Performance, financing decisions and corporate governance of Italian medium and large private family firms

This empirical study examines the relationship between financing decisions and corporate governance on the one side and firm performance on the other, concerning Italian large and medium private family firms. Tax-aggressive practices are not used to avoid a deprivation of socioemotional wealth, in terms of diminished reputation, caused by a possible tax-related lawsuit. Due to the low risk perception and most likely the profitable use of a larger quantity of cheaper debt, size improves performance. However, more solvent firms exhibit better results only when Return on Assets (ROA) is taken into account. The presence of descendants taking their place in the family business impairs performance. Short- and long-term debts are not related to the agency conflicts between owners and managers and between owners and creditors, therefore debt maturity has no influence on performance. Finally, the negative relationship between leverage and performance tends to reveal pecking order behaviour for the sampled firms.