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Family firms and the market's sensitivity to accruals quality
by Guy D. Fernando; Richard A. Schneible Jr.; SangHyun Suh
International Journal of Accounting and Finance (IJAF), Vol. 5, No. 2, 2015

 

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.

 

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