SpringerLink
Log in

The Influence of a Family Business Climate and CEO–CFO Relationship Quality on Misreporting Conduct

  • Original Paper
  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

This study answers Vazquez’s (J Bus Ethics 150(3):691–709, 2016) call for more research focused on the intersection between family firms and business ethics. We investigate two contextual factors potentially affecting the ethical reporting of chief financial officers (CFOs): a firm’s social ties to the controlling family and the CFOs’ perceived relationship quality with the CEO. We test our hypotheses by examining the financial reporting behavior of Chinese CFOs who work at (1) family or nonfamily businesses and in (2) private or public firms. Results of this study advance our understanding of social and contextual factors that may compromise CFOs' reporting behavior in family firms (Suh et al., J Bus Ethics, 2018, https://doi.org/10.1007/s10551-018-3982-3).  This research also suggests that failure to distinguish between public and private companies may bias the results of studies that examine family firms.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Subscribe and save

Springer+ Basic
EUR 32.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or Ebook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Price includes VAT (Germany)

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

Notes

  1. In a similar vein, Prencipe et al. (2014) draw upon the relatively scarce judgment and decision-making (JDM) research in the family firm literature to highlight the need to better understand “accounting phenomena” within private family enterprises.

  2. Utilizing Chinese firms also enables this research to avoid the North American sampling bias present in much of the family business literature (Labelle et al. 2018).

  3. Earnings quality is measured by evaluating “the informativeness of reported earnings, the level of disclosure, and the degree of compliance with accepted accounting standards” (Salvato and Moores 2010, p. 196). Accounting-based earnings attributes are accrual quality, persistence, predictability, and smoothness; market-based earnings attributes are value relevance, timeliness, and conservatism (Francis et al. 2004).

  4. The seven countries are Hong Kong, Indonesia, Malaysia, Singapore, South Korea, Taiwan, and Thailand. According to Leuz et al. (2003), Indonesia, South Korea, Taiwan, and Thailand are identified with a low index of minority shareholder rights and a weak legal enforcement environment.

  5. Cultural-normative embeddedness is the fourth context that determines the nature of influence of a family on a business. It refers to “the ethical and religious beliefs of the family, their social consciousness, and their values as a social unit. And these in turn may relate to the society in which a family is embedded and the socialization of the family within that society” (Le Breton-Miller and Miller 2009, p. 1182). In this study, we do not discuss and examine the fourth context of social embeddedness because of the lack of empirical evidence on the influence of cultural-normative embeddedness on business stewardship behavior or agency behavior.

  6. According to the State Administration for Industry and Commerce (http://www.saic.gov.cn/), there are 7 million firms registered in China and 90% of these firms are family firms. Of the total population, only 2875 firms are listed on the Shang Hai and Shenzhen stock exchanges.

  7. There are no specific criteria that need to be met for a private company to be listed on Bloomberg. In general, private companies are listed on Bloomberg if they appear frequently in the news and/or report more than 500 M in revenue per year.

  8. Our response rate of 9.5% falls close to those reported by prior studies surveying financial executives. For example, Indjejikian and Matĕjka (2009) obtained a response rate of 6.8%, Graham and Harvey (2001) 9%, Graham et al. (2005) 10%, Graham et al. (2013) 11%, Trahan and Gitman (1995) 12%, and Brav et al. (2005) 16%. These studies employed online surveys or paper-based surveys at a conference or forum with limited time. In our study, on the other hand, one of the authors administered the paper-based survey instrument, including the case material (of earnings management), to each participating CFO in a private setting, allowing them to spend enough time to analyze the earnings management case and respond to questions.

  9. The average participating CFO’s age is similar to the demographic data of Chinese CFOs reported by Liu et al. (2016). The authors used the Chinese Securities Market and Accounting Research databases from 1999 to 2011 and found that male CFOs are, on average, 42.6 years old, and have 2.94 years of tenure (female CFOs are, on average, 44.2 years old and have 2.85 years of tenure). Compared to the participating CFOs’ demographic data, the average U.S. CFOs-age and -tenure are 53 years and 5.1 years, respectively (http://www.kornferry.com/press/age-and-tenure-in-the-c-suite-korn-ferry-institute-study-reveals-trends-by-title-and-industry/).

  10. From 2010 to 2015, the mean and median revenues for Compustat North America companies ranged from $3045 to $3311 million US dollars and from $129 to 147 million US dollars, respectively.

  11. A one-way ANOVA reveals that the mean of Tenure (F = 0.26, p = 0.85) and Age (F = 0.29, p = 0.84) do not differ significantly across the four contexts for private firms. Results of a \(\chi^{2}\) test indicate that Accounting Expertise (\(\chi^{2}\) = 1.22, p = 0.75) and Promotion (\(\chi^{2}\) = 4.43, p = 0.62) do not differ significantly across the four contexts for private firms.

