CAPITAL STRUCTURE
DECISION MAKING: A
MODEL FOR FAMILY
BUSINESS
CLAUDIO A. ROMANO
Monash University, Victoria, Australia
GEORGE A. TANEWSKI
Monash University, Victoria, Australia
KOSMAS X. SMYRNIOS
Monash University, Victoria, Australia
EXECUTIVE
SUMMARY
Most theoretical and empirical studies of capital structure focus on public
corporations. Only a limited number of studies on capital structure have
been conducted on small-to-medium size enterprises (SMEs), and this defi-
ciency is particularly evident in investigations into factors that influence
funding decisions of family business owners.
Theory indicates that there is a complex array of factors that influence SME owner-managers’ fi-
nancing decisions. Recent family business literature suggests that these processes are influenced by firm
owners’ attitudes toward the utility of debt as a form of funding as moderated by external environmental
conditions (e.g., financial and market considerations).
A number of other factors have been shown to influence financing decisions including culture;
entrepreneurial characteristics; entrepreneurs’ prior experiences in capital structure; business goals;
business life-cycle issues; preferred ownership structures; views regarding control, debt–equity ra-
tios, and short- vs. long-term debt; age and size of the firm; sources of funding for growth; attitudes
Address correspondence to Claudio A. Romano, The National Mutual Family Business Research Unit,
Department of Accounting and Finance, Faculty of Business and Economics, Monash University, PO Box
197, Caulfield East, Victoria 3145, AUSTRALIA; ϩ61 3 9903 2171; Fax: ϩ61 3 9903 2422; Email: claudio.
romano@buseco.monash.edu.au
We are grateful to David Carson, Gerry Hills, and Ken Grant for their invaluable assistance, and to
Georgia Pashias for comments on an earlier draft. We are greatly indebted to the editor and blind reviewers
who saw the potential of our research. Their encouragement to rework our manuscript not only enhanced
the quality of this study but also stimulated much enthusiasm in our research endeavours. A recent version
of this manuscript was judged as the Best International Research Paper at the 9
th
Family Business Network
Conference, Paris, 1998. Further, we wish to thank the participants of the (1997) 10th UIC/AMA Marketing
and Entrepreneurship Research Symposium for comments made on an earlier version of this paper.
Journal of Business Venturing 16, 285–310
2000 Elsevier Science Inc. All rights reserved. 0883-9026/01/$–see front matter
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