Understanding debt financing decisions in family firms – Are there new insights from the recent literature?

Abstract

Purpose

Considering the important development that research on debt financing decisions of family firms (FFs) has undergone in recent years, we aim to assess the current state of the literature with the latest advances in this field.

Design/methodology/approach

We undertake a systematic review of 42 journal articles published on this topic in recent years.

Findings

As a result of our work, new directions for the advancement of this research field are established, such as the consideration of different methodologies and sources of heterogeneity of FFs, the need for an integration of the supply and demand side of funds or the importance of evaluating a diversity of firm-specific and contextual factors affecting the debt financial behaviour of FFs.

Originality/value

Considering the notable development of the field of debt financing decisions of FFs in recent years, we find it opportune and valuable to revise the advances and trends published in the most recent papers. Thus, by connecting previous and current knowledge, we provide an updated integrative model of the state of the art and posit key research questions to solve in the future.

Citation

Sánchez-Andújar, S., Parrado-Martínez, P. and Comino-Jurado, M. (2024), "Understanding debt financing decisions in family firms – Are there new insights from the recent literature?", Managerial Finance, Vol. 50 No. 8, pp. 1490-1514. https://doi.org/10.1108/MF-10-2023-0601

1. Introduction

Family businesses have become key players in the global economy, promoting economic and social well-being. For the survival and growth of this type of firm, access to financing resources is crucial (Michiels and Molly, 2017). Specifically, indebtedness is the most important source of external financing in the case of family firms (Romano et al., 2001). Although the interrelations of financing sources and family businesses have been a major focus of research in recent decades, previous studies have not reached a consensus regarding the incentives that determine the debt financing decisions of this group of businesses.

In this vein, many and diverse factors are responsible for these decisions. A review of the recent literature reveals that it is complicated to know which path to follow if one wants to make any contribution to this field, for several reasons. First, the lack of a standard definition of FFs and the sources of heterogeneity affecting them. Second, the overlap between the demand and supply sides of funds, both being absolutely connected. And third, the vast diversity of external factors influencing the evolution and development of a company (political, economic, legal, social, cultural, etc.), as well as the different definitions used to measure debt and the combination of emotional and economic motivations of FFs. Integrating all these factors could help researchers to focus and understand the scope of their findings.

Considering the notable development that the specific area of debt financing decisions has undergone and the huge interest that these particular decisions have aroused in researchers and practitioners, we find it opportune and valuable to carry out a systematic revision of the FFs debt financing literature, with a focus on articles published in recent years (2017–2021). We intend to shape the path followed by different authors and to identify future lines of research in this field. As a result, we realise that in spite of the fact that the revised papers use heterogenous samples of companies and countries, which may hinder comparisons and conclusions, there is still much more work to be done regarding the consideration and measurement of the heterogeneity of the FF due to different factors, including socio-emotional wealth (SEW), as well as other firm-specific and contextual determinants.

Thus, we contribute to the literature in several ways. First, we update and connect previous and recent knowledge, developing an integrative theoretical diagram to better understand the mix of factors currently influencing debt decision-making in FFs. Second, we establish key research questions that remain unsolved and new directions that could help advancement in the field.

The rest of the paper is organised as follows. Section 2 explains the methodological aspects of our systematic literature review (SLR). Section 3 describes the sample and analyses the findings. Next, in Section 4, we present an updated integrative model to better understand the logic of debt decisions in FFs, and we establish the main lines of the research agenda. Finally, Section 5 provides conclusions.

2. Methodology: a systematic literature review

The SLR is the methodology which has been applied in this work, following the process proposed by Tranfield et al. (2003) and Denyer and Tranfield (2009).

To implement this methodology, a protocol is established to guide the systematic process, in order to locate, select, evaluate and analyse documents, thus helping us to determine future research lines. To this end, the study has followed the five steps posited by the previous authors.

• 1) Formulation of research questions

First, we established our research questions. As defined above, the main goal of this study is to analyse advances in knowledge of the indebtedness decisions of FFs, specifically in recent years, due to the irruption in this research field of the concept of FF heterogeneity. Our specific research questions are as follows:

RQ1.

What are the most relevant contributions to the field in recent years?

RQ2.

What main gaps are there still in the literature and what future research could be proposed?

• 2) Locating the studies

The second step was to locate the studies that had addressed this topic, thus trying to answer the research questions formulated in the previous step. For that purpose, we had to define two fundamental aspects: search engines and query strings.

On the one hand, the search engines we used were the two main databases in the area of study: Web of Science (WoS) and Scopus. It should be emphasised that the use of more than one database meant that works relevant to the purpose of the research were not missed.

On the other hand, given that the aim of this study combines debt financing and FF topics, our query strings were designed to locate studies placed in this intersection area (see Table 1). For the WoS database, we searched for the combination of both debt and FF in the topic, i.e. title, abstract, author keywords and/or keywords plus. For the Scopus database, we focussed on the title, abstract and/or keywords. As a result, 821 and 759 documents were obtained, respectively (a total of 1,580 docs). This search was performed on January 14, 2022.

• 3) Studies selection and evaluation

In this third step, we intended to discard those articles that were not relevant to the research objective. To this end, we first defined a set of filters or inclusion criteria in order to select the articles that would be subsequently evaluated. These criteria are included in Table 1. Taking these aspects into account, 521 articles were excluded.

