Do Family Firms Use More or Less Debt?

This paper investigates whether the identity of controlling shareholders influences the financing decision of the firm. In particular, we explore the impact of family control on firm debt levels. We also study the effect of family involvement in management on firm leverage. Using a sample of firms listed on the French stock market, our results show that family firms use less debt than non-family firms. Our findings are consistent with the hypothesis that family-controlled-shareholders prefer less debt as a mean to reduce firm risk. Furthermore, our results show that family firms that have a family member as CEO use more debt than family firms with outside CEOs.