Family firms and the lease decision

Abstract

Family firms play an important role in many economies around the world. Their governance may be motivated by both financial and nonfinancial concerns. This study investigates whether and how family ownership affects a particular strategic decision: to purchase or lease assets. More specifically, the impact of family ownership on firms’ leasing propensity is examined. Financial determinants (growth, leverage, and liquidity) known to impact this relationship and their interaction with family ownership are included in the model. The results indicate that in publicly listed family firms, the SEW perspective influences strategic decisions involving long-term investment. The results also indicate a distinction between family and nonfamily firms as well as between firms with a family CEO and a lone founder, leading to different strategic decisions and risk-taking behaviors. Finally, from the lessor's standpoint, family firms appear to be less prone to lease, except when they are more leveraged, have growth opportunities, or want to preserve liquidity.