Earnings Management and Contests for Control: An Analysis of European Family Firms
21 Pages Posted: 11 Apr 2011 Last revised: 11 Mar 2012
Date Written: March 1, 2011
In this paper, the influence of large shareholders on earnings management in family-owned firms is analyzed using a sample of firms from nine European countries. How contests for control for the largest shareholder and the existence of a controlling coalition in family-owned firms affect earnings management is considered. It was found that increases in the contestability of control by the largest shareholder reduce earnings management in family-owned firms. The results also show that in firms in which the largest shareholder is a family member, a second or third family shareholder increases discretionary accruals.
Keywords: corporate control, discretionary accruals, earnings management, family firms
JEL Classification: G32, M41
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