Financial Reporting and the Protection of Socioemotional Wealth in Family-Controlled Firms

Gómez‐Mejía, Luis R.; Cruz, Cristina; Imperatore, Claudia

doi:10.1080/09638180.2014.944420

Cited by 134 publications

(172 citation statements)

References 73 publications

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“…Stockmans et al (2010) uses Flemish private firm data to conclude that socioemotional wealth motivates upward earnings management. Gomez-Mejia et al (2014) present a similar argument and establish their alternative hypotheses that are comparable to the hypotheses in this study. We also present the entrenchment hypothesis as an alternative hypothesis, which implies lower earnings quality against the null hypothesis.…”

Section: Motivation For the Studymentioning

confidence: 55%

“…The potential cost of managing earnings using an AEM strategy is lower than the cost of an REM strategy. More importantly, family firms may not want to incur economic cost by conducting REM strategies that will deter them from accumulating family socioemotional wealth (Gomez-Mejia et al, 2014). This prediction led to Hypothesis 2 and Hypothesis 2.A.…”

Section: Further Analysis Of Costs Of Earnings Managementmentioning

confidence: 99%

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Accrual-Based and Real Activities Based Earnings Management Behavior of Family Firms in Japan

Chen

Kubota

et al. 2015

TJAR

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We have explored the extent of accrual-based and real activities-based earnings management using data from family and non-family firms in Japan. Family firms are expected to have lower agency costs because family shareholders and management are more congruent in their pursuit of mutual firm goals and seek lower levels of earnings management. However, this collusion may lead to entrenchment and higher levels of earnings management, which becomes opaque to outside shareholders. A founding family is concerned with the reputation of their firm for sustained socioemotional wealth and family firms may conduct cosmetic earnings management to conceal bad news. We empirically assess the levels of earnings management and investigate whether the level will be lower or higher for family or non-family firms, and identify which method is more costly. The level of accruals and cost may vary among the family firm The Japanese Accounting Review, 5 (2015), 21-47 types; that is, whether or not shareholdings are large or the CEO is from the founding family. We find that the level of both accrual-based and real activity measures is lower for family firms. With cross-section regressions, we find that family shareholding increase the level of abnormal accruals management, whereas the family CEO decreases the level of abnormal accruals, but in both cases the amounts were not significant. We also find that family-related variables decrease the levels of real-activities earnings management. When we introduce economic measures related to the costs of earnings management, we find that Japanese family firms utilize accrual-based earnings management more often than real activities-based earnings management.JEL Classification: M41; G32; M14

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Section: Motivation For the Studymentioning

confidence: 55%

Section: Further Analysis Of Costs Of Earnings Managementmentioning

confidence: 99%

Accrual-Based and Real Activities Based Earnings Management Behavior of Family Firms in Japan

Chen

Kubota

et al. 2015

TJAR

View full text Add to dashboard Cite

show abstract

“…Likewise, these owners might restrict the possibilities for dynastic succession, at least in management, and the question of being listed can have an impact both on family members' identification with the firm and their emotions. Of course, multi-dimensional constructs such as SEW entail the problem that different dimensions might point into different directions in a concrete business situation (Gómez-Mejía, Cruz et al, 2014).…”

Section: The Sew Perspectivementioning

confidence: 99%

“…We pose, however, that it is unclear how these expectations are met, and how nonfinancial, i.e., socioemotional and wealth considerations are affected over time. Instead of merely being a tradeoff between financial gains and losses, such decisions could emerge from a "mixed gamble" where financial and socioemotional wealth factors are weighed against each other (Gómez-Mejía, Campbell et al, 2014;Gómez-Mejía, Cruz, & Imperatore, 2014). In other words, family owners consider several possible outcomes in regards to financial and socioemotional wealth in their decision-making.…”

Section: Introductionmentioning

confidence: 98%

“…First, it helps us better understand the phenomenon of going private decisions within family firms, in that, rather than being a tradeoff between financial gains and losses, such decisions arise from a mixed gamble where financial and socioemotional wealth considerations are weighed against each other (Gómez-Mejía, Campbell et al, 2014;Gómez-Mejía, Cruz et al, 2014). Second, we gain a better understanding of SEW by studying these empirical phenomena.…”

Section: Introductionmentioning

confidence: 99%

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Going private: A socioemotional wealth perspective on why family controlled companies decide to leave the stock-exchange

Boers

Ljungkvist

Brunninge

et al. 2017

Journal of Family Business Strategy

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A matter of control or identity? Family firms' environmental reporting decisions along the corporate life cycle

Arena

Michelon

2018

Bus Strat Env

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Building on the socioemotional wealth (SEW) perspective, this study explores environmental disclosure (ED) practices in family firms and investigates whether the firm's life cycle stage plays a moderating role in these practices. We focus on two dimensions of the SEW: family control and influence and family identity. To the extent that different types of family‐controlled firms have different reporting behaviors based on their primary SEW dimension, they will undertake the ED strategies that allow them to preserve their SEW. Using a sample of listed firms from the Milan Stock Exchange, we show that family firms for which the family control and influence SEW dimension is most salient provide less environmental information than non‐family firms and that this effect is weakened along the family firm's life cycle. Our findings also indicate that middle‐aged family firms, where the family identity dimension prevails, provide more ED than do non‐family firms. Our study contributes to knowledge about how the socioemotional endowment affects family firms' reporting behavior.

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Financial Reporting and the Protection of Socioemotional Wealth in Family-Controlled Firms

Cited by 134 publications

References 73 publications

Accrual-Based and Real Activities Based Earnings Management Behavior of Family Firms in Japan

Accrual-Based and Real Activities Based Earnings Management Behavior of Family Firms in Japan

Going private: A socioemotional wealth perspective on why family controlled companies decide to leave the stock-exchange

A matter of control or identity? Family firms' environmental reporting decisions along the corporate life cycle

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