Financial Reporting Practices of Family Firms

This paper investigates whether the financial reporting practices of family firms differ from non-family firms. Results indicate family firms have lower absolute discretionary accruals, report fewer small positive earnings surprises compared to non-family firms, have more informative earnings and have less earnings restatements relative to non-family firms. Overall, the findings indicate that the financial reporting practices of family firms are of better quality than those of non-family firms. Better quality financial reporting practices in family firms is consistent with a long-run investment horizon, reputation concerns and better monitoring of managers, and is indicative of less opportunistic rent extraction.