Journal of Financial Services Research

, Volume 48, Issue 1, pp 53–82

Founding Family Firms and Bank Loan Contracts

  • Ju-Fang Yen
  • Chih-Yung Lin
  • Yan-Shing Chen
  • Ying-Chen Huang
Article

DOI: 10.1007/s10693-014-0199-1

Cite this article as:
Yen, J., Lin, C., Chen, Y. et al. J Financ Serv Res (2015) 48: 53. doi:10.1007/s10693-014-0199-1

Abstract

Given the economic importance of bank loan financing worldwide, we empirically investigate the role of founding family ownership in bank loan contracts after controlling other governance practices via individual bank loan contracts in Taiwan. We first find that founding family firms can enjoy favorable loan contracts in terms of loan spread. Second, we find that these favors tend to decrease or even disappear when founding families are more likely to expropriate other investors or when the information asymmetry between the borrower and the bank is not severe. Third, we document that the favorable spread effect of founding family firms enlarge for firms with greater credit risk, or during periods of financial crisis.

Keywords

Founding family ownershipCorporate governanceBank loan contractsCredit riskFinancial crisis

JEL

G21G32G34

Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  • Ju-Fang Yen
    • 1
  • Chih-Yung Lin
    • 2
  • Yan-Shing Chen
    • 3
  • Ying-Chen Huang
    • 3
  1. 1.Department of Statistics, College of BusinessNational Taipei UniversityTaipeiRepublic of China
  2. 2.College of ManagementYuan Ze UniversityTaipeiRepublic of China
  3. 3.Department of FinanceNational Taiwan UniversityTaipeiRepublic of China