Transparency and Financing Choices of Family Firms

While recent literature has documented that U.S. family firms differ markedly from their non-family counterparts, there is a paucity of evidence on how these firms differ in terms of their cost of capital or financial structure. In this paper, we show that family and non-family firms differ in their debt maturity and leverage ratios in a manner consistent with the higher expropriation potential of family firms. Moreover, while more transparency causes both family and non-family firms to increase the maturity structure of their debt and reduce leverage ratios, the effects are stronger for family firms.