Financial Attitudes in Family Firms; The Moderating Role of Family Commitment

manager’s personal behavioral attitudes(Heck 2004;Van Auken2005).When decisions are at least partly under the volitional control of a single decision-maker,that person’s attitude toward the behavior in question is one key factor for explaining future decision making behaviors(Ajzen1991).Recent research(Gallo, Tapies,and Cappuyns2004)suggests that familyfirms follow a particularfinancial logic driven by economic and noneconomic consid-erations.As such,individualfinancial attitudes may produce peculiarfinancial behaviors and thus may be important for explaining variations among familyfirmfinancing.Therefore,in response to recent calls to analyze noneconomic aspects offinancial deci-sion making(e.g.,Beattie,Goodacre,and Thomson2006)and to study familyfirm behav-ior from a strategic management perspective (Chrisman,Chua,and Sharma2005a),this study uses a strategic management perspective of capital structure choice(Barton and Gordon 1987;Matthews et al.1994)to explore how personal characteristics(financial knowledge, positive experience with debt suppliers,and economic goal orientation)influence family firm owner–managers’financial attitudes.Spe-cifically,we examine owner–managers’finan-cial attitudes toward debtfinancing as debt is usually the primary externalfinancial source considered in familyfirms(e.g.,Romano, Tanewski,and Smyrnios2001).Moreover,existing research has vastly ignored the family as a relevant context factor influencing the success of familyfirms(Astra-chan2010).Holistic studies of familyfirm deci-sion making require the inclusion of salient effects(e.g.,family values and goals) that result from the overlap of the family and business systems(e.g.,Chrisman,Chua,and Steier2005b).Following suggestions from prior research,we study family commitment as a unique familial influence,which reflects the family’s commitment to,loyalty to,and pride in the business(Klein,Astrachan,and Smyrnios 2005;Rutherford,Kuratko,and Holt2008). Because family commitment influences strategic management processes in familyfirms,particu-larlyfinancing decisions(Rutherford,Kuratko, and Holt2008),we propose that family commit-ment may affectfinancial decision making pro-cesses via the owner–manager’s attitude formation.Our paper contributes to the familyfirm literature in several aspects.First,as most exist-ing studies on familyfirmfinancing focus on the business as research object(e.g.,Blanco-Mazagatos,de Quevedo-Puente,and Castrillo 2007),this study broadens our understanding of financial decision making by analyzing and incorporating unique owner–manager charac-teristics and their influences onfinancial atti-tudes toward debt.We also contribute to the vast amount of capital structure literature as our results support a more individually focused view onfinancing decisions,as suggested by the strategic management approach to capital struc-ture(e.g.,Barton and Gordon1987;Matthews et al.1994),which may explain variations in financial behaviors among familyfirms.Third, we contribute to the theory of the familyfirm,as we theorize that noneconomic factors affect financial decision making processes andfinan-cial attitude stly,we contribute to the recently emerging literature on family social capital(Chrisman,Chua,and Steier2005b;Ruth-erford,Kuratko,and Holt2008)by showing how strategic management decisions in familyfirms are affected by unique familial influences.Ours is thefirst study that provides empirical support for the notion that family commitment to the business indirectly affects decision making via the intra-individual attitude formation process.We begin by reviewing relevant areas of the familyfirm,finance,social psychology,and strategic management literatures to develop our conceptual model and moderating hypotheses. Then,we explain our methodology,including sample selection and measurements used,and present our empirical results.Finally,we discuss our keyfindings,study limitations,and future research avenues.Conceptual Model and BackgroundFamilyfirms are the prevalent organizational form in most economies around the world(e.g., La Porta,Lopez-de-Silanes,and Shleifer1999; Morck and Yeung2004).Compared with Anglo-Saxon countries,for example,the United States,Canada,or the United Kingdom,family ownership is even more widespread and longer lasting in continental Europe(Faccio and Lang 2002).For example,familyfirms make up Ger-many’s small and medium enterprises(SME) sector(Berghoff2006)and account for one-third of all German shareholdings(Franks and Mayer2001).The ubiquitous