It is worth highlighting a relevant issue related to the period of study. Regarding FF financing decisions, a major literature review was published in 2017 by Michiels and Molly, which included articles published between 1977 and 2016. Due to the irruption of the concept of FF heterogeneity in recent years, we decided to analyse the new studies that have appeared from that date in order to update the literature of the specific field of debt financing. It was found that the number of articles published between 2017 and 2021 was quite large in proportion to the papers published in previous decades regarding this topic, which highlights the contribution and value of our research. This new filter implied discarding 558 more articles. Finally, we also removed documents that were duplicated in both databases (150 docs).

On the other hand, to assess the studies, we first read the title and abstract of the 351 papers that had been previously included. Those articles related to our research aim were immediately selected, whereas for the documents that it was not clear whether they should be excluded or not, we read the theoretical framework, method and main conclusions.

At the end of this third step, our sample comprised 42 articles on debt financing decisions in FFs, published between 2017 and 2021 [1] in journals of finance, business, economics and management. Supplementary material – Table A1 lists the journals in which these papers were published.

Figure 1 provides a summary of the article identification, selection and evaluation process described above.

• 4) Analysis and synthesis of the findings

In the fourth step, we subjected the 42 articles that had been previously selected to an in-depth reading. In the total sample of papers, there are 35 quantitative studies, three qualitative analysis, one meta-analysis and three literature reviews. In this stage, we created our own database for the 38 quantitative and qualitative studies, coding data related to sample characteristics, methodology and variables, amongst others [2]. Supplementary material – Table A2 shows the specific aspects of each paper that we coded.

• 5) Reporting and using the results

In this last point, we summarised and synthesised all the information extracted, offering a discussion of the main results, as well as developing future research lines. This information is collected in Sections 3–5.

3. Results

3.1 Descriptive analysis

First, the studies were analysed chronologically by year of publication. Undoubtedly, research interest in debt financing decisions in FFs has been increasing in recent years, with a total of 42 publications in the period 2017–2021, whereas the number of publications on the topic of debt from 1977 to 2016 is around 52 (Michiels and Molly, 2017).

Regarding the research methods used in the analysed papers, we appreciate the predominance of quantitative ones: 83.33% (35 papers out of the total). The vast majority of these empirical studies have continued to apply traditional regression models, such as ordinal least squares (OLS), fixed-effect, random effect or dynamic panel regressions, whilst only a few studies have employed structural equations models (SEM), such as partial least squares (PLS), or simultaneous equations modelling, such as two-stage (2SLS) or three-stage least squares (3SLS). Supplementary material – Table A2 contains this information. A significant minority of papers adopted other research methodologies, such as qualitative studies (three papers), meta-analysis (one paper) and literature reviews (three papers).

Regarding the samples analysed in the quantitative and qualitative studies, they present considerable geographic dispersion, as can be seen in Table 2.

3.2 Analysis and synthesis of the findings

Michiels and Molly (2017) and Motylska-Kuzma (2017) each published literature review articles to clarify the state of the art and to identify future research lines regarding two fields of study considered together, FF and financing decisions. But all efforts made by authors in this vein are wasted if most of the articles published afterwards do not consider suggestions and recommendations and do not contribute to cover the gaps identified previously. This reason motivated us to check whether future lines of research proposed by those authors have in fact been addressed in recent years.

As opposed to the two previously mentioned literature reviews, which are focussed on a wider range of items related to financing decisions of FFs – debt, external equity and retained earning versus dividends – our revision pays special attention to the debt level of family businesses. In this vein, indebtedness decisions have become crucial for the development and survival of companies, especially in the new uncertain and agitated economic and financial context caused by the COVID-19 pandemic.

Traditionally, the majority of works on capital structure of firms examined financial theories, such as trade off – focussed on a leverage ratio target – or pecking order – focussed on hierarchical preferences of financing sources. In recent decades, these traditional theories have been applied together with agency theory, which has gained strength in analysing how the conflicts of interest amongst different groups influence the decision-making of any FF.

More recently, research has looked at other theories that incline towards psychological or emotional fields, such as stewardship theory, the theory of planned behaviour or resource-based theory. Along these lines, the SEW perspective appeared with the aim of considering the idiosyncratic features of FFs that have an influence on their decision-making (Gómez-Mejía et al., 2007).

The use of different theories to explain the financial behaviour of FFs has evolved over the years, with most of them being incorporated at different levels according to the authors' perspective or focus (see Supplementary material – Table A2). Nevertheless, our review has brought to light that there are some issues that need to be treated in detail. We will analyse all of these next.

3.2.1 Family firms' heterogeneity

Michiels and Molly (2017) place a strong focus on the need for an easily generalisable definition of a FF and highlight the importance of considering it fully in each sample, in order to enhance cross-study comparison of research. Moreover, they encourage different authors to consider heterogeneity within the group of family businesses, overpassing the comparison between family and non-FFs. In recent years, according to our analysis, this focus has been lightly improved, getting to around half of studies which explicitly consider FFs' heterogeneity (see Supplementary material – Table A2).

Whilst economic goals – such as profit maximisation or financial value growth – are common to all types of businesses, FFs also pursue unique family-centred goals, such as the preservation of family ownership and control, family harmony, or employment of family members (Molly et al., 2019). In any case, recent studies on FFs highlight that the focus on family-centred or business-centred goals can vary widely amongst FFs, leading to the recognition of their heterogeneity, which may help explain differences in their capital structure (Molly et al., 2019).

