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http://dx.doi.org/10.5762/KAIS.2013.14.1.101

The determinants of family firm's debt structure  

Gong, Jaisik (College of Business & Economics, Daegu University)
Kim, Choong-Hwan (College of Industrial Science, Kongju National University)
Publication Information
Journal of the Korea Academia-Industrial cooperation Society / v.14, no.1, 2013 , pp. 101-108 More about this Journal
Abstract
In this paper, we examine the impact of family ownership mechanism on the firm's debt policy. Our results show that family firms tend to have a lower debt level, compared with non-family firms. Foreign investors are found to lead to a reduction in the firm's debt level through their monitoring incentives for dominating large shareholders. The firm's profitablily is related to a lower level of debt, whereas higher tangible assets and firm size are positively associated with high debt ratios due to the possibility of large collateral assets. Some implications are that foreign investors can reduce the agency costs of dominating large shareholders in family firms through monitoring activities, thus enhancing the efficiency of business decision-makings.
Keywords
Debt structure; Family firms; Corporate governance; Agency problem; Foreign investors;
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