presence of familyfirms(e.g., Morck and Yeung2004)has led to a constantlygrowing research interest in the past two decades(Debicki et al.2009),which alongside resulted in an increasing amount of research on familyfirms’financial decision making. However,existing studies have produced mixed results on why familyfirms employ certain sources offinancial capital.Whereas some researchers suggest that familyfirms prefer internal and family funds(e.g.,Romano, Tanewski,and Smyrnios2001)and carry less debt than nonfamilyfirms(e.g.,McConaughy, Matthews,and Fialko2001),others indicate that familyfirms carry similar debt(e.g.,Coleman and Carsky1999),or even more debt,than do nonfamilyfirms(e.g.,Blanco-Mazagatos,de Quevedo-Puente,and Castrillo2007).Accord-ingly,including nonfinancial behavioral consid-erations in the analysis offinancial decision-making in familyfirms allows us to explain the variation in results by focusing on the specific attitudes of thefinancial decision-maker.To date,studies on familyfirmfinancing, which have been mostly descriptive(e.g., Gallo,Tapies,and Cappuyns2004)or have drawn from normative capital structure theo-ries,such as pecking order theory(Myers and Majluf1984)or trade-off theory(Modigliani and Miller1963),have merely analyzedfirm-related determinants(e.g.,Blanco-Mazagatos, de Quevedo-Puente,and Castrillo2007;López-Gracia and Sánchez-Andújar2007).Although such studies provide important insights into financial decision making,normative capital structure theories with their traditionalfinan-cial market assumptions were not developed with familyfirms in mind,as thesefirms are typically closely held and are not publicly listed.Familyfirms’decision making centrality (Feltham,Feltham,and Barnett2005)suggests thatfinancing decisions are strongly influenced by the owner–manager’s personal characteris-tics,such as individual attitudes(Carter and Van Auken2008),and originate from both eco-nomic and noneconomic motivations(Chris-man,Chua,and Litz2004).Attitudes are established through economic and noneco-nomic beliefs held by a decision-maker about the outcome of a certain behavior and are thus a key factor in the personal decision making process(Ajzen1991).Accordingly,a more behavioral approach to thefinancial decision-making process is needed to understand the variety offinancial choices in familyfirms.Our study employs a strategic management approach to capital structure choice(Barton and Gordon1987;Barton and Matthews1989), which suggests that afirm’sfinancial decisions are particularly associated with personal char-acteristics of the top-level decision-maker. Although the strategic management perspective was developed with large corporations in mind (Barton and Matthews1989),strategic manage-ment theories are considered fundamental for exploring familyfirms’economic behaviors (Chrisman,Chua,and Sharma2005a;Chrisman, Steier,and Chua2008).Combining this per-spective with theoretical insights from social psychology(Ajzen1991)and prior research on familyfirmfinancing(e.g.,Blanco-Mazagatos, de Quevedo-Puente,and Castrillo2007;Gallo, Tapies,and Cappuyns2004)suggests the need to incorporate internal(individual)and exter-nal(company and environmental)factors in our research framework.Whereas internal motivations may be especially important for strategicfinancing decisions(Van Auken2005), we acknowledge the importance of external factors that may affectfinancial decision making in familyfirms by including several specific control variables(e.g.,family owner-ship,need for family control,firm size,and industry)in our conceptual model.1Our overall conceptual model is presented in Figure1.However,although we expect causal relationships to exist as shown in Figure1,our study’s cross-sectional design should be kept in mind when suggesting causal inferences based on our study.Specifically,we followed prior qualitative research(Michaelas, Chittenden,and Poutziouris1998)that pro-posed a conceptual model suggesting that knowledge,goals,experience,risk propensity, and need for control drive an owner–manager’s financial attitudes toward debt.However,as familyfirm owner–managers are typically risk averse and have high control needs(e.g., Blanco-Mazagatos,de Quevedo-Puente,and Castrillo2007;Gallo,Tapies,and Cappuyns 2004;McConaughy,Matthews,and Fialko 2001),we focus our discussion on the distin-guishing antecedents forfinancial attitude formation in familyfirms and propose owner–1However,they will not be discussed in more detail as our paper focuses on the underresearched individual-level determinants of familyfirmfinancing.via(repeated)pairing