Corporate governance and financial policies of Portuguese family firms

Many businesses in the global economy are family firms. How do family firms differ from non-family firms with regards to corporate governance and financial policies? Current literature on the issue of corporate governance and financial development provides evidence that family firms adopt different financial practices from their non-family counterparts. Private family firms are at an advantage in terms of management experience and governance and a disadvantage when it comes to obtaining long-term debt and external equity. This may be the result of the unique characteristics of the private family business.

The empirical analysis of this study is based on a sample of Portuguese private family firms between 2013 and 2016. The study’s main results demonstrate that family firms have lower growth and significantly lower ratios of leverage than non-family firms and that, although directors of family firms are of similar age to those in non-family firms, they have much more experience, are less likely to be female, and live nearer the business.

The paper argues that the evidence is consistent with the financial development of Portuguese private family firms being guided by financial conservatism, which could potentially hamper firm growth.

Click here to go to the paper by Inna Sousa Paiva.