**1. Introduction and Literature Review**

Following the evidence cited by several researchers over the years (such as Shleifer and Vishny 1986; DeAngelo and DeAngelo 2000; Anderson and Reeb 2003), one principal characteristic to influence the management of firms is that of its risk profile. Even though very little empirical research has shown light on this topic, the small amount of existing empirical research suggests that the characteristics of family owned companies could be a possible reason for family business risk aversion and the choice of capital structure.

Anderson and Reeb (2003) argue that the agency problems that exist between management and stakeholders is reduced when the structure of a family firm is adopted by a company. They suggest however that the risk averse nature of the controlling families is disintegrated through monitoring. DeAngelo and DeAngelo (2000) add that the risk nature of family firms achieved through engaging in lower risky activities that promote net present value by large and undiversified shareholders might impose costs to well-diversified shareholders with minority power. Following the illustration in (Miller et al. 2007; Villalonga and Amit 2006; Pison et al. 2014), 65%–80% of firms around the world are managed by one or more families, and generate approximately 70%–90% of the gross domestic product. Neubauer and Lank (2016) add that family owned businesses create approximately 70%–80% of jobs on a yearly basis. Meanwhile, evidence from the European Family Businesses (2012) present that over the globe, 85% of business startups are family orientated.

The fundament reason for the said study using Spain as the case is due to the peculiarities of the Spanish system being made up of approximately 90% family orientedbusinesses contributing to 60% of the country's GDP. In (Pérez and Lluch 2015; Pison et al. 2014; European Family Businesses 2012), family-oriented businesses generate over two-thirds of the total employment, and often these firms are thought to be small and medium size enterprises. Yet little attention has been provided to the financial health of the business in terms of capital structure and leverage.

A review of both management and finance empirical evidence regarding the risk profile of family businesses suggests the main hypothesis that family-oriented businesses have lower leverage and lower risk, which could actually benefit the company during times of economic downturn. Thus, from a financial standpoint, this paper presents indicators that are specific to family-orientedbusiness with long-time horizon, family orientation, and generational continuity as potential reasons for family business risk aversion and the choice of capital structure for medium and small oriented family companies in Spain.

In order to answer the hypothesis, we first examine the characteristics of family firms in term of the operation aspect of the business's risk factors and whether family firms managed their business operations with lower risk and are generally healthier financially than their counterpart firms. Next, we examine a series of bankruptcy filings in Spain from 2002 to 2014 and evaluate the proportion of family businesses in the sample.

Accordingly, March and Shapira (1987) consider decision investment as the deal between expected return and risk per the conventional theory. Masulis (1988, pp. 14−16) suggests that "managers in both family and non-family businesses will prefer having less leverage than shareholders in order to reduce the risk of their undiversified investment in the company". Consistent with this view, Grossman and Hart (1986) argue that increased leverage reduces the agency cost of type I associated with managerial discretion and managers' discretion over corporate decisions. In Bangladesh, Dey et al. (2018) present findings of financial risk disclosure indices in annual reports of 48 manufacturing companies over six-year period (2011–2015) using 30 disclosure identifiers. Their results show that there is a positive and significant relationship between the level of financial risk disclosure and firm size, financial performance, and auditor type.

A more recent study suggests "that risk is an unavoidable part of life, including business life and therefore, it exists in the content of uncertainty" (Garland 2003, p. 4). Furthermore, "it is no surprise that predicting the future is an uncertain task, involving, at best, probabilities, and inferences since the memory of the past is sometimes flawed and our knowledge of the present is incomplete" (Garland 2003, pp. 4–5). Hollenbeck et al. (1994) find that individuals treat risk as a dynamic factor, because the future carries its opportunities as well as it risks. They add that the "perspective of change in value rather than total value to evaluate a decision and to separate gains but not losses from initial outlay" is preferred by most risk analysis treating risk as a dynamic factor.

Furthermore, Bernstein and Bernstein (1996) add that the nature of risk has been sharp by the time horizon. May (1995) posits that the reason behind managers using only approximate time frames in their planning rather than the accurate time forecast is due to the personal risk when making decisions regarding firms risk. De Vries (1993) add that family businesses have a longer-term perspective than non-family businesses, (Oswald and Jahera 1991; Ntoung et al. 2016a), which may "improve decision-making resulting in higher earnings and dividends. After controlling for a variety of factors that affect cross-sectional debt levels among all firms", Mishra and McConaughy (1999) conclude that family-controlled firms using less debt. This is indeed true because the use of less debt creates the founding family's aversion to the risk of loss of control.