of attitude objects(e.g.,a person,event,or behavior)with positive or negative effect(e.g.,Olson and Fazio2001).The development of attitudes is the result of an individual’s direct experience,for example,due to mere exposure or conditioning(De Houwer, Thomas,and Baeyens2001;Fazio,Shook,and Eiser2004;Winkielman et al.2003).However, research has demonstrated that attitude devel-opment(formation or change)may be subject to contextual stimuli or social roles(Dasgupta and Greenwald2001;Wittenbrink,Judd,and Park 2001).As such,attitudes are also formed through indirect experience obtained from an individual’s reference group(Fazio,Shook,and Eiser2004),for example,his or her family.Social influence on attitude formation may exert in the form of informational or normative influence (e.g.,Deutsch and Gerard1955;Wood2000).In the former,individuals may form their attitudes vicariously,for example,through general social-ization(e.g.,Newcomb1943),inferential rea-soning about the communicated attributes of the object(e.g.,Fishbein and Middlestadt1995),or consideration of the values others possess regarding the attitude object in question(e.g., Heider1958).Classical approaches(e.g.,Fest-inger1957;Heider1958)to social influence on attitude development suggest that individuals embedded in social contexts,such as family members being(emotionally)involved in the firm,often shift their attitudes due to motiva-tions such as dissonance reduction,cognitive consistency,balance,or symmetry.Normative influences are important because of three differ-ent processes:compliance(accept influence in order to gain specific rewards and approval or to avoid specific punishment or disapproval),iden-tification(accept influence to establish or main-tain a satisfying relationship to group members), or internalization(accept influence because it is intrinsically rewarding)(Kelman1958;Wood 2000).At this,compliance and identification are relevant in the familyfirm context due to the commingling of business and family roles, which is the result of the inherent overlap of family and business spheres(e.g.,Tagiuri and Davis1996).Furthermore,familyfirm owner–managers that have grown up with the family business may internalize business-and family-related values and mental models,especially in multigeneration family businesses.As a result, familyfirm owner–managers may see them-selves as stewards of the family’sfirm(Chris-man,Chua,and Sharma2005a).However,social embeddedness may also produce irrelevant information and strong in-group and out-group beliefs(Granovetter1985).Accordingly,we assume the impact of per-sonal characteristics on the formation of beliefs and attitudes not to be necessarily uniform across all familyfirms but subject to specific firm contexts.Different types of familyfirms exist due to the extent of the business and family systems’overlap;the resulting influence of family relationships on the business thus varies(Basco and Perez Rodriguez2009).Our conceptual model accounts for a specific social context,namely,family commitment,which may have a moderating influence on the indi-vidual’sfinancial attitude formation.Because family commitment—by means of a family’s commitment to,loyalty to,and pride in the business—represents a part of family culture,it is an important influence on the business (Klein,Astrachan,and Smyrnios2005)and on financial performance(Van Auken and Werbel 2006).Affective elements of commitment are closely linked to personal identification with thefirm(Zahra et al.2008),which represents a form of psychological involvement.High family commitment may thus result in family members’positive attitudes toward thefirm. Accordingly,family commitment is likely to increase interest and active participation in the business.Higher family commitment may therefore lead to an increase in social interac-tions between the family and the familyfirm owner–manager affecting itsfirm-related deci-sion making.Indeed,recent research reveals that differing levels of family commitment affect decision making regardingfinancing (Rutherford,Kuratko,and Holt2008),strategic flexibility(Zahra et al.2008),business culture (Heck2004),organizational capital,and orga-nizational values(Arregle et al.2007;Eddleston and Kellermanns2007).As such,we argue that the influence offinancial knowledge,positive experience with debt suppliers,and economic goal orientation on an owner–manager’sfinan-cial attitude formation is subject to the level of family commitment to the business. Financial KnowledgeBecause of centralized structures(Feltham, Feltham,and Barnett2005)and top manage-ments’long