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Are family firms more inclined to be zero-levered than non-family firms? Evidence of the Belgian economy

Ben Van Overloop
This study investigates the relation between the zero-leverage phenomenon and family firms. The sample is based on the Belgian economy and counts 62 631 year observations between 2008 and 2016, collected from the database Belfirst. Family firms represent 77% of all companies with employees in the Belgian economy and 45% of the labour market is associated with Belgian family firms. Logit and tobit panel analyses show that family firms are less inclined to adopt a zero-leverage policy as they do not want to dilute their ownership. Furthermore, old family firms are less motivated to be zero-levered as they do not need additional funding to expand their business. Overall, Belgian family firms are less inclined to be zero-levered than non-family firms.