect to

this, Song and Wang (2013) focus on the importance of

the relational strength between the family firm and the

financial institution in order to lower information asym-

metries. Chua, Chrisman, Kellermans, and Wu (2011)

even bring forward the relevance of borrowing social

capital (relying on relationships to get access to

resources) available in the family to improve access to

bank financing in new family ventures. Other findings

indicate that several aspects, such as the presence of

pyramid structures (Masulis, Pham, & Zein, 2011) lower

the financing constraints imposed by banks on family

firms. Finally, Chen, Ding, Wu, and Yang (2016) find

that family firms benefit less from the adoption of

International Accounting Standards than nonfamily

firms in terms of access to foreign banks.

When turning to the cost of debt financing, Anderson,

Mansi, and Reeb (2003) also focus on the owner–debt-

holder agency problem to analyze debt financing in pub-

licly listed U.S. family firms. They find evidence that

the cost of debt is lower in firms with family ownership,

external CEOs, or family CEOs who belong to the

founding generation. Also, Boubakri and Ghouma

(2010) focus on the information asymmetries between

shareholders and bondholders in public firms, but they

come to an opposite conclusion in their European and

Asian samples. Because bondholders fear the expropria-

tion by controlling shareholders, family control is found

to increase the cost of debt funding. Similarly, Tanaka

(2014) finds that bondholders of listed Japanese firms

are concerned about family agency conflicts, with an

increasing effect on the cost of public debt as a result.

The findings of Yen, Lin, Chen, and Huang (2015) can

be linked to these previous studies, as they conclude that

public family firms enjoy more favorable loan contracts

than nonfamily firms, but that this positive effect dimin-

ishes when they are more likely to expropriate external

investors. Finally, Waisman (2013) further examines the

effect of family ownership and the takeover friendliness

of a country, on the pricing of loans in U.S. listed firms.

A limited number of studies deepen the understand-

ing of the shareholder–bondholder agency relationship

by taking collateral or guarantees into consideration.

Bagnoli, Liu, and Watts (2011) find that listed family

firms use financial covenants more intensively than non-

family firms. Steijvers and Voordeckers (2009) and

Steijvers, Voordeckers, and Vanhoof (2010) further

point to the use of personal collateral to reduce agency

problems in private family firms. Similarly, Voordeckers

and Steijvers (2006) present several determinants of col-

lateral protection such as bank competition, the use of

credit, the length of the relationship between the bank

and the borrower, next to various other factors. In line

with these studies, Schmid (2013) finds evidence that

the level of debt used in family firms depends on the

level of credit monitoring and is different whether they

are located in bank-based versus other economies.

Finally, a number of studies focus on alternative

forms of debt financing. Di Giuli, Caselli, and Gatti

(2011), Fitó, Moya, and Orgaz (2013), and Landry,

Fortin, and Callimaci (2013) stress to investigate also

other financial instruments used by small- and medium-

sized enterprises (SMEs) such as leasing or factoring.

Evidence is found that family firms are less eager to use

leasing (Landry et al., 2013) and that the level of finan-

cial sophistication (making use of nonbasic financial

products such as leasing) increases over generations and

when the family firm is characterized by an external

CFO or external shareholder (Di Giuli et al., 2011).

Other studies point to the intertwinement of household

and business financing (Haynes, Walker, Rowe, &

Hong, 1999; Muske et al., 2009; Yilmazer & Schrank,

2006) or investigate the use of informal financing com-

ing from friends and family of the owner-manager

(Coleman & Carsky, 1999). The studies indicate that

family firms do not significantly differ from nonfamily

firms in their use of informal sources of financing (such

as loans from family and friends) or financial intermin-

gling (Coleman & Carsky, 1999; Yilmazer & Schrank,

2006) and that the level of intermingling can be linked to

the fact whether the business is incorporated or a sole

376 Family Business Review 30(4)

proprietorship (Haynes et al., 1999), or whether the fam-

ily business is operated by copreneurs (Muske et al.,

2009). Finally, Lappalainen and Niskanen (2013) and

Psillaki and Eleftheriou (2015) specifically focus on

trade credit, a type of nonfinancial leverage, which is

extensively used in many privately held family firms in

practice as well. Lappalainen and Niskanen (2013) focus

on the use and attitude toward trade credit in family and

nonfamily SMEs, while Psillaki and Eleftheriou (2015)

rather investigate the relation and complementarity

between bank borrowing and trade credit.

External Equity. Another stream of research focuses on

the use of external equity. On the one hand, several stud-

ies indicate that family involvement appears to result in

lower use of external equity (Wu, Chua, & Chrisman,

2007; Poutziouris, 2011), both based on samples consist-

ing of private as well as public firms. Usually, the dis-

tance between family firms and outside investors is quite

large, mainly due to the so-called empathy gap between

owners and investors (Poutziouris, 2011) or because of

the generally preferred retention of control rather than

the firm’s growth and development (Wu et al., 2007). On

the other hand, contrary to the pecking order perspective,

King and Peng (2013) find that in industries character-

ized by cyclicality, capital intensity, and growth, large

listed family firms rely on equity financing before debt

financing to fund their expansion, mainly because of a

strong aversion linked to financial distress.

When further analyzing the literature on external

equity in family firms, a number of studies focus on the

use of private equity and venture capital. These sources

may be more preferred than generally thought because

of the opportunities it offers to fund the family firm tran-

sition (Upton & Petty, 2000), or because of the nonfi-

nancial benefits that such investors can bring to the

family such as managerial support, expertise, and con-

tacts (Martí, Menéndez-Requejo, & Rottke, 2013;

Tappeiner, Howorth, Achleitner, & Schraml, 2012).

Other studies investigate the impact of private equity

investors on the long-term performance (Desbrières &

Schatt, 2002; Viviani, Giorgino, & Steri, 2008), the gov-

ernance structure, its benefits, and costs (Achleitner,

Herman, Lerner, & Lutz, 2010), and the strategy

(Scholes, Wright, Westhead, Bruining, & Kloeckner,

2009) of the family business. Evidence is found that the

participation of private equity reduces performance in

the years after an IPO (Viviani et al., 2008) or after a

leveraged buyout (Desbrières & Schatt, 2002). With

regard to strategy, Scholes et al. (2009) come to the con-

clusion that private equity–backed buyouts strongly

affect the strategy of family firms, but that this impact

varies according to the presence of the founder, the pres-

ence of managers with equity stakes, the involvement of

nonexecutive directors, and the involvement in succes-

sion planning. Finally, while most studies take the per-

spective of the family business (demand side), a number

of recent studies focus on the perceptions of private

equity investors (Dawson, 2011) or institutional inves-

tors (Fernando, Schneible, & Suh, 2014) toward family

businesses (supply-side). Dawson (2011) finds that pri-

vate equity investors take into account human resources,

the level of professionalization, and the opportunity to

reduce agency costs when selecting family firms.

Fernando et al. (2014) bring forward that institutional

investors avoid to invest in family firms because of

increased Type 2 agency problems compared with non-

family firms.

Firms can also acquire equity financing through an

IPO. Our sample contains several articles on this topic,

all published after the year 2000. While this is an impor-

tant event for all kinds of firms, it especially is for family

businesses. After all, a change in ownership structure by

going public implies a significant change in the gover-

nance of family businesses, because it is often the first

time that outside shareholders come into play (Ehrhardt

& Nowak, 2003). The most important financial reason

for family businesses to go public is the need to raise

higher funds to finance growth or to rebalance the debt–

equity level (Mazzola & Marchisio, 2002). Research on

the IPO process can be divided into three categories: the

pre-IPO process, the IPO itself (first trading day), and the

post-IPO process. As the aim of this article is to review

studies on the financing decision in family firms, we only

examine studies on the pre-IPO process and the IPO

itself, and not the performance after an IPO (post-IPO).

