Do Family Ownership and Ethnicity influence Financial Choices? Overview of Literature on Malaysian Corporate Landscape
Literature has addressed the reciprocal nature of the family and the business within the family-firm setting. This reciprocal relationship contributes to several distinctive features commonly found in family businesses. These features include strong family ties, undiversified family holdings, and strong desire to pass the firm onto subsequent successors and higher concerns to retain family control and reputation. Recent family business literature also suggests that the capital structure decision is important for family business. Therefore, one would argue that a firm’s organizational attributes such as those found in the family firms are likely to influence leverage levels in these firms. Agency theory suggests that family firms have a lower agency problems because owner-managers’ interests are likely to be more aligned, hence giving creditors greater confidence to lend. Drawing on the existence evidence that corporate ownership of Malaysian firms can be clearly identified along ethnic lines, this study also explain the possible effect of ethnicity that has been shown to influence corporate financing decisions in Malaysia.This study is unique, for it deals with the issue of capital structure determinants outside developed countries. It offers an alternative explanation for the leverage variations and provides evidence on the universality of the capital structure theory.