Accounting discretion in family firms: The case of goodwill write-off. Evidence from US firms

2021 ◽  
pp. 5-28
Author(s):  
Giulio Greco ◽  
Lorenzo Neri
Keyword(s):  
First Generation ◽  
Family Firms ◽  
Fair Value ◽  
Negative Consequences ◽  
Generational Change ◽  
Goodwill Impairment ◽  
Asset Values ◽  
Generation Family ◽  
Accounting Rules ◽  
Fair Value Measurements

This paper investigates whether family ownership affects decisions to take a writeoff of the goodwill and the amount written off. This study is based on a panel of public United States firms. Consistent with predictions based on agency theory and socioemotional wealth (SEW) theory, the findings demonstrate accounting discretion in goodwill impairment is lower in family firms than non-family firms. The results also show that first-generation family firms are more likely to exploit accounting discretion in goodwill impairment decisions than second or later generation family firms, due to greater concerns associated with the negative consequences of the write-off. This paper contributes to previous research on accounting in the context of family firms. Family firms cannot be considered a homogeneous group with the same propensity to exploit the discretion allowed by accounting rules in highly subjective fair value measurements. Generational change significantly influences firms' accounting choices, leading to more credible earnings and asset values for second or later generation family firms. This study also suggests the earnings management literature would benefit from additional in-depth investigation into how the generational stage of family businesses affects accounting discretion.

A Taxonomy of Founders Based on Values: The Root of Family Business Heterogeneity

2001 ◽  
Vol 14 (3) ◽  
pp. 209-230 ◽  
Author(s):  
Ercilia García-Álvarez ◽  
Jordi López-Sintas
Keyword(s):  
Family Business ◽  
First Generation ◽  
Family Firms ◽  
Large Range ◽  
New Economy ◽  
Value Systems ◽  
Business Owner ◽  
Doing Business ◽  
Generation Family ◽  
Business Behavior

The new economy offers a large range of opportunities to family businesses if they are able to promote values that allow constantly innovative behavior and business evolution. Although family firms are commonly associated with a traditional way of doing business, this paper shows the heterogeneity among first-generation family firms by building a taxonomy of four groups of founders based on values. The results show the relevance of identifying founders' value systems to understand the founders' influence on family business behavior. This value profile can be a valuable tool for family business owner-managers and advisors in identifying and promoting values that add value to firms without compromising next-generation family firm development.

scholarly journals Women in management: Are family firms somehow special?

2017 ◽  
Vol 23 (2) ◽  
pp. 224-240 ◽  
Author(s):  
Ángel L Meroño-Cerdán ◽  
Carolina López-Nicolás
Keyword(s):  
First Generation ◽  
Family Firms ◽  
Gender Effect ◽  
Services Sector ◽  
Organizational Conditions ◽  
Female Managers ◽  
Generation Family ◽  
Management Literature ◽  
Management Experience ◽  
Level Of Training

AbstractFirms managed by women present some differences in organizational conditions in terms of type of business and manager profile. The aim of this study is to check if those differences persist in family firms where the presence of female managers is higher, especially in second or subsequent generation family firms, than in non-family firms. The results reveal that family firms run by women are not smaller, but are concentrated in the services sector like non-family firms. Regarding the manager profile there are no differences either in the level of training or the age of female managers. They possess, however, less management experience but only in first generation family firms. In sum, gender differences in the type of business and in the manager profile found in the management literature disappear in family firms, only a sectoral gender effect persists.

The Invisible Hand of Evolutionary Psychology: The Importance of Kinship in First-Generation Family Firms

2019 ◽  
Vol 44 (1) ◽  
pp. 134-157 ◽  
Author(s):  
Xiaodong Yu ◽  
Laura Stanley ◽  
Yuping Li ◽  
Kimberly A. Eddleston ◽  
Franz W. Kellermanns
Keyword(s):  
Executive Compensation ◽  
Evolutionary Psychology ◽  
First Generation ◽  
Family Firms ◽  
Invisible Hand ◽  
Family Ownership ◽  
Generation Family ◽  
Different Types ◽  
Ceo Selection ◽  
Kinship Ties

While previous studies focus on differences between family and nonfamily firms regarding CEO selection and executive compensation, this study investigates differences among family firms with different types of kinship ties. We find that, compared with family firms with close kinship ties, those with distant kinship ties are more likely to appoint a nonfamily CEO and to pay nonfamily executives lower salaries. This relationship is moderated by firm performance and family ownership. Based on evolutionary psychology, we propose that family firms with close versus distant kinships have different motivation levels to preserve socioemotional wealth.

The Succession Conspiracy

1988 ◽  
Vol 1 (2) ◽  
pp. 119-143 ◽  
Author(s):  
Ivan Lansberg
Keyword(s):  
Succession Planning ◽  
First Generation ◽  
Family Firms ◽  
Generation Family

The lack of succession planning has been identified as one of the most important reasons why many first-generation family firms do not survive their founders. This paper explores some of the factors that interfere with succession planning and suggests ways in which these barriers can be constructively managed.

