Sustainable growth, financial flexibility and working capital management in family firms: An empirical study in Indonesia

Abstract

Family firms play an important role in the economies of developing countries such as Indonesia. Proper working capital management is necessary to support the sustainable growth of family firms. This study aims to analyze the characteristics of sustainable growth and working capital management of family firms. The study analyzes family firms by comparing them with non-family firms listed in the LQ45 index of the Indonesian capital market. Using quantitative methods, logistic regression is used to test the hypotheses. The survey sample covers 280 companies from 2015 to 2022. The results of the study show that the elements of sustainable growth of family firms differ from non-family firms only in the leverage element. Family firms tend to have lower leverage than non-family firms. Family firms tend to have more conservative working capital management policies for investment and financing than non-family firms. Family firms also have longer days of accounts payable outstanding than non-family firms, while days of inventory outstanding and days of sales outstanding are not significantly different. This study suggests that family firms should implement a moderate working capital policy to strengthen sustainable growth rates.