As can be seen in Supplementary material – Table A2, the heterogeneity of FF has been treated as an effect of different sources, such as family participation on the board of directors (BOD); the presence of the family in top management; family involvement in ownership; the generational stage of the company; or the importance of SEW or family-centred goals, amongst others. In more recent papers, an integral concept of family involvement in ownership, management and BOD has been used.

Even though nowadays the heterogeneity of FF is assumed in several dimensions, many studies continue to consider the family dimension as a dichotomous variable and consider all FFs as a group without paying attention to their dissimilarities. In other cases, authors simply analyse a sample of family businesses without recognising the heterogeneity.

3.2.2 Measuring the indebtedness

Regarding the level of debt in FFs, results remain inconclusive maybe due to the different perspectives used to construct the debt variable. Thus, the measure and the conclusions are different if financial or non-financial debt, short-, long-term or total debt are considered, because information asymmetry and transaction costs differ according to the debt maturity structure (Michiels and Molly, 2017) and because the supply and demand attitudes differ regarding the type of debt.

In our literature review, we have found that only fourteen out of the thirty-five empirical articles have taken into consideration the maturity structure of debt (see Supplementary material – Table A2). Over half of the analysed articles compute the dependent variable as the total level of debt without considering its maturity structure. With respect to the articles that do consider maturity structure of debt, they measure the indebtedness by means of different ratios, i.e. short-term debt and/or long-term debt, or the maturity of bonds issued by FFs.

In addition, some studies distinguish between market and book value of the leverage ratio in samples of listed firms (ElBannan, 2017; Amin and Liu, 2020; Muhammad et al., 2021), or use the net loans variable over total assets (Jara et al., 2018). Finally, a few authors have taken into consideration a differentiation between financial and non-financial debt (Du and Zeng, 2019; Molly et al., 2019; Gao et al., 2020; Baixauli-Soler et al., 2021).

3.2.3 Demand and supply perspectives

Traditional theoretical foundations used to explain a business's level of indebtedness are based on the perspective of the supply and demand sides. When they refer to risk aversion, the need to retain family control of the business – for economic or non-economic purposes – or the cost of the debt, they are placed in the funds demand side; but when they consider variables such as the information asymmetry between the supplier of funds and the owners of the company, or the trust relation along the time with FF, they are thinking about the supply side.

On the one hand, from the demand perspective, a balance amongst several factors influences debt decision-making of FFs. Firstly, they choose debt instead of issuing new shares to avoid the entrance of external shareholders, who could dilute ownership and reduce family influence, thus trying to protect their SEW (Gómez-Mejía et al., 2007). Secondly, a lower level of debt may be desirable to keep the prevalence of direct family control over indirect creditor control on the firm's decisions. In addition, family directors could show an excessive risk aversion due to the likelihood of bankruptcy associated with the presence of debt in the company.

On the other hand, regarding the debt supply side, the lenders' perception of risk in businesses helps to make a decision on whether to lend or not and the cost of the debt (Du and Zeng, 2019). Due to the long-term orientation of family businesses, their commitment with the continuity of the company and the belief that the overlapping of ownership and management reduces agency costs, lenders could facilitate FFs to access debt, probably at a lower cost. Nevertheless, due to agency costs generated by the lack of external control and the altruism of the family, creditors could perceive a high risk of inefficiency and increase the debt cost (Duréndez et al., 2019).

Most of the articles analysed focus on the debt demand side, trying to explain the financial behaviour of FFs based on their internal relationships and on the goals of family members involved in the company. Nevertheless, not to include the debt supply side leads to biased conclusions. In this sense, our literature review shows that the number of authors considering both debt sides, at least in the theoretical arguments or in the conclusions, are rising. However, the inclusion and measurement of their interaction in quantitative studies is still scarce (see Supplementary material – Table A2).

3.2.4 Firm-specific factors affecting the indebtedness of FFs

Many factors have been used as determinant of the level of indebtedness of FFs. Some of them are traditional, such as profitability, liquidity, assets tangibility, firm size, firm age, volatility, growth opportunities, depreciation, dividend pay-out, average cost of capital, etc. Others have been more recently incorporated by researchers and they refer to specific characteristics of FFs. Concretely, they try to capture the influence of family in the company through objective and easy-to-quantify measures, such as the representation of family in ownership, management and/or control, or through a more difficult to measure variable, that of SEW (see Supplementary material – Table A2).

In addition, incipient factors have emerged in recent years, trying to offer more complete knowledge about the financial behaviour of FFs. From a demand perspective, the presence of women on the BOD has been analysed by different authors, concluding that it has a negative effect on the level of debt of FF due to women's higher risk aversion (Benkraiem et al., 2018; Rossi et al., 2018; Poletti-Hughes and Martínez Garcia, 2022; Wang et al., 2022). The conclusions are opposite from the supply point of view. Du and Zeng (2019) find that the amount of bank loans is significantly larger for Chinese FFs with female entrepreneurs, as banks may recognise their ability to reduce default risk. Extant studies confirm that firms with high female participation in top management teams are more likely to follow accounting regulations and achieve more accurate future cash flow predictions, suggesting better earnings quality. In addition, Sardo et al. (2022) find that the speed of adjustment of their actual debt level towards the target debt ratio is lower for FFs under female ownership than for those under male ownership.

