38 Pages Posted: 15 Mar 2017
Date Written: March 13, 2017
We examine whether a country’s level of institutional development moderates the relationship between family ownership of firms and their financial reporting quality. Using a sample of family and non-family firms in 12 European countries, we find evidence of a moderating effect of institutional development. Specifically, a more developed institutional environment has a less beneficial impact on the earnings quality of family firms than that of non-family firms. Thus, family ownership and a country’s institutional environments have a substitute effect on the quality of firms’ financial reporting. Our study contributes to the literature by showing that well-developed formal institutions have a more beneficial effect on the earnings quality of non-family firms than that of family firms. We also show that informal institutions such as families have a particularly positive influence on firm behaviour in countries where formal institutions are lacking.
Suggested Citation: Suggested Citation
Mengoli, Stefano and Pazzaglia, Federica, Family Ownership and Earnings Quality: Evidence from Different Institutional Environments (March 13, 2017). Available at SSRN: https://ssrn.com/abstract=2932069 or http://dx.doi.org/10.2139/ssrn.2932069