First-, Second-, and Third-Generation Family Firms: A Comparison

2004 ◽  
Vol 17 (3) ◽  
pp. 189-201 ◽  
Author(s):  
Matthew C. Sonfield ◽  
Robert N. Lussier
Keyword(s):  
Social Science ◽  
Generational Differences ◽  
First Generation ◽  
Family Firms ◽  
Industrial Clusters ◽  
Family Businesses ◽  
Analysis Of Covariance ◽  
Lead Author ◽  
Third Generation ◽  
Generation Family

SAGE wishes to inform readers that the article titled “Bahavioral [sic] Characteristics of Entrepreneurs in the Gujrat, Gujranawala and Slalkot Industrial Clusters of Pakistan: A Comparisn [sic] of First, Second and Third Generation Family Firms,” by Shahid Qureshi, Sarfraz A. Mian, and Arif Iqbal Rana, published in Volume 1, Issue 2 (November 2010) of International Journal of Business and Social Science included substantial excerpts from this article, “First-, Second-, and Third-Generation Family Firms: A Comparison,” by Matthew C. Sonfield and Robert N. Lussier, Volume XVII, Number 3 (September 2004) of Family Business Review, without appropriate attribution to Drs. Sonfield and Lussier or authorization of the authors or SAGE. Numerous requests made by SAGE to the editor of International Journal of Business and Social Science to address the inappropriate use of this article have gone unanswered. SAGE has additionally been informed by the lead author of the IJBSS article, Shahid Qureshi, that Sarfraz A. Mian and Arif Iqbal Rana did not participate in the authorship of the IJBSS article, and authorship of the article was completed by Dr. Qureshi alone. There has been limited prior research into generational differences among family businesses. This study compared first-, second-, and third-generation family firms. Contrary to much of the current literature, only two significant differences were found when testing 11 hypotheses. As hypothesized, first-generation family businesses do less succession planning than second- and third-generation family firms, and there are no differences between first-, second-, and third- generation firms with regard to the influence of the firm's founder. Also, first-generation firms had the highest use of equity versus debt financing. Although not tested as a hypothesis, demographic analysis indicated fewer first-generation firms using the corporation form of ownership. Analysis of covariance indicated no spurious relationships existing in the hypotheses.

scholarly journals All in the Family? An Exploratory Study of Family Member Advisors and Firm Performance

2015 ◽  
Vol 28 (3) ◽  
pp. 227-242 ◽  
Author(s):  
Lucia Naldi ◽  
Francesco Chirico ◽  
Franz W. Kellermanns ◽  
Giovanna Campopiano
Keyword(s):  
Firm Performance ◽  
Family Member ◽  
Exploratory Study ◽  
First Generation ◽  
Family Firms ◽  
Family Firm ◽  
Future Research ◽  
Swedish Family ◽  
Generation Family ◽  
Future Research Directions

This exploratory study investigates the relationship between family members serving in an advising capacity and family firm performance. Integrating the stewardship and agency perspectives, we predict an inverted U-shaped relationship between the number of family advisors and family firm performance. We argue that the generation in control moderates this relationship such that family member advisors have a positive relationship with performance in first-generation family firms and an inverted U-shaped relationship with performance in later-generation family firms. Our empirical analysis on a sample of 128 Swedish family firms confirms our hypotheses. In the concluding section, we discuss results, contributions and future research directions.

Board independence and earnings management: influence of family business generation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Manish Bansal
Keyword(s):  
Earnings Management ◽  
Family Business ◽  
First Generation ◽  
Family Firms ◽  
Management Practices ◽  
Board Independence ◽  
Content Type ◽  
Indian Family ◽  
Generation Family

Purpose This study aims at investigating the moderating role of family business generation on the association between board independence and earnings management practices of Indian family firms. Design/methodology/approach This study uses panel data regression models to analyze the data. Board independence is operationalized via the proportion of independent directors on board and the dual role of chief executive officer. Earnings management is operationalized through discretionary accruals, which are estimated by the performance-adjusted modified Jones model (Kothari et al., 2005). Family business generation is based on the firm’s age, where each generation is equated to a period of 25 years. The parameters of interest are estimated through the hybrid model (Allison, 2009) which controls for the unobserved cross-sectional heterogeneity across firms while estimating the coefficients for time-invariant variables. Findings Based on a sample of 26,962 Bombay Stock Exchange–listed firm-years, spanning over 13 years from the year ending March 2007 to March 2019, the results exhibit that Indian family firms are less likely to be engaged in earnings management; board independence is ineffective in controlling the earnings management practices of firms, and this relation is found to be more pronounced among family firms; first-generation family firms are more likely to be engaged in earnings management than second- or third-generation firms; and board independence has a weaker role in curbing the earnings management practices of first-generation family firms. Overall, the results exhibit that generational involvement significantly influences the association between family firms and earnings management and moderates the relationship between board independence and earnings management. These results are robust to sensitivity measures. Originality/value This is the first study that examines the moderating impact of family business generation on the association between board independence and earnings management according to the author’s knowledge. Besides, this is among the earlier attempts to investigate the earnings management practices of Indian family firms.

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