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Family Involvement, Ethnicity, and Willingness to Borrow: Evidence from U.S. Small Firms

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  • Zhou Xing

    (University of Saskatchewan)

  • Yang Fan

    (University of Saskatchewan)

  • Wu Zhenyu

    (University of Manitoba)

Abstract

This study explores how the ethnicity of small business owners affects the influences of family ownership on their willingness to borrow. While the willingness issue is fundamental in the literature on small business debt financing, it has been understudied. We introduce an indirect measure of the willingness to borrow by taking into consideration the demand constraints of borrowers. Empirical findings indicate that family-owned businesses borrow less than non-family-owned ones only when they are owned by non-visible minorities. This phenomenon is not observed among visible-minority-owned firms, and we interpret this difference between ethnic groups using the availability of social capital.

Suggested Citation

  • Zhou Xing & Yang Fan & Wu Zhenyu, 2012. "Family Involvement, Ethnicity, and Willingness to Borrow: Evidence from U.S. Small Firms," Entrepreneurship Research Journal, De Gruyter, vol. 2(2), pages 1-26, March.
    • Handle: RePEc:bpj:erjour:v:2:y:2012:i:2:n:2
    DOI: 10.1515/2157-5665.1037
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    References listed on IDEAS

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    2. Hoy Frank & Pu Hansong, 2012. "Reconsidering Models for Investigating Family Firms: Variants from China," Entrepreneurship Research Journal, De Gruyter, vol. 2(4), pages 1-18, October.

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