Financial Literacy and Family Firm Growth: The Moderating Effect of Generational Stage

Abstract

This study examines the relationship between a CEO's financial literacy, the generational stage and family firm growth by employing a willingness-ability perspective. We argue that the willingness of a CEO to use his/her ability to foster growth is a mixed gamble. The outcome of the gamble is dependent on how the advantages and disadvantages of firm growth are evaluated by the CEO. This evaluation might be contingent on the generational stage of the family firm. Using a sample of 199 privately-held Spanish family firms, our results support the hypothesized positive association between a CEO's financial literacy and family firm growth. Moreover, this association is moderated by generational stage in such a way that the relationship becomes weaker for first generation and later generation family firms, while becoming stronger for second generation family firms.