Journal of Family Business Strategy 4 (2013) 71–83

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Journal of Family Business Strategy

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The role and impact of accounting in family business

Lucrezia Songini a,*, Luca Gnan b,1, Teemu Malmi c,2
a
Department of Economics and Business, Eastern Piedmont University, Via Perrone, 18 – 28100 Novara, Italy
b
Department of Economy and Finance, University of Roma Tor Vergata, Via Columbia, 2 – 00133 Rome, Italy
c
Department of Accounting and Finance, Aalto University School of Economics, Mechelininkatu 3C, 00100 Helsinki, Finland

A R T I C L E I N F O A B S T R A C T

Keywords: Why has accounting, one of the eldest disciplines in business, only recently started to consider family
Family business business, the prevalent form of economic organization in the world, as a relevant research context? What
Financial accounting is the role of accounting in family business? Which accounting issues are relevant in family business?
Managerial accounting How are different accounting practices implemented in family business? And how do these practices
affect various family business outcomes and dynamics? This article aims to answer these and other
questions by focusing on three key family business characteristics: 1. involvement of the family in
ownership, governance and management, 2. socioemotional wealth, and 3. succession. Given the
distinctive features, aims and foci of financial and managerial accounting, the article points out that
distinctive research questions, methodologies, and theoretical frameworks are needed to study financial
and managerial accounting in a family business context. We suggest several topics in both financial and
managerial accounting relevant to family business that can be explored by future research. In particular,
we propose that managerial accounting represents an area in family business that requires increasing
attention from accounting scholars.
ß 2013 Elsevier Ltd. All rights reserved.

1. Introduction that the majority of studies on family business were published in

Family business is a relatively young scientific field that only
recently started to investigate how major business disciplines,
such as human resource management, marketing and accounting,
might contribute to its development.3 All these investigations
followed a unique and original path, trying to identify the specific
adaptation that each discipline requires when applied to family
business. Accounting represents one of the most under developed
streams of research in family business studies, despite the fact that
accounting research is one of the eldest business disciplines and
family business represents the prevalent form of economic
organization in the world (Beckhard & Dyer, 1983; Feltham,
Feltham, & Barnett, 2005; Kelly, Athanassiou, & Crittenden, 2000;
Shanker & Astrachan, 1996).
A recent analysis (Materne, Debicki, Kellermanns, & Chrisman,
2013) of contents of 394 publications in 30 leading management
journals over the period between 2001 and 2009 has pointed out
* Corresponding author. Tel.: +39 032137 5425; fax: +39 032137 5405.
E-mail addresses: lucrezia.songini@eco.unipmn.it (L. Songini),
luca.gnan@uniroma2.it (L. Gnan), teemu.malmi@aalto.fi (T. Malmi).
1
Tel.: +39 06 72595810; fax +39 0672595804.
2
Tel.: +358 405100827; fax +358 10 837 3710.
3
See, for example, the Special Issues on ‘Marketing (in) the Family Firm’ (Reuber
& Fischer, 2011) and ‘Accounting in Family Firms’ (Salvato & Moores, 2010).
journals with a specific focus on family business or entrepreneur-
ship, such as Family Business Review (182 out of 394 articles),
Entrepreneurship Theory and Practice (70 out of 394 articles), Journal
of Small Business Management (26 out of 394), and Journal of
Business Venturing (25 out of 394 articles). Currently, only three
peer-reviewed print journals are entirely devoted to family
business research: Family Business Review (established in 1988),
and two more recent journals: Journal of Family Business Strategy
(established in 2010) and Journal of Family Business Management
(established in 2011). It is noteworthy that the latter two journals
were not part of the above-referenced analysis, given their
respective founding years post 2009.
