Research on Accounting in Family Firms

Carlo Salvato, Bocconi University, and Ken Moores, Bond University, published “Research on Accounting in Family Firms: Past Accomplishments and Future Challenges” in the September 2010 issue of Family Business Review. Professor Salvato and Professor Moores kindly provided the following thoughts on their article.

Who is the target audience for this article?

We explicitly designed this editorial to meet the interests of two different, yet connected target audiences. First, our main desire was to intrigue family business scholars to the study of accounting in family firms—a rarely addressed topic in the field, despite its relevance. To this aim, we provided an extensive literature review of all papers published in this area, and what we believe are exciting avenues for future research. Second, we were equally interested in attracting mainstream accounting scholars to the investigation of family firms—a relatively unusual empirical context for these colleagues. To this aim, besides the mentioned extensive literature review, we pointed to a number of gaps and controversies in the accounting literature that we believe could be fruitfully addressed by investigating family controlled firms more extensively.

Were there findings that were surprising to you?

By far the most surprising finding of our extensive literature review was the incredibly limited number of works published on accounting in family firms: only 47 papers over the past three decades were squarely focused on accounting in family firms. If we consider that family firms represent between 70-90% of all firms, and that they create well over 50% of Gross Domestic Product and new jobs in most countries, the limited attention devoted to how and why these firms differ in terms of accounting behavior was truly unexpected. It was especially surprising to learn that only 3 papers (about 6%) were concerned with management accounting topics, an area in which the context has long been known to affect the form and content of control systems. The fact that the unique context of family firms has not been explored further is perhaps understandable in terms of the limited access to data that inhibits all management accounting research of this type relative to the more accessible capital market and annual report data. The limited exploration of this context to dateclearly it opens up a number of exciting avenues for future research, debate and applications.

How do you see this study influencing future practice?

Despite our prevailing research-oriented aims, the article may offer significant insights to practice. Family entrepreneurs and accountants will learn what are the most typical accounting and reporting behaviors of family firms, by tracing them to different situations and contingencies. Practitioners would hence learn, for instance, under what conditions family firms tend to hire large international vs. small and local auditing firms, or under what conditions voluntary disclosure is more beneficial to different types of family business.

How does this study fit into your body of work/line of research?

This editorial is a perfect complement to both our lines of research. It was through the intuition of Editor-in-Chief Pramodita Sharma that we joined our different, yet converging backgrounds. Carlo Salvato, devoted most of his career to the study of management and organization in family firms, paying increasing attention to unexplored issues in the field. Ken Moores invested most of his academic career in exploring accounting topics. Over the past decade, however, he has been paying increasing attention and research efforts towards the field of family business management. These more recent efforts prompted his school, Bond University in Australia, to award him a higher Doctoral degree in Business (DBus.

How did your paper change during the review process?

Special Issue editorials follow a different review process at FBR, as in most other academic journals. Yet we benefited immensely from the comments of Editor-in-Chief Pramodita Sharma, and from countless discussions with colleagues within both the family business and accounting fields. Given the relative novelty of the topic, we found it essential to explore the different points of views and suggestions of scholars from both the fields that the Special Issue we edited was trying to connect—family business and accounting. The interpretations and suggestions for future research presented in our editorial are hence, in a way, also a “collective effort” that we performed with the help of colleagues, with the aim of offering a more shared view of this promising field of study.

What, if anything, would you do differently if you could go back and do this study again?

Our paper is the first systematic review of the accounting literature in family firms. It is also the result of several discussions with colleagues active both in the family business and accounting fields. After our paper was published and made available, we had several opportunities to present and discuss it with different audiences. These discussions significantly extended and deepened our understanding of the literature, and provided countless additional insights and directions for future research. Although this happens for any publication, it would have been probably beneficial to perform more of these exchanges with colleagues before publishing the paper. This would have allowed to further extend the extent of our insights, including perhaps opening up the issue of the knowledge foundations of accounting and their consistency with the reality of family business functioning, and suggestions for future research efforts in the field.

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