Ownership Succession Financing and Firm Growth: a Multiple Mediator Approach

Abstract

Drawing upon the (Behavioral) Agency Model, we build a conceptual model that provides detailed theoretical explanations regarding the effect of ownership succession financing on post-succession growth of private family firms. In particular, relationships among the succession financing choice (independent variable), post-succession growth (dependent variable), risk taking (mediating variable), payout (mediating variable) and corporate governance (moderating variable) are proposed. In contrast to management succession, ownership transfers involve the acquisition of a major shareholder stake and, therefore, the financing of this acquisition is a crucial element of ownership succession. We propose that financing choices inherent to intra-family ownership transfers may influence successor’s self-interested behavioral tendencies with respect to risk taking and the extraction of firm resources, which, in turn, may damage firm growth. This study will enhance family business researchers’ insights on successors’ risk attitudes and payout preferences and, ultimately, post-succession development paths of the family firm.