With regard to main areas of interest, corporate governance
issues have received the most attention in family business
research, representing 16.5 percent of family business articles
published between 2001 and 2009, followed by leadership and
ownership topics, and succession-related topics, representing
14.0% and 11.9% of the examined articles respectively (Materne
et al., 2013). On the contrary, other issues such as the economic and
non-economic goals of family businesses, the process of goal
formulation, family business strategy, stakeholders, ethics, corpo-
rate social responsibility and professionalization have received
relatively scant attention. Compared to the findings of a similar
analysis (Chrisman, Chua, & Sharma, 2003), it is noteworthy that
‘‘the relative emphasis on professionalization and stakeholders,

1877-8585/$ – see front matter ß 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.jfbs.2013.04.002
72 L. Songini et al. / Journal of Family Business Strategy 4 (2013) 71–83
ethics and social responsibility has increased by 33.0% and 20.9%
respectively and more than doubled in absolute numbers, but this
belies the fact that not much work has been produced on either of
these sets of topic areas’’ (Materne et al., 2013, p. 28). In particular,
professionalization ‘‘is especially in need of good empirical work
because little has been done’’ (Materne et al., 2013, p. 32). In this
context, it is noteworthy that the economic and non-economic
goals of family firms, the processes of goal formulation and
professionalization represent typical issues in the accounting
domain, especially in management control systems and strategic
planning research.
If we continue the analysis of previous literature on family
business by including academic books, we can highlight that the
first Handbook of Research on Family Business, edited in 2006, deals
primarily with subjects such as the definition, types and specific
features of family businesses, their contribution to the national and
world economy, different aspects of family firm performance,
family business succession, and family business finance (Pout-
ziouris, Smyrnios, & Klein, 2006). The second edition of the
handbook, issued in 2013, presents a structure consistent with
recent developments in family business research (Smyrnios,
Poutziouris, & Goel, 2013a). In fact, the 2013 edition covers the
following broad topics: corporate governance, family governance,
social capital, women in family business, leadership and human
resource management, knowledge management, and family
business sustainability. Despite these noteworthy advancements,
accounting still appears to be largely missing from the current
research agenda in family business. Moreover, in the first
Handbook of Research on Family Business (2006) only three articles
dealt with issues at the intersection of accounting and family firms,
such as managerialization and professionalization (Moores & Craig,
2006; Songini, 2006) and the role of strategic planning in family
business succession (Mazzola, Marchisio, & Astrachan, 2006). In
the second edition, one article deals with the effects of family
involvement and corporate governance practices on earnings
quality of listed companies (Tiscini & di Donato, 2013), and another
one with women and their role in the professionalization in family
SMEs (Gnan & Songini, 2013). In the introduction to the second
edition, discussing the trends and developments in family business
research, the editors highlight strategy implementation and
control as well as corporate governance as the most popular
topics of investigation in family business research (Smyrnios,
Poutziouris, & Goel, 2013b). However, no explicit mention of
accounting research is made. Moreover, in the list of research
streams published in peer-reviewed journals and the principal
conference themes of IFERA, the International Family Enterprise
Research Academy, accounting topics are routinely missing.
Our preliminary analysis of previous literature shows that the
topic of accounting in family business remains under-developed
and largely dispersed with respect to relevant research questions,
national contexts, and publication outlets. It appears that a
coherent framework with a consolidated paradigm is lacking to
contextualize and unify previous contributions and indicate
promising avenues for future research.
In 2010, Family Business Review published a special issue on
‘‘Research on Accounting in Family Firms: Past Accomplishments
and Future Challenges’’, which aimed at examining ‘‘several
different avenues for research at the accounting-family business
interface and identify common themes among them’’ (Salvato &
Moores, 2010, p. 193). A search conducted in main databases and
involving journals publishing family business and accounting
research over three decades showed 47 articles published between
1989 and 2010 (Salvato & Moores, 2010). 35 out of the 47 analyzed
articles focused on financial accounting, 9 on auditing, and only
3 on managerial accounting. With the exception of three articles,
all contributions were empirical and quantitative in nature.
Considering the articles published in the accounting special issue
of Family Business Review, two out of five articles dealt with
earnings management (Stockmans, Lybaert, & Voordeckers, 2010;
Yang, 2010); one article focused on the quality of accounting
information (Cascino, Pugliese, Mussolino, & Sansone, 2010), and
the remaining two articles dealt with auditing issues (Niskanen,
Karjalainen, & Niskanen, 2010; Trotman & Trotman, 2010).
