Earnings Quality in Acquired and Non-Acquired Family Firms: A Socioemotional Wealth Perspective

Abstract

We develop a socioemotional wealth (SEW) explanation for the differences in earnings quality between family firms. We argue that the process by which families obtain ownership of firms is a key contingency affecting earnings quality. Specifically, firms acquired by families through market transactions display lower earnings quality due to lower identification of family owners relative to firms still owned by the families which created them. Acquired family firms benefit with respect to their earnings quality from having a nonfamily CEO while non-acquired family firms benefit from having a family CEO.

Keywords: Identity, earnings quality, acquired family firms, non-acquired family firms, socioemotional wealth

JEL Classification: G32, M14, M41, M43