The Influence of Family Ownership on Long-Lived Asset Write-Offs. (December 2015)

• Record Type: Journal Article
• Authors: Greco, Giulio; Ferramosca, Silvia; Allegrini, Marco
• Is Part Of: Family business review. Volume 28:Number 4(2015)
• Page Start: 355
• Page End: 371
• Publication Date: 2015-12
• Subjects: family firm -- write-offs -- long-lived assets -- agency theory; Family-owned business enterprises -- United States -- Periodicals; Home labor -- United States -- Periodicals; Small business -- United States -- Periodicals; New business enterprises -- United States -- Periodicals; 658.045
• DOI: 10.1177/0894486515590017
• Languages: English
• ISSNs: 0894-4865

Abstract

Building on agency theory, this article investigates whether family firms' accounting behavior regarding long-lived asset write-offs differs from that of nonfamily firms. We provide evidence that nonfamily firms use write-offs for earnings management purposes, while family firms report write-offs coherent with the firm performance. Family firms experience dwindling sales and lower profitability in the years following the write-offs, consistently with an effective decline in their assets value. The findings are consistent with reduced owner-manager agency conflicts in family firms. We find no indication of family entrenchment, which is consistent with family owners being concerned with the reputational damage associated with a loss of a firm's asset value.