The Effect of Family Ownership on the Adjustment Speed of Financial Leverage towards Optimal Leverage

Document Type : Original Article

Authors

• Vahab Rostami ¹
• Abdolrasoul Rahmanian Koushkaki ²
• Ali Akbar Alahyari ³
• Hamed Kargar ²

¹ Assistant Prof., Department of Accounting, Payam Noor University, Tehran

² Department of Accounting, Payame Noor University, Tehran, Iran

³ Department of Accounting, Payam Noor University, Tehran, Iran

10.22067/ijaaf.2024.44118.1314

Abstract

Faster attainment of optimal financial leverage guarantees the company's survival and the growth of shareholders' interests. This paper investigates the effect of family ownership on the speed of adjustment of financial leverage toward optimal leverage. The data of 133 companies listed on the Tehran Stock Exchange, selected according to the systematic exclusion pattern, was collected for 10 years from 2012 to 2021 to achieve the research objectives. A multivariate linear regression model was used to test the research hypotheses. In order to measure the speed of adjustment of financial leverage, the partial adjustment pattern model of Öztekin (2015) has been used, and to evaluate the Family Ownership, Chen et al. (2008) method was used. The results showed that the speed of adjustment of financial leverage towards optimal leverage in family companies is faster than in non-family companies. Therefore, family owners in companies with a higher sense of responsibility towards the company's capital can create a safe environment for investors and ensure a return on their investment.

Keywords

• Adjustment Speed of Financial leverage
• Capital Structure
• Family and non-family Ownership
• Optimal leverage

Main Subjects

• Finance

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