To supplement these preliminary insights and update the state-
of-the-art of accounting research in family business, we carried out
an analysis of articles published since 2010 to present (2013), using
the same methodology as Salvato and Moores (2010). Our findings
shown in Table 1 below confirm a relatively small number of
family business contributions in the area of accounting, which
mainly deal with financial accounting topics such as earnings
management, debt financing, accounting properties and irregular-
ities, financial reporting, and tax aggressiveness. However, our
analysis also indicates an increasing trend in articles dealing with
management accounting, and professionalization, specifically the
role of non-family managers, the CFO, as well as performance
measurement and incentives.4
The findings confirm that prior accounting research has
primarily highlighted different disclosure practices and the impact
of capital markets, voluntary disclosure, earnings management,
earnings quality and tax aggressiveness as relevant accounting
issues in family business (Gomez-Mejia, Cruz, Berrone, & De Castro,
2011; Salvato & Moores, 2010). Relatively limited research has
focused on auditing in family business, considering the relation-
ship between external and internal auditors and the family firm,
the type of auditor hired by family firms, as well as auditor
judgments and audit quality (Chaney, Jeter, & Shivakumar, 2004;
Fortin & Pittman, 2007; Khalil, Cohen, & Trompeter, 2010;
Niskanen et al., 2010). A few studies have dealt with managerial
accounting issues in family business; some of which have
highlighted the presence of specific agency costs and the
consequent need for control mechanisms in family firms (Schulze,
Lubatkin, Dino, & Bucholtz, 2001; Songini & Gnan, 2013). Others
have focused on formal and informal management control
practices in family firms (Moores & Mula, 2000). The dynamic
change of management accounting systems over the life cycle of
both the family and the business and their role in the succession
process have also been studied to a certain extent (Giovannoni,
Maraghini, & Riccaboni, 2011; Ward, 1987). Finally, management
accounting systems, along with strategic planning, board of
directors and professional managers, have been considered
relevant aspects of the professionalization and managerialization
of family firms (Songini, 2006). Relatively few articles have dealt
with the role of non-family managers, and the CFO in particular, in
favoring family firm’s managerialization and succession process
(Hiebl, 2012; Speckbacher & Wentges, 2007, 2012).
Literature evidences that agency theory (Fama & Jensen, 1983;
Jensen & Meckling, 1976) has been the predominant theoretical
approach to study accounting issues in family business. This
finding is not surprising, given that agency theory is the prevailing
theoretical foundation for family business research (Chrisman,
Kellermanns, Chan, & Liano, 2010). However, other theories,
4
We conducted a search involving Science Direct, EBSCO, and Emerald databases,
as well as main journals relevant in family business, entrepreneurship, corporate
governance and accounting. The following journals were considered: Family
Business Review, Journal of Family Business Strategy, Journal of Family Business
Management, Entrepreneurship Theory and Practice, Corporate Governance, Corporate
Governance: An International Review, Journal of Business Research, Journal of Business
Venturing, Journal of Small Business Management, Journal of Financial Economics,
Journal of Accounting, Auditing and Finance, Long Range Planning, Management
Accounting Research, The Accounting Review, Journal of Accounting and Economics,
International Business & Economics Research Journal, Journal of Economic Surveys, and
Journal of Accounting and Public Policy.
Table 1

# Journal Volume, issue, pages Authors Year Title Main issues Main accounting area

1 Journal of Family
Business Strategy
2 CEFS Working Paper
Series
3 Journal of Financial
Economics
4 Family Business Review
5 Journal of Economic
1 (2): 78–87 Justin Craig and Ken Moores
No. 04; http://hdl.handle.net/ Eva Lutz, Stephanie Schraml,
10419/48421 and Ann-Kristin Achleitner
45 (1): 41–61 Shuping Chen, Xia Chen, Qiang
Cheng, and Terry Shevlin
23 (4): 341–354 Darya Granata and Francesco
Chirico
24 (4): 705–730 Sumon Kumar Bhaumik and
2010 Strategically aligning family and Balanced Scorecard Managerial accounting
business systems using the Balanced
Scorecard
2010 Loss of control vs. risk reduction: Non family CFOs, Managerial accounting
Decision factors for hiring non-family professionalization
CFOs in family firms
2010 Are family firms more tax aggressive Tax aggressiveness Financial accounting
than non-family firms?
