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Empirical studies examining the financing decisions of the firm focus exclusively on publicly held firms, not family-controlled firms despite their economic importance. This paper investigates the external financing behavior of family-controlled firms, using a comprehensive sample of 777 large European firms during the period 1998 to 2008. The authors document that, unlike nonfamily-controlled firms, the external financing decisions of family-controlled firms are influenced by control incentives and information asymmetry considerations. They find that family firms have a strong preference for debt financing, a non-control diluting security, while they are more reluctant to raise capital through equity offerings in comparison to nonfamily firms.
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