Exploring the role of excess control rights on real earnings management in family-controlled firms

IF 3.3 Q1 BUSINESS, FINANCE

Journal of International Accounting Auditing and Taxation Pub Date : 2023-03-01 DOI:10.1016/j.intaccaudtax.2023.100526

Ching-Lung Chen , Pei-Yu Weng , Hung-Shu Fan

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引用次数: 0

Abstract

Family-controlled firms are associated with financial reporting quality in two competing ways: incentives alignment hypothesis versus entrenchment hypothesis. Prior studies have investigated the potential effect of family-controlled firms on earnings management and/or the quality of financial reporting, but with inconsistent conclusions. This study uses the divergence between control rights and cash flow rights as a moderating variable and examines the association of family-controlled firms with real earnings management (REM) as compared to nonfamily-controlled firms in Taiwan. Taiwan is an emerging market where family owners play a dominant role in the decision-making process and are characterized by excess control rights. Based on unbalanced-panel data, empirical results indicate that family-controlled firms are more likely than nonfamily-controlled firms to engage in REM, which in turn results in poor subsequent operating performance. Further evidence reveals that this result is particularly pronounced for family-controlled firms with excessively high control rights. This suggests that excess control rights trigger family-controlled firms’ engaging in REM, thereby actually destroy operating performance. Our study performs several diagnostic tests and shows the results are robust in various specifications.

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论家族企业超额控制权在实际盈余管理中的作用

家族控制企业与财务报告质量有两种相互竞争的关系：激励一致假说与巩固假说。先前的研究调查了家族控制公司对盈余管理和/或财务报告质量的潜在影响，但结论不一致。本研究以控制权与现金流量权之差异为调节变量，并与台湾非家族控制公司比较，探讨家族控制公司与实际盈余管理（REM）之关联。台湾是一个新兴市场，家庭所有者在决策过程中发挥主导作用，其特征是控制权过大。基于不平衡的面板数据，实证结果表明，家族控制的公司比非家族控制的企业更有可能参与快速眼动，这反过来又导致后续经营业绩不佳。进一步的证据表明，这一结果在控制权过高的家族控制企业中尤为明显。这表明，过度的控制权会引发家族企业参与快速眼动，从而实际上破坏了经营业绩。我们的研究进行了几次诊断测试，结果表明在各种规格下都是稳健的。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of International Accounting Auditing and Taxation BUSINESS, FINANCE-

CiteScore

4.50

自引率

3.80%

发文量

期刊介绍： The Journal of International Accounting, Auditing and Taxation publishes articles which deal with most areas of international accounting including auditing, taxation and management accounting. The journal''s goal is to bridge the gap between academic researchers and practitioners by publishing papers that are relevant to the development of the field of accounting. Submissions are expected to make a contribution to the accounting literature, including as appropriate the international accounting literature typically found in JIAAT and other primary US-based international accounting journals as well as in leading European accounting journals. Applied research findings, critiques of current accounting practices and the measurement of their effects on business decisions, general purpose solutions to problems through models, and essays on world affairs which affect accounting practice are all within the scope of the journal.