Silvia Ferramosca

Exploring intellectual capital in family firms. An empirical investigation

We investigate the influence of family ownership and family involvement in the management on the firms intellectual capital (IC). The resource-based theory of the firm predicts both benefits and disadvantages of the family on the firms IC. Using Pulics VAIC as a proxy for the IC of the company, we test two sets of competing hypotheses through multivariate regressions of panel data from Italian listed companies. The results show that family firms have a significantly higher average VAIC than non-family firms. We find a non-linear association between family involvement in the management and IC. At lower levels, the family involvement has a positive association with IC. At higher levels, when the benefits of the family interaction with the business are overcompensated by the disadvantages, the relationship reverses and becomes negative. The research can contribute to both the academic literature on intellectual capital and to family business studies.

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

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.

Corporate Governance in Italian Listed Companies

In the past few decades a growing number of research studies have investigated the effect that insider ownership has on other corporate governance variables like the risk of expropriation for the minor shareholders, the demand for outside directors, etc. An increasing number of studies have analyzed the relationship between insider ownership and corporate performance in Anglo-Saxon countries, Continental Europe and emerging economies.

Earnings Management in Family Firms

This chapter begins the discussion about earnings quality in family firms. It examines whether family firms differently manage their earnings compared to non-family firms. We show that both from a theoretical and an empirical perspective, prior research documents show that family firms manage less their earnings relative to non-family firms. Nonetheless, we also look at deviations from these results, mainly due to the differences in the institutional environment, and/or in the management structure. Moreover, there has been a shift from the agency theory to the socioemotional wealth theory to explain family firms’ decisions with regards to earnings management. We conclude this chapter by suggesting future avenues for research, in particular in terms of theoretical framework and research design. The discussion about earnings quality continues in Chap. 4, where we investigate accounting conservatism in family firms.

Cause e implicazioni del cambiamento del revisore

This paper explores causes and implications of the auditor changes. We investigate the US setting in which the changes are voluntary and there is mandatory disclosure about the reasons for the change. The findings show that changes with a departing Big-4 are motivated by the auditor’s concerns about the client firm weaknesses in internal control processes and compliance with law. The changes between Non-Big-4 auditors are associated with the issuance of going concern qualified opinions, suggesting possible audit opinion shopping by client firms. The switches from a Non-Big-4 to a Big-4 auditor are associated with issues related to the application of accounting standards. Overall, our findings suggest that changes allow auditors to better organise their audit, and balance the objectives of their assignments and the maintenance of effective client relations. The balance of reasonably effective internal controls systems and of risk-proportioned audit fees is at the core of negotiations between audit and client firms. Also, the search for more effective audit and higher governance and financial markets reputation may motivate the switch from a smaller audit firm to a Big-4. The information regarding auditor changes can shed light upon the financial reporting practices and management behaviour, signalling to investors any potential misrepresentation, to the management potential risk areas and to regulators where they might need to intervene to enforce auditor and management independence.

Governance codes and types of issuer: a global study

We study the relationship between the types of issuer and the contents of the governance codes in the new-institutional theory, using a global sample of over 70 national governance codes. We hypothesise that the code recommendations are influenced by the isomorphic pressure to embrace new social practices, exerted by the different types of issuer. The findings show that codes issued involving multiple stakeholder groups and organisations in hybrid committees are more likely to: 1) include recommendations that take into account multiple political and social institutional demands; 2) adapt the mainstream agency-theory-based governance model to the national setting. Overall, the policy-making negotiations among different stakeholder groups in the local institutional setting appear to be determinant in shaping the recommendations of the code and in improving the promotion of good governance among firms. To the best of our knowledge, this is the first study to systematically investigate the relationship between the types of issuer and the contents of codes, in a global sample.

Accounting Conservatism in Family Firms

This chapter examines another relevant earnings quality in family firms, namely accounting conservatism. We argue that family businesses differ from non-family firms with regard to accounting conservatism due to their long-term investment horizon as well as the importance they place on non-economic factors. In this chapter we first discuss the notion of accounting conservatism, and more specifically of conditional conservatism. We then show that family firms, on average, exhibit higher accounting conservatism than non-family firms. We observe variability in the results due to the differences in the institutional environment, and in the management structure. We corroborate our findings by extending the notion of accounting conservatism. We thus affirm that family firms tend to be less tax-aggressive than non-family firms. Finally, we provide numerous research avenues regarding accounting conservatism in family firms.

Corporate Disclosure in Family Firms

This Chapter attempts to provide a systematic review of the possible relations between mandatory and voluntary disclosure and of financial and non-financial reporting on the one hand, and family firms on the other hand. In the first part we focus on the demand for financial reporting, what kind of financial information companies are required to provide and the mandate for statutory audits by laws. In the second part of the Chapter, the attention moves to non-financial information, and mainly to voluntary disclosure. Within the non-financial disclosure, we focus on corporate social responsibility (CSR) reports, reviewing prior literature on the relation between CSR and family firms. In a third part of the Chapter, we review prior research on financial analysts and their impacts on corporate disclosure, keeping the special contemplation on family firms to preserve the trait d’union of the whole book. Finally, we conclude the Chapter suggesting some opportunities and challenges for future research on the relationship between family firms research and corporate disclosure research. The overall contribution of this last part is to propose the path forward for future research, constituting both the family business and the corporate disclosure fields, two dense “jungles”, meaning that their mutual relationships create innumerable literature gaps.

The Relationship Between Accounting Choice and Family Business: What Is the Role of Culture?

Theoretical and empirical evidence demonstrates that accounting choices are strongly influenced by national and organisational cultures. Following the discussion of previous chapter we argue that the family business constitutes a very flourishing field which is interesting to investigate particularly in terms of the role played by the culture on accounting choices. Moving from the first anthropological definitions of culture and grounding on the premises of prior literature, we develop a conceptual model on the influences of accounting and family cultures on accounting decisions. This chapter also considers accounting harmonisation and the literature on earnings management and culture. Finally, as in the previous part of the book, we close the chapter by presenting challenges and opportunities for future research, in particular on the interplay amongst family firms, accounting choices and culture.

The Family Business

The family business is an economically relevant worldwide phenomenon. It is widespread in every industry and it takes diverse legal forms, ranging from micro, small and medium sized firms to large public companies. Its economic relevance frequently impacts more than half of the national GDP and it becomes an essential source of employment. After, presenting some facts and figures about the family business around the world, this chapter shows the two main approaches used to define a family firm, namely the essence and component approaches. We thus review more than 180 definitions of family firms and organise them within a table according to the following three main criteria: (1) Percentage of ownership held by the family, (2) Members of the family involved in management and control positions, and (3) Generational stages of the family firm. The intersection of these three criteria gives rise to other four groups of family firm definitions, theoretically proving the multidimensionality of the phenomenon. We then review the studies on family business and accounting and discuss the main theoretical framework used, with a specific focus on the transition from a mainly agency theory-based literature to the derived socioemotional wealth theory. Finally, this chapter pinpoints some early conclusions on the family business providing a bridge with the ensuing chapter stressing the relations between family firms and accounting choices.