To read this content please select one of the options below:

Does family identity matter for earnings management? Evidence from private family firms

Charlotte Haugland Sundkvist (Department of Business, Marketing and Law, University of South-Eastern Norway, Kongsberg, Norway)
Tonny Stenheim (Department of Business, Marketing and Law, University of South-Eastern Norway, Kongsberg, Norway)

Journal of Applied Accounting Research

ISSN: 0967-5426

Article publication date: 27 December 2022




The purpose of this paper is to examine the role family identity and reputational concerns plays when private family firms engage in earnings management.


The paper is conducted as an archival study using data from private limited liability firms in Norway over the period from 2002 to 2015. The dataset includes financial accounting data and data on family relationships between shareholders, board members and CEOs, where family relationships are determined through bloodlines, adoption and marriage, tracing back four generations and extending out to third cousins. To investigate the incidence of earnings management, the authors employ a measure of accrual-based earnings management (AEM) (Dechow and Dichev, 2002; McNichols, 2002) and a measure of real earnings management (REM) (Roychowdhury, 2006). They use whether or not the family name is included in the firm name (i.e. family name congruence) as a proxy for family members' identification with the family firm and their sensitivity to reputational concerns.


The authors’ results show that AEM is lower for family-named family firms. Moreover, their findings also indicate that family-named family firms are more likely to select REM over AEM, compared to nonfamily named family firms. This is even more pronounced when detection risk is high (high quality audit proxied by Big 4).

Research limitations/implications

The quality of the authors’ findings is limited to the validity of their proxy for family firm identification and reputational concerns (the family name included in the firm name). Even though findings from prior research suggest that family name congruence is a valid proxy for identity and reputational concerns (e.g. Kashmiri and Mahajan, 2010, 2014; Rousseau et al., 2018; Zellweger et al., 2013), future research should investigate the validity of these results using alternative proxies for family firm identification. Future research should also investigate whether the authors’ findings are generalizable to public family firms.

Practical implications

The authors’ results suggest that the risk of AEM is lower for family-named family firms, whereas the risk of REM is somewhat higher, compared to nonfamily named family firms. These results might be relevant for financial accounting users, auditors and supervisory and monitoring bodies when assessing the risk of earnings management.


The paper is, as far as the authors are aware of, the first to investigate the role of family name congruence and detection risk when private family firms select between AEM and REM.



The authors are grateful to the Center for Corporate Governance Research (CCGR) at the BI Norwegian Business School for giving permission to retrieve data from the CCGR database. The authors thank Kjell Henry Knivsflå, Limei Che, Frøystein Gjesdal, Han Wu and Anna Rossi for helpful comments. The authors also thank discussant Elica Krasteva, chair Annalisa Prencipe, Claudia Imperatore and other participants at the EAA Virtual Congress 2021, participants at the FIBE 2020 Conference and three anonymous reviewers. During the completion of earlier drafts of this paper, Tonny Stenheim was a faculty member at the BI Norwegian Business School.


Sundkvist, C.H. and Stenheim, T. (2022), "Does family identity matter for earnings management? Evidence from private family firms", Journal of Applied Accounting Research, Vol. ahead-of-print No. ahead-of-print.



Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

Related articles