Capital structure of family firms: the effect of debt and equity market timing

Abstract

Purpose

This study aims to investigate how the timing behavior affects the capital structure decisions of South Asian family firms. A strand of literature is available based on the capital structure of firms in general but inconsistent with family businesses framework and not from market timing outlook. This study looks at the issues from the market timing perspectives of both equity and debt market timing.

Design/methodology/approach

The sample of the study is the listed family firms of India, Pakistan and Bangladesh. The firm-level data are collected from Thomson Reuters' DataStream and the ownership data collected from the countries' stock exchanges and financial statements of the family firms.

Findings

The results show that there is strong support for the market timing in the family firms' capital structure. Moreover, the financial crisis of 2007–2009 surprisingly had a positive effect on the capital structure of South Asian family business.

Originality/value

This study looks at the issues from the market timing perspectives of both equity and debt market timing. It provides evidence for supporting the equity and debt market timing effect on the capital structure and financing decision of family firms. It also addresses the impact of the 2007–2009 financial crisis on the capital structure of family firms.

Citation

Muhammad, M., Ei Yet, C., Tahir, M. and Nasir, A.M. (2021), "Capital structure of family firms: the effect of debt and equity market timing", Journal of Family Business Management, Vol. 11 No. 1, pp. 1-18. https://doi.org/10.1108/JFBM-09-2019-0059