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Exploring the link between family ownership and leverage: a mediating pathway through socioemotional wealth objectives

Author

Listed:
  • Fernando Muñoz-Bullón

    (Universidad Carlos III de Madrid)

  • Maria J. Sanchez-Bueno

    (Universidad Carlos III de Madrid)

  • Pilar Velasco

    (Universidad de Valladolid)

Abstract

This paper explores the relationship between family ownership and a firm’s leverage from the socioemotional wealth (SEW) theory. We propose that SEW objectives (i.e., family control, long-term horizon, and family firm reputation) might have a mediating effect on the family ownership-leverage link. In addition, we argue that an internal contingency—such as below aspiration performance—may moderate SEW’s influence on the family ownership-leverage relationship as a result of a shift in focus from non-economic to economic goals. Using a sample of European listed firms from 2011 to 2018, we find that the negative impact of family ownership on a firm’s leverage is mediated through SEW objectives. Moreover, our evidence suggests that a negative performance-aspiration gap weakens the mediating influence of these SEW objectives on leverage. Over all, our study reveals that SEW is a key channel which drives family firms’ reluctance to leverage.

Suggested Citation

  • Fernando Muñoz-Bullón & Maria J. Sanchez-Bueno & Pilar Velasco, 2024. "Exploring the link between family ownership and leverage: a mediating pathway through socioemotional wealth objectives," Review of Managerial Science, Springer, vol. 18(11), pages 3203-3252, November.
    • Handle: RePEc:spr:rvmgts:v:18:y:2024:i:11:d:10.1007_s11846-023-00713-1
    DOI: 10.1007/s11846-023-00713-1
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    More about this item

    Keywords

    Leverage; Family control; Long-term horizon; Family firm reputation; Performance aspiration gap; Mediating effect;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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