  12. A one-way ANOVA reveals that the mean of Tenure (F = 1.75, p = 0.17) and Age (F = 0.49, p = 0.69) do not differ significantly across the four contexts for public firms. Results of a Chi-square test indicate that Accounting Expertise (\(\chi^{2}\) = 0.37, p = 0.95) and Promotion (\(\chi^{2}\) = 0.35, p = 0.95) do not differ significantly across the four contexts for public firms.

  13. Un-tabulated results of a one-way ANOVA reveal insignificant differences in the average sales revenue (F = 0.22, p = 0.88), the average number of operating segments (F = 0.44, p = 0.73), the average debt-to-assets (F = 1.89, p = 0.15) and the average ratio of short-term debt to total assets (F = 0.38, p = 0.77) across the four contexts for private firms. Un-tabulated results of a one-way ANOVA reveal significant differences in the average sales revenue (F = 2.54, p = 0.07) and the average number of operating segments (F = 4.01, p = 0.02) but insignificant differences in the average debt-to-assets (F = 0.32, p = 0.82) and the average ratio of short-term debt to total assets (F = 0.09, p = 0.97) across the four contexts for public firms.

  14. CFOs’ compensation information (salary, stock options, and bonus) is not included in the firm information due to the participating CFOs’ refusal to provide this information.

  15. See Peabody et al. (2000) for a validation study of vignette-based surveys.

  16. We created an initial survey instrument using a vignette or case material obtained from Brown (2014) and pretested in China with a group of accountants. Based on the pretest results and feedback from a number of academics and practitioners, we modified the final survey instrument to reduce ambiguity and improve clarity. The pretest participants were not included in the final sample.

  17. Rather than designing a reporting task specific to each firm, we opted to use an identical task of earnings management that Chinese CFOs would be familiar with given their past or present experience in financial reporting. All participants indicated that expense recognition is important for their company.

  18. The annual bonus rate (i.e., 50% of yearly salary) used in an earnings management case of Brown (2014) matches with the average annual bonus rate of corporate CFOs or CEOs reported in prior research (e.g., Indjejikian and Matĕjka 2009).

  19. We also used participants’ responses concerning the firm description to validate the two independent variables through investment companies.

  20. A confirmatory factor analysis was conducted on the items to test dimensionality using an OBLIQUE rotation for Eigen values greater than 1.0. The use of the factor analysis was supported by the Kaiser–Meyer–Olken (KMO) measure of sample adequacy, which was in the meritorious (> 0.8) range (KMO = 0.808) (Hutcheson & Sofronious, 1999), and Bartlett’s test of sphericity, which was significant (p < 0.001). All factor loadings were > 0.70.

  21. Neither logistic regression nor MANOVA is an appropriate analysis for hypothesis testing because (1) the former is used when the dependent variable is a categorical variable and the independent variables are both continuous and categorical, and (2) the latter is used when there are two or more continuous dependent variables and the independent variable(s) is(are) categorical variables (Allison 2012; Field 2009; Hair et al. 2006).

  22. The coefficient of the Family Firm variable is still negative and significant (p  =  0.079) even if we run the regression model without the interaction term.

  23. We excluded the interaction terms between the social embeddedness variables and the Relationship Quality variable from the regression model (Table 4) because of their insignificant effects on the CFOs’ Reporting Decision (p  ≥  0.629). The coefficient of Family Executives variable is still negative and significant (one-tailed p  =  0.076) with the interactions terms, after controlling for the CEO FR Oversight variable (p = 0.047).

References

  • Achleitner, A. K., Gunther, N., Kaserer, C., & Sciliano, G. (2014). Real earnings management and accrual-based earnings management in family firms. European Accounting Review, 23(3), 431–461.

    Google Scholar 

  • Adams, J., Taschian, A., & Shore, T. (1996). Ethics in family and non-family owned firms: An exploratory study. Family Business Review, 9(2), 157–170.

    Google Scholar 

  • Aier, J. K., Comprix, J., Gunlock, M. T., & Lee, D. (2005). The financial expertise of CFOs and accounting restatements. Accounting Horizons, 19(3), 123–135.

    Google Scholar 

  • Ali, A., Chen, T., & Radhakrishnan, S. (2007). Corporate disclosures by family firms. Journal of Accounting and Economics, 44, 238–286.

    Google Scholar 

  • Allison, P. D. (2012). Logistic regression using SAS: Theory and application. Cary: SAS Institute.

    Google Scholar 

  • Amit, R., & Villalonga, B. (2013). Financial performance of family firms. In L. Melin, M. Nordqvist, & P. Sharma (Eds.), Handbook of family business (pp. 157–178). Thousand Oaks: SAGE Publications.

    Google Scholar 

  • An, S., **, H. S., & Brown, J. D. (2009). Direct-to-consumer antidepressant ads and you adults’ beliefs about depression. Health Marketing Quarterly, 26, 259–278.

