An Empirical Investigation of the Debt Maturity of Italian Family Firms

This study examines, through a dynamic panel data methodology (GMM-SYS) applied on a sample of 1,224 Italian family firms, whether and how the debt maturity structure of Italian family firms is determined by asset maturity, taxes, agency conflicts between managers and shareholders and between shareholders and creditors, liquidity risk, asymmetric information, the recent crisis, and the past dynamics of the debt maturity structure itself. Firstly, Italian family firms do not immediately adjust their maturity structure to its target and this adjustment is costly. There is no evidence of the maturity matching principle, nor of taxes influencing the debt maturity of Italian family firms. Conflicts of interests between managers and shareholders increase as Italian family firms get older, hence older Italian family firms use more long-term debt. Moreover, the scarce presence of conflicts of interest between shareholders and creditors causes long-term debt to augment, as it is used to properly exploit growth opportunities and thus, finance long-term investments. Both low-quality and high-quality Italian family-owned businesses tend to use short-term debt, since the former are screened out of the long-term debt market and the latter employ short-term debt to signal their quality when new positive information becomes available. Finally, lower asymmetric information increases the amount of long-term debt Italian family firms can get, whereas the crisis has had a negative impact on their debt maturity and this is linked to a reduced need for long-term debt to finance the permanent assets of Italian family firms. My empirical research represents an attempt to interpret the main determinants influencing the debt maturity structure of Italian family firms, by using an advanced econometric model which can better explain the financial behaviour of the firms being surveyed. Because the work deals with Italian family firms, no comparison based on country-specific aspects has been made among family firms belonging to different countries. Moreover, the absence of detailed yearly information on the ownership, board of directors, and managers prevented me from further enhancing the knowledge of the relationship between agency conflicts and debt maturity of Italian family firms. However, these two limitations may constitute further streams of future applied research.