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Family loans and family firms

In: Research Handbook on Alternative Finance

Author

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  • Charilaos Mertzanis

Abstract

Due to the unique characteristics of family firms, conventional theories may not sufficiently explain how they make financing decisions. Alternative theoretical approaches are therefore necessary. The decision-making process of family firms draws upon a combination of economic, institutional, and behavioral theories. The involvement of family members in businesses impacts the behavior of lenders, prompting questions about whether formal lenders are willing to provide financing to family firms under the same conditions as non-family firms. Additionally, the existence of other formal or informal financing options specific to family firms is also a subject of inquiry. Given the intricate nature and behavior of family firms, this chapter aims to clarify the primary mechanisms behind lending behavior and the fundamental factors influencing the financing decisions made by these firms. It specifically focuses on the role of institutions and informal finance in shaping the decisions of family firms, particularly in relation to family loans.

Suggested Citation

  • Charilaos Mertzanis, 2024. "Family loans and family firms," Chapters, in: Franklin Allen & Meijun Qian (ed.), Research Handbook on Alternative Finance, chapter 8, pages 152-179, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:19941_8
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    File URL: https://www.elgaronline.com/doi/10.4337/9781800370494.00016
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