Family ownership and capital structure: evidence from ASEAN countries

What is it about?

This paper examines the capital structure decisions of family firms in ASEAN during 2007–2017. We find that family firms tend to use more debt, particularly short-term debt, than non-family firms. These findings can be explained by family owners’ concern about the risk of losing control over the firms, resulting in their preference for debt over equity to avoid control dilution. We further document that family firms would use more debt when they have lower ownership concentration, have more family members on the board of directors, and are young firms. We also find that the impact of family ownership on capital structure is moderated by the level of investors’ legal protection. Altogether, our study provides added-value insights into family firms’ financing behaviours for prospective investors as well as regulators to understand the dynamics of business decisions of ASEAN family firms to make more efficient investment and legislation decisions.

Featured Image