FAMILY INVOLVEMENT, FAMILY GENERATION AND ACCOUNTING CONSERVATISM PRACTICES
DOI:
https://doi.org/10.14392/asaa.2022150205Keywords:
Accounting conservatism, Family businesses, Family involvement, Family generationAbstract
The aim of the study is to assess the relationship between family involvement and the company's family generation in accounting conservatism practices. A descriptive research was carried out through a survey and quantitative data approach. For data analysis, Principal Component Analysis (PCA), correlation and multiple linear regression (Ordinary Least Squares) were performed. The study sample corresponded to 183 accountants from family and non-family businesses in the Brazilian scenario. The results point to a greater practice of accounting conservatism in family businesses than in non-family businesses. The findings also reveal that the lesser the family's involvement in the company's management, the lesser the accounting conservatism. Furthermore, the results show that the first generation of family businesses is more prone to more conservative accounting practices. In general, it is clear that the company's ownership, being family owned, can be a factor for the quality of accounting information. The study contributes by demonstrating that the involvement of the family and the respective generation in power are crucial for more conservative accounting practices. Still, such results contribute to investors being able to make investment decisions in family businesses, as the family generation can result in better quality reports.
Downloads
References
Anderson, R. C., Mansi, S. A., & Reeb, D. M. (2003). Founding family ownership and the agency cost of debt. Journal of Financial economics, 68(2), 263-285. DOI: 10.1016/S0304-405X(03)00067-9
Armstrong, C. S., Guay, W. R., & Weber, J. P. (2010). The role of information and financial reporting in corporate governance and debt contracting. Journal of Accounting and Economics, 50(2-3), 179-234. DOI: 10.1016/j.jacceco.2010.10.001
Ball, R., & Shivakumar, L. (2005). Earnings quality in UK private firms: comparative loss recognition timeliness. Journal of Accounting and Economics, 39(1), 83-128. DOI: 10.1016/j.jacceco.2004.04.001
Basu, S. (1997). The conservatism principle and the asymmetric timeliness of earnings1. Journal of Accounting and Economics, 24(1), 3-37. DOI: 10.1016/S0165-4101(97)00014-1
Beaver, W. H., & Ryan, S. G. (2005). Conditional and unconditional conservatism: concepts and modeling. Review of accounting studies, 10(2), 269-309.
Beck, T., Demirgüç‐Kunt, A. S. L. I., & Maksimovic, V. (2005). Financial and legal constraints to growth: does firm size matter?. The journal of finance, 60(1), 137-177.
Bertrand, M., & Schoar, A. (2006). The role of family in family firms. Journal of Economic Perspectives, 20(2), 73-96.
Boubakri, N., & Ghouma, H. (2010). Control/ownership structure, creditor rights protection, and the cost of debt financing: International evidence. Journal of Banking & Finance, 34(10), 2481-2499. DOI: 10.1016/j.jbankfin.2010.04.006
Bussab, W.O. Morettin, P.A. (2013). Estatística básica, 8 ed., Saraiva, p. 568.
Cascino, S., Pugliese, A., Mussolino, D., & Sansone, C. (2010). The influence of family ownership on the quality of accounting information. Family Business Review, 23(3), 246-265. DOI: 10.1177/0894486510374302
Cao, J., Cumming, D., & Wang, X. (2015). One-child policy and family firms in China. Journal of Corporate Finance, 33, 317-329. DOI: 10.1016/j.jcorpfin.2015.01.005
Chanchani, S., & Willett, R. (2004). An empirical assessment of Gray's accounting value constructs. The International Journal of Accounting, 39(2), 125-154. DOI: 10.1016/j.intacc.2004.02.003
Chen, C., & Zhu, S. (2013). Financial reporting quality, debt maturity, and the cost of debt: Evidence from China. Emerging Markets Finance and Trade, 49(sup4), 236-253. DOI: 10.2753/REE1540-496X4905S416
Chen, S., Chen, X., & Cheng, Q. (2014). Conservatism and equity ownership of the founding family. European Accounting Review, 23(3), 403-430. DOI: 10.1080/09638180.2013.814978
Chen, Y. (2019). Succession of Family Firms and Accounting Conservatism. Modern Economy, 10(01), 298. DOI: 10.4236/me.2019.101020
Chong, G., Huang, H., & Zhang, Y. (2012). Do US commercial banks use FAS 157 to manage earnings?. International Journal of Accounting & Information Management, 20(01), 78-93. DOI: 10.1108/18347641211201090
Chrisman, J. J., Chua, J. H., De Massis, A., Frattini, F., & Wright, M. (2015). The ability and willingness paradox in family firm innovation. Journal of Product Innovation Management, 32(3), 310-318. DOI: 10.1111/jpim.12207
Coelho, A. C., & Lima, I. S. (2007). Qualidade informacional e conservadorismo nos resultados contábeis publicados no Brasil. Revista Contabilidade & Finanças, 18, 38-49. DOI: S1519-70772007000400004
Connelly, B. L., Certo, S. T., Ireland, R. D., & Reutzel, C. R. (2011). Signaling theory: A review and assessment. Journal of Management, 37(1), 39-67. DOI: 10.1177/0149206310388419
Cruz, C., & Nordqvist, M. (2012). Entrepreneurial orientation in family firms: A generational perspective. Small Business Economics, 38(1), 33-49.
