The Effect of Family Ownership, Control and Management on Corporate Debt Structure – Evidence from Panel Fractional Data

Abstract

The present study examines the impact of family involvement on the debt structure of family businesses. Family corporate involvement is considered in three related but distinct dimensions: capital ownership, firm’s management and corporate control. The marginal effect of each of these three dimensions is specified as a unique regression parameter in a conditional mean model for the proportion of medium- plus long-term debt to total debt. This general strategy calls for an appropriate modelling and estimation approach, taking due account of the response variable’s inherent fractional definition and consequential nonlinear functional form of its conditional expectation, given covariates. Such an approach, combining a probit model for the equation of interest with a control function estimation method, is applied to a panel data set on Portuguese family businesses. Estimation results confirm the uniqueness of the impact of each of the three considered dimensions of families’ corporate involvement on the debt structure of firms.