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http://dx.doi.org/10.5762/KAIS.2018.19.3.337

An Empirical Study on Debt Financing of Family Firms : Focused on Packing Order Theory  

Jung, Mingeu (Department of Venture Business, Gyeongnam National University of Science and Technology)
Kim, Dongwook (Research and Analysis Team, Busan Economic Promotion Agency)
Kim, Byounggon (Department of Business Administration, Changwon National University)
Publication Information
Journal of the Korea Academia-Industrial cooperation Society / v.19, no.3, 2018 , pp. 337-345 More about this Journal
Abstract
The purpose of this study is to analyze the relationship between the characteristics of Korean family firms and the impact of debt financing. The analysis period was 10 years from 2004 to 2013, and the sample consisted of 4,008 non-financial firms listed on the Korea Exchange. For the analysis, the unbalanced panel data with time - series, cross - section data were formed and analyzed using panel data regression analysis. The results are as follows. First, Korean family firms use relatively less debt than non - family firms. It can be understood that family firms in which the dominant family owns and dominates the corporation are less likely to increase their debt because the agent problem is alleviated and the need for the control effect of Jensen (1986) is lowered. Second, in the verification of the packing order theory using the model proposed by Shyam-Sunder and Myers (1999), family firms have higher compliance with the packing order theory than non-family firms do. When financing is needed, debt is preferred over equity issuance. However, for Korean family firms, 24.38% of the deficit funds are financed through the issuance of net debt, which is relatively low compared to the 75% shown in the analysis of Shyam-Sunder and Myers (1999). These results reveal the limit to the strong claim that the Korean family firms follow the packing order theory.
Keywords
Family Firms; Capital Structure; Corporate Governance; Agency Problem; Panel Data Analysis;
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