Open AccessEARNING QUALITY IN LISTED FIRMS: HOW MUCH AN ACTIVE FAMILY GOVERNANCE IS DESIRABLE?
Author(s) -
Riccardo Tiscini,
Francesca Di Donato
Publication year - 2012
Publication title -
corporate ownership and control
Language(s) - English
Resource type - Journals
eISSN - 1810-0368
pISSN - 1727-9232
DOI - 10.22495/cocv10i1c7art4
Subject(s) - corporate governance , incentive , context (archaeology) , business , quality (philosophy) , earnings quality , accounting , earnings , empirical evidence , empirical research , finance , economics , market economy , philosophy , accrual , epistemology , paleontology , biology
The study investigates the relationship between family involvement in the governance of Italian listed companies and earnings quality (EQ). Family firms set incentives to extract private benefits (‘entrenchment’ effect), but, they also contribute to higher alignment between owners and managers (‘alignment’ effect). The literature shows mixed results about the relationship between EQ and family firms. We argue that family involvement in the governance affects EQ. The empirical evidence shows that in the Italian context, there is higher EQ in case of higher family involvement in the board, but only if the CEO is not belonging to the controlling family. On the contrary, in case of a family CEO, the higher family involvement in the board increases his entrenchment, reducing EQ. The results are valuable because we find that EQ in family firms is affected both by family ownership and by the attitude of the family toward governance practices.