Corporate disclosures by family firms

Does Corporate Governance Influence Earnings Management in Latin American Markets?

“…Thus, there would be fewer incentives to obtain private benefits at the expense of minority shareholders, which in turn could result in a higher earnings quality (Bona et al 2008). However, Wang (2006) and Ali et al (2007) also point out that one of the main limitations of their studies is the difficulty in extending their results to other settings where there is a lower protection of minority shareholders, and consequently, more concentrated ownership structures, such as Latin America. This is because the presence of concentrated ownership structures and the presence of family groups may trigger other problems of CG.…”

“…Following this suggestion, we analyze apart from these two common dimensions examined by previous literature, two different dimensions of ownership structure that the literature has also shown could be an effective CG mechanism in monitoring management decisions, able to constrict manipulative practices and, consequently, improve earnings quality: family ownership (Wang 2006;Ali et al 2007;Bona et al 2008) and institutional ownership (Ferreira and Matos 2008;Ruiz et al 2009;Ferreira et al 2010). The next sections describe the development of the hypotheses related to the four ownership structure variables examined in our study.…”

“…This leads to these external agents perceiving a ''family reputation'' that has economic consequences that last not only for the owners' lifetime, but throughout the lives of his/her heirs. In the same line, Wang (2006) and Ali et al (2007) states that long-term orientation and reputation concerns means that family firms do not act opportunistically in reporting earnings, such that their actions are more in line with a short-term orientation. Markets?…”

Assessing Disclosure Quality: A Methodological Issue

“…This method has been used in different studies with different methodological adjustments (Clarkson, Kao, & Richardson, 1994;Ali, Chen, & Radhakrishnan, 2007).…”

“…This method for measuring the level of disclosure varies and is dependent on the composition of the information, even on the basis of the subject researched and the degree of importance attached to certain parts of the information by the researcher. With reference to this last observation, it is important to specify that in research focusing on disclosure, most researchers created ad-hoc indexes for the analysis they were undertaking (on the basis of the aspects of interest to the study), but it is not uncommon for cases where in order to measure the level of quality of disclosure using a score, the authors (e.g., Patel, Balic, & Bwakira, 2002;Ali et al, 2007;Barron, Kile, & O'Keefe, 1999;Salter, 1998;Hope, 2003a;2003b) have relied on indexes created by external parties such as financial analysts or professional organizations (such as, for example, CIFAR "Centre for International Financial Analysis and Research"). The advantage of this approach, highlighted by Marston and Shrives (1991), is that it provides a greater possibility for comparison with studies previously conducted using the same indexes.…”