The first stream of research indicates that outside

expertise in the pre-IPO process appears to be advanta-

geous for family-controlled firms. Family firms may thus

benefit from associations with venture capitalists

(Astrachan & McConaughy, 2001) and with prestigious

investment banking firms (Walker, 2008) as this lowers

the information asymmetries between the issuer and the

investors. The second stream of research investigates the

IPO itself, and more in particular the relation between the

closing price and the offer price (IPO over- or underpric-

ing). Family firms are found to have 10 percentage points

more IPO underpricing than nonfamily firms (Leitterstorf

Michiels and Molly 377

& Rau, 2014). A number of studies have further investi-

gated this phenomenon of family business IPO underpric-

ing. IPO underpricing is found to be positively related to

family ownership (Lin & Chuang, 2011), generational

stage (Yu & Zheng, 2012), participation of family mem-

bers at the board level (Hearn, 2011), and the willingness

to preserve their SEW (Leitterstorf & Rau, 2014). IPO

underpricing is found to be negatively related to the ratio

of nonfamily directors (Ding & Pukthuanthong-Le,

2009), to wider dispersion of family ownership (Hearn,

2011), and to associations with prestigious investment

banking firms (Walker, 2008). These findings indicate

that family firms tend to use IPO underpricing as a way of

retaining control of the family firm. Alternatively, family

firms’ IPO underpricing might be a sign of risk aversion,

as IPO underpricing reduces the risk of lawsuits (Ibbotson,

1975) and the risk of a failed IPO (Welch, 1992). Recently,

Cirillo, Romano, and Ardovino (2015) find that family

firms positively influence IPO value, although the authors

measure IPO value differently by separately considering

offering and closing price, and by including accounting-

based information.

Other empirical studies investigate differences

between family and nonfamily firms for several stock

exchange–related phenomena, by focusing mainly on

the presence of principal–principal information asym-

metries and the importance of retention of control. For

instance, family controlled firms are found to have

higher voting premiums (Caprio & Croci, 2008), have

increased liquidity when double voting rights are used

(Ginglinger & Hamon, 2012), and have a higher price of

vote in unifications (Hauser & Lauterbach, 2004) than

nonfamily firms. In addition, a number of studies focus

on the cost of equity capital in listed family firms in rela-

tion to various other topics, for example, to the Asian

financial crisis (Boubakri, Guedhami, & Mishra, 2010),

to corporate social responsibility practices in listed

Taiwanese firms (Wu, Lin, & Wu, 2014), or to corporate

governance attributes (D. H. Tran, 2014). Finally, the

recent study by Jain and Shao (2015) investigates the

financial policy choices following an IPO and find that

family firms have a higher leverage, prefer a longer debt

maturity structure, and raise less external capital post-

IPO compared with nonfamily firms.

Retained Earnings Versus Dividends. Pecking order theory

states that firms prefer to finance new investments first

internally, through retained earnings (Myers, 1984). All

earnings that are retained in the firm, however, cannot

be distributed as dividends. This has led researchers to

examine this trade-off (retained earnings vs. dividend

payouts) that family businesses are facing when decid-

ing on how to allocate their earnings. The majority of the

articles study dividend policy in the context of publicly

held firms, and about half of the dividend articles in our

literature review focus on firms in Asia, where many

economies are characterized by considerable family

ownership of listed corporations (Chen, Cheung, Sto-

uraitis, & Wong, 2005). The studies in our sample inves-

tigate one (or more) of the following aspects of dividend

policy: propensity to pay dividends, dividend payout

level, or dividend smoothing.

Regarding the propensity to pay dividends, research-

ers found family firms to be less likely to pay dividends

than nonfamily firms because of their stronger focus on

the firm’s long-term orientation (Lace, Bistrova, &

Kozlovskis, 2013). Within the group of family firms,

SMEs (How, Verhoeven, & Wu, 2008) and private fam-

ily firms with passive family shareholders (Michiels,

Voordeckers, Lybaert, & Steijvers, 2015) are more likely

to pay dividends than other family firms, mainly

explained by information asymmetries between major-

ity and minority shareholders.

A large group of studies on the topic of dividend pol-

icy particularly examines the level of dividend payout.

Most researchers agree that family firms have higher

dividend payout levels than nonfamily firms (Carney &

Gedajlovic, 2002; Chen et al., 2005; Huang, Chen, &

Kao, 2012; Pindado, Requejo, & la Torre, 2012; Setia-

Atmaja, Tanewski, & Skully, 2009; Yoshikawa &

Rasheed, 2010). These studies thus find support for the

expropriation hypothesis, according to which paying

dividends is a mechanism that can be used to align the

interests of controlling family and minority shareholders

(Faccio, Lang, & Young, 2001; Setia-Atmaja et al.,

2009). Thus, the higher dividend payouts of family firms

might be considered as a result of investors demanding

higher dividend payouts from companies with the high-

est risk of expropriation of minority shareholders.

Risk arguments are also often used to explain the

higher dividend payout levels of family firms. Some

authors explain the higher dividends in family firms by

using risk aversion arguments. Family firm owners con-

sider high retained earnings as an undesirable concentra-

tion of firm-specific risk (Carney & Gedajlovic, 2002;

Huang et al., 2012) and a more concrete threat to their

welfare than a decline in the stock price (DeAngelo &

DeAngelo, 2000), and therefore prefer dividends that

378 Family Business Review 30(4)

can be reinvested in other firms or which can be used for

personal consumption. Other authors focus on argu-

ments of control risk (or retention of control) to explain

the higher dividend payouts of family firms. For exam-

ple, to enhance their wealth through capital gains, fam-

ily firm owners will have to sell their shareholdings,

which will dilute their control over the firm (Vandemaele

& Vancauteren, 2015; Yoshikawa & Rasheed, 2010).

Also, when a family has low levels of cash flow rights,

controlling families of public firms are found to pay

higher dividends in order to preserve personal wealth

due to the threat to lose control at any time (Huang et al.,

2012). In addition, several studies confirm the impor-

tance of taking into account the heterogeneity of family

businesses when studying dividend payout. For exam-

ple, family SMEs are found to pay out more dividends

than larger family firms (How et al., 2008). Family

influence on dividend policy was also proven to vary

depending on family involvement in ownership, man-

agement, and control, for a sample of private firms

(Vandemaele & Vancauteren, 2015) and a sample con-

sisting of both private and public firms (González,

Guzmán, Pomp, & Trujillo, 2014). The theoretical argu-

ments used in both articles differ and include factors

such as retention of control or information asymmetries

between shareholders.

Regarding dividend smoothing, family firms are

found to have less stable dividends than state-owned

firms (He, Li, & Tang, 2012) and nonfamily firms

(Gugler, 2003), which suggests that family firms can

adjust their dividend policy as investment opportunities

or financing needs occur and thus have more freedom in

making financing decisions. On the contrary, Pindado

et al. (2012), who use a more extensive database than the

above-mentioned studies (using data from 645 public

firms in 9 different countries, over a period of 10 years)

find that family firms distribute more stable dividends

than nonfamily firms. These authors argue that family

firms smooth their dividends to avoid future financing

constraints such as running out of capital and thereby

compromising profitable future investments. In com-

parison to the work of Gugler (2003), the authors do not

focus on principal–agent but on principal–principal

agency problems.