tenures(Zellweger2007),an owner–manager’s knowledge is a central resource for familyfirms(Habbershon,Will-iams,and MacMillan2003)and a significantcomponent of effective decision making (Arthurs and Busenitz2003;Jensen and Meck-ling1992).Financial knowledge is a multifac-eted construct that includes knowledge about availablefinancial sources,the functioning of capital markets,financial contracting,cashflow management practices,cash management systems,and so on.Although debt is generally a favorablefinancial source,2familyfirm owner–managers frequently possess fears and preju-dices about the use of externalfinancial sources, such as control and monitoring risks(e.g., McConaughy,Matthews,and Fialko2001)likely produce negative beliefs about the use of debt, which,in the end,result in more negative atti-tudes toward debtfinancing.However,greater knowledge about the functioning of external financial sources andfinancial contracting—which can mitigate agency problems related to risk and control(Jensen and Meckling1976)—should lower owner–managers’negative preju-dices against debtfinancing.Furthermore, owner–managers cannot selectfinancial sources they are not aware of:limited awareness of capital alternatives often results in inefficient, unorganized,and unsuccessful search for capital(e.g.,Lang,Calantone,and Gudmundson 1997)and thus may lead to suboptimal capital structures or undercapitalization(Van Auken 2001).Greaterfinancial knowledge may come along with greater expertise about the variety of existing debt products that have favorable or appropriate credit terms for familyfirms(such as governmental sponsored loans),which should lessen thefirm’s dependence on traditionally preferredfinancial sources,such as internal funding(e.g.,Gallo,Tapies,and Cappuyns 2004;Romano,Tanewski,and Smyrnios2001). Findings from Michaelas,Chittenden,and Poutziouris(1998)indicate that the owner—manager’s decision to use debt is influenced by his or her knowledge of availablefinancial sources.In sum,a morefinancially knowledge-able owner–manager should be generally more inclined toward external debtfinancing,reflect-ing a more favorable attitude toward debt.However,following arguments from research on altruism in familyfirms(e.g.,Eddleston and Kellermanns2007),higher family commitment to the business may lead to a more collectivistic orientation of familyfirm owner–managers that encourages them to consider the effect of their actions on other family members and reduces thefirm’s risk exposure in order to preserve family wealth.Conversely,when family commit-ment is low,owner–managers are expected to show a more individualistic orientation;that is, they try to maximize their utility function by choosing actions with the highest personal expected value(Jensen and Meckling1994). Accordingly,family commitment to the business will have a profound effect on the owner–manager’s ability to applyfinancial knowledge, as soundfinancial decision making will be affected by the emphasis on noneconomic family-oriented goals.Specifically,family com-mitment to the business may weaken the posi-tive effects of an owner–manager’sfinancial knowledge on his or herfinancial attitudes toward debt,as it introduces cognitive biases to business decisions due to fears of endangering family wealth,control,and proprietary informa-tion that will mitigate the rational informed behavior(e.g.,Gómez-Mejía et al.2007). Accordingly,despitefinancial knowledge that would suggest otherwise,family debt and family equity are more likely to be favored when family commitment is high.Therefore,we hypothesize the following:H1:High family commitment to the business weakens the positive effect of an owner–manager’sfinancial knowledge on the owner–manager’sfinancial attitudes toward debt.Positive Experience with Debt Suppliers An important influence on attitude formation is direct experience with the attitude object (Fazio,Shook,and Eiser2004).3Generally, experienced individuals utilize richer decision-making and problem-solving strategies and are2For example,the use of debt often increases the return for the owning family(ROE).This“leverage effect”is based on the reasoning by Modigliani and Miller(1958)and can be formulized as follows: ROE=ROA+(ROA-r)¥V,with V=debt-equity ratio.A higher debt-equity ratio will leverage afirm’s ROE if the return on assets(ROA)is higher than the debt interest rate(r).3Although prior experience forms part of an individual’s knowledge,it is clearly distinct from subjective or objective knowledge acquired through education and information collection,as similar experiences may not always