The financial structure of the family firm: generation does matter

This paper analyzes the effect or the desire to perpetuate family control on the financial structure of family firms across generations. We test this effect in a sample where both family and nonfamily firms have the same level of ownership concentration. We verify that the desire for family control gives rise to financing preferences in line with the peeking order theory. Since the desire for family control persists across generations, these financing preferences remain the same. However, we find that generational transitions weaken family bonds and thus reduce the family members' capacity for sacrifice, leading to variations in their weighting or the sources of financing.