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Does founding family control affect earnings management?

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  • Pornsit Jiraporn
  • Peter DaDalt

Abstract

Because of concentrated ownership stakes, board composition and longer-investment horizons, founding-family controlled firms provide an interesting setting for examining issues relating to governance and control. Anderson and Reeb (2003a, b, 2004), find that the founding-family controlled structure results in superior stock market and accounting performance and lower cost of debt compared to their nonfamily controlled counterparts. We add to their findings by examining the relationships between founding family control and earnings management. The unique characteristics of family controlled firms could insulate these firms from pressures to manage earnings. Our results support this notion, and find that family firms are significantly less likely to manage earnings.

Suggested Citation

  • Pornsit Jiraporn & Peter DaDalt, 2009. "Does founding family control affect earnings management?," Applied Economics Letters, Taylor & Francis Journals, vol. 16(2), pages 113-119.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:2:p:113-119
    DOI: 10.1080/17446540701720592
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    1. Mr. Ralph Chami, 2001. "What is Different About Family Businesses?," IMF Working Papers 2001/070, International Monetary Fund.
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