Indebtedness in family-managed firms: the moderating role of female directors on the board

Despite the analysis of capital structure has motivated a huge amount of literature within the field of finance, much is still unrevealed regarding how and why managers decide to get into debt. Stimulated by the increasing interest in capital structure decisions of family businesses and by the growing demand for advocating a faster increase in the presence of female directors in boardrooms, our work addresses how family management and the presence of a female critical mass affect the firm indebtedness in a private firm context. This study uses a sample of 4223 private firms in Spain, a privileged context to test the objectives of this work, from 2006 to 2013. We find that family-managed firms rely more heavily on indebtedness than non-family managed firms. The results also suggest that the presence of female directors has a negative influence on indebtedness. Finally, our findings also show that the involvement of female directors moderates the family management-indebtedness relationship, in such that only when a critical mass of women directors is on the board, the positive effect of family management on firm indebtedness is diminished considerably. Practitioners should consider family management and female presence on the board as essential factors when establishing financing strategy. Likewise, government agencies should take into consideration both aspects when designing and setting policies.