    Google Scholar 

  • Anderson, R., Mansi, S., & Reeb, D. (2003). Founding family ownership and the agency cost of debt. Journal of Financial Economics, 68, 263–285.

    Google Scholar 

  • Anderson, R., & Reeb, D. (2003). Founding-family ownership and firm performance: Evidence from the S&P 500. Journal of Finance, 58, 1301–1328.

    Google Scholar 

  • Arrègle, J.-L., Hitt, M., Sirmon, D., & Véry, P. (2007). The development of organizational social capital: Attributes of family firms. Journal of Management Study, 44(1), 73–95.

    Google Scholar 

  • Ball, R., & Shivakumar, L. (2005). Earnings quality in UK private firms: Comparative loss recognition timeliness. Journal of Accounting and Economics, 39, 83–128.

    Google Scholar 

  • Barua, A., Davidson, L. F., Rama, D. V., & Thiruvadi, S. (2010). CFO gender and accruals quality. Accounting Horizons, 24(1), 25–39.

    Google Scholar 

  • Beatty, A., Ke, B., & Petroni, K. (2002). Earnings management to avoid earnings declines across publicly and privately held banks. The Accounting Review, 11(3), 547–570.

    Google Scholar 

  • Bennedsen, M., Nielsen, K. M., Perez-Gonzalez, F., & Wolfenzon, D. (2007). Inside the family firm: The role of families in succession decisions and performance. The Quarterly Journal of Economics, 122, 647–691.

    Google Scholar 

  • Bertrand, M., & Schoar, A. (2006). The role of family in family firms. The Journal of Economic Perspectives, 20(2), 73–96.

    Google Scholar 

  • Beuselinck, C., & Manigart, S. (2007). Financial reporting quality in private equity backed companies: The impact of ownership concentration. Small Business Economics, 29, 261–274.

    Google Scholar 

  • Bingham, J. B., Dyer, W. G., Jr., Smith, I., & Adams, G. L. (2011). A stakeholder identity orientation approach to corporate social performance in family firms. Journal of Business Ethics, 99(4), 565–585.

    Google Scholar 

  • Bishop, C. C., De Zoort, F. T., & Hermanson, D. R. (2017). The effect of CEO social influence pressure and CFO accounting experience on CFO financial reporting decisions. Auditing: A Journal of Practice & Theory, 36, 21–41.

    Google Scholar 

  • Blodgett, M. S., Dumas, C., & Zanzi, A. (2011). Emerging trends in global ethics: A comparative study of US and international family business values. Journal of Business Ethics, 99(1), 29–38.

    Google Scholar 

  • Brav, A., Graham, J. R., Harvey, C. R., & Michaely, R. (2005). Payout policy in the 21st century. Journal of Financial Economics, 77(3), 483–527.

    Google Scholar 

  • Brower, H. H., Schoorman, F. D., & Tan, H. H. (2000). A model of relational leadership: The integration of trust and leader-member exchange. Leadership Quarterly, 11(2), 227–250.

    Google Scholar 

  • Brown, B. (2014). Advantageous comparison and rationalization of earnings management. Journal of Accounting Research, 52(4), 849–876.

    Google Scholar 

  • Burgstahler, D., Hail, L., & Leuz, C. (2006). The importance of reporting incentives: Earnings management in European private and public firms. The Accounting Review, 81(5), 983–1016.

    Google Scholar 

  • Cai, G., & Zheng, G. (2016). Executive compensation in business groups: Evidence from China. China Journal of Accounting Research, 9, 25–39.

    Google Scholar 

  • Cambieri, G. (2011). Family businesses are China’s economic engine but face succession challenges, report. Campden FB. Assessed at April 4, 2018, from http://www.campdenfb.com/article/family-businesses-are-china-s-economic-engine-face-succession-challenges-report.

  • Campopiano, G., & De Massis, A. (2015). Corporate social responsibility reporting: A content analysis in family and non-family firms. Journal of Business Ethics, 129(3), 1–24.

    Google Scholar 

  • Casino, S., Pugliese, A., Mussolino, D., & Sansone, C. (2010). The influence of family ownership on the quality of accounting information. Family Business Review, 23, 246–265.

    Google Scholar 

  • Chen, S., Chen, X., & Cheng, Q. (2008). Do family firms provide more or less voluntary disclosure? Journal of Accounting Research, 46(3), 499–536.

    Google Scholar 

  • Chen, S., Chen, X., Cheng, Q., & Shevlin, T. (2010). Are family firms more tax aggressive than non-family firms? Journal of Financial Economics, 91, 41–61.

    Google Scholar 

  • Chen, F., Hope, O.-K., Li, Q., & Wang, X. (2011). Financial reporting quality and investment efficiency of private firms in emerging market. The Accounting Review, 86(4), 1255–1288.

    Google Scholar 

  • Chen, Z., Li, Y., & Zhang, J. (2016). The bank–firm relationship: Hel** or grabbing? International Review of Economics and Finance, 42, 385–403.

