Intergenerational Differences in Family Firms: Impact on Capital Structure and Growth Behavior

Based on a sample of 425 SMEs, we investigate whether intergenerational differences affect the capital structure and growth behavior of family firms. We integrate the financing and growth relation into our research by using a 2SLS approach and the internal and sustainable growth concepts. Evidence is found that the capital structure is not directly influenced by the managing generation, but indirectly through the realized growth rate. Moreover, results indicate that next–generation companies grow slower because they have the tendency to forego part of their growth rather than risk the loss of family control due to the increased use of debt.