Earnings management in family firms: The role of inside directors
Authors: Yi-Hui Tai
Journal: Corporate Management Review. Jun. 2017, 37(1): 77-114.
Keywords: Family firms; real earnings management; accruals management;
inside director proportion; inside director compensation.
Abstract:
This paper investigates earnings management in family firms and further examines the moderating effects of
inside directors. The empirical results show that family firms are more likely to engage in accruals
management than in real earnings management. The compensation to inside directors for their director role is
far less than that for their manager role, and thus the incentive for inside directors to share private
information individually is not strong. However, increasing the proportion of inside directors and bringing
together all private information is one workable way for family firms to reduce the possibility of engaging
in accruals management.