    Google Scholar 

  • Cheng, Q. (2014). Family firm research—A review. China Journal of Accounting Research, 7, 149–163.

    Google Scholar 

  • Chinese Security Regulation Commission (CSRC). (2014). No. 107 Supplement regulations on improvement of withdraw mechanism of listed companies. CSRC. Accessed from http://www.csrc.gov.cn/pub/zjhpublic/zjh/201410/t20141017_261947.htm

  • Davis, J. H., Allen, M. R., & Hayes, H. D. (2010). Is blood thicker than water? A study of stewardship perceptions in family business. Entrepreneurship Theory and Practice, 34, 1093–1116.

    Google Scholar 

  • Dichev, I. D., Graham, J. R., Harvey, C. R., & Rajgopal, S. (2013). Earnings quality: Evidence from the field. Journal of Accounting and Economics, 56(2), 1–33.

    Google Scholar 

  • Duh, M., Belak, J., & Milfelner, B. (2010). Core values, culture and ethical climate as constitutional elements of ethical behaviour: Exploring differences between family and non-family enterprises. Journal of Business Ethics, 97(3), 473–489.

    Google Scholar 

  • Duong, L., & Evans, J. (2016). Gender differences in compensation and earnings management: Evidence from Australian CFOs. Pacific-Basin Finance Journal, 40, 1.

    Google Scholar 

  • Dupont, A. M., & Craig, J. S. (1996). Does management experience change the ethical perceptions of retail professionals: A comparison of ethical perceptions of current students with those of recent graduates? Journal of Business Ethics, 15, 815–826.

    Google Scholar 

  • Dyer, W. G., & Whetten, D. A. (2006). ‘Family Firms and Social Responsibility: Preliminary Evidence from the S&P 500. Entrepreneurship Theory and Practice, 30(6), 785–802.

    Google Scholar 

  • Eberl, M. (2010). An application of PLS in multi-group analysis: the need for differentiated corporate-level marketing in the mobile communications industry (pp. 487–514)., Handbook of Partial Least Squares Berlin: Springer.

    Google Scholar 

  • EY Global Fraud Survey. (2016). Corporate misconduct: Individual consequences. EY 14th Global Fraud Survey

  • Fan, J., & Wong, T. (2002). Corporate ownership structure and the informativeness of accounting earnings in East Asia. Journal of Accounting and Economics, 30, 401–425.

    Google Scholar 

  • Feng, M., Ge, W., Luo, S. & Shevlin, T. (2011). Why do CFOs become involved in material accounting manipulations? Journal of Accounting and Economics, 51(1), 21–36.

  • Field, A. (2009). Discovering statistics using SPSS (2nd ed.). California: Sage.

    Google Scholar 

  • Firth, M., Fung, P. M. Y., & Rui, O. M. (2007). Ownership, two-tier board structure, and the informativeness of earnings—Evidence from China. Journal of Accounting and Public Policy, 26, 463–496.

    Google Scholar 

  • Firth, M., Lin, C., Liu, P., & Wong, S. M. (2009). Inside the black box: Bank credit allocation in China’s private sector. Journal of Banking & Finance, 33(6), 1144–1155.

    Google Scholar 

  • Francis, J., LaFond, R., & Schipper, K. (2004). Costs of equity and earnings attributes. The Accounting Review, 79(4), 967–1010.

    Google Scholar 

  • Free, C., & Murphy, P. R. (2015). The ties that bind: The decision to co-offend in fraud. Contemporary Accounting Research, 31(1), 18–54.

    Google Scholar 

  • Gao, M., Su, R., & Fang, F. (2014). Evaluation and effectiveness test of board governance of Chinese listed companies. Economic Perspectives, 2, 24–35. (in Chinese).

    Google Scholar 

  • Ge, W., Matsumoto, D., & Zhang, J. L. (2011). Do CFOs have style? An empirical investigation of the effect of individual CFOs on accounting practices. Contemporary Accounting Research, 28, 1141–1179.

  • Geiger, M. A., & North, D. S. (2006). Does hiring a new CFO change things? An investigation of changes in discretionary accruals. The Accounting Review, 81, 781–809.

  • Givoly, D., Hayn, C. K., & Katz, S. P. (2010). Does public ownership of equity improve earnings quality? The Accounting Review, 85(1), 195–225.

    Google Scholar 

  • Gollwitzer, P. (1993). Goal achievement: The role of intentions. European Review of Social Psychology, 4, 141–185.

    Google Scholar 

  • Gollwitzer, P. (2012). Mindset theory of action phases. In P. A. Van Lange (Ed.), Theories of social psychology (pp. 526–545). Los Angeles: Sage. ISBN 978-0-85702-960-7.

  • Gollwitzer, P., Heckhausen, H., & Steller, B. (1990). Deliberative and implemental mindsets: Cognitive tuning toward congruous thoughts and information. Journal of Personality and Social Psychology, 59, 1119–1127.

