Controlling shareholders, private profits and corporate debt: an empirical study on the French market.

Summary This thesis focuses on the study, in the French context, of the debt behavior of firms dominated by controlling shareholders. First, we tried to analyze how the ownership of controlling shareholders affects the level of debt. Second, we tried to understand the impact of the conflict of interest between controlling and external shareholders on the level of debt of firms. Finally, we focused on family firms and sought to explore whether family-dominated firms are more or less indebted than other firms. The empirical results obtained in this thesis shed new light on a topic that has not yet been widely discussed in France. First, our empirical study shows that the relationship between debt and the percentage of capital held by controlling shareholders is of the inverted U form. As a result, leverage increases and then decreases with the capital ownership of controlling shareholders. Second, our results reveal that the more opportunistic the controlling shareholders are, the more they favor debt financing. Moreover, the hypothesis proposed by Jensen (1986) that firms with excess cash have a greater recourse to debt is rejected. Thus, the disciplinary role of debt is abandoned. On the other hand, debt is used by controlling shareholders as a tool to promote their opportunism at the expense of external shareholders. Finally, the study of the capital structure of family firms indicates that debt financing is rather prudent on the part of family controlling shareholders. Family firms are, in fact, less indebted than non-family firms. Nevertheless, the involvement of family shareholders in the management of the family firm modifies their attitude towards debt. We found that family firms run by a family member have more recourse to debt than other firms.