Family Ownership, Earnings Management, & CEO Turnover

• In Event: Family Owned Firms

Abstract

In this study we investigate the moderating effect of family ownership on the relation between earnings management and CEO turnover. Using a hand collected sample of 221 Italian family and non-family-controlled firms between 2006-2010, we find a general positive and significant association between earnings management and CEO turnover, the result primarily driven by non-family-controlled firms. In the case of family-controlled firms, we find the general relation to be insignificant. Furthermore, in the specific case where the controlling family also manages the firm, i.e., the CEO is a member of the family; we find the association between earnings management and CEO turnover to be negative and significant. Robustness tests rule out the alternative hypothesis that this difference is driven by differences in the propensity of family and non-family firms to manage earnings, supporting the existence of two distinct corporate governance systems. Overall, this study contributes to our understanding of differences in corporate governance systems driven by family ownership concentration, a relatively unexamined area in the literature.

Authors

• John Manuel Barrios, University of Miami

• Daniele Macciocchi, LUISS Guido Carli University