Capital Structure Adjustment in Brazilian Family Firms

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Eduardo K. Kayo
Eduardo Ottoboni Brunaldi
Dante M. Aldrighi


We examine the extent to which family companies are different from non-family companies in their leverage ratios and their capital structure adjustment. By applying a dynamic trade-off model to a sample of Brazilian companies for 2003-2013, we show that family companies have higher leverage and slower adjustment speeds in comparison to non-family companies. We argue that family companies’ managers tend toward higher leverage because they are more confident and optimistic than managers of non-family firms. Financial constraints stemming from this high leverage prevent over-leveraged family firms from rapidly adjusting their target capital structure.


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Kayo, E. K., Brunaldi, E. O., & Aldrighi, D. M. (1). Capital Structure Adjustment in Brazilian Family Firms. Journal of Contemporary Administration, 22(1), 92-114.