Advertisement

Small Business Economics

, Volume 52, Issue 1, pp 277–301 | Cite as

Relational capital in lending relationships: evidence from European family firms

  • Marco CucculelliEmail author
  • Valentina Peruzzi
  • Alberto Zazzaro
Article

Abstract

The aim of this paper is to investigate the role of family CEOs’ relational capital and non-family CEOs’ managerial skills in the context of bank relationships for a large sample of small- and medium-sized European firms. The results indicate that family firms appointing family managers are significantly more likely to maintain soft-information-based and longer-lasting lending relationships than family firms managed by professionals, and that these closer bank-firm ties reduce the likelihood of experiencing credit restrictions. Moreover, we find that having professional CEOs does not directly affect the probability of being credit rationed. Hence, family relational capital appears to have a univocal beneficial impact on bank-firm relationships.

Keywords

Family firm Family CEO Soft information Relational capital Relationship lending Credit rationing 

JEL codes

D22 G21 G22 

Notes

Acknowledgements

We are grateful to two anonymous referees for helpful comments and suggestions. We are also grateful for the comments of Stefania Cosci, Rocco Ciciretti, Riccardo Lucchetti, Pierluigi Murro, Tommaso Oliviero and participants at the XXIV Conference on Money, Banking and Finance (Rome, Italy), the 3rd CERBE Workshop (Rome, Italy) and seminar held at the University of Rome Tor Vergata.

