An Analysis of the Relationship between the Capital Structure and Operational Profit in the Various Generations of Brazilian Family Companies

Abstract

The objective of this work is to analyze the relationship between the capital structure and operational profit over various generations of Brazilian family companies. This research is descriptive relational of a survey type using quantitative analysis with a cross-section. The research population comprised the 500 largest Brazilian companies as classified by Exame magazine in 2005. The main criterion for the non-probabilistic-intentional sample was that the company has Brazilian shareholder control, as was the case with 253 of the 500 largest companies. After adjustments to the sample, 175 of those companies were electronically mailed requesting information on whether they were family companies, and if so which generation currently administered them, with 86 responding negatively and 59 confirming they were family companies. It was possible to analyze the Balance Sheet, Statement of Income and Notes to the Financial Statements for 2004 of 39 of those companies. In the statistical analysis of the data collected, the variables analyzed were capital invested from outside sources and from the owners (independent variable) and operational profit (dependent variable). The results showed a weak correlation between the variables analyzed in the first generation. In the second generation there was a moderate to strong correlation between the variables. From the third generation onwards, a strong correlation was observed in the capital from outside sources and a weak correlation in the owner capital. It was concluded that there are differences in the capital structure and in the profit generated from the perspective of the generations that administer the companies researched.