2010 Measures of value in acquisitions: Measures of value Financial accounting
Family versus nonfamily firms in acquisitions
2010 Family’ ownership, tunneling and Tunneling and earnings Financial accounting

L. Songini et al. / Journal of Family Business Strategy 4 (2013) 71–83

Surveys Andros Gregoriou earnings management: A review of the management
literature
6 Journal of Accounting 50 (2–3): 179–234 Christopher S. Armstrong, 2010 The role of information and financial Financial reporting Financial accounting
and Economics Wayne R. Guay, and Joseph P. reporting in corporate governance and
Weber debt contracting
7 The Accounting Review 85 (1): 287–314 Andrew J. Leone and Michelle 2010 Accounting irregularities and executive Accounting irregularities Financial accounting
Liu turnover in founder-managed firms
8 Family Business Review 24 (2): 126–150 Elena Giovannoni, Maria Pia 2011 Transmitting knowledge across Management accounting Managerial accounting
Maraghini, and Angelo generations: The role of management practices
Riccaboni accounting practices
9 Journal of Accounting, 26 (4): 623–640 Shujun Ding, Baozhi Qu, and Zili 2011 Accounting Properties of Chinese Accounting properties Financial accounting
Auditing & Zhuang Family Firms
Finance
10 Journal of Accounting, 26 (2): 199–227 Annalisa Prencipe and Sasson 2011 Corporate governance and earnings Earnings management Financial accounting
Auditing & Bar-Yosef management in family-controlled
Finance companies
11 International Business 11 (3): 315–322 Martin R. W. Hiebl 2012 Peculiarities of financial management The role of CFO Managerial accounting
& In family firms
Economics Research
Journal
12 Management 23 (1): 34–46 Gerhard Speckbacher and Paul 2012 The impact of family control on the use Performance measurement, Managerial accounting
Accounting Research Wentges of performance measures in strategic strategic target setting and
target setting and incentive incentive compensation
compensation: A research note
13 Family Business Review 25 (1): 58–86 Alex Stewart and Michael A. 2012 Why can’t a family business be more Professionalization Managerial accounting
Hitt like a nonfamily business? Modes of
professionalization in family firms
14 Journal of Small 51 (1): 114–137 Christian Koropp, Dietmar 2013 Financial attitudes in family firms: The Financial attitudes Financial accounting
Business Grichnik, and Franz moderating role of family commitment
Management Kellermanns
15 Family Business Review 26 (1): 81–99 Julie C. Dekker, Nadine Lybaert, 2013 Family firm types based on the Professionalization Managerial accounting
Tensie Steijvers, Benoı̂t professionalization construct:
Depaire, and Roger Mercken Exploratory research
16 Journal of Family 3 (1): 62–80 Esra Memili, Kaustav Misra, 2013 The propensity to use incentive Professionalization Managerial accounting
Business Management Erick P.C. Chang, and James J. compensation for non-family managers and incentives
Chrisman in SME family firms

73
74 L. Songini et al. / Journal of Family Business Strategy 4 (2013) 71–83
usually applied in both family business and accounting research,
could equally be used to cover the broad range of issues shaping
financial and managerial accounting, such as: stewardship theory
(Davis, Schoorman, & Donaldson, 1997), resource based view of the
firm theory (Barney, 1991), transaction cost economics (David &
Han, 2004; Hill, 1990; Williamson, 1981, 1993), management
control theory (Kaplan, 1984; Langfield-Smith, 1997), company
growth theory (Greiner, 1972), contingency theory (Burns &
Stalker, 1961; Lawrence & Lorsch, 1967; Miller & Friesen, 1983),
institutional theory (DiMaggio & Powell, 1983, 1991), legitimacy
theory (Dowling & Pfeffer, 1975), stakeholder theory (Freeman,
1984), social and political economy theory (Belkaoui, 1984;
Guthrie & Parker, 1990), and positive accounting theory (Watts
& Zimmerman, 1978), to mention just a few.
