Title: Family firms and the market's sensitivity to accruals quality

Authors: Guy D. Fernando; Richard A. Schneible Jr.; SangHyun Suh

Addresses: Department of Accounting and Law, School of Business, University at Albany – SUNY, USA ' Department of Accounting and Law, School of Business, University at Albany – SUNY, USA ' Department of Accounting, Manning School of Business, University of Massachusetts Lowell, USA

Abstract: Prior research shows that family firms have better financial reporting quality compared to non-family firms. However, prior research also shows that the financial markets discount the value of family firm choices. In this paper, we show that even though family firms, on average, have better realised reporting quality as measured by accruals based measures, the market's reaction to poor earnings quality is more severe for family firms. Our findings will be important to family firm managers as they grapple with how best to communicate with financial market participants.

Keywords: family firms; reporting quality; investor perceptions; family business; market sensitivity; accruals quality; financial reporting; market reaction; earnings quality.

DOI: 10.1504/IJAF.2015.071837

International Journal of Accounting and Finance, 2015 Vol.5 No.2, pp.133 - 147

Received: 05 Jun 2014
Accepted: 22 Mar 2015
Published online: 19 Sep 2015 *

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