Dawson, A., Ginesti, G., & Sciascia, S. (2020). Family-related antecedents of business legality: An empirical investigation among Italian family owned SMEs. Journal of family business strategy, 11(1), 100284. DOI: 10.1016/j.jfbs.2019.04.003
Dyer, W. G. (1988). Culture and continuity in family firms. Family Business Review, 1(1), 37-50.
Drago, C., Ginesti, G., Pongelli, C., & Sciascia, S. (2018). Reporting strategies: What makes family firms beat around the bush? Family-related antecedents of annual report readability. Journal of Family Business Strategy, 9(2), 142-150. DOI: 10.1016/j.jfbs.2017.11.006
Duréndez, A., & Madrid-Guijarro, A. (2018). The impact of family influence on financial reporting quality in small and medium family firms. Journal of Family Business Strategy, 9(3), 205-218. DOI: 10.1016/j.jfbs.2018.08.002
Ferramosca, S., & Allegrini, M. (2018). The complex role of family involvement in earnings management. Journal of Family Business Strategy, 9(2), 128-141. DOI: 10.1016/j.jfbs.2018.01.001
Ferramosca, S., Ghio, A., (2018). Accounting choices in family firms. An analysis of influences and implications. Contributions to Management Science, Springer, First edn., Cham, Switzerland.
Gao, H., He, J., Li, Y., & Qu, Y. (2020). Family control and cost of debt: Evidence from China. Pacific-Basin Finance Journal, 60, 101286. DOI: 10.1016/j.pacfin.2020.101286
García-Meca, E., & Palacio, C. J. (2018). Board composition and firm reputation: The role of business experts, support specialists and community influentials. BRQ Business Research Quarterly, 21(2), 111-123. DOI: 10.1016/j.brq.2018.01.003
Gomez-Mejia, L. R., Cruz, C., Berrone, P., & De Castro, J. (2011). The bind that ties: Socioemotional wealth preservation in family firms. Academy of Management Annals, 5(1), 653-707. DOI: 10.1080/19416520.2011.593320
Groysberg, B., Kelly, L. K., & MacDonald, B. (2011). The new path to the C-suite. Harvard Business Review, 89(3), 60-68.
Guadalupe, M., Li, H., & Wulf, J. (2014). Who lives in the C-suite? Organizational structure and the division of labor in top management. Management Science, 60(4), 824-844. DOI: 10.1287/mnsc.2013.1795
Jensen, M. C., & Meckling, W. H. (2019). Theory of the firm: Managerial behavior, agency costs and ownership structure. In Corporate Governance (pp. 77-132).