A Framework to Understand Family Business

Financing Decisions

In Figure 1, we present a framework that structures the

extant literature on financing decisions in family firms.

As has become clear from the aforementioned literature

review, several factors complicate a thorough under-

standing of family business financing decisions and may

lead to inconsistent results: the theoretical arguments

applied, the demand- versus supply-side focus, the com-

parison between family and nonfamily firms or within

the group of family firms, and contextual factors.

Appendix B gives an overview of the extant literature

Figure 1. Framework for organizing research on financing decisions in family businesses.

Michiels and Molly 379

reviewed in this article and how to frame these studies in

the structure of Figure 1. This framework will also be

used in the next section to structure suggestions to fur-

ther develop the field in the future.

Where Should We Go?

Based on the literature review above and on the results

of an enquiry of an expert panel in the area of finance

and/or family businesses, this section discusses opportu-

nities and challenges for future research in the field of

financing decisions in family firms. We discuss opportu-

nities and challenges across theoretical perspectives, as

well as across context-specific elements. Suggestions of

potential research questions are stated throughout the

text and are summarized in Table 2.

Future Research Opportunities and

Challenges Across Theoretical Perspectives

Researchers have been questioning the applicability of

classical agency theory to family firms because of the

absence of a separation between ownership and control,

especially in privately held family businesses (Anderson

& Reeb, 2003; Ang, Cole, & Lin, 2000). Still, agency

theory and other traditional finance theories such as

pecking order theory and trade-off theory are among the

dominant frameworks used by family business research-

ers in studying financing decisions (Fama & French,

2002; Frank & Goyal, 2003; Harris & Raviv, 1991;

Titman & Wessels, 1988). However, a number of limita-

tions to the applicability of these traditional finance

theories to explain family business financing decisions

are worth getting attention.

First, agency theory, pecking order theory, and trade-

off theory are all based on the wealth maximization prin-

ciple of organizations, assuming that mainly financial

motives will influence financing decisions. More specifi-

cally, the trade-off theory assumes that firms are trying to

reach an optimal debt level by balancing the costs of debt

against the benefits of debt (Kraus & Litzenberger,

1973). As such, this theory partly relies on agency theory

to identify costs related to information asymmetries

between shareholders and bondholders, and benefits

related to the potential of debt financing in reducing

information asymmetries between shareholders and

managers. Pecking order theory focuses on the diminish-

ing preference in using retained earnings, then debt and

finally external equity, based on information asymmetry

costs linked to these different forms of financing (Myers,

1984). While these financial arguments can be applied to

family businesses, financing behavior in family firms is

not exclusively driven by financial motives, but also by

noneconomic considerations such as the risk-taking pro-

pensity, emotions, preferred values, and goals of the fam-

ily. Thus, traditional finance theories, in their current

form, are unable to fully explain financing behavior in

family firms. Therefore, it is worth investigating further

how behavioral arguments (such as, e.g., SEW, theory of

planned behavior, stewardship theory) relate to each

other and to the dominant agency perspective for explain-

ing financing behavior. Despite the increasing attention

to the behavioral financing approach, it remains an

underresearched topic that has much potential in analyz-

ing financing decisions in family firms. Future research

that links noneconomic considerations such as family

business goals and risk preferences to capital structure

decisions would fill a gap in the literature on the actual

incentives and motives of family owners to steer capital

structure decisions. A way to open this black box can be

through qualitative research, which is very relevant in

examining and understanding processes (Langley &

Abdallah, 2011; Pratt, 2009), but at the same time, it

allows answering “why” and “how” questions, which are

very difficult to answer through quantitative research

methods (Reay, 2014). Relying on interviews, case stud-

ies, or observations would enable scholars to signifi-

cantly improve our knowledge on why certain sources of

financing are used in family firms and how financing

decisions are taken in reality (Koropp et al., 2014; Shyu

& Lee, 2009). Qualitative case study research is

also ideal to help sharpen existing theory by pointing to

gaps and beginning to fill them (Siggelkow, 2007).

Alternatively, when performing quantitative research, a

multirespondent approach in which all persons poten-

tially involved in the financial decision-making process

are questioned, would on the one hand allow researchers

to gain representativeness by forming a consensus-based

data set in which method biases caused by individual

respondents’ affect or mood are reduced (e.g., Chua,

Chrisman, & Sharma, 1999; Podsakoff, MacKenzie, Lee,

& Podsakoff, 2003). On the other hand, dispersion mod-

els that take into account discord among family members

are interesting to explore as well in the analysis of finan-

cial decision making in family firms (see Holt, Madison,

& Kellermanns, 2017). This way, broader and deeper

theoretical insights on the financial decision-making pro-

cess can be obtained.

380 Family Business Review 30(4)

Table 2. Potential Future Research Questions on Financing Decisions Within Family Firms.

Gaps

Demand/supply

side

Source of

financing Possible research questions

Theoretical Both Various How do behavioral arguments for explaining financing behavior

(such as SEW [socioemotional wealth] or stewardship

theory) relate to each other and to the dominant agency

perspective? How are noneconomic considerations such as

family business goals and risk preferences related to capital

structure decisions? How could the socioemotional wealth

perspective extend our view on the demand side of financing?

How could alternative forms of financing such as leasing,

crowdfunding, mini bonds, state-subsidize or subordinated

loans and intermingling between firm and household finance

be incorporated into the traditional finance theories? How

does the importance of SEW influence financing behavior of

family firms in comparison to nonfamily firms?

Heterogeneity

across family

firms

Demand Various Do variations in the importance attached to SEW lead to

heterogeneous financing decisions among family firms? What

is the impact of potential SEW gains on financing decisions?

Do female and male family business managers tend to differ

with respect to financing decisions? What is the impact of

visible minorities in the board or management team on a

family firm’s financing choices? What is the impact of the

financial knowledge and competencies of family owners and

their reliance on financial advice on the financing decisions

that are being taken? To what extent are financing decisions

in family firms time-varying and depending on the family and

the firm’s life stage?

Demand Debt What is the effect of board characteristics on the amount of

debt financing that is applied for? How does the process

develop through which financing decisions are taken within

the board and/or the management of the company? What is

the impact of family governance on the willingness to take on

extra bank financing?

Demand External equity What is the impact of family governance on the willingness to

take on external equity?

Demand Retained

earnings

What is the impact of family governance on the willingness to

adapt dividend payouts?

Supply Debt, external

equity

Does the degree to which a family business is professionalized

influence the access to external financing? How does the

presence of venture capital influence access to bank debt?

Are SEW aspects in family firms considered either as a risk-

enhancing or a risk-reducing motive by capital suppliers?

Supply Debt What is the impact of relationship lending on getting bank

financing for family businesses? How is relationship lending

influenced by generation?

Heterogeneity

across countries

Demand Various What are the consequences for family business financing

behavior that result from certain policy shifts due to taxation?

Both Various How can country-level factors be differentiated from firm-level

effects on family firm financing behavior? How has the global

financial crisis that began in 2007 affected the demand and

supply of finance to family firms?

