Earnings Management and the Contest to the Control: An International Analysis of Family Owned Firms

Forthcoming in the Spanish Journal of Finance and Accounting

35 Pages Posted: 17 Jul 2008 Last revised: 12 Sep 2014

See all articles by Mauricio Jara-Bertin

Mauricio Jara-Bertin

University of Chile - Business School

Félix J. López-Iturriaga

University of Valladolid - Department of Financial Economics and Accounting; National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy

Date Written: July 17, 2014

Abstract

In this paper we focus on the conflict of interests among shareholders as a possible determinant of earnings management. Using a sample of 3,559 listed firms from the United States, Canada, the United Kingdom, France, Spain, and Italy between 2008 and 2013, we analyse how the distribution of power among shareholders affects earnings management in family owned firms. We find that the contest to the dominant family shareholder is relevant: namely, the more challenge to the control of dominant shareholders, the less earnings management in family firms. This contest is more important in civil law countries in which the shareholders rights are less protected. We also find that the nature of the blockholders can be relevant: consistent with the view that nonfamily shareholders are under more public scrutiny and have more difficulty to agree with the largest family shareholder to extract private benefits, our results suggest that a second or third nonfamily shareholder can reduce or alleviate earnings management.

Keywords: corporate control, discretionary accruals, earnings management, family firms

JEL Classification: G32, G34, M41, M43, M47

Suggested Citation

Jara-Bertin, Mauricio Alejandro and Lopez-Iturriaga, Felix Javier, Earnings Management and the Contest to the Control: An International Analysis of Family Owned Firms (July 17, 2014). Forthcoming in the Spanish Journal of Finance and Accounting. Available at SSRN: https://ssrn.com/abstract=1162122 or http://dx.doi.org/10.2139/ssrn.1162122

Mauricio Alejandro Jara-Bertin

University of Chile - Business School ( email )

Diagonal Paraguay 257
Santiago, Chile
Chile

Felix Javier Lopez-Iturriaga (Contact Author)

University of Valladolid - Department of Financial Economics and Accounting ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain
+34 983 184 395 (Phone)
+34 983 183830 (Fax)

HOME PAGE: http://www2.eco.uva.es/flopez

National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy ( email )

Lebedeva,27
Perm, Perm 614070
Russia

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