lead to similar increases in knowledge(Quinones,Ford,and Teachout1995).better able to evaluate their appropriateness (Johnson1988).Furthermore,experience is most beneficial in decision contexts that are less structured and complex(e.g.,Baron and Ward 2004),such asfinancial decision making in familyfirms.However,experienced decision-makers have the tendency to become increas-ingly channeled by the past(Shepherd, Zacharakis,and Baron2003),which makes it difficult for them to recognize new insights and situational changes(Tversky and Kahneman 1974).Accordingly,personal prior experiences withfinancing options and supplier behavior (e.g.,based on credit conditions,credit availabil-ity,or generalfinancial institution behavior)are likely to determine beliefs about the future behavior offinancial suppliers and thus shape an owner–manager’sfinancial attitudes.At this, if a credit application is consistently rejected or a credit contract is offered only at very high interest rates and against high collaterals,the familyfirm owner–manager will likely associate a negative experience with debt suppliers and form more negative attitudes toward debt financing.According to Michaelas,Chittenden, and Poutziouris(1998),owner–managers that have unpleasant past experiences are more likely to postpone growth opportunities that require the issue of new debt.Conversely,family firm owner–managers with favorable prior experiences with debtfinancing are less cau-tious in raising additional debt(Michaelas,Chit-tenden,and Poutziouris1998).Moreover, Gudmundson,Tower,and Hartman(2001) report that familyfirms use formal data-gathering techniques and processes,by means of secondary information collection,less fre-quently,which makes direct personal experi-ence more likely to influence decision making anizational decision makers prefer direct experiential knowledge because of its salience,richness,and ease of comprehen-sion(e.g.,Argote1999).Therefore,it is likely that positive experiences with debt suppliers positively affect a familyfirm owner–manager’s attitudes toward debt.However,if the family is highly committed to the business,willingness to protect the family firm as a source of socioemotional wealth will likely supersede the quest for familyfirm per-formance(Gómez-Mejía et al.2007).In these scenarios,the owner–manager will strive to protect the longevity of the business and to limit most outside involvement to fully preserve control for future generations,even forgoing growth and other opportunities(Mishra and McConaughy1999).When commitment inter-acts with prior experience with lenders,the feedback received from the family,as the decision-maker’s social reference group,may play an important part in explaining the attitude formation process(see also Baumeister et al. 2001).Thus,if high levels of family commitment to the business coincide with a prior negative experience with debt suppliers,negative atti-tude toward debt is likely to be even more pronounced.However,if family commitment is low,financial considerations are likely to prevail and negative experiences with debt suppliers will not strongly affect attitude toward debt. Alternative funding sources(such as family funds)are less likely to be available or consid-ered a desirable alternative,and lenders are not likely to be perceived as impediments to family control and wealth.Accordingly,we hypoth-esize the following:H2:High family commitment to the business strengthens the positive effect of an owner–manager’s prior positive experience with debt suppliers on the owner–manager’s financial attitudes toward debt. Economic Goal OrientationThe perception and subsequent evaluation of the environment’s characteristics,and thus the formation attitudes,are affected by the indi-vidual’s goal orientation(Haynie and Shepherd 2009).Accordingly,familyfirm owner–managers’goal orientations may serve as frameworks forfinancial decision making (Barton and Gordon1987)that create specific financial attitudes.According to normative capital structure theories,managers select afirm’sfinancial sources based on capital cost(Myers and Majluf 1984)and/or tax and bankruptcy considerations (Modigliani and Miller1963).Thus,theirfinan-cial behavior is determined by pure economic motivations,all dedicated to a single overriding goal:the increase of shareholder value. Although some research implicitly assumes eco-nomic performance as the familyfirms’single goal,it is,however,generally acknowledged that familyfirms pursue both economic and noneconomic goals when making decisions (Chrisman,Chua,and Litz2004).This has pro-found implications