Research Article Open Access

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

Elena Smirnova1, Sirousse Tabriztchi1 and Cary Lange1
  • 1 State University of New York, United States

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.

American Journal of Economics and Business Administration
Volume 7 No. 1, 2015, 1-10

DOI: https://doi.org/10.3844/ajebasp.2015.1.10

Submitted On: 19 March 2015 Published On: 2 May 2015

How to Cite: Smirnova, E., Tabriztchi, S. & Lange, C. (2015). Cash Holdings, Use of Debt and Dividend Structure of Family Firms. American Journal of Economics and Business Administration, 7(1), 1-10. https://doi.org/10.3844/ajebasp.2015.1.10

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Keywords

  • Family Firms
  • Cash Holdings
  • Financial Structure