The Future of Accounting Research in Family Firms

Over the last two decades academia has turned its attention to the family dimension as a determinant of business phenomena. Results show significant differences between family and non-family firms.

While family business research has already consolidated as a field of study, accounting research to date seems to have been rather slow to pick up on the distinctive characteristics of family firms, and their implications for accounting and reporting practices.

In a recent article forthcoming on the European Accounting Review (Accounting Research in Family Firms: Theoretical and Empirical Challenges), Annalisa Prencipe and Sasson Bar-Yosef (Department of Accounting) together with Henri Dekker (VU University Amsterdam) offer a useful review of the recent literature on accounting issues in family firms and provide guidelines to researchers who intend to focus on such area, in the attempt to accelerate and support the research in the field.

The article highlights theoretical and empirical challenges that accounting scholars need to consider when addressing issues related to accounting and reporting in family firms. These challenges include the selection and potential mixing of appropriate theoretical frameworks, and complications in defining operationally what family firms are.

In short, family firms are characterized by different features compared to non-family firms, since there is a strong interaction between family and business life, so that noneconomic factors (such as, for example, emotional attachment) play a dominant role. These peculiar features make the choice of the right theoretical framework to adopt a difficult one, given that different frameworks tend to give prominence to one or more of these features. The agency theory is still the dominant framework in accounting research, and only very few articles have used alternative theories. The authors suggest that adopting and combining different perspectives (e.g. Agency, Socioemotional Wealth, Resource-based, Stewardship) can generate new and more interesting contributions.

Empirically, the main problem comes from the definition itself of family firms. Many authors have chosen the so-called "involvement approach" (i.e. focusing on the family's power to direct goals, strategies and actions), but this has given rise to rather simplistic classifications. The operational definitions have been, moreover, quite heterogeneous. Consistency is therefore lacking in the literature and the authors suggest that it should be properly addressed.

The article also provides a 'state of the art' of studies in financial accounting, management accounting and auditing, identifying which issues in relation to family firms have been addressed in the research, and which theories, research methods and types of data have been used in these studies. The Authors conclude by providing directions for future research that can advance our understanding of accounting and reporting in family firms.