IDEAS home Printed from https://ideas.repec.org/a/bla/abacus/v60y2024i4p935-966.html
   My bibliography  Save this article

Corporate Misconduct and Subsequent Consequences in Family Firms

Author

Listed:
  • Lele Chen
  • Jennifer Yin

Abstract

This paper investigates the effect of family ownership on corporate misconduct and its subsequent consequences. We argue that the reduced Type I agency conflicts (conflicts between managers and shareholders) in family firms may create an alignment effect, thereby curbing managerial misbehaviour. In contrast, the more severe Type II agency issues (conflicts between family owners and other shareholders) may induce an entrenchment effect, potentially fostering misconduct in these firms. Whether and how family ownership affects firm misconduct remains an empirical question. Through a research design that analyzes both types of agency conflict across various combinations of ownership and management control, our study of S&P 500 firms in the US suggests that family ownership tends to restrain firm misconduct. Specifically, family firms with externally hired CEOs effectively mitigate Type I agency problems and deter misconduct. Further analyses of misconduct consequences show that family ownership mitigates the negative effect of misconduct on firms’ credit ratings, particularly in firms with outside‐hired CEOs. Moreover, family firms encounter less adverse market reactions in response to disclosures of misconduct penalties.

Suggested Citation

  • Lele Chen & Jennifer Yin, 2024. "Corporate Misconduct and Subsequent Consequences in Family Firms," Abacus, Accounting Foundation, University of Sydney, vol. 60(4), pages 935-966, December.
  • Handle: RePEc:bla:abacus:v:60:y:2024:i:4:p:935-966
    DOI: 10.1111/abac.12352
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/abac.12352
    Download Restriction: no

    File URL: https://libkey.io/10.1111/abac.12352?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:abacus:v:60:y:2024:i:4:p:935-966. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0001-3072 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.