Journal of Accounting Research Vol. 44 No. 3 2006
Founding Family Ownership and Earnings Quality
Abstract
This study investigates the relation between founding family ownership and earnings quality using data from the Standard & Poor's 500 companies. Existing literature has documented that financial reporting is of higher quality when firms have stronger corporate governance mechanisms and when there is greater demand for quality financial reporting. I provide two competing theories of the effect of founding family ownership on the demand and supply of earnings quality: the entrenchment effect and the alignment effect. The empirical results show that, on average, founding family ownership is associated with higher earnings quality. In particular, I find consistent evidence that founding family ownership is associated with lower abnormal accruals, greater earnings informativeness, and less persistence of transitory loss components in earnings. In addition, the results suggest a nonlinear relation between family ownership and earnings quality.
- DOI
- 10.1111/j.1475-679x.2006.00213.x
- Volume
- 44
- Issue
- 3
- Pages
- 619-656
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib