Purpose
The purpose of this paper is to examine the effect of the emotional attachment strength of family members to their business on the quality of the voluntary disclosure of their key performance indicator (KPI). More specifically, the authors focused on the effect of two dimensions of the socio-emotional theory, i.e. “family influence and control” and “firm dynasty succession.”
Design/methodology/approach
The authors performed a content analysis of annual reports for a sample of 87 French families listed in CAC All-Tradable to calculate a disclosure quality index of KPI. The authors proxied the “family influence and control” by the proportion of family members appointed in the board. To identify the “firm dynasty succession” concern, the authors classified firms according to the generation they belonged to. The authors estimated a cross-sectional linear regression model to meet the research objective.
Findings
This study confirms the role of the family affective attachment in decreasing the quality of KPI disclosure in such a way to preserve its socio-emotional wealth. The family firms’ principals who desire to sustain their control on the firm, to perpetuate the business for future generations and to protect their emotional wealth tend to avoid the disclosure of credible and reliable KPI information.
Practical implications
The findings have meaningful practical implications. First, they provide relevant insights into the regulatory bodies of the financial reporting regarding the increasing appeal for making KPI disclosure mandatory. Second, as the family businesses are the most widespread proprietorship in the French context, the effect of the family agenda on the quality of the KPI should be of interest to various policymakers and financial statements’ users of such firms. Third, the results inform nonfamily shareholders regarding the importance of selecting representatives on the board that should share similar interest with regard to KPI disclosure.
Social implications
From a societal perspective, this study is relevant in taking into account the critical role the family businesses have in the French economy. This study should help the minority shareholders to protect their interests and maximize their wealth within the family firm because it sheds light on the influence that family members have on hiding key information on the firm’s real performance.
Originality/value
To the best of the authors’ knowledge, no prior study in the family firms literature has examined the quality of voluntary disclosure of KPI. Although most previous studies merely compared family and nonfamily firms in terms of voluntary disclosure, the authors acknowledge and address the heterogeneity between family firms. The authors contribute to the few prior empirical validations of SEW implication on voluntary disclosure decisions by testing the effect of an additional dimension, which is family dynasty.
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