Are Financial Statements of Family Firms More Comparable than Non-Family Firms?

s study investigates whether there is a difference in the comparability of financial statements between family and non-family companies and whether the comparability is related to family firm value. I uses a list from a survey from the Forbes website that reports the 500 Largest Family-Owned Companies In The World from 1983 to 2016. All financial data is obtained from COMPUSTAT. This study find that financial statements of family firms are less comparable than their non-family counterparts but also find that family firms with the lowest earnings quality benefit from comparability. Family firms have unique ownership structures, occupy both senior management positions and board seats. Hence, the different business culture of these firms affects strategic, investment and managerial decision-making and ultimately financial reporting practices differently. This study contributes to the literature that studies the impact of ownership structure on financial reporting and the growing body of financial statement comparability. Family firms have unique ownership structures, occupy both senior management positions and board seats. Hence, the different business culture of these firms affects strategic, investment and managerial decision-making and ultimately financial reporting practices differently. The various aspects of family firms reporting decisions also would affect financial statement com parability as well. This study could aid investors and outside shareholders in evaluating firm performance related to their investment portfolio. Even though family firms have less comparable financial statements than their non-family peers, firm per formance appear to be higher via comparability at family firms with lower earnings quality. This could signal to the market that family firms’ accounting information could provide a benchmark to other non-family firms in terms of valuation because even the family firms with the lowest earnings quality has higher valuation than non-family firms. This shed some light on the earnings quality and comparability differences to outside shareholders, creditors and regulators. Using family firms’ earnings performance as a benchmark, market participants can increase monitoring roles on non-family firms to enhance earnings quality and comparability.