Kelly, L. M., Athanassiou, N., & Crittenden, W. F. (2000). Founder centrality and strategic behavior in the family-owned firm. Entrepreneurship theory and practice, 25(2), 27-42. DOI: 10.1177/10422587000250020
Lafond, R., & Roychowdhury, S. (2008). Managerial ownership and accounting conservatism. Journal of Accounting Research, 46(1), 101-135. DOI: 10.1111/j.1475-679X.2008.00268.x
López-González, E., Martínez-Ferrero, J., & García-Meca, E. (2019). Corporate social responsibility in family firms: A contingency approach. Journal of cleaner production, 211, 1044-1064. DOI: 10.1016/j.jclepro.2018.11.251
Menz, M. (2012). Functional top management team members: A review, synthesis, and research agenda. Journal of Management, 38(1), 45-80. DOI: 10.1177/0149206311421830
Moura, G. D. D., Franz, L., & Cunha, P. R. D. (2015). Qualidade da informação contábil em empresas familiares: influência dos níveis diferenciados de governança da BM&FBovespa, tamanho e independência do conselho de administração. Contaduría y Administración, 60(2), 423-446. DOI: 10.1016/S0186-1042(15)30008-5
Muttakin, M. B., Khan, A., & Subramaniam, N. (2014). Family firms, family generation and performance: evidence from an emerging economy. Journal of Accounting in Emerging Economies.
Paiva, I. S., Lourenço, I. C., & Branco, M. C. (2016). Earnings management in family firms: current state of knowledge and opportunities for future research. Review of Accounting and Finance. DOI: 10.1108/RAF-06-2014-0065
Pan, X., & Tian, G. G. (2016). Family control and loan collateral: Evidence from China. Journal of Banking & Finance, 67, 53-68. DOI: 10.1016/j.jbankfin.2016.02.003
Paulo, I. I. S. L. M., Paulo, E., & Cavalcante, P. R. N. (2015). Conservadorismo contábil nas companhias abertas familiares e não-familiares no mercado brasileiro. Enfoque: Reflexão Contábil, 34(1), 19-28.
Paulo, E., Antunes, M. T. P., & Formigoni, H. (2008). Conservadorismo contábil nas companhias abertas e fechadas brasileiras. Revista de Administração de Empresas, 48, 46-60.
Prencipe, A., & Bar-Yosef, S. (2011). Corporate governance and earnings management in family-controlled companies. Journal of Accounting, Auditing & Finance, 26(2), 199-227.
Santana, A. G., & Klann, R. C. (2016). Conservadorismo Contábil e a adoção das IFRS: Evidências em empresas brasileiras familiares e não familiares. Enfoque: Reflexão Contábil, 35(1), 35-53. DOI: 10.4025/enfoque.v35i1.29417
Sciascia, S., Mazzola, P., & Kellermanns, F. W. (2014). Family management and profitability in private family-owned firms: Introducing generational stage and the socioemotional wealth perspective. Journal of Family Business Strategy, 5(2), 131-137. DOI: 10.1016/j.jfbs.2014.03.001
Sebrae (2020, agosto 7). Pais, filhos e negócios: os desafios e valores entre gerações de empreendedores. Recuperado em agosto 09, 2021, em https://sebrae.ms/empreendedorismo/pais-filhos-e-negocios-os-desafios-e-valores-entre-geracoes-de-empreendedores/.
Skærbæk, P., & Tryggestad, K. (2010). The role of accounting devices in performing corporate strategy. Accounting, Organizations and Society, 35(1), 108-124. DOI: 10.1016/j.aos.2009.01.003
Songini, L., Gnan, L., & Malmi, T. (2013). The role and impact of accounting in family business. Journal of Family Business Strategy, 4(2), 71-83. DOI: 10.1016/j.jfbs.2013.04.002
Xu, N., Yuan, Q., Jiang, X., & Chan, K. C. (2015). Founder's political connections, second generation involvement, and family firm performance: Evidence from China. Journal of Corporate Finance, 33, 243-259. DOI: 10.1016/j.jcorpfin.2015.01.004
Watts, R. L. (2003). Conservatism in accounting part I: Explanations and implications. Accounting Horizons, 17(3), 207-221. DOI: 10.2308/acch.2003.17.3.207
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2022 Darclê Costa Silva Haussmann, Micheli Aparecida Lunardi, Roberto Carlos Klann
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Copyright for articles published in the ASAA Journal is held by the author, with first publication rights to the journal. By virtue of appearing in this publicly accessible journal, the articles are free to use, with their own attributions, in educational and non-commercial applications. The ASAA Journal will allow the use of published works for non-commercial purposes, including the right to submit the work to publicly accessible databases. Published articles are the authors' full and exclusive responsibility. There are no submission/publishing charges or fees for processing articles (APC).