    Google Scholar 

  • Gomez-Mejia, L. R., Haynes, K., Nunez-Nickel, M., Jacobson, K., & Moyano-Fuentes, J. (2007). Socio-emotional wealth and business risks in family-controlled firms: Evidence from Spanish olive oil mills. Administrative Science Quarterly, 52, 106–138.

    Google Scholar 

  • Gopalan, R., & Jayaraman, S. (2012). Private control benefits and earnings management: Evidence from insider controlled firms. Journal of Accounting Research, 50(1), 117–157.

    Google Scholar 

  • Graen, G. B., & Uhl-Bien, M. (1995). Relationship-based approach to leadership: Development of leader member exchange (LMX) theory of leadership over 25 years: Applying a multi-level multi-domain perspective. Leadership Quarterly, 6(2), 219–247.

    Google Scholar 

  • Graham, J. R., & Harvey, C. R. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of Financial Economics, 60, 187–243.

    Google Scholar 

  • Graham, J. R., Harvey, C. R., & Puri, M. (2013). Managerial attitudes and corporate actions. Journal of Financial Economics, 109, 103–121.

    Google Scholar 

  • Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40, 3–73.

    Google Scholar 

  • Griffith, E. E., Hammersley, J. S., Kadous, K., & Young, D. (2014). Auditor mindsets and audits of complex estimates. Journal of Accounting Research, 53, 49–77.

    Google Scholar 

  • Guo, J., & Zhao, X. (2015). Board governance, managerial power and internal control weakness. Soft Science, 29(4), 43–47. (in Chinese).

    Google Scholar 

  • Habbershon, T. G., & Williams, M. L. (1999). A resource based framework for assessing the strategic advantages of family firms. Family Business Review, 12, 1–25.

    Google Scholar 

  • Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2006). Multivariate data analysis (6th ed.). Prentice Hall, NJ: Pearson.

    Google Scholar 

  • Hair, J. F., Sarstedt, M., Ringle, C. M., & Gudergan, S. (2017). Advanced issues in partial least squares structural equation modeling (PLS-SEM). Thousand Oaks, CA: Sage.

    Google Scholar 

  • Hamilton, R., Vohs, K. D., Sellier, A. L., & Meyvis, T. (2011). Being of two minds: Switching mindsets exhausts self-regulatory resources. Organizational Behavior and Human Decision Processes, 115, 13–24.

    Google Scholar 

  • He, T. T., Li, W. X., & Tang, G. Y. (2012). Dividends behavior in state-versus family-controlled firms: Evidence from Hong Kong. Journal of Business Ethics, 110(1), 97–112.

    Google Scholar 

  • Healy, P. M., & Wahlen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 13, 365–383.

    Google Scholar 

  • Heilbrun, K., O’Neil, M. L., Stevens, T. N., Strohman, M. A., Bowman, Q., & Lo, Y. W. L. (2004). Assessing normative approaches to communicating violence risk: A national survey of psychologist. Behavioral Sciences & the Law, 22, 187–196.

    Google Scholar 

  • Henseler, J. (2012). PLS-MGA: A non-parametric approach to partial least squares-based multi-group analysis. In W. A. Gaul, A. Geyer-Schulz, L. Schmidt-Thieme, & J. Kunze (Eds.), Challenges at the interface of data analysis, computer science, and optimization (Studies in Classification, Data Analysis, and Knowledge Organization) (pp. 495–501). Berlin: Springer.

    Google Scholar 

  • Henseler, J., Hubona, G., & Ray, P. A. (2016). Using PLS path modeling in new technology research: Updated guidelines. Industrial Management & Data Systems, 116, 2–20.

    Google Scholar 

  • Hofman, E., Halman, J. I. M., & Ion, R. A. (2006). Variation in housing design: Identifying customer preferences. Housing Studies, 21(6), 929–943.

    Google Scholar 

  • Hope, O.-K., Thomas, W. B., & Vyas, D. (2011). Financial credibility, ownership, and financing constraints in private firms. Journal of International Business Studies, 42, 935–957.

    Google Scholar 

  • Hope, O.-K., Thomas, W. B., & Vyas, D. (2013). Financial reporting quality of U.S. private and public firms. The Accounting Review, 88, 1715–1742.

    Google Scholar 

  • Hutcheson, G., & Sofroniou, N. (1999). The multivariate social scientist: Introductory statistics using generalized linear models. Thousand Oaks, CA: Sage.

    Google Scholar 

  • Indjejikian, R. J., & Matĕjka, M. (2009). CFO Fiduciary responsibilities and annual bonus incentives. Journal of Accounting Research, 47, 1061–1093.

    Google Scholar 

  • Jaggi, B., Siney, L., & Ferdinand, G. (2009). Family control, board independence and earnings management: Evidence based on Hong Kong firms. Journal of Accounting and Public Policy, 28, 281–300.