Therefore, the question arises: Why has accounting, represent-
ing one of the eldest business disciplines, only recently started to
consider family business, representing the majority of business
organizations around the world, as a relevant research context?
This apparent gap becomes even more astonishing if we compare
accounting with other disciplines, such as corporate governance,
management, strategy and organization, which have been used
more or less routinely in family business research since the very
inception of the field. Possible answers to this question comprise
the following. Theoretical frameworks used in the accounting
discipline are in part different from those used by family business
scholars, although both disciplines regularly refer to agency theory
as a reference framework.5 Specifically, accounting scholars are
more interested in accounting generalizations, principles and
mechanisms, than in specific empirical contexts. When accounting
researchers adopt a contingency approach, they mainly focus on
publicly listed companies, where agency conflicts prevail, thereby
providing a fruitful ground to study accounting issues. The lack of
interest for accounting in family business research could also be a
consequence of different developmental stages of the two
disciplines. Family business is a relatively young field and may
not have yet attracted the interest of a great number of accounting
scholars. In fact, Materne et al. (2013, p. 28) highlighted that
‘‘family business research is dominated by a relatively small
number of scholars from a small number of schools . . . (they) seem
to work together in relatively stable groups and publish their work
in the same set of outlets’’. This evidence supports the background
of family business scholars and the developmental stage of family
business studies as two possible explanations why accounting
remains a relatively neglected topic in family business research.
To increase our understanding of the role and impact of
accounting in family business, several fundamental questions
should be addressed. Which accounting issues are relevant in
family business, due to the specific features of family firms? What
is the role of accounting in family business? How are different
accounting practices implemented in family enterprises? And how
do these practices affect various family business outcomes and
dynamics? Before we can answer these questions, we first need to
fully understand what accounting is, on the one hand, and what
specific family business features there are that require a specific fit
with accounting issues, on the other hand.
2. What is accounting?
Accounting is a broad research field comprising two main areas,
financial accounting and managerial accounting (also called
5
As highlighted before, accounting uses partially different theories than family
business, such as transaction cost economics, management control theory,
company growth theory, contingency theory, institutional theory, legitimacy
theory, stakeholder theory, social and political economy theory and positive
accounting theory, among the most relevant.
management accounting), which can be distinguished along
several aspects: targeted users, restrictions on inputs and
processes, type of information, time orientation, degree of
aggregation, breadth, and focus (Mowen, Hansen, & Heitger,
2012). It is noteworthy that auditing is commonly considered as
linked to financial accounting, although it is a separate discipline.6
Financial accounting is concerned with producing information
(financial statements) for external users, such as investors,
shareholders, creditors, customers, suppliers, labor unions, and
government agencies. It provides mainly historical information,
which must conform to rules and conventions defined by each
sovereign state, but also accounting bodies and agencies, such as
the Financial Accounting Standards Board (FASB), the International
Accounting Standard Board (IASB), and the Securities and
Exchange Commission (SEC).
Financial accounting deals with compulsory financial state-
ments, accounting and reporting standards and practices underly-
ing financial statements, and the broader environment under
which financial statements are prepared and used. Financial
accounting is bound by formal criteria, rules, and regulations,
which result in limited autonomy given to companies in producing
financial statements. However, the recent financial scandals and
economic crisis, which have risen the need to give both share-
holders and stakeholders fair, relevant and complete information
about a company’s financial situation and future perspectives,
have caused several relevant issues to emerge in contemporary
accounting research, such as: fair value accounting, the quality of
accounting information, earnings management, and the increasing
request coming from stakeholders in favor of voluntary disclosure
about non financial information, concerning environmental and
social issues, risks, and business models (Arnold, 2009; Kothari &
Lester, 2011). Thus, although summarizing the multitude of issues
related to financial accounting proves rather difficult, the following
appear to be particularly relevant topics in contemporary financial
accounting research: disclosure practices in different contexts (for
example, listed and non-listed companies, large enterprises and
SMEs, different countries and industries); the impact of capital
markets on disclosure practices, voluntary disclosure (drivers,
features, and consequences); sustainability reporting and inte-
grated reporting, earnings management and earnings quality, the
impact of financial accounting practices on firm performance, and
fair value accounting (Eccles & Krzus, 2010; Healy & Palepu, 2001;
Lo, 2008; Riedl, 2010; Wood, 2010).
