Abstract
Several studies show that family firms avoid risky financial policies and value goals such as survival and reputation more than financial profits. Our study provides new evidence that extends the literature by showing that family firms exhibit conservative short-term investment policies by investing more in working capital. Notably, family firms hold more inventories and pay their suppliers promptly. The general notion that higher working capital investments debilitate profitability does not hold true for family firms. This paper is the first to explore the unique channel of working capital investments through which family firms may accomplish survival and reputation goals without hurting profitability.
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