Are Small Family Firms Financially Sophisticated?

46 Pages Posted: 24 Sep 2007 Last revised: 27 Mar 2011

See all articles by Alberta Di Giuli

Alberta Di Giuli

ESCP

Stefano Caselli

Bocconi University - Department of Finance

Stefano Gatti

Bocconi University - Department of Finance

Date Written: February 1, 2011

Abstract

We study the drivers of financial sophistication in small family firms. Sophistication is defined as the use of non-basic financial products such as options, swaps, debt restructuring, and mergers and acquisitions (M&A) advisory services. Our analysis is based on a unique dataset with detailed information on 187 Italian family firms. We find that the main drivers of financial sophistication are: 1) the generation that currently owns the firm; 2) the presence of a non-family CFO; and 3) the existence of a non-family shareholder. We analyze the impact of these factors on the following four classes of non-basic financial products: corporate finance, cash management, corporate lending and risk management. Our results can be used to determine the characteristics of financially sophisticated family firms and whether their corporate governance and ownership structure increase the use of non-basic financial products.

Keywords: Family Firm, Small Business, Relationship Banking, Financial Products

JEL Classification: G20, G24, G32

Suggested Citation

Di Giuli, Alberta and Caselli, Stefano and Gatti, Stefano, Are Small Family Firms Financially Sophisticated? (February 1, 2011). Available at SSRN: https://ssrn.com/abstract=1016122 or http://dx.doi.org/10.2139/ssrn.1016122

Alberta Di Giuli

ESCP ( email )

Paris Campus
79, Avenue de la Republique
Paris, 75011
France

Stefano Caselli (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Stefano Gatti

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

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