Real Earnings Management and Accrual-Based Earnings Management in Family Firms

Posted: 23 Jan 2014 Last revised: 9 Apr 2019

See all articles by Ann‐Kristin Achleitner

Ann‐Kristin Achleitner

Technische Universität München - Center for Entrepreneurial and Financial Studies

Nina Guenther

Technische Universität München (TUM) - Center for Entrepreneurial and Financial Studies (CEFS)

Christoph Kaserer

Technische Universität München (TUM)

Gianfranco Siciliano

China Europe International Business School

Date Written: January 23, 2014

Abstract

We examine the effects of family firms on real earnings management (REM) and accrual-based earnings management (ABEM). Using socioemotional wealth (SEW) as a theoretical framework and considering the different implications of REM and ABEM on family firms’ transgenerational sustainability, we hypothesize and find for a sample of 402 German listed family firms during 1998-2008, that family firms engage less in REM and exhibit more earnings-decreasing ABEM policies as compared to a sample of 436 non-family firms. We further provide evidence that family firms as compared to non-family firms treat REM and ABEM as substitute rather than complementary tools for earnings management. Overall, our findings suggest that family firms use earnings management activities strategically, avoiding those that inhibit the firm’s long-term value (i.e. REM) and engaging in those that help families retain transgenerational control (i.e. ABEM).

Keywords: family firms, accrual-based earnings management, real earnings management, Germany

Suggested Citation

Achleitner, Ann-Kristin and Guenther, Nina and Kaserer, Christoph and Siciliano, Gianfranco, Real Earnings Management and Accrual-Based Earnings Management in Family Firms (January 23, 2014). European Accounting Review Forthcoming. Available at SSRN: https://ssrn.com/abstract=2383741

Ann-Kristin Achleitner

Technische Universität München - Center for Entrepreneurial and Financial Studies ( email )

Arcisstr. 21
Munich, D-80290
Germany
+49 89 289 25181 (Phone)

Nina Guenther

Technische Universität München (TUM) - Center for Entrepreneurial and Financial Studies (CEFS) ( email )

Arcisstr. 21
Munich, 80333
Germany

Christoph Kaserer (Contact Author)

Technische Universität München (TUM) ( email )

Arcisstr. 21
Munich, D-80290
Germany
+49 89 289 25489 (Phone)
+49 89 289 25488 (Fax)

HOME PAGE: http://www.cefs.de

Gianfranco Siciliano

China Europe International Business School ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

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