Michiels and Molly 381

A second main limitation of the traditional finance

theories is that they do not clearly distinguish between

the demand and supply sides of financing. If family busi-

nesses, for example, make less use of certain sources of

financing, the main question is whether this is because of

a restricted access to external financing (supply) or

because of a lower willingness to attract financing

(demand). In the traditional finance theories both per-

spectives can be detected. For the trade-off and agency

theories, the agency costs of debt between shareholders

and debtholders refer to the supply side of financing as it

forms one of the main arguments why some family busi-

nesses are constrained in attracting financing. With

respect to the demand side, we can refer to the costs of

financial distress, which increases the reluctance to use

debt financing, or to the debt control mechanism, which

can stimulate family business owners to use debt financ-

ing to reduce information asymmetries between manag-

ers and themselves. When turning to pecking order

theory, both perspectives can be detected as well. The

information asymmetry costs linked to certain forms of

financing put constraints on the provisions of external

financing to family firms (supply), leading to a sequen-

tial order in the preference of using various sources of

financing (demand). Thus, in developing and testing

hypotheses, and in selecting and constructing samples,

future research should make a clear distinction between

supply-side and demand-side perspectives. Otherwise,

findings will be biased as they will not be able to separate

demand-side from supply-side arguments in explaining

the relation(s) found.

Furthermore, following a behavioral approach

extends our knowledge on the demand side of financing,

which is only partially captured by the traditional

finance theories, and to gain more knowledge on how it

relates to the supply-side factors of financing. Especially

the SEW perspective (Gómez-Mejía et al., 2007), which

is based on behavioral agency theory in management lit-

erature, appears to be a promising framework to study

demand aspects of financing decisions in family busi-

nesses. Preservation of SEW is usually an important

objective for many family-owned businesses, which

translates itself among others in keeping independence

and control in ownership, exerting control over the com-

pany’s strategic direction, limiting the role of outside

directors in the board, building strong and long-term

relations based on trust, decision making affected by

emotions and sentiments, and long-term evaluation of

investments (Berrone, Cruz, & Gomez-Mejia, 2012).

Each of these factors is likely to affect the willingness of

family businesses to use various sources of financing,

extending our view on the demand side of financing. In

addition, SEW arguments can also be linked to the avail-

ability of external financing (supply), since capital sup-

pliers might take these arguments into account as well

when making financing/investment decisions. In this

respect, future research might investigate whether SEW

aspects in family firms are considered either a risk-

enhancing or a risk-reducing motive by capital suppli-

ers? Overall, SEW could provide benefits to the finance

field by integrating the idea that family firms are willing

to sacrifice economic gains in order to preserve noneco-

nomic utility. At the same time family business financ-

ing could also be an interesting context to deepen our

knowledge on the theoretical underpinnings of SEW,

which still need further attention and development

(Chua, Chrisman, & De Massis, 2015). In addition, also

other nontraditional behavioral perspectives such as the

stewardship theory or the theory of planned behavior

form promising theoretical frameworks for future stud-

ies in this field, as they consider noneconomic goals and

pro-organizational behavior in the family firm (steward-

ship theory), and norms, attitudes, perceived behavioral

control, and behavioral intentions of family owners/

managers (theory of planned behavior).

Another important aspect in explaining the demand

side of financing revolves around the interaction

between financing and growth, and the extent to which

capital structure and growth are determined by the will-

ingness to borrow versus the willingness to grow. In the

extant literature, financing and growth behavior have

been studied separately, although several studies sug-

gest that financing and growth are interrelated.

According to pecking order approach, growth is an

important determinant when analyzing the capital struc-

ture of a company (Fama & French, 2002). Other stud-

ies point at the impact of a firm’s capital structure on a

firm’s growth rate, where firm growth is constrained by

the availability of financial resources (Carpenter &

Petersen, 2002; Oliveira & Fortunato, 2006). It is there-

fore important for future research to further explore the

simultaneous interaction between a firm’s debt level

and growth rate and potential endogeneity by using the

appropriate estimation techniques such as simultaneous

equations analysis, as demonstrated for example in the

work of Molly et al. (2012).

382 Family Business Review 30(4)

Next, traditional frameworks such as pecking order

theory also need a more extended and detailed view

beyond the use of classic financing forms such as

retained earnings, debt, and external equity. For exam-

ple, alternative forms of financing such as leasing,

crowdfunding, mini bonds, state-subsidized loans, sub-

ordinated loans, and intermingling between firm and

household finances should be incorporated in these tra-

ditional theories. This way, scholars can make an inter-

esting and incremental contribution to family business

literature by modifying existing theories to improve

their explanatory power (Reay & Whetten, 2011).

Future Research Opportunities and

Challenges Across Context-Specific Elements

Heterogeneity Among Family Firms. In analyzing the arti-

cles on financing decisions in family firms, a significant

number of studies do not integrate the criteria to identify

family firms. Our review shows that about 25% of the

articles published after 2010 still lacks a clear family

business definition. The remaining studies define family

firms in very diverging ways. This is especially trouble-

some because it hampers the accumulation of knowl-

edge (Schulze & Gedajlovic, 2010). In light of this

discussion in family business literature on what exactly

characterizes a family business, we urge researchers to

take fully into account the family firm definition used in

their sample, in order to enhance cross-study compari-

son of research results. Moreover, we also recommend

scholars to focus more strongly on the heterogeneity of

family businesses and how this influences their financ-

ing decisions, since the majority of articles exclusively

takes into account the oversimplified comparison

between family and nonfamily firms. Family firms

could indeed have a peculiar financial logic, but this is

likely to be influenced by a variety of factors that can be

traced back to the internal characteristics of the family

and the business, and of the external environment as

well. As such, we are echoing recent calls for research

that have been made by Chua et al. (2012) and Nordqvist

et al. (2014) to go beyond comparisons between family

and nonfamily firms and to focus on the heterogeneous

nature of this type of organization. Most studies in our

review rely on secondary data, which often do not

account for this family business heterogeneity in a

refined way. Analysis based on detailed survey data or

qualitative research could deepen our knowledge in this

direction. In addition, meta-analyses could bring more

clarity as well in the various dichotomies that can be

found in the literature (e.g., Do family firms pay out

more or less dividends?).

This heterogeneous nature could be captured by tak-

ing into account the different goals, governance struc-

tures, and resources they have (Chrisman & Patel, 2012;

Chrisman, Sharma, Steier, & Chua, 2013; Chua et al.,

2012). As these three drivers are considered to be the

sources of differences in behavior among family firms as

well as between family and nonfamily firms (Chrisman

& Holt, 2016; De Massis, Kotlar, Chua, & Chrisman,

2014), they provide an excellent basis to distinguish

between different types of family firms to investigate

financing decisions in the remainder of this article.

Goal-related sources of heterogeneity that might

broaden our insight into the financing decisions of fam-

ily firms are, for example, the importance family owners

place on SEW goals. As indicated above, researchers

have started to rely on the SEW premise in order to

explain financing behavior of family firms. Yet none of

these studies have directly measured SEW, which essen-

tially makes it hard to indicate what exactly drives fam-

ily firm financing behavior. In this sense, the

Socioemotional Wealth Importance Scale, recently

developed by Debicki, Kellermanns, Chrisman, Pearson,

and Spencer (2016) could be an interesting measure.

Future research might use this scale to test how the

importance of SEW influences financing behavior of

family firms in comparison with nonfamily firms and

how variations in the importance attached to SEW leads

to heterogeneous financing decisions among family

firms. As an example, it would be interesting to investi-

gate whether the use of collateral is influenced by the

family owners’ risk tolerance and willingness to give up

control. Additionally, although researchers generally

only focus on SEW loss aversion in financial decision

making (risk of losing control, financial risk aversion),

we encourage future research that investigates the

impact of potential SEW gains on financing decisions as

well. After all, family firms may prioritize financial

goals when the socioemotional gains of these goals are

perceived as outweighing socioemotional costs. Thus,

family firms may sometimes choose not to pursue SEW

goals when the second order, negative socioemotional

effects (i.e., the socioemotional costs) are expected to be

too large (Martin & Gomez-Mejia, 2016).

