Article2014

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

Luis R. Gómez‐Mejía · Cristina Cruz · Claudia Imperatore

172 citations0/0 files storedEuropean Accounting Review

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Auditing, Earnings Management, Governance Accounting and Organizational Management Family Business Performance and Succession

Abstract

We develop an integrated framework to financial reporting decisions in family-controlling firms. Our model contends that in these firms, financial reporting decisions (i.e. earnings management and voluntary disclosure) are driven by a diverse set of family owners’ motives that can be synthesised in the preservation of the different aspects of the family socioemotional wealth (SEW). The proposed model suggests the criticality of recognising the existence of different family owners’ reference points, given the gambling nature of accounting choices. By focusing on two dimensions of SEW (‘Family Control and Influence’ and ‘Family Identification’), we explore how the prioritisation of one dimension or the other will imply a different family owners' evaluation of benefits and costs of accounting strategies and, hence, a diverse resolution of the accounting gamble.

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References

1999Corporate Ownership Around the World 2001Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature 2005The economic implications of corporate financial reporting 2003Earnings management and investor protection: an international comparison 1999A Review of the Earnings Management Literature and Its Implications for Standard Setting 2002Audit committee, board of director characteristics, and earnings management 2007Socioemotional Wealth and Business Risks in Family-controlled Firms: Evidence from Spanish Olive Oil Mills 2010Understanding earnings quality: A review of the proxies, their determinants and their consequences

Cited by

2017The courage to choose! Primogeniture and leadership succession in family firms 2014Accounting Research in Family Firms: Theoretical and Empirical Challenges 2017Is nepotism so bad for family firms? A socioemotional wealth approach 2019Does corporate social responsibility affect tax avoidance: Evidence from family firms 2014Hooked on a feeling: The affective component of socioemotional wealth in family firms

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