Abstract
Using a sample of Western European firms, we confirm the precautionary motive for holding cash as family-controlled firms’ desire to perpetuate the family legacy for future generations motivates them to accumulate more cash than their non-family counterparts. We also show that, given family-controlled firms’ long-term perspective, they focus on cash flow volatility rather than cash flow level. Finally, the relation between financing constraints and cash holdings is not homogeneous: financially constrained family-controlled firms hold higher levels of cash than financially constrained non-family firms. Overall, these results suggest that family firms’ cash holding policy is the result not of a specific financial outcome but rather on the strategic objectives of the firm.
Original language | English |
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Pages (from-to) | 1325-1360 |
Number of pages | 36 |
Journal | Journal of Business Finance and Accounting |
Volume | 43 |
Issue number | 9-10 |
DOIs | |
State | Published - 28 Sep 2016 |
Externally published | Yes |
Keywords
- Euro zone
- G32
- cash flow volatility
- cash holding
- family firms
- liquidity