Governance-related sources of heterogeneity arise

from the family’s involvement in ownership and man-

agement and can also lead to a wide variety of outcomes

Michiels and Molly 383

(Chua et al., 2012). Next to investigating the difference

in importance placed on socioemotional concerns, the

discretion that family members have in pursuing those

concerns are important to take into account (Chrisman

& Holt, 2016). Since capital structure decisions are nor-

mally influenced or taken by the board of directors, the

role and quality of this board are likely to affect financ-

ing decisions in family firms. Future research could

therefore study the effect of board characteristics on the

amount of debt financing that is applied for and the pro-

cess through which financing decisions are taken within

the board and/or the management of the company. In

contrast to nonfamily firms, the sustainability of family

firms depends not only on the success of the firm but

also on the functionality of the family (Stafford, Duncan,

Dane, & Winter, 1999). Thus, as the business family

also needs to be governed, specific family governance

mechanisms might be installed in the firm. Through

these family governance mechanisms, family members

can, for example, be informed about interesting invest-

ment opportunities, thereby raising the families’ aware-

ness of the negative second-order effects that are

associated with SEW goals (Martin & Gomez-Mejia,

2016). An interesting avenue for future research might

therefore be to investigate whether family governance

influences the willingness to, for example, take on exter-

nal equity or extra bank financing (demand-side) or to

adapt dividend payouts. In addition, both corporate and

family governance mechanisms implemented within the

family business might be taken into account by external

investors or loan officers. More specifically, having a

formalized board of directors, and/or well-functioning

family governance practices might be a sign of profes-

sionalization to capital suppliers. Future research could

investigate whether this higher professionalization

degree indeed influences the ability to obtain external

financing (supply-side).

Family firm goals are also likely to change when

the firm moves from one generation to another, and

the financing challenge is likely to become even big-

ger over generations (Coleman & Carsky, 1999).

Future research is needed to provide us with further

insight into the extent to which financing decisions in

family firms are time-varying and depending on the

family and firm’s life stage. For example, factors worth

investigating concern the changing goal orientation

and risk behavior of founders versus successors, the

relationship and conflicts between different genera-

tions of family members, the changing ownership and

management structure pre- versus post-succession, the

type of succession, the source of transition funding,

and so on. The role of family offices in intergenera-

tional wealth creation and preservation also forms an

interesting avenue for future research (see Zellweger

& Kammerlander, 2015, for a profound theoretical

overview on this topic).

Apart from investigating the importance family

members place on SEW and other concerns, and their

ability to pursue those concerns, also the family firm’s

capabilities to achieve these goals are important aspects

to consider (Chrisman & Holt, 2016). Examples of

resource-related sources of heterogeneity that could be

taken into account when examining financing decisions

in family firms are, for example, the availability of fam-

ily-based human assets (Verbeke & Kano, 2012), the

ability to professionalize the firm (Chua, Chrisman, &

Sharma, 2003), or the presence of venture capital, which

can influence the resources available to the firm both in

quantity and quality. Therefore, future research could

investigate how these resource-related aspects influence

the availability of external financing (supply) as well as

the willingness (demand) to attract debt or equity financ-

ing. Another interesting research direction related to the

human resources available to the family firm concerns

the impact of gender on financing decisions in family

firms. Although women’s access to, and use of, debt

(e.g., Coleman, 2004; Constantinidis, Cornet, &

Asandei, 2006; Francis, Hasan, & Wu, 2013), angel cap-

ital (Becker-Blease & Sohl, 2007), and bootstrap financ-

ing (Neeley & Van Auken, 2010) has been explored in

finance and entrepreneurship journals, none of these

studies has considered the family firm or family CEO

contingency. Yet the impact of having a female CEO on

a firm’s financing choices might be different for family

firms than for nonfamily firms and might also differ

within the group of family firms. Additionally, woman

entrepreneurship studies have emphasized that female

business owners tend to balance economic goals with

noneconomic goals more often than their male counter-

parts (Hechavarria, Ingram, Justo, & Terjesen, 2012;

Jennings & Brush, 2013; Sullivan & Meek, 2012). Thus,

future research could investigate whether female and

male family business managers tend to differ with

respect to financing decisions by using the SEW per-

spective. A similar ongoing debate worth investigating

concerns the impact of visible minorities in the board or

management team on a family firms’ financing choices

(e.g., Cavalluzzo & Cavalluzzo, 1998; Coleman, 2004).

384 Family Business Review 30(4)

Firm size can also lead to heterogeneity among fam-

ily firms, as it might explain the goals, governance, and

resources of family firms (Chua et al., 2012). As indi-

cated by the literature review, most of the studies are

oriented toward large public firms even though, in real-

ity, small private firms are the norm. The findings result-

ing from samples of large listed family businesses

cannot automatically be transferred to privately owned

companies that usually are of a much smaller size, and

thus more explicit evidence is required on this size

effect. For example, many small family firms will be

confronted with financial illiteracy (Koropp, Grichnik,

& Kellermanns, 2013), which could be addressed par-

tially through the financial advice provided by bankers

or accountants. However, the literature is quite silent on

the financial knowledge and competencies of family

owners and their reliance on financial advice. Also, firm

age could be an important factor in explaining financing

decisions, as relationship lending could play a signifi-

cant role in getting bank financing for companies with a

longer history. However, little knowledge exists on this

topic, thus warranting further research on, for example,

how the family’s history, generation, and legacy influ-

ences this relationship. We recognize, however, that this

presents “both an opportunity and a challenge to future

research, as access to data from a large sample of these

[privately held] firms is severely limited” (Gómez-

Mejía, Larraza-Kintana, & Makri, 2003, p. 236).

Heterogeneity Across Countries. The majority of empirical

articles in our review are single-country studies. This is

somewhat surprising, given that several researchers

have pointed to the large differences that occur between

countries regarding their level of investor and creditor

protection, their level of development of financial mar-

kets, the degree to which the capital markets are bank-

centered, their culture, and their legal framework (civil

vs. common law; Driffield, Mahambare, & Pal, 2007;

King & Santor, 2008; Lappalainen & Niskanen, 2013;

Santos, Moreira, & Vieira, 2014). For example, several

countries have introduced rules to correcting the incen-

tive to take on excessive debt, such as limiting the

deductibility of interest costs (France, Germany, Hun-

gary, Spain, Italy) or extending the deductibility to

include the cost of equity financing (Belgium, Italy, Por-

tugal; European Commission, 2015b). These incentives

might significantly influence decisions on capital struc-

ture and dividend payout. More investigation into these

country-level factors, and how they can be differentiated

from firm-level effects, on family firm financing behav-

ior, are thus warranted. Performing these multicountry

studies might also clarify some of the inconsistent

results on family business financing found in extant

studies (see, e.g., the multicountry study of Pindado

et al., 2012, on dividend smoothing).

In addition, longitudinal approaches could allow for

capturing the consequences for family business financ-

ing behavior that result from certain policy shifts due to

taxation (e.g., the changes in deductibility of interest

costs, as discussed above), banking regulation (e.g., the

implementation of Basel III), or financial–economic

shocks. More specifically, taxation rules might discour-

age family firms to take on debt or pay out dividends in

some countries, whereas they will not in other countries.

