The Value relevance of accounting performance measures for quoted family firms: A study in the light of the alignment and entrenchment hypotheses

Abstract

The present research examines the value relevance of accounting earnings data disclosed by a sample of French family and non-family firms. The major goal of this paper is to find if the value relevance of accounting earnings for investors depends on the nature of the firm. In addition, it intends to check if accounting earnings relevance varies in function of the concentration of ownership in the hands of families.
 The research is based on a longitudinal data set (2009 – 2012) obtained from a sample of 349 firms quoted on the Paris stock market and composing the CAC-All tradable index. Relying on the association studies’ methodology, the main hypotheses are supported as the results show that family firms exhibit more value relevant earnings than non-family firms. This finding could be justified by an alignment effect that may be especially evidenced in the case of moderate family ownership. Conversely, less value relevant earnings are exhibited by highly controlled family firms thus showing evidence for a probable entrenchment by the owning-families.

The Financial Performance of Family versus Non-Family Firms Operating in Nautical Tourism

“…Asset Turnover (AT) = Total Sales/Total Assets (6) This is an efficiency ratio [32]. The higher the index, the greater the company's ability to increase sales with the investment made.…”

“…Regarding the correlation of control variables, the findings suggesy that: (1) More liquid companies show less ROE, as they increase self-financing rather than pay dividends; (2) Firms that are more indebted underperform, because of the debt burden and greater financial risk; (3) The higher the sales over total assets (AT), the better the performance measured by ROA and by operating margin, and the greater the sales growth, because as sales increase, the company's profit also tends to increase; (4) The higher the investment levels, the lower the performance measured by ROA and by operating margin. Indeed, higher levels of investments require debt financing, which negatively impacts on operating earnings; (5) The lower the asset turnover, the greater the leverage; (6) Increases in labor costs cause drops in liquidity; (7) Larger and older firms show higher ROA, higher investment levels and higher wages.…”

“…These variables can be manipulated by the manager in order to increase the company's value and profit. Likewise, the ownership structure of firms, that is, whether they are managed by family or non-family professionals, can have an impact on corporate performance [6]. This happens because family firms possess specific characteristics that can be reflected on corporate performance.…”

Reacting to a Generalised Crisis. A Theoretical Approach to the Consumption of Slack Resources in Family Firms

“…These cuts, particularly in costs, may also be a response to declines in the munificence of the environment (Boyne & Meier, 2009). In this regard, family firms are more flexible than non-family firms because of the organizational and management models they employ (Nodqvist et al, 2008), taking into account the differences in the financial information management (Basly & Saadi, 2020). Casillas et al (2010Casillas et al ( , 2013 showed that these management systems allowed them to speed up decision-making processes and therefore to be more responsive.…”

The Importance of Value Relevance in The Indonesian Manufacturing Sector

“…Another said that the effectiveness of inspections under the new enforcement regime may be demonstrated by stock market reactions to inspections, demonstrating that corporate environmentalism has value (Sam & Zhang, 2020). Furthermore, when controlling families' control is considerable (more than 33.33 percent), incomes' value relevance deteriorates, implying a possible entrenchment effect on their behalf (Basly & Saadi, 2020). Because any change, whether it is an increase or decrease in the figures given in financial statements, should effect investors' actions, the greater the quality of information, the higher the value relevance of the book value and market value of the equity (Nasution & Mita, 2018).…”