Intergenerational Differences in Family Firms: Impact on Capital Structure and Growth Behavior

Authors

  • Vincent Molly,

    Corresponding author
    1. Hogeschool-Universiteit Brussel, Research Centre for Entrepreneurship, and University of Antwerp
      Vincent Molly, tel.: +32-2-609.82.65; e-mail: vincent.molly@hubrussel.be, to Eddy Laveren at eddy.laveren@ua.ac.be, and to Ann Jorissen at ann.jorissen@ua.ac.be.
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  • Eddy Laveren,

    Corresponding author
    1. University of Antwerp
      Vincent Molly, tel.: +32-2-609.82.65; e-mail: vincent.molly@hubrussel.be, to Eddy Laveren at eddy.laveren@ua.ac.be, and to Ann Jorissen at ann.jorissen@ua.ac.be.
    Search for more papers by this author
  • Ann Jorissen

    Corresponding author
    1. University of Antwerp
      Vincent Molly, tel.: +32-2-609.82.65; e-mail: vincent.molly@hubrussel.be, to Eddy Laveren at eddy.laveren@ua.ac.be, and to Ann Jorissen at ann.jorissen@ua.ac.be.
    Search for more papers by this author

Vincent Molly, tel.: +32-2-609.82.65; e-mail: vincent.molly@hubrussel.be, to Eddy Laveren at eddy.laveren@ua.ac.be, and to Ann Jorissen at ann.jorissen@ua.ac.be.

Abstract

Based on a sample of 425 SMEs, we investigate whether intergenerational differences affect the capital structure and growth behavior of family firms. We integrate the financing and growth relation into our research by using a 2SLS approach and the internal and sustainable growth concepts. Evidence is found that the capital structure is not directly influenced by the managing generation, but indirectly through the realized growth rate. Moreover, results indicate that next-generation companies grow slower because they have the tendency to forego part of their growth rather than risk the loss of family control due to the increased use of debt.

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