Family businesses and debt maturity structure: Focusing on family involvement in governance to explain heterogeneity

Abstract

Understanding family firms’ debt maturity structure is important because it plays a key role in making strategic decisions and mitigating agency conflicts. This study investigates the relationship between family involvement in governance and debt maturity structure in family firms by drawing on governance literature and insights from the socioemotional wealth perspective. Based on a sample of non-financial Italian public family firms, comprising 383 firm-year observations, we find differences in the proportion of long-term debt depending on variations in components of family involvement in governance. In particular, later-generation involvement on the board is associated with a lower proportion of long-term debt. Furthermore, family ownership positively moderates this relationship such that the proportion of long-term debt is higher with high family ownership. This study contributes to literature by adding further nuance to our understanding of the heterogeneity of family firms, by considering the relationship between variations in family involvement in governance and debt structure. Our study has practical implications that may inform investors about factors related to family involvement in governance, which are likely to influence debt maturity structure, and thus long-term strategies of family firms.