References

  1. Alesina, A., Giuliano, P., & Nunn, N. (2013). On the origins of gender roles: women and the plough. The Quarterly Journal of Economics, 128, 469–530.CrossRefGoogle Scholar
  2. Alfani, G., & Gourdon, V. (2012). Entrepreneurs, formalization of social ties, and trustbuilding in Europe (fourteenth to twentieth centuries). Economic History Review, 65, 1005–1028.CrossRefGoogle Scholar
  3. Altomonte, C., Aquilante, T., 2012. The Eu-Efige/Bruegel-Unicredit dataset. Bruegel Working Paper.Google Scholar
  4. Amore, M. D., & Bennedsen, M. (2013). The value of local political connections in a low-corruption environment. Journal of Financial Economics, 110, 387–402.CrossRefGoogle Scholar
  5. Anderson, R., & Reeb, D. (2003). Founding family owner and firm performance: evidence from the S&P500. Journal of Finance, 58, 1302–1328.CrossRefGoogle Scholar
  6. Anderson, R., Mansi, S., & Reeb, D. (2003). Founding family ownership and the agency cost of debt. Journal of Financial Economics, 68, 263–285.CrossRefGoogle Scholar
  7. Andersson, F. W., Johansson, D., Karlsson, J., Lodefalk, M., & Poldahl, A. (2017). The characteristics of family firms: exploiting information on ownership, kinship, and governance using total population data. Small Business Economics.  https://doi.org/10.1007/s11187-017-9947-6.
  8. Andres, C. (2011). Family ownership, financing constraints and investment decisions. Applied Financial Economics, 21, 1641–1659.CrossRefGoogle Scholar
  9. Andrieu, G., Staglianò, R., & van der Zwan, P. (2017). Bank debt and trade credit for SMEs in Europe: firm-, industry-, and country-level determinants. Small Business Economics.  https://doi.org/10.1007/s11187-017-9926-y.
  10. Barontini, R., & Caprio, L. (2006). The effect of family control on firm value and performance: Evidence from continental Europe. European Financial Management, 12, 689–723.CrossRefGoogle Scholar
  11. Bartoli, F., Ferri, G., Murro, P., & Rotondi, Z. (2013). SME financing and the choice of lending technology in Italy: Complementarity or substitutability? Journal of Banking & Finance, 37, 5476–5485.CrossRefGoogle Scholar
  12. Bellucci, A., Borisov, A., & Zazzaro, A. (2010). Does gender matter in bank-firm relationships? Evidence from small business lending. Journal of Banking and Finance, 34, 2968–2984.CrossRefGoogle Scholar
  13. Bennedsen, M., & Fan, J. P. H. (2014). The family business map. Assets and roadblocks in long term planning. Basingstoke, Hampshire, UK: Palgrave Macmillan.Google Scholar
  14. Bennedsen, M., Fan, J. P. H., Jian, M., & Yeh, Y. (2015). The family business map: framework, selective survey, and evidence from Chinese family firm succession. Journal of Corporate Finance, 33, 212–226.CrossRefGoogle Scholar
  15. Berger, A. N., & Udell, G. F. (2006). A more complete conceptual framework for SME finance. Journal of Banking and Finance, 30, 2945–2966.CrossRefGoogle Scholar
  16. Bertrand, M., & Schoar, A. (2006). The role of family in family firms. The Journal of Economic Perspectives, 20, 73–96.CrossRefGoogle Scholar
  17. Bloom, N., & Van Reenen, J. (2007). Measuring and explaining management practices across firms and countries. The Quarterly Journal of Economics, 122, 1351–1408.CrossRefGoogle Scholar
  18. Bopaiah, C. (1998). Availability of credit to family businesses. Small Business Economics, 11, 75–86.CrossRefGoogle Scholar
  19. Braggion, F. (2011). Managers and (secret) social networks; the influence of the freemasonry on firm performance. Journal of the European Economic Association, 3, 1053–1081.CrossRefGoogle Scholar
  20. Brau, J. C. (2002). Do banks price owner-manager agency costs? An examination of small business borrowing. Journal of Small Business Management, 40, 273–286.CrossRefGoogle Scholar
  21. Brown, M., Ongena, S., Popov, A., & Yesin, P. (2011). Who needs credit and who gets credit in Eastern Europe? Economic Policy, 26, 93–130.CrossRefGoogle Scholar
  22. Bunkanwanicha, P., Fan, J. P. H., & Wiwattanakantang, Y. (2013). The value of marriage to family firms. Journal of Financial and Quantitative Analysis, 48, 611–636.CrossRefGoogle Scholar
  23. Caprio, G., Laeven, L., & Levine, R. (2007). Ownership and bank valuation. Journal of Financial Intermediation, 16, 584–617.Google Scholar
  24. Carillo, M. R., Lombardo, V., Zazzaro, A., 2015. Family firms and entrepreneurial human capital in the process of development, CSEF working papers 400.Google Scholar
  25. Caselli, F., & Gennaioli, N. (2013). Dynastic management. Economic Inquiry, 51, 971–996.CrossRefGoogle Scholar
