Income Smoothing in Family-Controlled Companies: Evidence from Italy

Prencipe, Annalisa; Bar‐Yosef, Sasson; Mazzola, Pietro; Pozza, Lorenzo

doi:10.1111/j.1467-8683.2011.00856.x

Cited by 108 publications

(81 citation statements)

References 78 publications

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“…The top management team is in fact selected by (or under the influence of) the Board of directors and is hardly selected against the will of the controlling shareholders (Miller & Le-Breton Miller, 2006;Shleifer & Vishny, 1997). 4 To check the robustness of our results, we also used other proxies for the family firms to be classified as such, namely a control threshold of 50% of the voting shares (Cascino et al, 2010) and the family being the largest shareholder (Prencipe, Bar-Yosef, Mazzola, & Pozza, 2011). We obtained consistent results.…”

Section: Sample Selection and Data Collectionsupporting

confidence: 67%

The Influence of Family Ownership on Long-Lived Asset Write-Offs

Greco

Ferramosca

Allegrini

2015

Family Business Review

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Building on agency theory, this article investigates whether family firms’ accounting behavior regarding long-lived asset write-offs differs from that of nonfamily firms. We provide evidence that nonfamily firms use write-offs for earnings management purposes, while family firms report write-offs coherent with the firm performance. Family firms experience dwindling sales and lower profitability in the years following the write-offs, consistently with an effective decline in their assets value. The findings are consistent with reduced owner-manager agency conflicts in family firms. We find no indication of family entrenchment, which is consistent with family owners being concerned with the reputational damage associated with a loss of a firm’s asset value

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Section: Sample Selection and Data Collectionsupporting

confidence: 67%

The Influence of Family Ownership on Long-Lived Asset Write-Offs

Greco

Ferramosca

Allegrini

2015

Family Business Review

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“…Choi, Lee, and Park () find that CSR activities are abused by Korean firms to conceal poor earnings quality. Prencipe, Bar‐Yosef, Mazzola, and Pozza () find that family firms in Italy engage in less income smoothing and CEO duality reduces it further. Independent (diligent) boards in Hong Kong ( India ) result in higher quality financial reporting (see Jaggi, Leung, & Gul, ; Sarkar, Sarkar, & Sen, ).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

How Does Regulation Affect the Relation Between Family Control and Reported Cash Flows? Comparative Evidence from India and the United States

Nagar¹,

Sen²

2016

Corporate Governance

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Manuscript Type Empirical. Research Question/Issue We conduct a two‐country study to understand (i) how family and non‐family firms engage in classification shifting to manage reported operating cash flows in each country; (ii) how this behavior varies between the two countries; and (iii) how corporate governance regulation introduced independently in each country moderates the observed behavior. Research Findings/Insights We find that family ownership has different effects on quality of cash flow reporting in the two countries. Furthermore, country‐level regulation moderates these effects differently. In particular, (i) firms in both countries engage in manipulating operating cash flows, but the evidence is stronger in the United States; (ii) family firms in India engage in more shifting than non‐family firms, but this is not observed in the United States; and (iii) family (non‐family) firms in India increase (reduce) shifting, whereas only non‐family firms in the United States increase shifting after regulation. Since non‐family firms in India raise more external capital than family firms after regulation, we infer that family firms in India reacted to this competition for capital and resorted to shifting. Theoretical/Academic Implications Most studies assume that the incentives for family firm behavior are the same in different market settings. However, factors such as efficiency of public capital markets, enforcement of corporate laws and regulations, and other institutional practices can cause differences in family firm behavior across different market settings. We investigate the behavior of family and non‐family firms in each of these markets and study how a feature of the national governance system, regulatory design, moderates this behavior. Practitioner/Policy Implications Our findings should be useful to global investors and regulators in both emerging and developed markets. The results indicate how similar regulation in the two different settings can trigger differences in the behavior of firms.

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“…Anderson, Melanson, and Maly (); Angwin, Stern, & Bradley (); Banalieva and Eddleston (); Davis et al (), Desai, Kroll, and Wright (); Fox and Hamilton (); Ghosh and Harjoto (); Giovannini (); Kluvers and Tippett (); Lambright (); Lee and O'Neill (); Marvel and Marvel (); Nicholson, Kiel, and Geoffrey (); Pieper, Klein, and Jaskiewicz ();Prencipe, Bar‐Yosef, Mazzola, and Pozza (); Tosi, Brownlee, Silva, and Katz (); Uhlaner, Floren, and Geerlings (); Van and David (); Wasserman ()…”

Section: Introductionmentioning

confidence: 99%

Has Agency Theory Run its Course?: Making the Theory more Flexible to Inform the Management of Reward Systems

Cuevas‐Rodríguez¹,

Gómez‐Mejía²,

Wiseman³

2012

Corporate Governance

169

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Manuscript Type Conceptual Research Question/Issue In this paper we discuss three assumptions of agency theory: (1) conflicts of interest between principal and agent, (2) nature of risk, and (3) the proposed internal mechanisms to reduce agency costs. We review criticisms of agency theory's pessimistic assumptions of human behavior and its simplistic view about individual risk preferences to argue how the context may influence both the interest and mechanisms for aligning interest of principals and agents. Research Findings/Insights We draw on alternative theoretical perspectives from behavioral and organizational sciences to describe circumstances under which honesty, loyalty, and trust in agents' behaviors are possible and also the development of cooperative rather than contentious relationships. Theoretical/Academic Implications This study explores the boundary conditions of traditional agency theory in the hope of extending agency theory outside its current contextual boundaries. In doing so, we provide a more robust and exhaustive view of the economic exchange between principals and agents. Practitioner/Policy Implications This study offers insights to managers about how intrinsic incentives may provide an alternative mechanism of control over agents' behavior to extrinsic incentives prescribed by traditional agency theory. Indeed, intrinsic incentives of personal satisfaction and identification with organizational objects, combined with implicit social obligations and reciprocity may, under certain circumstances, provide stronger restraints on agent opportunism than the use of traditional extrinsic rewards in the form of incentive alignment.

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Income Smoothing in Family-Controlled Companies: Evidence from Italy

Cited by 108 publications

References 78 publications

The Influence of Family Ownership on Long-Lived Asset Write-Offs

The Influence of Family Ownership on Long-Lived Asset Write-Offs

How Does Regulation Affect the Relation Between Family Control and Reported Cash Flows? Comparative Evidence from India and the United States

Has Agency Theory Run its Course?: Making the Theory more Flexible to Inform the Management of Reward Systems

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