In this vein, other boardroom attributes have been considered as relevant for the leverage of a FF, such as the size of the BOD, the frequency of its meeting or the average age of its independent directors (Benkraiem et al., 2018). Furthermore, Mundi et al. (2022) conclude that the psychological aspects of financial managers also influence capital structure decisions of family-owned firms, for example, overconfident financial managers prefer self-financing over debt in their capital structures; in debt financing, they prefer short-term debt. Related to the psychological aspect, numerous studies analysing the influence of family dynamics (Jaskiewicz and Dyer, 2017; Jaskiewicz et al., 2017) and individuals (Felin and Foss, 2005; Yu et al., 2023) on FFs can be found – even though they do not study debt decisions, we can learn from them, as they help understand the behaviour of family members. Likewise, Diéguez-Soto and López-Delgado (2019) conclude that FFs in which there is no other family member in the business apart from the founder have higher levels of indebtedness.

Other incipient variables recently considered in listed FFs are auditor quality (Feito-Ruiz et al., 2023), timing behaviour (Muhammad et al., 2021), as well as intragroup transactions, voting rights and cash flow rights (Jara et al., 2018).

3.2.5 Context-specific factors affecting the indebtedness of FFs

Other determinants influencing the level of debt in FF are contextual, such as the cultural, legal, financial or tax system. Recently, some authors have made several contributions.

Wang et al. (2022) conclude that in regions where gender stereotypes rooted in local social norms are less prevalent, women hold more voting rights and a leadership role in the FF and have an effect on financial leverage. Yusof Ali and Ahmad (2021) analyse the influence of the government decision to favour access to debt for the Bumiputera ethnicity and find that all commercial banks are required to extend at least 20% of the total loans outstanding of the preceding year to the Bumiputera community.

Closely related with ethnicity and region are religion and traditional culture. In this sense, Du and Zeng (2019) confirm the influence of the entrepreneur's religious belief on the amount of bank loans received by Chinese FFs. This finding suggests that FFs with religious entrepreneurs, which tend to be more ethical, transfer soft information to banks, so that lenders eventually favour religious entrepreneurs with more bank loans. These authors also highlight the importance of considering the influence of the traditional culture, regional macro-economic factors and industry-specific effects as these aspects may have an impact on the amount of bank loans received.

Another contextual factor influencing indebtedness of firms is the financial-economic situation. The results of Muhammad et al. (2021) show that during the financial crisis of 2007–2009, FFs in India, Pakistan and Bangladesh took more external finance. The leverage of the firms increased, which may denote the need of firms to be competitive or perhaps private benefit of the managers motivated them to take more external debt. In the same vein, Rossi et al. (2018), in their research about indebtedness, include as independent variable the year of economic crisis.

Finally, it is also important to consider the financial system and the protecting creditor rights idiosyncratic to each country, as well as the level of development of the economy (Bacci et al., 2018; Du and Zeng, 2019).

4. Discussion

4.1 Understanding the indebtedness decisions of FFs: an updated integrative model

Figure 2 presents an integrative diagram which summarises, organises and relates the main findings of our SLR on debt financing decisions in family businesses. As we explained previously, current research finds diverse results probably due to several aspects that complicate the understanding of the decision-making of FFs on indebtedness issues. First, the focus on different sources of heterogeneity of FFs – if it is considered – and the variety of dimensions employed to measure the debt level contribute to the dissimilar results. Second, the disparity of financial, managerial and behavioural arguments supporting the logic of debt decisions in FFs from both, the supply and the demand side of financial funding, enlarges the misunderstanding. And third, the diversity of firm-specific and contextual factors may end up influencing the debt decisions of this type of firms, which leads to results that complicate generalisations and comparisons.

4.2 Research avenues

Based on the results of our review of previous studies, we identify several research gaps and we advance the debate by presenting some future research avenues on FFs' debt financing decisions, which we explain in the following discussion.

4.2.1 The concept of heterogeneity

The question of the FF heterogeneity has emerged strongly in recent years, generating an open debate on the findings so far. Daspit et al. (2021) identify up to nine different aspects that determine the aforementioned heterogeneity, highlighting family involvement in the business – in ownership, management and governance structures – as a crucial attribute in this type of company. The level of family involvement differs from one firm to another since, amongst other reasons, an important and primary source emerges from the core of the controlling family and the bond between its individuals, as well as with the business. Thus, if ownership is highly concentrated amongst family members, the business is managed by the family itself and, at the same time, family is present on the BOD, then the preservation of SEW predominates over economic objectives (Muñoz-Bullon et al., 2018). Conversely, a different configuration of family involvement could change these preferences.

Thus, beyond the ongoing debate over whether FFs are more or less indebted than non-FFs, we must consider whether all FFs – due to their family nature – have the same attitude towards decisions on debt. Unequivocally, the particular configuration of each FF has an impact on its operations and organisation, giving rise to heterogeneous decisions amongst them. Researchers are encouraged to analyse the different types of family involvement – according to the family members participating in the ownership, management and governance structures – as a source of heterogeneity, both individually and comprehensively, since the wide variety of configurations in this regard will have potentially different effects on their level of debt.

