Capital Structure Adjustment in Brazilian Family Firms

• Autor(a) principal: Kayo,Eduardo K.
• Data de Publicação: 2018
• Outros Autores: Brunaldi,Eduardo Ottoboni, Aldrighi,Dante M.
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: RAC. Revista de Administração Contemporânea (Online)
• Texto Completo: http://old.scielo.br/scielo.php?script=sci_arttext&pid=S1415-65552018000100092
• topic: capital structure; family firms; speed of adjustment; largest ultimate shareholder

Abstract We examine the extent to which family companies are different from non-family companies in their leverage ratios and their capital structure adjustment. By applying a dynamic trade-off model to a sample of Brazilian companies for 2003-2013, we show that family companies have higher leverage and slower adjustment speeds in comparison to non-family companies. We argue that family companies’ managers tend toward higher leverage because they are more confident and optimistic than managers of non-family firms. Financial constraints stemming from this high leverage prevent over-leveraged family firms from rapidly adjusting their target capital structure.