Meeting Halfway? an Instrumental Approach of Family Firms’ Voluntary Information Disclosure

Abstract

Whether and how family firms overcome public perception bias due to the perceived asymmetric treatment between family and nonfamily interests is under heated debate. Drawing insights from the instrumental stakeholder theory and the literature of voluntary disclosures, we propose family firms can overcome this bias by utilizing instrumental voluntary disclosure. Specifically, we distinguish between the intensity of information disclosure and the contents of information disclosed and develop the arguments in the context of voluntary information disclosure of newly established foreign subsidiaries. We posit that voluntarily disclosing more information can signal professionalization and alleviates concerns associated with family involvements. Disclosing information insensitive to socioemotional wealth, on the other hand, allows family firms to protect the core interests of the controlling families. We also highlight that the perceived salience of investor protection and family value protection in the host countries serves as important boundary conditions. We find support for our argument in a hand-collected sample of 425 newly established foreign subsidiaries from 283 Chinese publicly listed family firms from 2010 to 2017. Evidence from post-hoc analyses of foreign subsidiary survival and qualitative evidence further strengthens our arguments. We contribute to the literature of family business, voluntary disclosures, and the stakeholder theory.