4.2.2 Aspects of socio-emotional wealth

Recent studies increasingly recognise the important role of non-economic goals and the perspective of SEW in FFs' strategic decision-making. Closely related to the previous suggestion, future works should identify and validate empirical variables to measure the impact of SEW aspects on that process. Although still scarce, some authors have already introduced the role of SEW in their empirical research, approximating it through the dimension of family control and influence on the business – as a proxy (Gottardo and Moisello, 2014; Comino-Jurado et al., 2021b); or with a self-reported measure of SEW (Baixauli-Soler et al., 2021; Belda-Ruiz et al., 2022) based on the scale developed by Debicki et al. (2016).

In this sense, we also stress the importance of expanding and disaggregating the concept of SEW into different dimensions, in order to properly understand how each influences FFs' indebtedness decisions, given that they capture non-financial values that sometimes compete with each other and can lead to heterogeneous outcomes. Considering the five dimensions identified by Berrone et al. (2012) and Hsueh et al. (2023) find that dynastic renewal and family identification are the most relevant for providing researchers with valuable signals about the greater or lesser future orientation of the controlling family. Additionally, studying different SEW configurations could also enrich this research field, thus contributing to a better understanding of the heterogeneity of FFs.

In terms of data collection, we suggest employing questionnaires to measure SEW directly as a source of heterogeneity, as well as using innovative methodologies that are able to proxy and explain complex concepts and to test relationships mediated or moderated by other variables.

4.2.3 Behavioural arguments behind heterogeneity

To complement and aid knowledge of the above future lines of research, FF heterogeneity and SEW, the interdisciplinary analysis of FFs through the combination of family and management sciences is of interest. Jaskiewicz et al. (2017) indicate that family science could be applied to management theories to understand how families influence entrepreneurs, employees, managers and their organisations. If most studies of FFs' debt decision-making assume that the family influences those decisions and leads the FF to behave differently from a non-FF, we need to know the family intrinsically in order to understand how family members directly or indirectly influence the FFs' level of indebtedness and their outcomes.

Drawing on the research of Jaskiewicz et al. (2017) and Jaskiewicz and Dyer (2017) developed four common dimensions of families that are frequently encompassed by family science theories – family structures, family functions, family interactions and family events. We thus emphasise the importance of studying different family patterns when analysing debt decisions within FFs. First, regarding family structure, most studies implicitly assume the prevalence of the traditional family structure, but it would be interesting to investigate how alternative families shape firms and the making of such decisions. Second, the functions assigned to family members within the family – related, for instance, to access to family resources – should be studied as these could be replicated in the business. Third, family interaction will be weak if there are family conflicts and poor communication, which may reduce the firm's ability to achieve an optimal level of debt. The effect will not be the same in a FF whose members hold similar views and amongst whom there are no conflicts. Finally, these dynamics change over time, not only because of generational succession, but also as a consequence of family events and evolution.

Understanding these family dynamics leads us to broaden the concept of heterogeneity within FFs and to assist managers in their debt decision-making. It is important to note that families, in turn, are influenced by the culture, religion and society that surround them. Furthermore, family characteristics play a role in determining the importance which each family member attributes to SEW and how it competes with economic wealth in decision-making. This perspective highlights the need to understand that behind each decision, there are individuals who might behave differently in the same environment. In fact, continuous research over the years in the field of family businesses indebtedness has demonstrated that they are conditioned by emotions more than any other type of businesses. Along these lines, Felin and Foss (2005) and Yu et al. (2023) suggest enriching FF research with micro-foundations.

In short, our proposal suggests complementing the study of decisions regarding the level of debt with theories related to family and individual behaviour and their dynamics. This approach would help to more accurately consider the heterogeneity of the FF, enriching the information used for debt decision-making. At this point, we again encourage researchers to use questionnaires or interviews which allow access to information related to specific characteristic of individuals within the family who, directly or indirectly, could influence the use of debt for the development and growth of FFs. Both types of variables, those regarding the motivation and attitude of family individuals and those regarding financial information of the firm, should be combined to better understand the level of influence of the former on the latter.

4.2.4 Generational stage and multi-family businesses

We must extend our understanding of the evolution of FFs over time and its influence on debt decisions. Along these lines, studies about the effect of the generational stage of FFs on the debt are scarce, and they are only focussed on the differences between first and second generations. However, it would be desirable to develop a more in-depth analysis of generational stage, trying to detect differences amongst second and subsequent generations. Likewise, the identification and analysis of the behaviours of multi-family businesses are essential to advance knowledge. In this business, a common bond of bloodline or marriage exists, but within each family, not between each family. Although these enterprises are not very common in FF environment, their exploration can be decisive to better capture the heterogeneity of FFs, as they are supposed to share the idiosyncrasy of any FF.

4.2.5 Type and maturity of debt

Although this is an important issue for any company, in the case of FFs, indebtedness is the main source of external financing, and the distinction of the maturity and type of debt becomes crucial because the effects of the different SEW dimensions or family dynamics mentioned above on indebtedness may be different.

Even though research that specifically focusses on this issue is scarce in the FF arena, some arguments can be found to support the disparity of indebtedness decisions that can be observed when different types and maturity of debt are considered. Regarding the type of debt, financial debt is usually subject to collateral or covenants with a bank, which allows the creditor to impose restrictions on the actions undertaken by the firm, and for this reason, FFs prefer lower levels of financial debt (Strebulaev and Yang, 2013; Molly et al., 2019).