    Google Scholar 

  • Jiang, J., Petroni, K., & Wang, I. (2010). CFOs and CEOs: Who have the most influence on earnings management? Journal of Financial Economics, 96, 513–526.

    Google Scholar 

  • Jiraporn, P., & DaDalt, P. J. (2009). Does founding family control affect earnings management? Applied Economics Letters, 16, 113–119.

    Google Scholar 

  • Jollineau, S. J., Vance, T. W., & Webb, A. (2012). Subordinates as the first line of defense against biased financial reporting. Journal of Management Accounting Research, 24, 1–24.

    Google Scholar 

  • Kets de Vries, M. F. R. (1993). The dynamics of family controlled firms: The good and the bad news. Organizational Dynamics, 21, 59–71.

    Google Scholar 

  • Klein, S. B. (2000). Family businesses in Germany: Significance and structure. Family Business Review, 13, 157–181.

    Google Scholar 

  • Krishnan, G. V., Raman, K. K., Yang, K., & Yu, W. (2011). CFO/CEO-board social ties, sarbanes-oxley, and earnings management. Accounting Horizons, 25, 537–557.

    Google Scholar 

  • La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (1999). Corporate ownership around the world. Journal of Finance, 54, 471–517.

    Google Scholar 

  • Labelle, R., Hafsi, T., Francoeur, C., & Amar, W. B. (2018). Family firms’ corporate social performance: A calculated quest for socioemotional wealth. Journal of Business Ethics, 148(3), 511–525.

    Google Scholar 

  • Le Breton-Miller, I., & Miller, D. (2009). Agency vs. stewardship in public family firms: A social embeddedness reconciliation. Entrepreneurship Theory and Practice, 33, 1169–1191.

    Google Scholar 

  • Le Breton-Miller, I., Miller, D., & Lester, R. H. (2011). Social embeddedness reconciliation of conduct and performance. Organization Science, 22, 704–721.

    Google Scholar 

  • Leuz, C., Nanda, D., & Wysocki, P. D. (2003). Earning management and investor protection: An international comparison. Journal of Financial Economics, 69, 505–527.

    Google Scholar 

  • Li, Y., Lou, F., Wang, J., & Yuan, H. (2013). A survey of executive compensation contracts in China’s listed companies. China Journal of Accounting Research, 6, 211–231.

    Google Scholar 

  • Liden, R. C., & Maslyn, J. M. (1998). Multidimensionality of leader-member exchange: An empirical assessment through scale development. Journal of Management, 24(1), 43–72.

    Google Scholar 

  • Lim B. K., Miller, M., & Stanway, D. (2016). Exclusive: China to lay off five to six million workers, earmarks at least $23 billion. Business News Reuters. Accessed from https://www.reuters.com/article/us-china-economy-layoffs-exclusive/exclusive-china-to-lay-off-five-to-six-million-workers-earmarks-at-least-23-billion-idUSKCN0W33DS.

  • Liu, Y., Wei, Z., & **e, F. (2016). CFO gender and earnings management: Evidence from China. Review of Quantitative Finance and Accounting, 46, 881–905.

    Google Scholar 

  • Lo, K. (2008). Earnings management and earnings quality. Journal of Accounting and Economics, 45, 350–357.

    Google Scholar 

  • Mao, H., & Shen, P. (2009). The Research on the relevance between CFO compensation and earnings quality of Chinese listed companies. Nankai Business Review, 5, 82–93.

    Google Scholar 

  • Martin, G., Campbell, J. T., & Gomez-Mejia, L. (2016). Family control, socioemotional wealth, and earnings management in publicly traded firms. Journal of Business Ethics, 133(3), 453–469.

    Google Scholar 

  • Martins, T., Ukoumunne, O., Banks, J., Raine, R., & Hamilton, W. (2015). Ethnic differences in patients’ preferences for prostate cancer investigation: A vignette-based survey in primary care. British Journal of General Practice, 65, 161–170.

    Google Scholar 

  • Matthews, L. M. (2017). Applying multi-group analysis in PLS-SEM: A step-by-step process. In H. Latan & R. Noonan (Eds.), Partial least squares structural equation modeling—Basic concepts, methodological issues and applications (pp. 219–243). Berlin: Springer.

    Google Scholar 

  • Mei, F., Ge, W., Luo, S., & Shevlin, T. (2011). Why do CFOs become involved in material accounting manipulations? Journal of Accounting and Economics, 51(1–2), 21–36.

    Google Scholar 

  • Miller, D., & Le Breton-Miller, I. (2006). Family governance and firm performance: Agency, stewardship, and capabilities. Family Business Review, XIX, 73–87.

    Google Scholar 

  • Morales, J., Gendron, Y., & Guénin-Paracini, H. (2014). The construction of the risky individual and vigilant organization: A genealogy of the fraud triangle. Accounting, Organizations and Society, 39, 170–194.

    Google Scholar 

  • Morck, R., Shleifer, A., & Vishny, R. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20, 293–315.