forfinancial decision-making situations as familyfirms may follow an idiosyncraticfinancial logic driven by economic(e.g.,firm growth)and noneconomic(e.g., socioemotional value)motives(e.g.,Gallo, Tapies,and Cappuyns2004;Gómez-Mejía et al. 2007).For example,owner–managers who are driven to increase profits by constantly growing the business(high economic goal orientation) are more willing to use externalfinancial sources(Mahérault2004).Conversely,owner–managers who have rather low economic goal orientation(e.g.,to sustain personal emotional value of the business)are more likely to forgo growth opportunities that cannot befinanced by internal funds.Not surprisingly,recent research indicates that a familyfirm’s owner–manager’s economic goals are positively related to obtain-ing debt(Romano,Tanewski,and Smyrnios 2001),as the acquisition of debt as afinancing tool has been shown to enhance performance (e.g.,by facilitating growth projects)(Mishra and McConaughy1999).Accordingly,higher levels of economic goal orientation should posi-tively affect an owner–manager’sfinancial atti-tudes toward debt.However,goal orientation is a context-related personal disposition(Button,Mathieu,and Zajac 1996).Familyfirm owner–managers may show a high economic goal orientation regarding business-related dimensions and,at the same time,show a high social(noneconomic)goal orientation in terms of family-related dimen-sions.Familyfirm owner–managers will facili-tate a more collectivistic thinking when family commitment is high.As such,if the pursuit of economic goals is paired with low levels of family commitment to the business,positive atti-tudes toward debt are likely to be unmitigated: owner–managers are likely to favor and develop more risky strategies of profit maximization and growth,which are facilitated by the use of debt financing.However,with higher family commit-ment,positive attitude toward debt will likely be mitigated by the desire to maintain not only economic wealth creation but also socioemo-tional wealth,family employment,or manage-ment control within the family.Higher levels of commitment,which are associated with a desire to exert discretionary effort in the organization (Davis,Allen,and Hayes2010;Zahra et al. 2008),should dampen attitude toward debt,as lower debt,for example,allows for stronger family control in the future(McConaughy,Mat-thews,and Fialko2001).Furthermore,as com-mitment tends to increase access to survivability capital(Zahra et al.2008)and thus facilitates the availability and utilization of family funds in lieu of debt service to external debt suppliers,a decreasing attitude toward debt should be observed in high commitment scenarios. Accordingly,we hypothesize the following:H3:High family commitment to the business weakens the positive effect of an owner–manager’s economic goal orientation on the owner–manager’sfinancial attitudes toward debt.MethodsData and SampleDue to the centralizedfinancial decision-making processes in familyfirms(Feltham, Feltham,and Barnett2005),we used the key informant approach.We obtained our data in 2008by mailing out surveys to familyfirm owner–managers,a method commonly used in familyfirm research(e.g.,Chrisman,Chua,and Litz2004).Initially,our sample was drawn from the Hoppenstedt database,the largest database on German companies.Following prior research(e.g.,Pieper,Klein,and Jaskiewicz 2008;Short et al.2009),familyfirms were iden-tified by analyzing family influence on owner-ship,management,and board positions of the selectedfirms.We combined information obtained from the Hoppenstedt database with that from the Creditreform and Bürgel data-bases and reviewed relevant sections of company web pages(“about us”or“company history”).To eliminate lifestyle businesses,we included onlyfirms with sales of at least EUR 700,000(approximately U.S.$1million)in2007. Finally,we randomly selected2,200firms and sent a postal survey with a personalized cover letter and a return-addressed envelope to the owner–manager.Following three reminders, we received a total of362questionnaires.This response rate of16.5percent is similar to those of other studies on familyfirms in Germany (e.g.,Pieper,Klein,and Jaskiewicz2008). However,because some surveys were deemed unusable due to missing data,we included only 280in ourfinal analysis.The response rate of usable questionnaires is thus12.7percent. Accordingly,we analyzed differences between the total(362)and usable(280)samples for all variables of our conceptual model using an analysis of variance(ANOVA).We did notfind statistically significant differences between