Do Family Firms Provide More or Less Voluntary Disclosure?

TLDR

The study examines voluntary disclosure practices of family firms. Family firms tend to issue fewer earnings forecasts and conference calls but more earnings warnings, reflecting longer investment horizons, better monitoring, lower information asymmetry, and heightened litigation and reputation concerns. The findings indicate that family firms provide fewer forecasts and calls yet more earnings warnings, and that family ownership, rather than nonfamily insider or institutional ownership, chiefly explains voluntary disclosure likelihood.

Abstract

ABSTRACT We examine the voluntary disclosure practices of family firms. We find that, compared to nonfamily firms, family firms provide fewer earnings forecasts and conference calls, but more earnings warnings. Whereas the former is consistent with family owners having a longer investment horizon, better monitoring of management, and lower information asymmetry between owners and managers, the higher likelihood of earnings warnings is consistent with family owners having greater litigation and reputation cost concerns. We also document that family ownership dominates nonfamily insider ownership and concentrated institutional ownership in explaining the likelihood of voluntary disclosure. Using alternative proxies for the founding family's presence in the firm leads to similar results.