The long-term horizon of family firms in M&A: the impact on research investments and debt maturity structure

Despite family business is the most widespread ownership structure worldwide, there is a lack of evidence on the impact of external growth strategies on their capital structure. The aim of the paper is to shed new light on the planning of debt maturity structure and innovation investments when family firms embrace an acquisition path. The study analyses whether and to what extent over-leveraged financial structures may lead to give up the exploitation of external growth strategies. Moreover, due to family risk-aversion, I argue that family firms will use bank debt to a lower extent than non-family firms when they embrace an external growth strategy. Moreover, thanks to a lower use of debt, family firms are more likely to avoid cuts in research investments. Thus, it is more likely that there will be a positive relationship between long term debt and acquiring family firms. In short, the findings suggest that family firms will use less bank debt to finance acquisitions, avoiding cutting research investments and relying on a more balanced debt maturity structure.