    Google Scholar 

  • Morck, R., Wolfenzon, D., & Yeung, B. (2005). Corporate governance, economic entrenchment, and growth. Journal of Economic Literature, 43, 655–720.

    Google Scholar 

  • Mullins, W., & Schoar, A. (2016). How do CEOs see their roles? Management philosophies and styles in family and non-family firms. Journal of Financial Economics, 119(1), 24–43.

    Google Scholar 

  • Neckebrouck, J., Schulze, W., & Zellweger, T. (2018). Are family firms good employers? Academy of Management Journal, 61(2), 553–585.

    Google Scholar 

  • O’Boyle, E. H., Rutherford, M. W., & Pollack, J. M. (2010). Examining the relation between ethical focus and financial performance in family firms: An exploratory study. Family Business Review, 23(4), 310–326.

    Google Scholar 

  • Peabody, J. W., Luck, J., Glassman, P., Dresselhaus, T. R., & Lee, M. (2000). Comparison of vignettes, standardized patients, and chart abstraction: A prospective validation study of 3 methods for measuring quality. Journal of American Medical Association, 283, 1715–1722.

    Google Scholar 

  • Peek, E., Cuijperts, R., & Bui**k, W. (2010). Creditors’ and shareholders’ reporting demand in public versus private firms: Evidence from Europe. Contemporary Accounting Research, 27, 49–91.

    Google Scholar 

  • Penno, M., & Simon, D. T. (1986). Accounting choices: Public versus private firms. Journal of Business Finance & Accounting, 86, 561–570.

    Google Scholar 

  • Pérez-González, F. (2006). Inherited control and firm performance. American Economic Review, 96, 1559–1588.

    Google Scholar 

  • Prencipe, A., Bar-Yosef, S., & Dekker, H. C. (2014). Accounting research in family firms: Theoretical and Empirical Challenges. European Accounting Review, 23, 361–385.

    Google Scholar 

  • Private Company Council (Financial Accounting Standards Board). (2013). Private company decision-making framework: A guide for evaluating financial accounting and reporting for private companies. Issued December 23.

  • Rasmussen, L. J., & Sieck, W. R. (2015). Culture-general competence: Evidence from a cognitive field study of professionals who work in many cultures. International Journal of Intercultural Relations, 38, 75–90.

    Google Scholar 

  • Ruane, J. M. (2005). Essentials of research methods: A guide to social science research. Malden, MA: Blackwell.

    Google Scholar 

  • Salvato, C., & Moores, K. (2010). Research on accounting in family firms: Past accomplishments and future challenges. Family Business Review, 23, 193–215.

    Google Scholar 

  • Sarstedt, M., Henseler, J., & Ringle, C. M. (2011). Multi-group analysis in partial least squares (PLS) path modeling: Alternative methods and empirical results. Advances in International Marketing, 22, 195–218.

    Google Scholar 

  • Schulze, W. S., Lubatkin, M. H., Dino, R., & Buchholtz, A. (2001). Agency relationships in family firms: Theory and evidence. Organization Science, 12(2), 99–116.

    Google Scholar 

  • Sherman, E. (2014). China: The year of the layoff. MoneyWatch, January. Accessed April 4, 2018, from https://www.cbsnews.com/news/china-the-year-of-the-layoff/.

  • Simpson, S. S., & Piquero, N. L. (2002). Low self-control, organizational theory, and corporate crime. Law & Society Review, 36, 509–548.

    Google Scholar 

  • Sorenson, R. L., Goodpaster, K. E., Hedberg, P. R., & Yu, A. (2009). The family point of view, family social capital, and firm performance an exploratory test. Family Business Review, 22(3), 239–253.

    Google Scholar 

  • Srinidhi, B., He, S., & Firth, M. (2014). The effect of governance on specialist auditor choice and audit fees in U.S. family firms. The Accounting Review, 89(6), 2297–2329.

    Google Scholar 

  • Suh, I., Sweeney, J. T., Linke, K., & Wall, J. M. (2018). Boiling the frog slowly: The immersion of C-suite financial executives into fraud. Journal of Business Ethics. https://doi.org/10.1007/s10551-018-3982-3. (forthcoming).

    Article  Google Scholar 

  • Sun, P., & Jiang, W. (2015). The squeezed middle: Political affiliation and financial constraints in China. Emerging Markets Finance & Trade, 51, 1074–1083.

    Google Scholar 

  • Tong, Y. (2008). Financial reporting practices of family firms. Advances in Accounting, 23, 231–261.

    Google Scholar 

  • Trahan, E., & Gitman, L. (1995). Bridging the theory-practice gap in corporate finance. A survey of chief financial officers. Quarterly Review of Economics and Finance, 35, 73–87.

    Google Scholar 

  • Trotman, A. J., & Trotman, K. T. (2010). The intersection of family business and audit research: Potential opportunities. Family Business Review, 23, 216–229.