Concerning the maturity of debt, different conclusions can be drawn for long- and short-term leverage for several reasons. First, short-term debt decisions are usually made by financial or operations managers, whilst long-term debt decisions may be influenced by the general manager and the BOD, who will generally be more oriented towards preserving SEW (Comino-Jurado et al., 2021b). Second, in FFs, some discrepancies exist between the preferences of claimants and suppliers of debt. In particular, from the demand side, following SEW preservation, shareholders and managers of FFs prefer to use long-term debt as, with this type of borrowing, they feel less constrained in controlling the firm (Molly et al., 2019). However, from the supply side, creditors are more likely to provide short-term debt to FFs because in this case, creditors can monitor managers more effectively through more frequent renegotiations of loan contract terms (Lardon et al., 2017).

Considering the previous arguments and the importance of the different conclusions that can be drawn depending on the particular maturity and type of debt analysed, in order to gain a deeper understanding of the financing decisions of FFs, the total debt needs to be broken down into different categories such as short- versus long-term and financial versus non-financial indebtedness. In particular, future research comparing the impact that the different SEW dimensions may exert on the variety of debt classes identified above will contribute to a better understanding of the heterogeneous indebtedness decisions of this group of businesses. Likewise, forthcoming studies should examine how the characteristics of individuals and their non-financial objectives will determine their attitude toward particular types of debt.

Finally, as indebtedness decisions may depend on the specific cultural setting and legal frameworks of each nation, multi-country studies that compare the impact of this contextual environment in the proportion of short-/long-term and financial/non-financial debt of FFs would be therefore useful.

4.2.6 Contextual factors

Related to the last research avenue, as businesses act in a changeable and unstable environment, in addition to including the contextual factors, such as financial, legal, economical or cultural characteristics affecting the supply and demand of funds sides, future research will need to examine new contextual determinants of the debt financing decisions of FFs. The recent impact of the coronavirus (COVID-19) health crisis in the world global economy or the commitment with the achievement of Sustainable Development Goals (SDGs) according to the 2030 Agenda are some of the central milestones to analyse in forthcoming studies. Thus, from a supply perspective, the available debt funding could vary depending on the financial soundness of national and international banks, as well as on the requirements of sustainable investments to obtain funds by companies.

5. Conclusions

The huge advance in the field of debt financing decision of FFs in recent decades is undeniable. Nevertheless, after analysing the articles published in recent years, we conclude that there is still much more work to be done and some issues still should be improved, such as the need to integrate the knowledge reported by different authors and to consider a variety of sources of heterogeneity and firm-specific, behavioural and contextual factors affecting financing decision-making in FFs.

5.1 Implications and limitations

Compared to other works, our SLR focusses exclusively on recent literature on debt decision-making, considering the special attention and advances made in this particular field in the last few years. Therefore, it has practical and theoretical implications that may have an impact at a social, political and economic level.

First, from a practical viewpoint, our results can be used in economic and business practice due to the important role that the specific dynamics of FFs play in comprehending their decisions on indebtedness. Indeed, by recognising the distinctive nature of FFs, financial institutions and policymakers could design more appropriate financing strategies to better cover the specific necessities of these businesses, thus aligning the demand and supply side of debt financing.

Regarding the theoretical implications, this SLR provides a comprehensive synthesis of the available empirical evidence; it defines the current state of research on FFs' debt decision-making and serves as a guide both for teaching purpose and for the development of future papers. Thus, our work contributes to better structuring ongoing research and provides explanations for competing arguments found in the literature on this topic. In particular, as a starting point, we emphasise the need to develop interdisciplinary studies that combine family and management sciences, which will allow under-explored aspects to be analysed, which will undoubtedly advance the understanding of debt decisions within FFs. On this point, with an awareness of the number and variety of aspects influencing FFs' indebtedness decisions, we also highlight the need to delimitate the specific context of study, as well as to combine different variables, methodologies and perspectives that will enrich the comprehension of the complex phenomenon analysed here, given the close relationship between emotions and financial objectives in this type of decisions. Moreover, it is crucial to delve deeper into the nature of the controlling family and the bond between its individuals as the primary source of the differences between FFs – also by disaggregating the concept of SEW.

In spite of the above-mentioned contributions, our research is not exempt from limitations. First, this SLR presents weaknesses which are typical of this particular method of analysis, for example, the subjectivity in some stages of the process – mainly in the definition of keywords and evaluation of articles; the parameters placed on the inclusion criteria for papers, such as language, document type or research field; or the selection of specific databases of indexed academic journals. Including other databases or type of documents or adding bibliometric processes could enrich the conclusions. Second, the heterogeneous samples of the analysed papers could be also seen as a shortcoming due to the difficulties in comparing the results from different types of companies and regions. However, we strongly believe that this heterogeneity can bring important findings to light and that it enhances the interest in researching FFs' debt decisions around the world.

