While the value of external audits was long considered to be minimal for private family firms, some exceptional studies indicate that external audits are demanded by these firms to reduce the agency conflicts between family and non-family members. Using a sample of Belgian private family firms, this study empirically shows that (high quality) auditors are also hired to mitigate agency conflicts among family members. Since these intrafamily conflicts are mainly based on emotions instead of economically rational behavior and are therefore difficult to grasp by compositional proxies, they are identified by the level of family cohesion. Moreover, this study shows that the monitoring effectiveness of the board of directors weakens the association between the level of intrafamily agency conflicts and audit (quality) demand, indicating that the audit demand effect of intrafamily agency conflicts decreases when family firms are able to reduce the related agency costs internally.

Former audit demand studies generally consider wholly family-owned private firms as a homogeneous group of firms that incur minimal agency costs. Family firm literature, however, argues that these firms might incur significant agency costs as well and we therefore examine audit demand in this particular type of firms. As we examine private family firms from the US, which have no audit requirement, we broaden the concept of audit demand to the demand for auditor services, which encompasses audits, reviews and compilations. Consistent with former audit demand studies, we hypothesise a negative association between management ownership and the demand for auditor services but only for first generation private family firms. We hypothesise that this relation turns positive for subsequent generation private family firms due to entrenching behaviour caused by weakened altruistic feelings between the family shareholders. Our results support this hypothesis but only regarding the demand for reviews and compilations. Therefore, our findings suggest that reviews and compilations seem to be sufficient and more cost-effective in this specific context to mitigate shareholder-manager agency costs compared to more expensive audits.Moreover, results suggest that the level of shareholder-debtholder agency costs do seem to be a driver for the demand for audits.

Audit demand is generally considered to be a direct reflection of the level of agency conflicts. This study examines the CEO's value perception towards auditing as additional driver for both auditor reputation demand (appointing a Big 4 auditor or not) and audit effort demand in private firms. Examining the CEO's value perception in a multidimensional way, the regression results indicate that the CEO's functional value perception towards auditing positively affects the demand for audit effort, while the CEO's social value perception towards auditing negatively affects the demand for audit effort but positively affects the demand for auditor reputation.

PurposeThis study investigates the impact of the CEO's financial literacy on family SMEs' growth, as well as the moderating role of the generational stage on this relationship.Design/methodology/approachThe study is based on survey data of Spanish private family firms and utilizes a second source of data, the SABI database by Bureau Van Dijk. The authors run ordinary least squares regressions and use both the base and the partition approaches to test the hypotheses.FindingsThe analysis reveals a positive association between the CEO's financial literacy and firm growth. However, this relationship is not uniform across generations. The CEO's financial literacy-firm growth relationship becomes weaker for first- and third or subsequent-generation family firms while becoming stronger for second-generation family firms.Originality/valueThis study adds the financial literacy of the CEO as a novel individual-level determinant of family firm growth. It also shows that CEOs do not always use their financial literacy to its full potential to foster growth. More specifically, the extent to which financial literacy leads to firm growth is found to be conditional on the generational stage of the family SME. The obtained findings are valuable for family SMEs intending to hire a new CEO, encouraging the financial literacy of the current CEO and educating the next generation of family members.

Reliable financial reporting is highly important when aiming for sustainable development and the long-term financial stability of the entire economy. An external audit is one of the main monitoring mechanisms to warrant this reliability. While auditing serves as an independent monitoring mechanism towards management, studies indicate that management is often the driving force behind auditor appointments and terminations, especially if it is willing to drive auditor choice. While this raises questions about an auditor’s independence and resulting audit quality, willingness will only have an impact when management is also able to exert its will. This study, therefore, examines to what extent ability strengthens the CEO’s willingness to appoint a non-Big Four auditor. Using a dataset of 316 private firms, regression results show that when the CEO is willing to appoint a non-Big Four auditor and also has sufficient power, it is less likely that a Big Four auditor is actually appointed, at least when the control effectiveness of the board is weak such that the CEO can exert his/her power. This emphasizes the need for both shareholders and legislators to ensure that the independence of the auditor is guaranteed and to implement complementary monitoring mechanisms like a strong board.

