The Impact of Family Ownership on Quality and Disclosure of Internal Control in Pakistan

Imran Abbas Jadoon,Usman Ayub,Muhammad Tahir,Naima Shahzadi,Umara Noreen

doi:10.3390/su13168755

Abstract

The role of family owners in the internal control environment is characterized by contradictory theoretical arguments i.e., entrenchment and alignment behavior. Therefore, the objective of this study is to investigate the behavior exhibited by family owners concerning the internal control environment in an underdeveloped regulatory setting. The study collected both primary and secondary data to use a multivariate regression research design to investigate the impact of family owners and CEOs on the internal control quality and disclosure of enterprises. The results of the current study demonstrated that family owners and family CEO have a negative impact on the internal control quality and disclosure, which validates the entrenchment behavior exhibited by family owners in the Pakistani setting. The results of the current study imply that policymakers should promote strict policy initiatives regarding the effectiveness of internal controls and their reporting so that companies are compelled to have better engagement in internal control practices for the protection of minority shareholders.

Highlights

IntroductionPublisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations
The descriptive statistics results indicated the average score of internal control quality of Pakistani firms is 2.159 which shows that companies have no intention of focusing on internal control practices and demonstrates the overall weakness of internal control systems in Pakistan
In Pakistan, family-owned businesses are prominent in the business community and play a vital part in the advancement of the nation’s economy

Summary

Introduction

Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations. The ownership structure is an essential governance mechanism that helps to align the interests of shareholders and managers. It has been found that family ownership and family control is the most prominent organizational structure that plays a vital role in economic development of a country and around the globe almost 80 percent of businesses are owned by families [1,2,3]. In Pakistan, family businesses are leading in the business community and playing a significant role in the expansion of the national economy

Objectives

Methods

Results

Conclusion