Managerial accounting is not bound by any formal criteria, such
as Generally Accepted Accounting Principles (GAAP). According to
the Chartered Institute of Management Accountants (CIMA),
managerial accounting is ‘‘the process of identification, measure-
ment, accumulation, analysis, preparation, interpretation and
communication of information used by management to plan,
evaluate and control within an entity and to assure appropriate use
of and accountability for its resources. Managerial accounting also
6
Auditing is considered a vital support function for accounting. Traditionally,
auditing was mainly associated with gaining information about financial systems
and the financial records of a company or a business. In fact, auditing deals with
‘‘the verification of accounting data, with determining the accuracy and reliability
of accounting statements and reports’’ (Mautz, 1964, p. 1). It implies ‘‘the
accumulation and evaluation of evidence about information to determine and
report on the degree of correspondence between the information and established
criteria. It should be done by an independent and competent person’’ (Arens, Elder,
& Beasley, 2004, p. 11). According to ICAI (1983, p. 5), auditing is a ‘‘systematic and
independent examination of data, statements, records, operations and perfor-
mances (financial or otherwise) of an enterprise for a stated purpose. In any
auditing situation, the auditor perceives and recognizes the propositions before him
for examination, collects evidence, evaluates the same and on this basis formulates
his judgment which is communicated through his audit report’’. Finally, auditing
may also involve a review of compliance with law, costing records, operations, and
performances.
 L. Songini et al. / Journal of Family Business Strategy 4 (2013) 71–83
comprises the preparation of financial reports for non-manage-
ment groups such as shareholders, creditors, regulatory agencies
and tax authorities’’ (CIMA, 1996). Managerial accounting includes
both cost accounting and responsibility accounting. Different from
financial accounting, managerial accounting supports the infor-
mation needs of managers, providing information for planning,
controlling and making effective decisions. ‘‘Management ac-
counting must serve the strategic objectives of the firm. It cannot
exist as a separate discipline, developing its own set of procedures
and measurement systems and applying these universally to all
firms without regard to the underlying values, goals, and strategies
of particular firms’’ (Kaplan, 1984, p. 414). According to Chenhall
(2003, p. 129), ‘‘the terms management accounting (MA),
management accounting systems (MAS), management control
systems (MCS), and organizational controls (OC) are sometimes
used interchangeably. MA refers to a collection of practices such as
budgeting or product costing, while MAS refers to the systematic
use of MA to achieve some goal. MCS is a broader term that
encompasses MAS and also includes other controls such as
personal or clan controls. OC is sometimes used to refer to
controls built into activities and processes such as statistical
quality control, just-in-time management.’’ Chenhall (2003)
defines MCS as the systematic use of management accounting in
conjunction with other forms of control such as personal or
cultural controls to achieve some goal.
In particular, management control systems (MCSs) are consid-
ered mechanisms that shape actors‘practices (Ahrens and Chap-
man, 2007; Hopwood, 1974) and support strategy (Langfield-
Smith, 1997; Kober, Ng, & Paul, 2007). MCSs are considered central
to strategy-making, as these systems shape the process of strategy
emergence and support the implementation of deliberate strate-
gies (Ferreira & Otley, 2009; Henri, 2006; Otley, 1999; Simons,
Dávila, & Kaplan, 2000). According to Simons (1994, p. 170)
management control systems are ‘‘the formal, information-based
routines and procedures used by managers to maintain or alter
patterns in organizational activities’’. Four types of management
control systems can be outlined: beliefs systems, boundary
systems, diagnostic control systems, and interactive control
systems (Simons, 1995), which represent the means used by
senior managers to successfully implement their intended strate-
gies. Malmi and Brown (2008, p. 294) proposed a typology which
‘‘starts from the idea that control is about managers ensuring that
the behavior of employees (or some other relevant party, such as a
collaborating organization) is consistent with the organization’s
objectives and strategy. It is structured around how control is
exercised and, as such, it broadly maps the tools, systems and
practices managers have available to formally and informally
direct employee behavior’’. This typology comprises both more
recent developments in MCS design (such as the balanced
scorecard) and cultural control. Strategic planning is considered
among MCSs by these authors.