Figures

Figure 1

Identification, selection and evaluation of studies (step 2 and 3)

Figure 2

Integrative model of knowledge about FFs' debt financing decisions

Table 1

Query strings and selection of studies: inclusion criteria

Search engine	Query string
WoS	TS = (“family board*” or “family business*” or “family ceo” or “family compan*” or “family control*” or “family corporation*” or “family director*” or “family enterprise*” or “family firm*” or “family govern*” or “family implication*” or “family influence” or “family involv*” or “family manag*” or “family organization*” or “family owner*” or “family participation” or “founding family-controlled firm*” or sew or “socio-emotional wealth” or “socioemotional wealth”) and TS=(“capital struct*” or credit* or *debt* or “financ* behavio*” or “financ* decision*” or “financ* indicator*” or “financ* manag*” or “financ* resource*” or “financ* struct*” or leverage)
Scopus	TITLE-ABS-KEY (“family board*” or “family business*” or “family ceo” or “family compan*” or “family control*” or “family corporation*” or “family director*” or “family enterprise*” or “family firm*” or “family govern*” or “family implication*” or “family influence” or “family involv*” or “family manag*” or “family organization*” or “family owner*” or “family participation” or “founding family-controlled firm*” or sew or “socio-emotional wealth” or “socioemotional wealth”) and TITLE-ABS-KEY (“capital struct*” or credit* or *debt* or “financ* behavio*” or “financ* decision*” or “financ* indicator*” or “financ* manag*” or “financ* resource*” or “financ* struct*” or leverage)

Filter	Inclusion criteria
Language	English
Document type (peer-reviewed)	Article (article in press) Early access Review
Research field	Business economics	WoS category	Scopus category
		Business finance Management Business Economics	Economics, econometrics and finance Business, management and accounting

Source(s): Authors’ own elaboration

Table 2

Research of debt financing decisions in FFs by country

Country	Number of documents
Belgium	2
Chile	1
China	3
Czech Republic	1
Egypt	1
England	1
France	1
Germany	2
India	3
Italy	3
Jordan	1
Latin America	1
Malaysia	2
Pakistan	1
Portugal	3
Singapore	1
South Asia	1
Spain	8
Taiwan	1
Vietnam	1
Total	38

Note(s): The total (38) corresponds to quantitative and qualitative documents

Source(s): Authors’ own elaboration

Table A1

Journals in which the papers were published

Journal	Number of documents	% Total
Afro-Asian Journal of Finance and Accounting	1	2.38
Applied Economics	1	2.38
Asian Review of Accounting	1	2.38
Cogent Economics and Finance	2	4.76
Corporate Governance: An International Review	1	2.38
Economics Bulletin	1	2.38
Emerging Markets Finance and Trade	2	4.76
Emerging Markets Review	1	2.38
Eurasian Business Review	1	2.38
Family Business Review	1	2.38
Finance A Uver – Czech Journal of Economics and Finance	1	2.38
Finance Research Letters	1	2.38
International Journal of Finance and Economics	1	2.38
International Review of Financial Analysis	1	2.38
International Small Business Journal – Researching Entrepreneurship	1	2.38
Investment Management and Financial Innovations	3	7.14
Journal of Business Research	2	4.76
Journal of Economics and Finance	1	2.38
Journal of Family Business Management	3	7.14
Journal of Family Business Strategy	1	2.38
Journal of Risk and Financial Management	1	2.38
Journal of Small Business Management	3	7.14
Journal of Southeast Asian Research	1	2.38
Management Decision	1	2.38
Pacific–Basin Finance Journal	1	2.38
Polish Journal of Management Studies	1	2.38
Qualitative Research in Financial Markets	1	2.38
Review of Managerial Science	1	2.38
Revista Contabilidade e Financas	1	2.38
Small Business Economics	3	7.14
Studies of Applied Economics	1	2.38
Total	42	100

