Despite recent evidence on the importance of chief executive officer (CEO) successions in family firms, we still know little about the differences in corporate strategies entailed by family and professional managers around transition. We investigate the consequences of managerial successions for the financial policies of Italian family firms. Our findings indicate that the appointment of non-family professional CEOs leads to a significant increase in the use of debt, primarily driven by short-term maturities. We document substantial heterogeneity in the impact of professional successions on debt financing: the increase in debt is particularly pronounced for young firms, firms with a high level of investment, and firms in which the controlling family maintains a dominant representation on the board of directors. Examining the importance of financial flexibility, we find that the increase in debt occurs primarily when firms are cash-poor, and when incoming CEOs can exploit spare borrowing capacity.

This paper investigates the risk of failure of loans guaranteed by public credit guarantee schemes. We analyse the determinants of the time to default of approximately 15,000 loans guaranteed by the Italian Central Guarantee Fund between 2007 and 2009. Using the Cox proportional hazards model, we test the role of the financial intermediary that requests the guarantee on a firm’s behalf, while distinguishing between banks and mutual guarantee institutions (MGIs) and controlling for a set of variables that characterise each guaranteed loan. The findings confirm that loans are more likely to default when a bank—rather than an MGI—is involved in the guarantee process. Considering some elements (e.g. age, size and sector) that affect opacity among small- and medium-sized enterprises (SMEs), banks seem to perform better than MGIs in screening and monitoring loans requested by firms in the manufacturing sector.

We investigate how leadership by couples affects the profitability of family firms. Using comprehensive data from Italy, we show that family firms led by married couples perform significantly better than other family firms. This result is robust to several estimation techniques, including matching, instrumental variables and transition analyses. Marital leadership works best when firm operations are complex and knowledge-based, as well as when the firm is subject to agency conflicts due to weak competition and poor legal infrastructure. Studying the mechanisms behind these results, we show that the presence of couples at the top of the firm enhances the willingness to invest during uncertain times, reduces employee turnover, and improves labor productivity.