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Ownership succession intentions affecting earnings management in private family firms

Author

Listed:
  • Ine Umans

    (Hasselt University – Research Center for Entrepreneurship and Family Firms)

  • Maarten Corten

    (Hasselt University – Research Center for Entrepreneurship and Family Firms)

Abstract

Drawing on agency and socioemotional wealth theory, this study elucidates that ownership succession intentions affect earnings management in private family firms. Based on a combination of questionnaire data and archival data of 331 Belgian private family firms, results indicate that family firms intending to transfer ownership to non-family members engage more in earnings management than those planning to transfer ownership to family members. Our findings also show differences in earnings management within each subset of ownership succession, thereby highlighting family firm heterogeneity. Family owners intending to transfer ownership to their children engage less in upward earnings management than those planning to transfer ownership to other family members. Family owners intending to transfer ownership to employees engage more in downward earnings management than those intending to transfer ownership to outsiders. This study contributes to both theory and practice by considering ownership succession intentions as a driver of earnings management.

Suggested Citation

  • Ine Umans & Maarten Corten, 2023. "Ownership succession intentions affecting earnings management in private family firms," Small Business Economics, Springer, vol. 61(2), pages 827-842, August.
    • Handle: RePEc:kap:sbusec:v:61:y:2023:i:2:d:10.1007_s11187-022-00696-5
    DOI: 10.1007/s11187-022-00696-5
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    More about this item

    Keywords

    Private family firms; Earnings management; Ownership succession; Family firm heterogeneity; Agency theory; Socioemotional wealth;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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