Financing decisions in family businesses: the Portuguese example

• Main Author: Delgado, Maria Francisca Reis Videira Lima
• Publication Date: 2019
• Format: Master thesis
• Language: eng
• Source: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Download full: http://hdl.handle.net/10071/19886
• topic: Pecking Order Theory; Financing decisions; Capital structure; Family businesses

In a context of extreme significance of family businesses in the Portuguese business fabric and their representativeness in terms of GDP and employability, it is essential to assess the financing options and resources availability, as well as the determinants behind these firms' decision making process. This study aims to prove the suitability of the Pecking Order Theory and Trade-Off Theory to a sample of 460 Portuguese family businesses. Proven assumptions concern the existance of a negative relationship between age and debt and also between profitability (ROA) and debt ratio, which proves the adequacy of two premisses inherent to the Pecking Order Theory for our sample. According to the literature, this negative relationship between variables might be consequence of a preference for this kind of businesses to resort to internal financing as the first option when considering financing options, in order to preserve family reputation, control and ownership and also heritage perpetuation.