Can we afford it? Investment decisions of family and nonfamily owners

UNCG Author/Contributor (non-UNCG co-authors, if there are any, appear on document)
Dianne H.B. Welsh, Distinguished Professor of Entrepreneurship (Creator)
Institution
The University of North Carolina at Greensboro (UNCG )
Web Site: http://library.uncg.edu/

Abstract: This study focuses on an issue particularly relevant in these difficult financial times. Can family businesses afford the risk associated with making investments that could generate higher returns? Studies examining financing behavior of family firms report higher control risk aversion than nonfamily firms, whereby control risk is measured through leverage levels. We found that family firm owners' degree of control risk aversion depends on reference points. Investment alternatives implying higher leverage levels become significantly more attractive to family owners when considered from a secure reference point with low leverage levels, than when the same investment alternatives are assessed from a less secure reference point with higher leverage levels. Implications are discussed.

Additional Information

Publication
Academy of Entrepreneurship Journal, 16 (2), 21-41
Language: English
Date: 2010
Keywords
Family business, High risk investments , Risk aversion, High return, Security