Fast or Slow? Asymmetric Adjustment Speed Toward Target Leverage in Family Firms

Abstract

Despite the vast literature on family business capital structure, there is a paucity of research on how the speed of adjustment and its asymmetry toward target leverage of family firms differ from those of nonfamily counterparts. In a study of 763 publicly listed firms in the United States during the 2000-2019 period, we find significant differences in the speed of adjustment and its asymmetry toward variable and constant target leverage between family and nonfamily firms, particularly before and after the global financial crisis. Overall, we contribute toward understanding the dynamic nature of family and nonfamily firm capital structures.

Keywords: dynamic capital structure, adjustment speed, asymmetry, global financial crisis, family firms