Family firms and the incentive contracting role of accounting earnings

Yu-Lin Chen and Chao-Jung Chen

Asia-Pacific Journal of Accounting & Economics, 2015, vol. 22, issue 4, 384-405

Abstract: We investigate how family controls affect the sensitivity of the variable pay of top management to the firm's accounting-based performance (PPS) in order to deal with both the traditional agency problem between owners and managers, and the central agency problem between controlling and minority shareholders. Using five-year data from Taiwan-listed firms, our results show that PPS is stronger for both non-family managers employed by family firms, and family managers, and is weakest for managers in non-family firms. Additionally, PPS is more pronounced in family firms with potential central agency problems, when the CEO is not a family member than when the CEO is.

Date: 2015
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DOI: 10.1080/16081625.2014.995769

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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