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We posit that family firms in China exhibit accounting properties consistent with the prevalence of Type II agency problems. In contrast to the owners of non-family firms, the owners of family firms have more incentives to seek private benefits of control at the expense of minority shareholders and provide lower-quality earnings for self-interested purposes. The empirical evidence presented in this study suggests that the accounting earnings of listed Chinese family firms are less informative, and family firms employ less conservative accounting practices than their non-family counterparts. We also find that Chinese family firms have higher discretionary accruals compared to non-family firms, which is consistent with the view that family firms engage in more opportunistic reporting behavior. Overall, our study suggests that family ownership in China is associated with lower earnings quality, which is in sharp contrast to the findings of prior studies that examine such ownership in the U.S.

This study examines the relationship between family control and young entrepreneurial firm's bribing behavior around the globe. Relying on over 2,000 young firms from the World Bank Environment Survey, we find that family control helps to reduce a firm's bribery behavior, but further investigation shows that this effect only exists in countries with weaker macro-governance environment. In countries with more established and transparent governance mechanism, family control does not seem to make any difference. We interpret our findings as the business family's preservation of socioemotional wealth.

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