3.3.1. Dependent Variables

Leverage is measured using the debt/EBITDA and interest coverage ratio and Altman Z-score. This is consistent with (Shleifer and Vishny 1986; DeAngelo and DeAngelo 2000; Anderson and Reeb 2003).

#### 3.3.2. Independent Variables—Ownership structure

The criteria used for the ownership structure of firms in Spain are based on the Iberian balance sheet analysis system (SABI). These criteria focus on the holding of a shareholder's ultimate voting

rights across these firms, which differ from the ultimate cash flow rights. In cases where information was available about the ownership structure of a company, we search this property directly on the company websites. Firms in Spain were classified through the aid of the BvD independence indicator available in SABI. The BvD independence indicator has five levels, namely "A", "B", "C", "D", and "U". According to SABI, independent indicator "A" denotes that a company is said to be independent if the shareholder must be independent by itself (i.e., no shareholder with more than 25% of ownership of ultimate voting rights), whereas independent indicator "B" is when no shareholders with more than 50% exist but one shareholder with voting rights between 25.1% to 50%. For a company to be classified with independent indicator "C", the company must have a recorded shareholder with a total or calculated ownership of 50.1% or higher, whereas a company is classified as "D" when a recorded shareholder demonstrates direct ownership of over 50% with branches and foreign companies (Ntoung et al. 2017).

Independent indicator "U" is applied when a company does not fall into the categories "A", "B", "C" or "D". Based on the above features and prior studies, a company with a shareholder having more than 25% is classified as family-run firm, while firms with no shareholder with more than 25% areclassified as widely held firms. This threshold of 25% allows shareholder to have significant influence on the firm. Therefore, firms categorized as "A" are widely held firms while firms in "B", "C", and "D" are family firms. Our next criteria for family is that, in a family firm, an individual or a family must be the largest shareholder and be categorized in "B", "C", and "D". The individual must be part of the founding family. If this is not the case, the controlling shareholder must have had the largest percentage of ultimate voting right over a long time period.For each firm, we identify founding family presence using information provided by SABI about corporate proxy statements on board structure and characteristics, ECO attributes, equity ownership structure, and founding-family attribute" (Ntoung et al. 2017). In case where there weremissing data, we directly search the company website for extra detail.
