Earnings Management, Issues and Firm Market Value

Abstract

We address the question of the value relevance of earnings management practices. Using a sample of 239 non-financial listed firms for the period 2007-2015 and drawing on the agency theory integrated with the socioemotional wealth framework we study the effect of earnings quality on a firm's market value. Equity and bond issues are accounted for and we control also for the effect of corporate social responsibility (CSR) disclosure. The results suggest that family and non-family firms' market value is related to different drivers. Earnings management practices have a significant negative effect on non-family firms' market value whilst they do not affect family firms' value in a significant way. We provide also empirical evidence of a significant positive relation between voluntary non-financial disclosure and market value, but this is true only for family firms. The influence exerted by families in terms of founder presence in management, family CEO and family members on the board does not seems to have an impact on firms' market value.