Source(s): Authors’ own elaboration

Table A2

List of reviewed articles

Author(s)	Article type	Compare FF/Non-FF	Heterogeneity consideration		Debt variable	Theoretical arguments	Supply/demand side	Years of study	Methodology
			Yes/No	Source of heterogeneity
Acedo-Ramírez et al. (2017)	Quantitative	Yes	No		TD	Agency costs, asymmetric information	Demand (and for some traditional determinants of capital structure: both)	2000–2008	GMM technique
Amin and Liu (2020)	Quantitative	Yes	No		TD	Agency cost theory, pecking order theory, trade-off theory	Demand	2008–2016	OLS regression, GMM model
Bacci et al. (2018)	Quantitative	No	Yes	Family ownership	TD	Family control, risk aversion, SEW	Demand (and for some traditional determinants of capital structure: both)	2002–2011	Regression analysis
Baixauli-Soler et al. (2021)	Quantitative	No	Yes	Importance of SEW	TD, TFD, NFD	SEW, family control	Demand	2016	OLS regression
Benkraiem et al. (2018)	Quantitative	Yes	No		TD, LTD	Agency theory, pecking order theory	Both	2008–2016	Regression analysis
Chakraborty (2018)	Quantitative	No	–		TD	Agency theory	Demand	2006–2013	GMM model
Comino-Jurado et al. (2021a)	Quantitative	No	Yes	Family involvement in ownership, management and board of directors	TD	SEW, family control	Both	2015, 2016 or 2017	PLS-SEM
Comino-Jurado et al. (2021b)	Quantitative	No	Yes	Family involvement on the board of directors, generational stage	TD, STD, LTD	SEW, family control	Both	2015, 2016 or 2017	PLS-SEM
Diéguez-Soto and López-Delgado (2019)	Quantitative	Yes	No		TD	Risk aversion, SEW	Demand (and for some traditional determinants of capital structure: both)	2006–2013	Regression analysis, GMM model
Du and Zeng (2019)	Quantitative	No	No		Bank loans	Agency theory, institutional theory, CSR, consistency theory, social capital theory	Supply	2010	Regression analysis
ElBannan (2017)	Quantitative	No	Yes	Family ownership	TD	Agency costs, asymmetric information	Demand (and for some traditional determinants of capital structure: both)	2006–2014	2SLS model
Feito-Ruiz et al. (2023)	Quantitative	Yes	No		LTD	Agency theory, SEW	Both	1998–2016	GMM
Gao et al. (2020)	Quantitative	Yes	No		TD, maturity of bonds	Agency theory	Both	2009–2017	Regression analysis
Hussain et al. (2018)	Quantitative	Yes	No		LTD	Agency costs, liquidity, tax deduction, signalling theory	Demand	2001–2017	OLS regression
Jara et al. (2018)	Quantitative	Yes	No		TD, Net loans	Conservative attitude, risk aversion, monitoring role of creditors	Demand	2006–2014	OLS regression, 2SLS
Kharabsheh et al. (2019)	Quantitative	Yes	No		TD, LTD	Trade-off theory, agency costs, risk aversion	Demand (and for some traditional determinants of capital structure: both)	2010–2015	GMM model (two step)
Lardon et al. (2017)	Quantitative	No	Yes	Family management	STD, LTD, TFD	Family control, SEW	Both	2011	OLS regression
Lee et al. (2021)	Quantitative	No	No		TD	Agency perspective	Both	1991–2016	OLS regression
López-Delgado and Diéguez-Soto (2020)	Quantitative	Yes	Yes	Family management	TD	Family control, risk aversion, agency costs, SEW	Demand	2006–2013	Regression analysis
Mbanyele (2020)	Quantitative	Yes	Yes	Family ownership, firm life cycle	TD	Risk aversion, agency costs	Demand (and for some traditional determinants of capital structure: both)	2002–2013	Regression analysis
Molly et al. (2019)	Quantitative	No	Yes	Family goals	TD, LTD, STD, TFD, TNFD	Family control, SEW	Demand (and for some traditional determinants of capital structure: both)	2007–2008	OLS regression
Muhammad et al. (2021)	Quantitative	No	No		TD	Market timing theory	Both	2006–2017	OLS regression
Nguyen and Vu (2021)	Quantitative	Yes	No		TD	Behavioural agency theory	Demand (and for some traditional determinants of capital structure: both)	2010–2020	Regressions analysis, GMM model
Ntoung et al. (2020)	Quantitative	Yes	No		TD	Risk aversion	Demand	2007–2014	Regression analysis
Pestana et al. (2021)	Quantitative	No	No		TD, STD	Pecking order theory, trade-off theory	Both	2009–2016	Partial adjustment model
Poletti-Hughes and Martínez Garcia (2022)	Quantitative	No	Yes	Family control	LTD	Family control, agency costs, SEW	Demand	2005–2016	GMM model
Rajverma et al. (2019)	Quantitative	Yes	Yes	Family ownership	TD	Agency theory, pecking order theory, bankruptcy theory	Demand	2006–2017	3SLS model
Ramalho et al. (2018)	Quantitative	Yes	No		LTD	Agency costs, asymmetric information	Both	2006–2012	Regression analysis
Rossi et al. (2018)	Quantitative	No	Yes	Governance structures characteristics	TD	Risk aversion	Demand	2005–2013	Probit regression model
Sardo et al. (2022)	Quantitative	No	Yes	Governance structures characteristics	TD	Dynamic trade-off theory	Both	2010–2017	GMM model
Schickinger et al. (2022)	Quantitative	Yes	Yes	Family management, firm age, importance of SEW	TD	Trade-off theory, pecking order theory, behavioural agency models, SEW	Demand	2018	Regression analysis
Serrasqueiro et al. (2022)	Quantitative	Yes	No		STD, LTD	Pecking order theory, dynamic trade-off theory, deviation costs, adjustment costs	Both	2006–2014	GMM model
Thiele and Wendt (2017)	Quantitative	Yes	No		TD, LTD, trade credit ratio	Agency costs, asymmetric information	Both	2010–2014	Regression analysis
Wang et al. (2022)	Quantitative	No	Yes	Ownership and management structures	TD	Risk aversion, corporate financial risk	Demand	2008–2017	OLS regression
Yousaf et al. (2019)	Quantitative	Yes	No		TD, STD, LTD	Agency costs, family control	Demand (and for some traditional determinants of capital structure: both)	2005–2017	GMM model
Mundi et al. (2022)	Qualitative					Traditional financial theories, behavioural corporate finance	Both	2019	Interviews
Petrů and Tomášková (2020)	Qualitative						Demand	2014–2018	Interviews
Yusof Ali and Ahmad (2021)	Qualitative						Both	–	–

Note(s): TD (total debt); STD (short-term debt); LTD (long-term debt); TFD (total financial debt); TNFD (total non-financial debt). This appendix analyses the 38 quantitative and qualitative papers

Source(s): Authors’ own elaboration

Notes

1. The date of some of the analysed papers is 2022 because these articles have been included in a later issue, although they were accepted and published for the first time in 2021.

2. Due to the particular characteristics of the methodology employed, the meta-analysis and literature reviews have been analysed but they have not been included in Supplementary material – Table A2.

Research funding: This study was funded by the SEJ-289 research group (Universidad de Jaén). Funding for open access charge: Universidad de Jaén/CBUA.