The Trade-Off between Financial Resources and Agency Costs in the Family Business: An Exploratory Study

15 Pages Posted: 5 Aug 2007

See all articles by Virginia Blanco-Mazagatos

Virginia Blanco-Mazagatos

University of Burgos

Esther de Quevedo-Puente

University of Burgos

Luis A. Castrillo

affiliation not provided to SSRN

Abstract

This exploratory study is intended to analyze how a combination of the resources-based view and agency theory can provide a better understanding of the internal dynamic of the family business and its evolution. Our evidence seems to suggest that the desire to keep family control produces specific sources of value and conditions the firm's financial capacity to acquire resources. These peculiarities change between first and following generations. During the first generation, we find that less severe agency costs balance the negative effect of scarce financial structure on the family firm's value. After descendants join the firm, the increasing agency costs are compensated by the enlargement of the firm's financial structure.

Suggested Citation

Blanco-Mazagatos, Virginia and Quevedo-Puente, Esther de and Castrillo, Luis A., The Trade-Off between Financial Resources and Agency Costs in the Family Business: An Exploratory Study. Family Business Review, Vol. 20, Issue 3, pp. 199-213, September 2007, Available at SSRN: https://ssrn.com/abstract=1004911 or http://dx.doi.org/10.1111/j.1741-6248.2007.00095.x

Virginia Blanco-Mazagatos (Contact Author)

University of Burgos ( email )

Hospital del Rey, s/n
Burgos, 09001
Spain

Esther de Quevedo-Puente

University of Burgos ( email )

Hospital del Rey, s/n
Burgos, 09001
Spain

Luis A. Castrillo

affiliation not provided to SSRN

No Address Available

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