Purpose This paper aims to examine whether a private firm’s demand for a Big4 auditor is influenced by the auditor choice of its main supplier, customer and competitor. The authors rely on institutional theory to explain this stakeholders’ influence. The authors also examine whether the extent to which the firm’s board of directors engages in networking moderates this influence. Design/methodology/approach Questionnaire data are combined with archival data of 210 Belgian private firms with a statutory audit requirement. Logistic regression analysis is applied to examine to what extent firms follow their main competitor, customer and supplier in hiring a Big4 auditor. Findings The results reveal a positive association between the firm’s choice of a Big4 auditor and its main supplier being audited by a Big4 auditor, supporting the conformance effect (isomorphism) toward suppliers as hypothesized by institutional theory. The extent of board networking, however, seems to weaken this effect. Toward competitors, a divergence effect instead of a conformance effect is found, which indicates the existence of competitive differentiation regarding auditor choice. Research limitations/implications While prior studies mainly focus on the agency relationships between shareholders, debtholders and managers to explain auditor choice, this study also takes into account the firm’s other main stakeholders by relying on institutional theory. Both the conformance effect toward suppliers as well as the divergence effect toward competitors provide interesting additional perspectives on why auditors are demanded, leading to interesting future research opportunities. Originality/value This paper fulfills an identified need to consider additional theories in explaining audit outcomes.

PurposeThe Accounting Information Systems (AIS) research field emerged around 30 years ago as a subfield of accounting but is at risk to develop further as an isolated discipline. However, given the importance of digitalization and its relevance for accounting, an amalgamation of the parent research field of accounting and the subfield of accounting information systems is pivotal for continuing relevant research that is of high quality. This study empirically investigates the distance between AIS research that is included in accounting literature and AIS research that prevails in dedicated AIS research outlets.Design/methodology/approachTo understand which topics define AIS research, all articles published in the two leading AIS journals since 2000 were analyzed. Based on this topical inventory, all AIS studies that were published in the top 16 accounting journals, also since 2000, are identified and categorized in terms of topic, subtopic and research methodology. Next, AIS studies published in the general accounting field and AIS studies published in the AIS field were compared in terms of topics and research methodology to gain insights into the distance between the two fields.FindingsThe coverage of AIS topics in accounting journals is, to no small extent, concentrated around the topics “information disclosure”, “network technologies” and “audit and control”. Other AIS topics remain underrepresented. A possible explanation might be the focus on archival studies in accounting outlets, but other elements might play a role. The findings suggest that there is only a partial overlap between the parent accounting research field and the AIS subfield, in terms of both topic and research methodology diversity. These findings suggest a considerable distance between both fields, which might hold detrimental consequences in the long run, if no corrective actions are taken.Originality/valueThis is the first in-depth investigation of the distance between the AIS research field and its parent field of accounting. This study helped develop an AIS classification scheme, which can be used in other research endeavors. This study creates awareness of the divergence between the general accounting research field and the AIS subfield. Given the latter's relevance to the accounting profession, isolation or deterioration of the AIS research must be avoided. Some actionable suggestions are provided in the paper.

Using a unique multiple-respondent dataset of 218 individual managers of 37 private family firms, this study examines differences in the importance attached to socioemotional wealth (SEW) preservation among top management team (TMT) members as a determinant of earnings management. Such SEW diversity might cause conflicts that can harm TMT decision-making quality and, ultimately, firm performance, which the TMT might cover up by engaging in earnings management. Furthermore, we examine to what extent a board of directors that functions as a sounding board is able to mitigate the relationship between SEW diversity within the TMT and earnings management.