American Journal of Economics and Business Administration

Cash Holdings, Use of Debt and Dividend Structure of Family Firms

Elena Smirnova, Sirousse Tabriztchi and Cary Lange

DOI : 10.3844/ajebasp.2015.1.10

American Journal of Economics and Business Administration

Volume 7, 2015

Pages 1-10

Abstract

In this study we examine the relation between firm’s financial structure and family ownership. We develop a theoretical model of the precautionary cash holdings. Our empirical results show that the fraction of a company’s shares that are held by the founding family members or their descendants influences the use of cash and equivalents, dividend policy and debt structure of a firm. Our results are robust to different estimation methods and alternative model specifications. We find that family firms tend to rely less on long-term debt financing, pay fewer dividends and carry higher precautionary cash balances.

Copyright

© 2015 Elena Smirnova, Sirousse Tabriztchi and Cary Lange. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.