Due to the variety of approaches used by authors and different
emphases given to various issues, outlining main topics related to
managerial accounting is a complex task. Some studies have
focused on the planning and control cycle, other on a single
mechanism (for example, budget, report, managerial accounting
and cost accounting). Some authors have considered the process as
well as structure of planning and control systems (Anthony, 1988;
Otley, 1994; Simons et al., 2000). Formal and bureaucratic control
systems have been studied as well as informal and social control
approaches (Bisbe & Otley, 2004; Chenhall & Euske, 2007;
Chenhall, 2003; Davila, 2000). In the last decade, increasing
attention has been given to innovative systems and mechanisms,
such as activity based costing and balanced scorecard, as well as to
performance measurement systems (PMSs) and to different types
of management control systems (MCSs) (Simons, 1995; Simons
75
et al., 2000). The relation between performance evaluation and
incentives has been a well studied topic along with the impact of
managers on the choice of adopting strategic planning and MCSs.
Finally, professionalization represents a frequent topic, as shown
by the vast amount of literature on the role of the CFO, the
accountant, and the controller (Hartmann, Maas, & Naranjo-Gil,
2009; Zimmerman, 2006).
3. Family business characteristics and implications for
accounting
Salvato and Moores (2010, p. 206) proposed that ‘‘a trend in
recent research seems to emerge toward a more detailed
understanding of family-specific features affecting accounting
phenomena, which may gradually yield a richer understanding of
the nature and behavior of family firms’’. Following this proposal,
in the subsequent sections we outline the main characteristics of
family businesses, as well as their relationship with and
implications for various accounting issues.
At the first developmental stage of family business studies,
authors dealt primarily with the definition of family businesses,
their unique characteristics, and differences among various types
of family firms, with the aim to clarify the differences between
family and nonfamily enterprises. In 2002, Astrachan, Klein and
Smyrnios highlighted three dimensions of family influence in their
F-PEC scale as relevant in identifying a family business, namely
Power (involvement of the family in ownership, governance and
management of the business), Experience (number of successions
and number of family members who contribute to the business)
and Culture (overlap between family values and business values
and family commitment to the business). The F-PEC scale not only
allows to identify a business as a family business; more
importantly, it also allows to differentiate among various types
of family businesses by measuring the level of family influence on a
continuous scale. According to Mustakallio (2002), the various
definitions of family business could be summarized into six
categories: ownership, management, generational transfer, the
family’s intention to continue as a family business, family goals
and interaction between the family and the business. In 2003,
Chrisman et al. stated that the essence of a family firm consists of:
‘‘1. Intention to maintain family control of the dominant coalition;
2. unique, inseparable, and synergistic resources and capabilities
arising from family involvement and interactions; 3. a vision set by
the family controlled dominant coalition and intended for trans-
generational pursuance; and 4. pursuance of such a vision’’ (2003,
p. 9). Accordingly, the authors defined a family business as ‘‘a
business governed and/or managed with the intention to shape
and pursue the vision of the business held by a dominant coalition
controlled by members of the same family or a small number of
families in a manner that is potentially sustainable across
generations of the family or families’’ (Chua, Chrisman, & Sharma,
1999, p. 25).
Nowadays, although there is not a unique and widely accepted
definition of family business, especially at the operational level,
authors seem to have reached a consensus about specific aspects
that distinguish family business at a theoretical level. Generally,
family business features have been considered the consequence of
two overlapping and interacting systems in family business: the
emotion-oriented family system that focuses on noneconomic
goals on one hand and the results-oriented business system that
focuses on economic goals on the other (Stockmans et al., 2010).
Thus, the special relationships between the family and the
business system are considered key features of family businesses,
along with the presence of some family businesses’ specific and
relevant categories of internal stakeholders, such as founders, next
generation members, nonfamily employees, managers, and
76 L. Songini et al. / Journal of Family Business Strategy 4 (2013) 71–83
women (Sharma, 2006). The family itself is often considered a
stakeholder of the family firm.
