Abstract
ABSTRACT This study sheds light on the impact of family involvement on the financial management of companies. We analyze if family firms show differences in the sophistication of financial management compared with their non-family counterparts. We surveyed Austrian and German medium-sized and large firms and found that family businesses have a lower level of overall financial sophistication compared with non-family firms. This result can be attributed to their reluctance to implement value-based management and working capital management, whereas no significant differences could be found for the use of financial risk management techniques. Furthermore, our study indicates that the type of family influence is an important determinant of financial sophistication. Our empirical findings provide new evidence of how the specific incentive and goal structure of family firms influences their financial decisions. Keywords financial sophistication, family firms, financial management, value-based management, working capital management, risk management
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