Abstract
Using a sample of hi-tech Chinese small and medium-size enterprises (SMEs), we compare financing costs for family and nonfamily firms. We find that family SMEs enjoy relatively lower average financing costs through mitigating agency problems, the provision of greater collateral, and the reliance on internal finance. Family firms may also make better use of their advantage in the pledged assets of family members, thereby making them less subject to financing constraints. We also find that the apparent inconsistency between the willingness and likeliness to rely on internal finance for family firms reflects the financial constraints of SMEs.
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