  26. Chelli, F., & Zazzaro, A. (2008). I finanziamenti bancari allo start-up: L’esperienza e il ruolo dei direttori di filiale. In A. Zazzaro (Ed.), I vincoli finanziari alla crescita delle imprese (pp. 19–44). Roma: Carocci Editore.Google Scholar
  27. Chrisman, J. J., Chua, J. H., De Massis, A., Minola, T., & Vismara, S. (2016). Management processes and strategy execution in family firms: From “what” to “how”. Small Business Economics, 47, 719–734.CrossRefGoogle Scholar
  28. Chung, C., & Luo, X. R. (2013). Leadership succession and firm performance in an emerging economy: Successor origin, relational embeddedness, and legitimacy. Strategic Management Journal, 34, 338–357.CrossRefGoogle Scholar
  29. Claessens, S., Djankov, S., & Lang, L. H. (2000). The separation of ownership and control in East Asian corporations. Journal of Financial Economics, 58, 81–112.CrossRefGoogle Scholar
  30. Colli, A. (2012). Contextualizing performances of family firms: the perspective of business history. Family Business Review, 25, 243–257.CrossRefGoogle Scholar
  31. Cosci, S., Meliciani, V., & Sabato, V. (2015). Relationship lending and innovation: empirical evidence on a sample of European firms. Economics of Innovation and New Technology, 25, 335–357.CrossRefGoogle Scholar
  32. Cucculelli, M., & Peruzzi, V. (2016). Bank screening technologies and the founder effect: evidence from European lending relationships. Finance Research Letters.  https://doi.org/10.1016/j.frl.2016.10.004.
  33. D’Aurizio, L., Oliviero, T., & Romano, L. (2015). Family firms, soft information and bank lending in a financial crisis. Journal of Corporate Finance, 33, 279–292.CrossRefGoogle Scholar
  34. Faccio, M., & Lang, L. H. P. (2002). The ultimate ownership of Western European corporations. Journal of Financial Economics, 65, 365–395.CrossRefGoogle Scholar
  35. Faccio, M., & Parsley, D. C. (2009). Sudden deaths: taking stock of geographic ties. Journal of Financial and Quantitative Analysis, 44, 683–718.CrossRefGoogle Scholar
  36. Ferri, G., & Murro, P. (2015). Do firm-bank “odd couples” exacerbate credit rationing? Journal of Financial Intermediation, 24, 231–251.CrossRefGoogle Scholar
  37. Freel, M., Carter, S., Tagg, S., & Mason, C. (2012). The latent demand for bank debt: characterizing “discouraged borrowers”. Small Business Economics, 38, 399–418.CrossRefGoogle Scholar
  38. Gambini, A., & Zazzaro, A. (2013). Long-lasting bank relationships and growth of firms. Small Business Economics, 40, 977–1007.CrossRefGoogle Scholar
  39. Heckman, J. (1979). Sample selection bias as a specification error. Econometrica, 47, 153–161.CrossRefGoogle Scholar
  40. Hernández-Cánovas, G., & Martínez-Solano, P. (2007). Effect of the number of banking relationships on credit availability: evidence from panel data of Spanish small firms. Small Business Economics, 28, 37.CrossRefGoogle Scholar
  41. Herrera, A. M., & Minetti, R. (2007). Informed finance and technological change: evidence from credit relationships. Journal of Financial Economics, 83, 223–269.CrossRefGoogle Scholar
  42. La Porta, R., Lopez-De-Silanes, F., & Shleifer, A. (1999). Corporate ownership around the world. Journal of Finance, 54, 471–518.CrossRefGoogle Scholar
  43. Laeven, L., & Levine, R. (2009). Bank governance, regulation and risk taking. Journal of Financial Economics, 93, 259–275.Google Scholar
  44. Le Breton, I., & Miller, D. (2005). Managing for the long run: lessons in competitive advantage from great family businesses. Boston MA: Harvard Business School Press.Google Scholar
  45. Lee, L. F., Maddala, G. S., & Trost, R. P. (1980). Asymptotic covariance matrices of two-stage probit and two-stage tobit methods for simultaneous equations models with selectivity. Econometrica: Journal of the Econometric Society, 491–503.Google Scholar
  46. Liberti, J. M., & Mian, A. R. (2009). Estimating the effect of hierarchies on information use. Review of Financial Studies, 22, 4057–4090.CrossRefGoogle Scholar
  47. Lollivier, S. (2001). Endogénéité d’une variable explicative dichotomique dans le cadre d’un modèle probit bivarié. Annales d’Economie et de Statistique, 62, 251–269.CrossRefGoogle Scholar
  48. Luo, X., Kanuri, V. K., & Andrews, M. (2014). How does CEO tenure matter? The mediating role of firm-employee and firm-customer relationships. Strategic Management Journal, 35, 492–511.CrossRefGoogle Scholar
  49. Miller, D., Le-Breton-Miller, I., & Lester, R. H. (2011). Stewardship or agency: a social embeddedness reconciliation of conduct and performance in public family businesses. Organization Science, 22, 704–721.CrossRefGoogle Scholar
