Friederike Meyer
Title
Ph.D. HSG
Last Name
Meyer
First name
Friederike
Email
friederike.meyer@unisg.ch
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Item type:Publication, Financing Costs and Credit Rating Changes of Family-Owned Firms Under Varying Market StressWe study the financing costs and credit rating changes of family-owned firms during varying levels of market stress. We examine the bond spreads of 5,186 bond issuances and the credit rating changes of 699 bond issuers in the S&P 1500 from 1995 to 2018. Our findings show that the impact of family ownership on the cost of debt financing is dependent on the level of financial market stress. We show that family-owned firms are associated with lower financing costs during times of below-average market stress and higher financing costs during years of financial crisis compared to non-family-owned firms. We also test whether this change in the cost of debt for family-owned firms is reflected in a change in the bond issuers' corporate credit rating. Our results suggest that family-owned firms are more likely to receive a rating downgrade during years of above-average market stress and crisis compared to non-family-owned firms. The results are in line with the concept of a mixed gamble, with family-owned firms acting risk-averse in a stable external environment and risk-seeking in times of a distressed external environment.Type:working paper