Knowledge that Transforms

We survey 153 empirical studies of family firms and document 192 operational definitions representing 25 distinct definition types. These definitions can be decomposed into five recurring, codable dimensions: ownership, management, board representation, embeddedness, and succession. We relate these dimensions to economic mechanisms including agency conflicts, residual control rights, transaction costs, and dynastic control. Alternative definitions select systematically different populations and yield materially different estimates of firm performance and innovation. Definition choice is largely unrelated to the research question, except in succession studies. Ownership thresholds track private enforcement of self-dealing rules, but not statutory shareholder rights or rule of law. We conclude that the family firm is a family of related constructs rather than a single latent construct. Definitions should therefore match the family-firm construct implied by the research question, and results should be reported across alternative classification rules.

Prior research finds that the textual content of Item 1A risk factor disclosures in 10‐K filings provides valuable information about firm risk. However, less is known about whether the ordering of these disclosures conveys useful information. We examine whether the relative prominence of individual risk factors within Item 1A reflects firms' exposure to the underlying risks and predicts future adverse outcomes. Focusing on credit and goodwill risk disclosures, we find that risk factor prominence is associated with proxies for the underlying risks and predicts credit rating downgrades, bankruptcy filings, and goodwill impairments. We further find that prominence is more informative during periods of high information uncertainty, when the benefits of risk disclosure are predicted to be greater. Overall, our findings suggest that risk factor prominence offers a valuable signal of firm risk that complements the textual disclosures in Item 1A. Accordingly, investors, analysts, lenders, auditors, boards, and regulators should consider both the level of, and changes in, risk factor prominence when evaluating firm risk.

We examine how the prevalence of gossip about peers' performance (peer performance gossip), a form of informal communication, influences employees' performance manipulation. Gossip is often viewed as a mechanism that disciplines behavior and deters misconduct. Yet, it may also serve as a salient cue of social evaluation, heightening employees' concerns about appearing incompetent to others. We predict that the prevalence of peer performance gossip increases employees' fear of negative social evaluation, which in turn leads them to inflate their reported performance to protect their social image. We further predict that this effect is weaker for employees with higher self‐monitoring, as they are more adept at tailoring their behavior to social cues and managing impressions. Data from two field surveys and an experiment support our predictions. Peer performance gossip increases performance manipulation by heightening social image concerns, particularly among employees with lower self‐monitoring. We contribute to the accounting literature by uncovering a social motive for performance manipulation and highlighting how informal social dynamics can shape reporting behavior beyond formal control systems. Accordingly, leaders should explicitly consider gossip when designing compensation systems, training programs, and internal communication practices. If left unaddressed, gossip may encourage performance manipulation and distort performance evaluations.

We develop a credit-risk based framework for macroprudential policy that treats systemic risk as the credit exposure of a policymaker to a portfolio of supervised banks. Using a structural credit model estimated from Credit Default Swap (CDS) prices, we derive the socially optimal capital buffers per bank by balancing the benefits of lower systemic risk against the economic costs of higher capital requirements through reduced credit supply. Applying this framework to Europe’s systemic banks, we find that the market-based optimal buffers are substantially higher than those currently in use and vary significantly across institutions. Conditional on current country averages, within-country buffers are aligned close to optimally; suboptimality mostly arises from substantial differences between country averages.

We study the history and geography of wealth accumulation in the United States using newly collected historical property tax records from the early 1800s onward. These records come from the administration of the General Property Tax–a tax that aspired to cover all types of property. We construct wealth series at the state, county, and national levels. At the state level, we use annual assessed values of wealth from state-level reports drawn from multiple sources. Because assessed values may differ from market values, we also require assessment ratios, defined as the ratio of assessed to market wealth. We obtain state-level assessment ratios from decadal U.S. Census wealth data (drawn from various Census reports, including those on “Wealth, Debt, and Taxation”), in which the Census carried out detailed valuation work, complemented with information on changes in assessment practices from the state reports, to build higher-frequency series of assessment ratios. The result is long-run annual wealth series for states from 1850 (or earlier, depending on the state) to 1935. We obtain national wealth series by aggregating these state series. At the county level, we use assessed values (or market values where available) from the U.S. Census wealth data for each decade, and apply either state-level or county-level assessment ratios, where available, to obtain market values of wealth for each decade from 1850 to 1930. We use these data to show, first, that the United States experienced extraordinary wealth accumulation after the Civil War and until the Great Depression. Second, spatial inequality in the United States has been large and highly persistent since the mid-1800s. We also examine the determinants of long-term wealth growth and find, among other results, that counties with a higher share of enslaved property before the Civil War or with higher wealth inequality experienced lower subsequent long-run wealth growth.

Discretionary announcement timing generates high conditional risk premia of stock returns and a pattern of negative drifts followed by positive jumps. Average announcement returns are much larger than unconditional risk premia. Capital Asset Pricing Model alphas turn negative when conditioning on nondisclosure because betas rise faster than risk premia prior to disclosures, but average announcement returns may appear to be too large relative to market risk when betas are estimated from past returns. The effects are amplified when multiple firms exercise discretion over the timing of correlated announcements. We present evidence that firms time earnings announcements in a manner consistent with our model.