    Google Scholar 

  • Vallejo, M. C. (2008). ‘Is the culture of family firms really different? A value-based model for its survival through generations. Journal of Business Ethics, 81(2), 261–279.

    Google Scholar 

  • Vance, T. W. (2010). Subcertification and relationship quality: Effects on subordinate effort. Contemporary Accounting Research, 27, 959–981.

    Google Scholar 

  • Vazquez, P. (2016). Family business ethics: At the crossroads of business ethics and family business. Journal of Business Ethics, 150(3), 691–709.

    Google Scholar 

  • Veloski, J., Tai, S., Evans, A. S., & Nash, D. B. (2005). Clinical vignette-based surveys: A tool for assessing physician practice variation. American Journal of Medical Quality, 20, 151–157.

    Google Scholar 

  • Wang, D. (2006). Founding family ownership and earnings quality. Journal of Accounting Research, 44, 619–656.

    Google Scholar 

  • Wang, X., Hong, Z., Xu, Y., Zhang, C., & Hong, L. (2014). Relevance judgments of mobile commercial information. Journal of the Association for Information Science and Technology, 65(7), 1335–1348.

    Google Scholar 

  • Wang, K., & Xu, Y. (2015). An empirical study of impact of family-tie on management compensation. Nankai Business Review, 18(4), 15–25. (in Chinese).

    Google Scholar 

  • Wang, L., & Yung, K. (2011). Do state enterprises manage earnings more than privately owned firms? The case of China. Journal of Business Finance & Accounting, 38, 794–812.

    Google Scholar 

  • Worrall, J. L., Els, N., Piquero, A. R., & TenEyck, M. (2014). The moderating effects of information social control in the sanctions-compliance nexus. American Journal of Criminology Justice, 39, 341–357.

    Google Scholar 

  • Xu, J., & Lv, C. (2011). Types of CEOs in family firms and earnings quality: evidence from China. Management World, 1, 112–120. (in Chinese).

    Google Scholar 

  • Xu, N., Yuan, Q., Jian, X., & Chan, K. C. (2015). Founder’s political connections, second generation involvement, and family firm performance: Evidence from China. Journal of Corporate Finance, 33(August), 243–259.

    Google Scholar 

  • Yiu, D. W., Su, J., & Xu, Y. (2013). Alternative financing and private firm performance. Asia Pacific Journal Management, 30, 829–852.

    Google Scholar 

  • Zorn, D. M. (2004). Here a chief, there a chief: The rise of the CFO in the American firm. American Sociological Review, 69, 345–364.

    Google Scholar 

Download references

Funding

This research has been partially funded through the research center of Renmin University of China (No. 16XNF020) and the National Natural Science Foundation of China (NSFC-71902181).

Author information

Authors and Affiliations

  1. Department of Accounting, Renmin University of China, Bei**g, China

    **gyu Gao & **gchang Xu

  2. Department of Accounting and Information Systems, University of Kansas, School of Business, Lawrence, USA

    Adi Masli

  3. Department of Accounting, University of Nevada, Las Vegas, Las Vegas, USA

    Ikseon Suh

Authors
  1. **gyu Gao
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Adi Masli
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Ikseon Suh
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. **gchang Xu
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Ikseon Suh.

Ethics declarations

Ethical approval

All procedures performed in studies involving human participants were in accordance with the ethical standards of the institutional and/or national research committee and with the 1964 Helsinki declaration and its later amendments or comparable ethical standards. Informed consent was obtained from all individual participants included in the study.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

We appreciate the insightful comments of Kimberly Charron, Jane Jollineau, Erin Hamilton, William Messier, Robyn Raschke, Jason Smith, Aaron Saiewitz, Hun-Tong Tan, and Jixun Zhang.

Appendix I

Appendix I

All questions are answered on a scale from − 3 to + 3, anchored by “Strongly Disagree” and “Strongly Agree.”

  1. 1.

    The CEO would be a lot of fun to work with.

  2. 2.

    I like the CEO as a person.

  3. 3.

    The CEO is the kind of person I would like to have as a friend.

  4. 4.

    The CEO would come to my defense if I were “attacked” by others.

  5. 5.

    The CEO would defend me to others in the organization if I made an honest mistake.

  6. 6.

    The CEO would defend my work actions to the board members, even without complete knowledge of the issue in question.

  7. 7.

    I would not mind working my hardest for the CEO.

  8. 8.

    I would be willing to do work for the CEO that goes beyond what is specified as my task.

  9. 9.

    I would be willing to apply extra efforts, beyond those normally requested, to meet the CEO’s work goals.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Gao, J., Masli, A., Suh, I. et al. The Influence of a Family Business Climate and CEO–CFO Relationship Quality on Misreporting Conduct. J Bus Ethics 171, 99–122 (2021). https://doi.org/10.1007/s10551-019-04253-1

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-019-04253-1

Keywords

Search

Navigation