Anecdotal evidence suggests that family businesses are very dependent on a single individual (the owner-manager). However, the degree of dependence previously has not been studied formally. Further, an explanation for why some family businesses are highly dependent on the owner-manager and others are not has not been explored. Utilizing a national survey of Canadian family-owned businesses, this paper therefore addresses two central issues: (1) the degree of dependence of familyowned businesses on a single individual; and (2) the factors associated with this reliance.Self-report responses from family business owners provided evidence of a high level of dependence on the owner-manager. In 75 percent of all family businesses, respondents believed that the company was either dependent or very dependent on them. The response to this subjective question is consistent with responses to our three more objective measures. First, 65 percent of owner-managers responded that they made all the major decisions in at least three of five functional business areas. Second, these businesses had few key managers-in 57 percent of all businesses, there were only two or fewer key managers in addition to the owner. Third, in 62 percent of all family businesses, neither had a successor been chosen nor had a process been put in place for choosing a successor. These results strongly suggest that family businesses are highly dependent on a single individual.Six factors had significant power in explaining the degree of dependence. Two factors related to the owner-manager-dependence decreased in the age of the owner-

A primary objective of the Sarbanes-Oxley Act is to bolster public confidence in the U.S. capital markets. The SEC aims to achieve this objective in part by regulating the use of alternate earnings measures (colloquially referred to as “pro forma” earnings) that differ from generally accepted accounting principles. This paper examines whether firms change their reporting practice in response to pro forma regulation. Specifically, it examines whether the use, calculation, and presentation of pro forma measures by S&P 500 companies changes between 2001 and 2003. We document three significant shifts in pro forma reporting in this period. First, the proportion of firms reporting pro forma earnings declines from 77 to 54 percent. Second, by 2003, pro forma is used in a less biased manner. Not only is the proportion of firms using pro forma earnings to increase reported income smaller than in 2001, but also the magnitudes of these increases are reduced. Third, in 2003, firms present pro formas in press releases in a much less prominent and less potentially misleading manner. These results suggest a strong impact of the recent regulation of pro forma reporting and provide important empirical evidence for policy makers.

In two articles, the first published in 1997 in the Journal of Accounting and Economics and the second in 1999 in this journal, Gary Biddle, Robert Bowen, and James Wallace presented evidence that reported earnings are more closely related than EVA to marketadjusted stock returns- in other words, that earnings are more "value relevant" than EVA. These papers, which are among the most widely cited in finance and accounting, fundamentally affected perceptions about the importance of EVA as a measure of corporate performance. 2004 Morgan Stanley.

This study compares managers' voluntary disclosure of pro forma earnings—an alternative measure to generally accepted accounting principals (GAAP) earnings—in the U.S. and Canada. The results indicate some distinct differences between the two countries in that U.S. managers (1) disclose pro forma earnings more frequently, (2) place greater emphasis on the pro forma earnings number relative to the GAAP earnings figure, and (3) make greater (income-increasing) adjustments from GAAP in calculating pro forma earnings than do their Canadian counterparts. While we find distinct differences in the use of pro forma between the U.S. and Canada, we do not find evidence that it is used for different purposes. Our evidence suggests that in both countries pro forma earnings is used by some corporations to affect users' perceptions of firm performance. Overall, given the differences in managers' use of pro forma, a form of voluntary disclosure, our results suggest caution in moving to a uniform (cross-border) system of financial regulation.

This article explores whether pro forma earnings, GAAP earnings, and I/B/E/S earnings are value relevant and, more important, which in comparative terms has the greatest value relevance. In addition to using actual pro forma measures contained in earnings press releases of Standard and Poor's (S&P) 500 firms, our design employs both traditional price and returns association models and incorporates both current and future measures of earnings. We find for the full period, 2000 through 2004, that all three earnings measures are value relevant. We further find that pro forma earnings are significantly more value relevant than Institutional Broker's Estimate System (I/B/E/S) earnings, which in turn are more value relevant than Generally Accepted Accounting Principles (GAAP) earnings. These results are robust to several alternate model specifications as well as to controlling for measures of opportunistic reporting.