Strings attached: Socioemotional wealth mixed gambles in the cash management choices of family firms. Issue 3 (September 2022)

• Record Type: Journal Article
• Authors: Cambrea, Domenico Rocco; Ponomareva, Yuliya; Pittino, Daniel; Minichilli, Alessandro
• Is Part Of: Journal of family business strategy. Volume 13:Issue 3(2022)
• Publication Date: 2022-09
• Subjects: Cash holdings -- Corporate governance -- SEW -- Mixed gamble -- Boards of directors; Family-owned business enterprises -- Management -- Periodicals; Strategic planning -- Periodicals; planning -- Periodicals; 658.04505
• DOI: 10.1016/j.jfbs.2021.100466
• Languages: English
• ISSNs: 1877-8585

Abstract

Highlights: Family firms enjoy greater benefits and incur lower costs from increasing their cash holdings. The performance effects of cash holdings in family firms depend on the degree of control and influence exercised by the family. The benefits of cash holdings are most pronounced when family control and influence is high and when the board chair and CEO roles are separated. Abstract: Family owners differ from other types of owners due to the presence of socioemotional wealth (SEW) concerns. We take a closer look at this distinctive aspect by examining the impact of family control and influence dimension of SEW on the cash management choices of family firms, conceptualizing it as a mixed gamble choice. Our empirical analysis of 195 Italian firms listed on the Milan Stock Exchange between 2003 and 2015 shows that family firms derive more value and incur lower costs than nonfamily firms when they increase their cash holdings. We then delve deeper into family firms' cash management choices by exploring how different levels of family control and influence as well as types of board governance arrangements moderate this relationship. The empirical results indicate that the positive effects of family ownership are more pronounced under a high level of family control and influence and with separation of the board chair and CEO positions.