Does family ownership always reduce default risk?

This paper analyses the effect of family ownership on the outcome of the firm's risk-taking activities, measured by the company's default risk. We show that family ownership reduces the probability of default, which is proxied by the Black-Scholes-Merton (BSM) model. Our study goes further than the initial approach by taking into account certain factors conditioning the aforementioned relationship. We find that the expected negative relationship between family ownership and default risk is modified when there is a significant participation of institutional investors, whose positive moderating influence intensifies if they are stable and long-term oriented and/or during adverse financial circumstances.