Emotional attachment and cash holdings in family SMEs: the effect of family influence and identification

Family firms often navigate the complex challenge of balancing financial rationality with emotional or identity-driven goals, which leads to distinctive financial behaviors. Drawing on the socioemotional wealth (SEW) framework, this study examines how family influence and identification (FII) affect cash holdings in family small- and medium-sized enterprises (SMEs). Using survey data from 180 Spanish family SMEs and structural equation modeling, the results show that FII positively affects cash holdings. This suggests that families prioritize liquidity to safeguard socioemotional wealth. Furthermore, we analyze three moderating factors related to chief executive officer (CEO) characteristics that may influence this relationship. Findings indicate that longer CEO tenure strengthens the positive effect of FII on cash holdings, whereas later generational stages weaken it. By integrating SEW perspective with traditional financial theories, this study contributes to a more nuanced understanding of how emotional attachment and family identity influence financial decision-making in family SMEs and identifies the internal sources of heterogeneity. Practical implications include the need for governance mechanisms that help balance emotional goals with financial rationality, particularly across generations.