Abstract
This study examines the effects of idiosyncratic risk of a family firm on its credit risk and tests the relationship between credit risk and accrual or real earnings management under the condition of idiosyncratic risk. Findings indicate that debt financing and equity financing activities negatively affect the credit risk of a family firm when market models or Fama–French three-factor model measure idiosyncratic risk. The higher the idiosyncratic risk, the higher the credit risk for a family firm. Controlling for idiosyncratic risk, accrual-based earnings management positively affects credit risk but real earnings management negatively affects credit risk.
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