Family control and cost of debt: Evidence from Thailand

This paper analyzes the incentives behind controlling families' financing decisions which help sustain their firms' long-term survivorship. Using a sample of hand-collected ownership of Thai listed companies for the period 2009–2015, we show that family firms in Thailand have lower debt financing cost compared to non-family firms. The lower cost of external debt financing predominates in highly profitable family firms insofar that these firms are reputable and concerned with their long-term survivorship. Further, family firms benefit from the strong and trustworthy relationships they established with creditors, which help to alleviate information asymmetry in Thailand's weak institutional environment. Our results are robust to possible confounding effect of bank-connected lending, possible endogeneity issues, different proxies for family control and control variables, and the use of matched samples.