Abstract
Family financing has become a powerful channel for entrepreneurs to obtain entrepreneurial funding. How do family members use intent and quality signals to select new ventures to provide lending support? Building on the signaling theory, this study provides the first quantitative evidence using a sample of 166 samples of family lenders in China. Our findings reveal that psychological capital can support entrepreneurs to obtain family lending. As an intent signal, psychological capital becomes more influential when quality signals, corporate competitive advantage, and firm performance perform more positively. This study emphasizes that family financing support is not only out of love or altruism and extends the literature concerning the influence of positive psychological capital in financial investment decisions.
Highlights
By explicitly focusing on entrepreneurial family financing, we extend the stream of literature concerning the influence of positive psychological capital in financial investment decisions (Anglin et al, 2018)
Our results reveal that intent signal, psychological capital, becomes more influential when quality signals, corporate competitive advantage, and firm performance perform more positively
We focused on intent signal, psychological capital, and two quality signals, corporate competitive advantage and firm performance
Summary
Traditional academic literature typically focuses on venture capital or crowdfunding investors. They do not focus on family financing, despite serving as the largest single source of startup capital in the world (Steier, 2003). The first kind is an intent signal, which is general information about the entrepreneur’s character and is mainly obtained through a personal relationship with the entrepreneur. The second kind is a quality signal, which is specific information about the entrepreneur’s ability and the quality of the entrepreneurial project. It is mainly obtained through the professional investigation of the entrepreneur and the entrepreneurial project
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