So as to be able to compare studies, and to find explana-

tions for contrasting results, we urge researchers to dis-

cuss the taxation rules applicable in their sample country,

and, in case of a multicountry study, to thoroughly

review the differences in taxation rules.

Finally, future research could examine how a major

crisis such as the global financial crisis that began in

2007 has affected financing decisions in family firms.

After all, periods of economic downturn could strongly

influence financing decisions in family businesses

given the reduced availability of capital and other

sources of financing. Apart from a number of articles

in this direction, more efforts are needed to signifi-

cantly broaden our knowledge on how financial crises

affect family firm financing decisions (Amann &

Jaussaud, 2012; Boubakri et al., 2010; Pindado et al.,

2012). Possible research questions are abundant. For

example, the effect of a financial crisis on voluntary

delistings, the use of private equity, the commitment to

pay dividends, and so on. Again, we especially encour-

age researchers to take into account the heterogeneity

of family firms when examining the impact of eco-

nomic shocks or crises.

Conclusion

Motivated by the growing attention to family firms in

general, and their financing decisions in particular,

this review brings together the two highly relevant

research fields of family business and finance. As the

knowledge and contributions on financing decisions in

family firms are quite dispersed, we develop a state of

the art on family business financing literature and

present a model to guide future research by identifying

Michiels and Molly 385

gaps across the theoretical perspectives, the demand

versus supply side of financing, and across contexts.

More specifically, we discuss the arguments underly-

ing traditional theories and elaborate on their applica-

bility to study financing decisions in family businesses.

We also present future research opportunities and

challenges across the context-specific elements such

as family business heterogeneity and country-specific

factors. We hope that our review provides finance

scholars with fruitful research ideas which eventually

will contribute to advance our understanding of family

firm financing behavior in theory and practice.

Appendix A

Distribution of Articles by Journal.

Journal 2016 Impact factor N%

Family Business Review 4.229 17 12.98%

Small Business Economics 2.421 8 6.11%

Journal of Banking & Finance 1.776 8 6.11%

Journal of Family Business Strategy 2.375 6 4.58%

Journal of Small Business Management 2.876 6 4.58%

Journal of Business Venturing 5.774 5 3.82%

Corporate Governance: An International Review 3.571 5 3.82%

Journal of Financial Economics 4.505 4 3.05%

Journal of Business Finance & Accounting 1.276 4 3.05%

Entrepreneurship Theory and Practice 4.916 3 2.29%

Asia Pacific Journal of Management 2.024 2 1.53%

Business History 0.83 2 1.53%

Journal of Management & Governance N/A 2 1.53%

Journal of Private Equity N/A 2 1.53%

Journal of Small Business & Entrepreneurship N/A 2 1.53%

Journal of Management Studies 3.962 2 1.53%

Pacific-Basin Finance Journal 1.754 2 1.53%

Review of Financial Studies 3.689 2 1.53%

Strategic Management Journal 4.461 2 1.53%

The Journal of Risk Finance N/A 2 1.53%

Journal of Corporate Finance 1.579 2 1.53%

Academy of Management Journal 7.417 1 0.76%

American Journal of Small Business N/A 1 0.76%

Annals of Finance N/A 1 0.76%

Annals of Financial Economics N/A 1 0.76%

Asia Pacific Business Review 1 1 0.76%

Asian Academy of Management Journal of Accounting & Finance N/A 1 0.76%

Brazilian Business Review N/A 1 0.76%

British Accounting Review 2.135 1 0.76%

Business Ethics Quarterly 1.703 1 0.76%

Business: Theory & Practice N/A 1 0.76%

Economics & Rural Development N/A 1 0.76%

Economics Letters 0.558 1 0.76%

Economics of Transition 0.479 1 0.76%

Emerging Markets Finance & Trade 0.826 1 0.76%

European Financial Management 1.236 1 0.76%

Finance N/A 1 0.76%

(continued)

386 Family Business Review 30(4)

Appendix B

Journal 2016 Impact factor N%

Industrial & Corporate Change 1.777 1 0.76%

International Review of Financial Analysis 1.457 1 0.76%

International Review of Law & Economics 0.57 1 0.76%

Japan & the World Economy 0.489 1 0.76%

Journal of Business 1.133 1 0.76%

Journal of Business & Retail Management Research N/A 1 0.76%

Journal of Business Ethics 2.354 1 0.76%

Journal of Business Research 3.354 1 0.76%

Journal of Enterprising Culture N/A 1 0.76%

Journal of Financial & Quantitative Analysis 1.673 1 0.76%

Journal of Financial Services Research 1.13 1 0.76%

Journal of Financial Counseling & Planning N/A 1 0.76%

Journal of General Management N/A 1 0.76%

Journal of International Financial Markets, Institutions & Money 1.379 1 0.76%

Journal of International Business Studies 5.869 1 0.76%

Journal of Law & Economics 0.932 1 0.76%

Journal of Multinational Financial Management N/A 1 0.76%

Journal of the Japanese & International Economies 0.542 1 0.76%

Journal of World Business 3.758 1 0.76%

Management Decision 1.396 1 0.76%

Multinational Business Review N/A 1 0.76%

South African Journal of Business Management 0.246 1 0.76%

Strategic Change N/A 1 0.76%

The International Journal of Business in Society N/A 1 0.76%

The Journal of Private Equity N/A 1 0.76%

Universia Business Review 0.138 1 0.76%

Venture Capital N/A 1 0.76%

Total 131 100%

Appendix A (continued)

Overview of Extant Literature on Financing Decisions in Family Firms.

Author(s)

Source of

financing Theoretical arguments

Demand

or supply

FB/NFB or

within FB

Country of

research

Achleitner etal. (2010) Equity Retention of control NA Within FB Germany

Adams, Manners, Astrachan,

and Mazzola (2004)

Multiple Aversion to risk Demand NA NA

Ahlers, Hack, and

Kellermanns (2014)

Equity NA Supply Within NA

Al-Ajmi etal. (2009) Debt Asymmetric information

between shareholders and

bondholders, and between

shareholders and managers

NA FB/NFB Saudi Arabia

Alekneviciene (2012) Alternative

sources

NA NA FB/NFB Lithuania

Amann and Jaussaud (2012) Debt Aversion to risk Demand FB/NFB Japan

(continued)

Michiels and Molly 387

Author(s)

Source of

financing Theoretical arguments

Demand

or supply

FB/NFB or

within FB

Country of

research

Amore etal. (2011) Debt Free cash flow hypothesis,

retention of control, aversion

to risk

Demand Within FB Italy

Anderson etal. (2003) Debt Asymmetric information

between shareholders and

bondholders

Supply FB/NFB USA

Anderson and Reeb (2003) Debt Asymmetric information

between shareholders and

bondholders

Supply FB/NFB USA

Astrachan and McConaughy

(2001)

Equity Signaling hypothesis NA FB/NFB USA

Attig, El Ghoul, Guedhami,

and Rizeanu (2013)

Alternative

sources

Asymmetric information

between shareholders

Supply Both EU, Asia

Bagnoli etal. (2011) Debt Asymmetric information

between shareholders and

bondholders

Supply FB/NFB USA

Batten and Hettihewa

(1999)

Debt Asymmetric information

between shareholders and

bondholders

Supply FB/NFB Sri Lanka

Benito-Hernández etal.

