Project R-8852

Bank financing at private family firms: disentangling willingness and ability (Research)

Family firms are considered to be the backbone of the economy. Their access to bank finance as well as their willingness to attract bank finance in order to execute valuable investment projects is crucial for each economy. Even though prior studies indicate that financing decisions in family firms differ substantially from non-family firms, current research is not able to identify why financing decisions differ in family firms, and whether the actual use of bank debt use in family firms is demand driven (are they willing to use debt) or supply driven (are they able to obtain debt?). Therefore, our first research objective is to investigate how family firms take financing decisions, who is involved in the decision-making process and how they interact. Our second research objective is to understand the different motives and factors that are considered by family firms and banks when taking debt financing decisions, and how these factors and motives interact in reaching a debt decision. Next, this project will investigate the effect of the family firms' non-economic goals (objective 3) and governance structures (objective 4) on the willingness and ability to obtain bank debt. The willingness to attract bank debt(demand) can exceed the ability to attract bank debt (supply). In this case, family firms will be bank debt rationed. The fifth objective of this project is to investigate to what extent (certain types of) family firms are debt rationed and which characteristics they have.

01 October 2018 - 30 September 2022