IDEAS home Printed from https://ideas.repec.org/a/hde/epregl/v73y2022i3p459-481.html
   My bibliography  Save this article

The Role Of Family Control In Determining The Capital Structure: Evidence From Nonfinancial Listed Firms

Author

Listed:
  • Imran Yousaf

    (Namal University Mianwali, Pakistan)

  • Seyed Alireza Athari

    (Faculty of Economics and Administrative Sciences, Cyprus International University, Turkey)

  • Dervis Kirikkaleli

    (Faculty of Economics and Administrative Sciences, European University of Lefke, Turkey)

  • Arshad Hassan

    (Capital University of Science and Technology, Islamabad, Pakistan)

  • Shoaib Ali

    (Air University School of Management, Air University, Islamabad, Pakistan)

Abstract

This study aims to examine the effect of family control on the corporate financing decision of firms in Pakistan. This study uses the annual data of 100 non-financial firms listed at PSX for the period 2005-2012. To estimate the impact of family control on the corporate financing decision, we employ the ordinary least square (OLS) method. The findings of the univariate analysis show that a significant difference exists between family and nonfamily firms based on many characteristics of firms. Multivariate analysis results show that family firms maintain significantly high “total debt ratio” and “short-term debt ratio” compared to non-family firms. There are two reasons why family firms keep high debt ratios compared to non-family firms. First, family-owned firms do not want to dilute their ownership, and that is why they fulfill their major financing needs through debt instead of issuing new shares in the market. Second, family firms in Pakistan use extra cash flows for their private benefits. These findings reveal useful insights for investors, banks, regulators, and business families of Pakistan.

Suggested Citation

  • Imran Yousaf & Seyed Alireza Athari & Dervis Kirikkaleli & Arshad Hassan & Shoaib Ali, 2022. "The Role Of Family Control In Determining The Capital Structure: Evidence From Nonfinancial Listed Firms," Ekonomski pregled, Hrvatsko društvo ekonomista (Croatian Society of Economists), vol. 73(3), pages 459-481.
    • Handle: RePEc:hde:epregl:v:73:y:2022:i:3:p:459-481
    DOI: 10.32910/ep.73.3.6
    as

    Download full text from publisher

    File URL: https://doi.org/10.32910/ep.73.3.6
    Download Restriction: no
    File URL: https://libkey.io/10.32910/ep.73.3.6?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    Capital structure; Family ownership; Family firm; corporate financing decision; Dilute ownership;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hde:epregl:v:73:y:2022:i:3:p:459-481. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Josip Tica (email available below). General contact details of provider: https://edirc.repec.org/data/hdeeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.