The Influence of Family Firm Dynamics on Voluntary Disclosures

Abstract

We examine the voluntary disclosure practices of family firms. Family firms have longer investment horizons, lower agency conflicts between owners and managers but higher agency conflicts between controlling and non-controlling shareholders, and greater concerns about firm reputation. We therefore hypothesize that the previously documented association between stock-based incentives and voluntary disclosures is dampened for family firms. We find that, compared to non-family firms, family firms are less likely to provide management earnings forecasts as their CEO’s wealth linked to the firm increases. We further find that this influence is only present in larger firms consistent with larger firms have significantly greater stock-based incentives than smaller firms. We contribute to the literature by extending stock-based incentive and voluntary disclosure research, link this research to family firms, and provide insight on conflicting results investigating family firms.