Lone founders, family ownership and earnings management practices: do female directors matter?

Ali Amin and Asma Houcine

Accounting Research Journal, 2026, vol. 39, issue 4-5, 719-738

Abstract: PurposeThis study aims to investigate how lone-founder firms and family firms influence earnings management practices and examines whether the presence of female directors moderates these relationships.Design/methodology/approachUsing a sample of 3,971 firm-year observations from non-financial firms listed on the Pakistan Stock Exchange between 2012 and 2024, the study uses ordinary least squares regression to test the baseline hypotheses. Multiple robustness checks, including fixed effects, generalized method of moments (GMM), two-stage least squares (2SLS), entropy balancing and Heckman correction, are conducted to address endogeneity and selection bias.FindingsDrawing on agency theory and the socioemotional wealth (SEW) perspective, the authors report that lone-founder firms are positively associated with earnings management practices. In contrast, family firms are negatively associated with them. Moreover, the presence of female directors weakens the positive relationship between lone founder firms and earnings management practices and strengthens the negative relationship in family firms. The findings, robust across multiple estimation methods including fixed effects, dynamic GMM and 2SLS, confirm that these relationships hold after accounting for endogeneity and sample selection biases.Research limitations/implicationsThe study focuses on a single emerging-market context, Pakistan, where ownership concentration and social norms may differ from those in other institutional settings. Future research could examine other ownership types (e.g. institutional or state ownership) and other dimensions of board diversity (e.g. nationality, education) as additional moderators.Practical implicationsThe findings highlight the importance of differentiating among ownership structures when assessing financial reporting quality. Policymakers and regulators can rely on these insights to promote stronger governance reforms, including gender diversity requirements for boards. For investors, the results provide a deeper understanding of how founders influence and how family control shapes financial transparency. The study also supports ongoing global initiatives, including United Nations Sustainable Development Goal (UNSDG) 5, by demonstrating the positive impact of female directors on governance.Social implicationsThe study underscores the value of inclusive governance, demonstrating that female directors play a significant role in enhancing financial transparency and reducing earnings manipulation. These findings support broader societal efforts to promote gender equality, particularly in male-dominated emerging markets and reinforce the importance of implementing gender quota policies. By demonstrating the positive impact of women’s participation in strategic decision-making, the study advances UNSDG 5 (gender equality). It encourages firms to embrace more diverse, socially responsible governance practices.Originality/valueTo the best of the authors’ knowledge, this study is the first to empirically distinguish lone-founder firms from family firms in explaining earnings management practices in an emerging market. It highlights the central role of SEW in limiting earnings manipulation in family firms. The study also provides clear evidence that female directors enhance strategic decision-making and reduce earnings management practices, underscoring women’s effective participation in line with UNSDG 5.

Keywords: Lone founder firms; Family firms; Female directors; Earnings management practices; Agency theory; UNSDG 5 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:arjpps:arj-01-2026-0001

DOI: 10.1108/ARJ-01-2026-0001

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