them(at10percent level of significance),sug-gesting that the exclusion of questionnaires did not affect the results.In Germany,family ownership is more wide-spread than in Anglo-Saxon countries—such as the United States,Canada,or the United Kingdom(Faccio and Lang2002).Familyfirms make up most of the SME sector,which is the backbone of the German economy(Berghoff 2006).Although older and smaller(Klein2000), familyfirms are more successful than nonfamily firms(Simon2009).Ownership is very closely held;German familyfirms prefer legal forms with limited liability and operate in all indus-tries(Klein2000).Our samplefirms are similar to mentioned samples.On average,firms existed for78years,had229employees,and generated sales of approximately EUR 38million in2007.Family ownership was about95percent,on average.A variety of busi-ness industries is represented,predominantly those including industrial goods(18percent), retail and wholesale(14percent),construction (11percent),and media(7percent). MeasuresMulti-item constructs were measured mainly by adapted versions of previously validated scales.Content and internal validity of our mea-sures was assessed by expert interviews with two familyfirm consultants and a pilot study with eight familyfirm owner–managers(Ker-linger1986).Based on this feedback,we reworded or deleted problematic items before sending out thefinal questionnaire.Data were screened with the help of the Kolmogorov–Smirnov test to ensure normality and to identify outliers using Mahalanobis distance measures (Tabachnick and Fidell1996).Necessary trans-formations are noted in the subsequent para-graphs.A list of all multi-item constructs and their respective Cronbach’s alpha is presented in the Appendix.Except where noted,items were assessed using a seven-point Likert scale. Independent Variables and Moderator We consider the owner–manager’sfinancial knowledge as accurate,storedfinancial infor-mation and thus measure the individual’s objec-tive knowledge(e.g.,Moorman et al.2004). Following prior research on individuals’knowl-edge bases(e.g.,Moorman et al.2004;Park, Mothersbaugh,and Feick1994),objective financial knowledge was measured by a series of six questions specific to familyfirmfinancing (see the Appendix for details).The number of correct answers was summed up to afinancial knowledge indicator ranging from0to6.Financial experience is acquired over time and reflects an individual’s positive and nega-tive appraisal of relational outcomes with capital suppliers.Negative or positive experi-ences,in particular,may affect futurefinancial decisions(e.g.,Matthews et al.1994).As we focus onfinancial attitudes toward debtfinanc-ing,we measured the individual’s prior positive experience with debt suppliers.Experience was assessed with two items(1=strongly disagree to7=strongly agree).Items were averaged to yield an experience score(a=0.85).Following prior research on individual goal orientation(Button,Mathieu,and Zajac1996), we assessed the owner–manager’s economic goal orientation by creating a new construct consisting of a three-item goal inventory,with goals that are closely related to the economic performance of familyfirms.Owner–managers were asked to indicate the importance of share-holder value,cost minimization,and business profit as goals within decision making pro-cesses(1=very unimportant to7=very impor-tant).These three items were averaged to yield an economic goal orientation score (a=0.62).Family commitment to the business,our moderator variable,was assessed using the Family-Power,Experience,Culture(P-PEC) culture subscale(Klein,Astrachan,and Smyrnios2005)that employed the Family Busi-ness Commitment Questionnaire(Carlock and Ward2001).Specifically,we used four items that reflect a family’s commitment to,loyalty to, and pride in the business:for example,“Family members really care about the fate of the family business.”The four items were averaged to yield a family commitment score(a=0.86). Dependent VariableAn individual’s attitude is commonly assessed with perceptual items related to the overall favorableness or unfavorableness of the behavior in question,captured in attribute dimensions such as good–bad,harmful–beneficial,pleasant–unpleasant,or likeable–unlikeable(Ajzen2001).In this study,the owner–manager’sfinancial attitude toward debt was assessed by four items,which included the evaluative adjectives good,useful, beneficial,and wise.We asked familyfirm owner–managers to indicate the extent of their agreement(1=strongly disagree to7=strongly agree).The four items were averaged to yield a financial attitude score(a=0.95).。