Family control, accounting misstatements, and market reactions to restatements

Evidence from China

Liangbo Ma*, Shiguang Ma, Gary Tian

*Corresponding author for this work

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

We examine the impact of family control on the likelihood of accounting misstatements and on market reactions to subsequent restatements. Using a matched-firm approach, we find that family control overall reduces the incidence of misstatements, consistent with the notion that controlling families have a greater concern for reputation than nonfamily blockholders. However, compared to nonfamily firm restatements, restatements announced by family-controlled firms trigger significantly more negative market reactions. We attribute the more negative market reactions to the greater loss in reputation and higher investor scepticism of the credibility of corporate insiders for family firms than for nonfamily firms following restatements.

Original languageEnglish
Pages (from-to)1-27
Number of pages27
JournalEmerging Markets Review
Volume28
DOIs
Publication statusPublished - 1 Sep 2016

Keywords

  • Family firm
  • Restatement
  • Financial reporting
  • Market reaction

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