(2014)

Debt Retention of control Demand FB/NFB Spain

Berghoff (2013) Multiple Transaction costs NA NA Germany

Bhattacharya and Ravikumar

(2001)

Multiple NA Supply Within FB NA

Bjuggren etal. (2012) Debt Asymmetric information

between shareholders and

bondholders, free cash flow

hypothesis, aversion to risk

Demand FB/NFB Sweden

Blanco-Mazagatos etal.

(2007)

Multiple Free cash flow hypothesis,

retention of control, aversion

to risk

Demand FB/NFB Spain

Bopaiah (1998) Debt Asymmetric information

between shareholders and

bondholders

Supply FB/NFB USA

Boubakri and Ghouma

(2010)

Debt Asymmetric information

between shareholders and

bondholders

Supply FB/NFB EU, Asia

Boubakri etal. (2010) Equity Asymmetric information

between shareholders

Supply FB/NFB Asia

Burgstaller and Wagner

(2015)

Debt Retention of control, aversion

to risk

Demand FB/NFB Austria

Caprio and Croci (2008) Equity Asymmetric information

between shareholders,

retention of control

Supply FB/NFB Italy

Carney and Gedajlovic

(2002)

Retained

earnings

Aversion to risk Demand FB/NFB Hong Kong

Chaganti and Damanpour

(1991)

Multiple NA Demand FB/NFB USA

Chan, Dang, and Yan (2012) Multiple NA Supply FB/NFB China

Appendix B (continued)

(continued)

388 Family Business Review 30(4)

Author(s)

Source of

financing Theoretical arguments

Demand

or supply

FB/NFB or

within FB

Country of

research

Chen etal. (2005) Retained

earnings

Asymmetric information

between shareholders,

retention of control

Demand FB/NFB Hong Kong

Chen etal. (2016) Debt Asymmetric information

between lenders and

borrowers

Supply FB/NFB Multiple

Chua etal. (2011) Debt Asymmetric information

between shareholders and

bondholders, social capital

Supply Both USA

Cirillo etal. (2015) Equity Stewardship Supply Within FB Italy

Coleman and Carsky (1999) Debt NA Demand FB/NFB USA

Croci etal. (2011) Multiple Asymmetric information

between shareholders and

bondholders, retention of

control

Both FB/NFB EU

Dailey, Reuschling, and De

Mong (1977)

Debt Asymmetric information

between shareholders and

bondholders

NA Within FB USA

Dawson (2011) Equity Asymmetric information

between shareholders

Supply NA Italy

DeAngelo and DeAngelo

(2000)

Retained

earnings

Asymmetric information

between shareholders

Demand Within FB USA

Dejung (2013) Debt NA Demand NA Switzerland

Desbrières and Schatt

(2002)

Equity NA NA FB/NFB France

Di Giuli etal. (2011) Alternative

sources

NA Demand Within FB Italy

Ding and Pukthuanthong-Le

(2009)

Equity Asymmetric information

between shareholders

Supply FB/NFB Taiwan

Dreux (1990) Multiple NA Both NA NA

Driffield etal. (2007) Debt Asymmetric information

between shareholders, and

between shareholders and

managers, aversion to risk

Demand Both Asia

Ebihara, Kubota, Takehara,

and Yokota (2014)

Multiple Asymmetric information

between shareholders,

retention of control

Demand FB/NFB Japan

Ehrhardt and Nowak (2003) Equity NA NA Within FB Germany

El-Chaarani (2013) Debt Retention of control, aversion

to risk

Demand Within FB France,

Lebanon

Faccio and Parsley (2009) Debt NA Demand FB/NFB Multiple

Fernando etal. (2014) Equity Asymmetric information

between shareholders

Supply FB/NFB USA

Fitó etal. (2013) Debt Aversion to risk Demand FB/NFB Spain

Gallo and Vilaseca (1996) Multiple Aversion to risk, financial

distress costs

Both Within FB Spain

Ginglinger and Hamon

(2012)

Equity Asymmetric information

between shareholders,

aversion to risk

NA Both France

Appendix B (continued)

(continued)

Michiels and Molly 389

Author(s)

Source of

financing Theoretical arguments

Demand

or supply

FB/NFB or

within FB

Country of

research

González etal. (2013) Debt Asymmetric information

between shareholders and

bondholders, free cash flow

hypothesis, retention of

control, aversion to risk

Both FB/NFB Colombia

González etal. (2014) Retained

earnings

Asymmetric information

between shareholders

Demand FB/NFB Colombia

Gugler (2003) Retained

earnings

Asymmetric information

between shareholders and

managers

Demand FB/NFB Austria

Hakim, Lypny, and Bhabra

(2012)

Equity Asymmetric information

between shareholders

Supply FB/NFB Multiple

Hauser and Lauterbach

(2004)

Equity Retention of control NA FB/NFB Israel

Haynes etal. (1999) Debt NA Demand FB/NFB USA

He etal. (2012) Retained

earnings

Asymmetric information

between shareholders,

retention of control

Demand FB/NFB Hong Kong

He, Li, and Tang (2013) Retained

earnings

NA Demand FB/NFB Hong Kong

Hearn (2011) Equity Asymmetric information

between shareholders

Supply Both Africa

Hearn (2014) Equity Transaction costs Supply FB/NFB Africa

How etal. (2008) Equity Asymmetric information

between shareholders

Demand FB/NFB Hong Kong

Huang etal. (2012) Retained

earnings

Asymmetric information

between shareholders,

retention of control

Demand Within FB Taiwan

Jain and Shao (2015) Multiple Asymmetric information

between shareholders,

between shareholders and

managers, and between

shareholders and bondholders,

risk aversion, retention

of control, protection of

reputation

Both Both USA

Keasey, Martinez, and

Pindado (2015)

Debt Retention of control,

asymmetric information

between shareholders and

bondholders

Both Both EU

Kimhi (1997) Debt NA Supply Within FB NA

King and Peng (2013) Multiple Aversion to risk Demand Within FB USA

King and Santor (2008) Debt Asymmetric information

between shareholders and

bondholders, aversion to risk

Demand Both Canada

Koropp, Grichnik, and

Gygax (2013)

Debt Retention of control, aversion

to risk, debt use intention

Demand Within FB Germany

Koropp, Grichnik, and

Kellermanns (2013)

Debt Retention of control Demand Within FB Germany

Appendix B (continued)

(continued)

390 Family Business Review 30(4)

Author(s)

Source of

financing Theoretical arguments

Demand

or supply

FB/NFB or

within FB

Country of

research

Koropp etal. (2014) Multiple Retention of control Demand Within FB Germany

Kusnadi (2011) Alternative

sources

Asymmetric information

between shareholders and

managers

Demand FB/NFB Singapore,

Malaysia

Lace etal. (2013) Retained

earnings

NA Demand FB/NFB EU

Landry etal. (2013) Multiple Retention of control, aversion

to risk

Demand Both Canada

Lappalainen and Niskanen

(2013)

Multiple Asymmetric information

between shareholders and

bondholders, retention of

control

Both FB/NFB Finland

Leitterstorf and Rau (2014) Equity Retention of control, protection

of reputation

Demand FB/NFB Germany

Lin and Chuang (2011) Equity Asymmetric information

between shareholders

Supply FB/NFB Taiwan

López-Gracia and Sánchez-

Andújar (2007)

Debt Financial distress costs Both FB/NFB Spain

Mahérault (2004) Equity Retention of control Supply Within FB France

Martí etal. (2013) Equity Asymmetric information

between shareholders

Both FB/NFB Spain

Martinez and Serve (2011) Equity Aversion to risk Demand FB/NFB France

Masulis etal. (2011) Retained

earnings

Asymmetric information

between shareholders

Both FB/NFB Multiple

Matias Gama and Manuel

Mendes Galvão (2012)

