Do Family Firms have Better Access to External Finance during Crises?

Manuscript Type Empirical Research Question/Issue We explore whether family firms have easier access to debt during crises than nonfamily firms. We adapt the leverage equation from the corporate finance literature and estimate the differences in the leverages of family and nonfamily firms between expansion and crisis periods. Research Findings/Insights The capital structure of family firms is based less on external finance than that of nonfamily firms. Nevertheless, during crisis periods, family firms are less subject to credit restrictions than nonfamily firms and, thus, the impact of the lack of credit on their capital structure is less severe in the former than in the later. Theoretical/Academic Implications We provide a reliable test of the access of family firms to external finance in a market with severe financial constraints. A precise empirical definition of family firms contributes to the study of the differential characteristics of this group of firms. Practitioner/Policy Implications This paper shows the relevance of family firms in the economy under difficult financial conditions. The finding that lenders can be less reluctant to lend to family firms during a crisis encourages policies promoting a long‐term view of these firms and their control across generations. The results can also be useful at the time of designing policies related to the access of credit during expansion and crisis periods.