THE LONG-TERM HORIZON OF FAMILY FIRMS IN M&A: THE IMPACT ON RESEARCH INVESTMENTS AND DEBT MATURITY STRUCTURE

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Abstract

Despite family business is the most widespread ownership structure worldwide, there is a lack of evidence on the impact of external growth strategies on their capital structure. Although most researches showed that the risk of losing control leads family firms to a lower level of debt, this article sheds new light on debt maturity structure and innovation investments when family firms embrace an acquisition path. In particular, I argue that family firms will use bank debt to a lower extent than nonfamily firms when they embrace an external growth strategy and, as a consequence, they are more likely to avoid cuts in research investments and focus more on long term debt. These hypotheses are consistent with agency theory arguments, as family principals exercise a more effective monitoring due to the larger ownership stake and the desire to pass the company on the offspring in profitable conditions. By having access to a panel data, I analyse acquisitions carried out in the period 2000-2013 by all Italian companies with turnover exceeding 50 million Euros, and the results support the long term perspective of family firms. In particular, family firms will use less bank debt to finance acquisitions, avoiding cutting research investments and relying on a more balanced debt maturity structure.

Keywords: Acquisition, Family Firm, Research Investments, Debt Maturity Structure

Received: 31.05.2017

Accepted: 29.08.2017

How to cite this paper: Quarato, F. (2017). The long-term horizon of family firms in M&A: The impact on research investments and debt maturity structure. Corporate Ownership & Control, 15(1), 108-122. https://doi.org/10.22495/cocv15i1art11