Disclosure Practices by Family Firms: Evidence from Swedish Publicly Listed Firms

Abstract

I investigate the effect of family ownership on firms' disclosure practices in their annual reports. In specific, I study Swedish publicly listed firms, which are typically characterized by controlling owners that have a strong influence in the corporate governance decisions of the firm, including corporate disclosures. To measure disclosure, I construct a comprehensive disclosure index covering information on (1) corporate governance, (2) strategic and financial targets and (3) notes to the financial statements. The results reveal that overall, family firms provide less disclosure in annual reports than non-family firms do. The finding is consistent with the premise that through their management positions, family owners can directly monitor managers and avoid costly public disclosures. Overall, the results suggest that ownership structure of firms is important to consider in understanding firms' disclosure incentives, particularly in settings where controlling owners play a significant role in the governance of the firm.

The Effect of Ownership Structure on Disclosure Quality and Credit Ratings in Family Firms: The Moderating Role of Auditor Choice

“…Specifically, we examine whether Big 4 auditors play a moderating role in mitigating the negative impact of C-O divergence on disclosure quality resulting in consequent improvement in credit ratings, an indication of the extent of the shareholder–debtholder agency cost. We propose that highly C-O divergent family firms have greater incentives to expropriate debtholders (Johnson et al, 2000; Liu & Tian, 2012; Shleifer & Vishny, 1997), and corporate disclosure constitutes a mechanism that facilitates controlling shareholders by masking the private benefits they derive from their control (Fan & Wong, 2002; Guedhami et al, 2009; Vural, 2018). As such, family firms with a higher C-O divergence are more likely to provide less transparent disclosure than their counterparts with a lower C-O divergence, suggesting a negative relationship between C-O divergence and disclosure quality.…”

What motives shape the initial accounting for goodwill under IFRS 3 in a setting dominated by controlling owners?

“…It is likely that the financial reporting of a family-controlled firm will have several distinct features. Vural (2018) investigates disclosure practices in Swedish firms' annual reports using a disclosure index. She documents that family firms disclose less information than non-family firms.…”

Corporate Governance Disclosure and Ownership Concentration in Non-Financial Listed Firms in Kuwait Stock Exchange (KSE)

“…The researcher found no empirical studies examining the impact of family ownership on corporate governance disclosure. However, Arman and Yonet (2011), Vural (2018), and Ho and Tower (2011) found that family ownership negatively impacted voluntary disclosure. As few studies have examined this particular variable and Kuwait's situation has not yet been explored, the final hypothesis is:…”