Debt Asymmetric information

between shareholders,

retention of control, aversion

to risk

Demand FB/NFB Portugal

Maula, Autio, and Arenius

(2005)

Equity NA Supply FB/NFB Finland

Mazzola and Marchisio

(2002)

Equity NA NA FB/NFB Italy

McConaughy (1999) Multiple NA NA Both NA

McConaughy, Matthews,

and Fialko (2001)

Debt Aversion to risk Demand FB/NFB USA

Michiels etal. (2015) Retained

earnings

Asymmetric information

between shareholders

Demand Within FB Belgium

Mishra and McConaughy

(1999)

Debt Aversion to risk Demand FB/NFB USA

Molly etal. (2010) Debt Retention of control, aversion

to risk

Both Within FB Belgium

Molly etal. (2012) Debt Retention of control, aversion

to risk

Demand Within FB Belgium

Muske etal. (2009) Debt NA Demand NA USA

Napoli (2012) Debt Asymmetric information

between shareholders and

bondholders, social capital

Supply Within FB Italy

Nielsen (2008) Equity NA Supply FB/NFB NA

Noordin, Ariffin, and Law

(2008)

Equity NA Supply FB/NFB Asia

Appendix B (continued)

(continued)

Michiels and Molly 391

Author(s)

Source of

financing Theoretical arguments

Demand

or supply

FB/NFB or

within FB

Country of

research

O’Regan, Hughes, Collins,

and Tucker (2010)

Multiple Retention of control Demand Within FB UK

Pindado etal. (2012) Retained

earnings

Asymmetric information

between shareholders

Demand FB/NFB EU

Pindado etal. (2015) Debt Asymmetric information

between shareholders and

bondholders

Supply Both EU

Poutziouris (2001) Equity Retention of control Demand FB/NFB UK

Poutziouris (2011) Multiple Asymmetric information

between shareholders and

bondholders, retention of

control

Both FB/NFB UK

Psillaki and Eleftheriou

(2015)

Debt Asymmetric information

between lenders and

borrowers

Supply FB/NFB France

Romano etal. (2001) Multiple Retention of control, aversion of

risk, protection of reputation

Both Within FB Australia

Santos etal. (2014) Debt Free cash flow hypothesis,

retention of control, aversion

to risk

Both FB/NFB EU

Schmid (2013) Debt Asymmetric information

between shareholders and

bondholders, and between

shareholders and managers,

free cash flow hypothesis,

retention of control

Both FB/NFB EU, Asia

Scholes, Wright, Westhead,

Burrows, and Bruining

(2007)

Equity Asymmetric information

between shareholders, and

between shareholders and

managers, game theory

Both Within FB EU

Scholes etal. (2009) Equity Asymmetric information

between shareholders and

managers

Both Within FB EU

Schulze etal. (2003) Debt Asymmetric information

between shareholders,

aversion to risk, loss aversion

Demand Within FB USA

Segura and Formigoni

(2014)

Debt Retention of control, aversion

to risk

Demand FB/NFB Brazil

Setia-Atmaja etal. (2009) Retained

earnings

Asymmetric information

between shareholders, free

cash flow hypothesis

Demand FB/NFB Australia

Shyu and Lee (2009) Debt Asymmetric information

between shareholders, free

cash flow hypothesis

Both FB/NFB Taiwan

Song and Wang (2013) Debt Asymmetric information

between shareholders and

bondholders

Supply NA China

Steijvers and Voordeckers

(2009)

Debt Asymmetric information

between shareholders and

bondholders

Supply FB/NFB USA

Appendix B (continued)

(continued)

392 Family Business Review 30(4)

Author(s)

Source of

financing Theoretical arguments

Demand

or supply

FB/NFB or

within FB

Country of

research

Steijvers etal. (2010) Debt Asymmetric information

between shareholders and

bondholders

Supply FB/NFB USA

Strebualev and Yang (2013) Debt Aversion to risk Demand FB/NFB USA

Tanaka (2014) Debt Asymmetric information

between shareholders and

bondholders

Supply FB/NFB Japan

Tappeiner etal. (2012) Equity Asymmetric information

between shareholders,

retention of control

Demand Within FB Germany

H. T. Tran and Santarelli

(2014)

Multiple Asymmetric information

between shareholders, and

between shareholders and

bondholders, social capital

Supply Within FB Vietnam

D. H. Tran (2014) Multiple Asymmetric information

between shareholders, and

between shareholders and

bondholders

Demand FB/NFB Germany

Upton and Petty (2000) Equity NA Supply Within FB USA

Vandemaele and

Vancauteren (2015)

Retained

earnings

Retention of control, aversion

to risk

Demand Within FB Belgium

Viviani etal. (2008) Equity Asymmetric information

between shareholders

Supply FB/NFB Italy

Voordeckers and Steijvers

(2006)

Debt Asymmetric information

between shareholders and

bondholders

Supply FB/NFB Belgium

Waisman (2013) Debt Asymmetric information

between shareholders and

bondholders

Supply FB/NFB USA

Walker (2008) Equity Asymmetric information

between shareholders

Supply FB/NFB Multiple

Wright, Amess, Weir, and

Girma (2009)

Equity Asymmetric information

between shareholders

NA NA NA

Wu etal. (2007) Equity Asymmetric information

between shareholders

Supply FB/NFB Canada

Wu etal. (2014) Multiple NA Demand FB/NFB Taiwan

Yilmazer and Schrank

(2006)

Debt Transaction costs Demand FB/NFB USA

Yoshikawa and Rasheed

(2010)

Retained

earnings

Asymmetric information

between shareholders,

retention of control

Demand FB/NFB Japan

Yen etal. (2015) Debt Asymmetric information

between shareholders and

bondholders

Supply FB/NFB Taiwan

Yu and Zheng (2012) Equity Retention of control Demand FB/NFB Hong Kong

Zellweger and

Kammerlander (2016)

Multiple Family blockholder conflicts NA NA NA

Zhang, Venus, and Wang

(2012)

Multiple Retention of control Demand Within FB China

Note. FB = family business; NFB = nonfamily business.

Appendix B (continued)

Michiels and Molly 393

Acknowledgments

The authors would like to thank a panel of experts that pro-

vided valuable insights for this review, based on their expe-

rience as a family business and/or finance scholar and/or

editor of a prominent family business journal: Joseph

Astrachan, Joern Block, Marc Deloof, Luis Gomez-Mejia,

Danny Miller, Pannikos Poutziouris, Alessandro Minichilli,

Wim Voordeckers, and Pramodita Sharma. We are also

grateful for the helpful comments from Daniel Holt and

three anonymous FBR reviewers on earlier versions of this

article.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with

respect to the research, authorship, and/or publication of this

article.

Funding

The author(s) received no financial support for the research,

authorship, and/or publication of this article.

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Author Biographies

Anneleen Michiels is an assistant professor of Finance and

Governance at the Research Centre for Entrepreneurship and

Family Firms at Hasselt University. Her current research

focuses on financing decisions, executive compensation, and

professionalization of family firms.

Vincent Molly is an assistant professor of Entrepreneurship and

Family Business at the Strategy, Innovation & Entrepreneurship

Department at KU Leuven. He is also academic director of the

Family Business Community at Antwerp Management School.

His research focuses on financing decisions, governance, per-

formance, and succession of family firms.

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