  50. Miller, D., Minichilli, A., & Corbetta, G. (2013). Is family leadership always beneficial? Strategic Management Journal, 34, 553–571.CrossRefGoogle Scholar
  51. Minetti, R., Murro, P., & Paiella, M. (2015). Ownership structure, governance, and innovation. European Economic Review, 80, 165–193.CrossRefGoogle Scholar
  52. Ogura, Y., & Uchida, H. (2014). Bank consolidation and soft information acquisition in small business lending. Journal of Financial Services Research, 45, 173–200.CrossRefGoogle Scholar
  53. Petersen, M. A., & Rajan, R. G. (1994). The benefits of lending relationships: evidence from small business data. Journal of Finance, 49, 3–37.CrossRefGoogle Scholar
  54. Petersen, M. A., & Rajan, R. G. (1995). The effect of credit market competition on lending relationships. The Quarterly Journal of Economics, 110, 407–443.CrossRefGoogle Scholar
  55. Pindado, J., & de la Torre, C. (2011). Family control and investment-cash flow sensitivity: empirical evidence from the euro zone. Journal of Corporate Finance, 17, 1389–1409.CrossRefGoogle Scholar
  56. Rose, M. B. (2000). Firms, networks and business values: the British and American cotton industries since 1700. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  57. Salvato, C., & Melin, L. (2008). Creating value across generations in family-controlled businesses: the role of family social capital. Family Business Review, 21, 259–276.CrossRefGoogle Scholar
  58. Schäfer, D., Stephan, A., & Mosquera, J. S. (2017). Family ownership: does it matter for funding and success of corporate innovations? Small Business Economics, 48, 931–951.CrossRefGoogle Scholar
  59. Scott, J. (2004). Small business and the value of community financial institutions. Journal of Financial Services Research, 25, 207–230.CrossRefGoogle Scholar
  60. Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. Journal of Finance, 52(2), 737–783.CrossRefGoogle Scholar
  61. Sirmon, D. G., & Hitt, M. A. (2003). Managing resources: linking unique resources, management, and wealth creation in family firms. Entrepreneurship Theory and Practice, 27, 339–358.Google Scholar
  62. Stacchini, M., & Degasperi, P. (2015). Trust, family businesses and financial intermediaries. Journal of Corporate Finance, 33, 293–316.CrossRefGoogle Scholar
  63. Steijvers, T., Voordeckers, W., & Vanhoof, K. (2010). Collateral, relationship lending and family firms. Small Business Economics, 34, 243–259.CrossRefGoogle Scholar
  64. Uchida, H., Udell, G. F., Yamori, N., 2006. SME financing and the choice of lending technology. RIETI Discussion Paper Series.Google Scholar
  65. Uchida, H., Udell, G. F., & Yamori, N. (2012). Loan officers and relationship lending to SMEs. Journal of Financial Intermediation, 21, 97–122.CrossRefGoogle Scholar
  66. Uzzi, B., & Lancaster, R. (2003). Relational embeddedness and learning: the case of bank loan managers and their clients. Management Science, 49, 383–399.CrossRefGoogle Scholar
  67. Villalonga, B. (2004). Intangible resources, Tobin’s q and sustainability of performance differences. Journal of Economic Behavior & Organization, 54, 205–230.CrossRefGoogle Scholar
  68. Villalonga, B., & Amit, R. (2006). How do family ownership, control and management affect firm value? Journal of Financial Economics, 80, 385–441.CrossRefGoogle Scholar
  69. Voordeckers, W., & Steijvers, T. (2006). Business collateral and personal commitments in SME lending. Journal of Banking and Finance, 30(11), 3067–3086.Google Scholar
  70. Wooldridge, J. M. (1997). On two stage least squares estimation of the average treatment effect in a random coefficient model. Economics Letters, 56, 129–133.CrossRefGoogle Scholar
  71. Xu, N., Xu, X., & Yuan, Q. (2013). Political connections, financing friction, and corporate investment: evidence from Chinese listed family firms. European Financial Management, 19, 675–702.CrossRefGoogle Scholar
  72. Zahra, S. A. (2010). Harvesting family firms' organizational social capital: a relational perspective. Journal of Management Studies, 47, 345–366.Google Scholar
  73. Zona, F. (2016). CEO leadership and board decision processes in family-controlled firms: comparing family and non-family CEOs. Small Business Economics, 47, 735–753.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Università Politecnica delle Marche and MoFiRAnconaItaly
  2. 2.Università Politecnica delle MarcheAnconaItaly
  3. 3.Università di Napoli Federico II, CSEF and MoFiRNaplesItaly

Personalised recommendations