Moreover, some authors suggested using the intention and
vision of a particular firm as a mean of determining whether it can
be defined as a family business. Most studies have focused on
family firms’ strategic objectives, such as the intention to maintain
family control of the dominant coalition (Chua et al., 1999), to
influence the strategic direction of the firm (Davis & Tagiuri, 1989;
Handler, 1989; Shanker & Astrachan, 1996), and to maintain the
control of the business over generations (Litz, 1995). Research has
pointed out that the transition from one generation to the next
often represents one of the greatest challenges facing family
businesses (Handler, 1994). Therefore, many authors have
considered succession the most important and typical issue in
family business management (Ayers, 1990; Lane, 1989).
Moreover, company culture represents a particular feature of
family business, due to the overlap between family values and
business values and family commitment to the business.
Previous research has highlighted the inseparable and synergis-
tic resources and capabilities arising from family involvement
and interactions, commonly referred to as ‘‘familiness’’ (Habber-
shon, Williams, & MacMillan, 2003), to be a typical feature of
family business. Gómez-Mejı́a, Takács Haynes, Núñez-Nickel,
Jacobson, and Moyano-Fuentes (2007) proposed ‘‘socioemo-
tional wealth’’ or ‘‘affective endowments’’ as key distinctive
aspect distinguishing family businesses from their non-family
counterparts. These concepts refer to ‘‘the intertwined nature of
family and business systems due to family embeddedness
[giving] these firms their distinctive flavor’’ (Gomez-Mejia
et al., 2011, p. 654). Socioemotional wealth originates from
the strong emotional overtone characterizing various dynamics
of family business, from strong family values permeating the
organization, and from altruistic behavior typically found among
family owners. According to this theoretical proposal, ‘‘factors
like emotional attachment, sibling involvement, sense of legacy,
family control, and concern for reputation, among many others,
give family firms their distinctiveness’’ (Gomez-Mejia et al.,
2011, p. 692). Gomez-Mejia et al. (2011) have proposed that
family owners’ management decisions are driven by non-
financial goals concerning the preservation of socioemotional
wealth, more than by economic instrumental considerations.
Thus, socioemotional wealth could represent the main factor
explaining specific choices of family businesses in terms of
management processes (including professionalization), strategic
choices (including accounting decisions concerning tax aggres-
siveness and earnings manipulation), organizational governance,
stakeholder relationships and business venturing.
Finally, in almost all definitions of family business, family
involvement in ownership, governance and management has been
considered a distinctive feature. Family involvement is related to
the presence of family members in ownership as shareholders, in
governance as members of the board of directors and in
management as managers. According to Fama and Jensen
(1983), family ownership should be effective in coping with
agency conflicts, as the shares are in the hands of agents. The
concurrence between shareholders/principals and managers/
agents should therefore minimize agency conflicts (also referred
to as Type I agency conflicts). Thus, family members ‘‘have
advantages in monitoring and disciplining related decision agents’’
(Fama & Jensen, 1983, p. 306). Therefore, agency cost control
mechanisms, such as board of directors, management control
systems and strategic planning seem unnecessary in family-owned
enterprises. Nevertheless, recently, some authors have pointed out
that in family firms, distinctive agency conflicts arise from sources
other than classic principal-agent issues, requiring the adoption of
appropriate agency cost control mechanisms in family firms
(Songini & Gnan, 2013). Type II agency conflicts in family business
include conflicts arising from asymmetric altruism (Anderson and
Reeb, 2003; Schulze et al., 2001; Schulze, Lubatkin, & Dino, 2003),
conflicts of interest between family members in different roles
(Chrisman et al., 2003), conflicts of interest between family
members and non-family members (Burkart, Panunzi, & Shleifer,
2003; Chrisman, Chua, & Litz, 2004; Daily & Dollinger, 1993;
Villalonga & Amit, 2006), conflict of interest between dominant
(family) and minority (non-family) shareholders (Morck, Schleifer,
& Vishny, 1988; Myers, 1977; Smith & Warner, 1979), as well as
conflict of interest between owners and lenders (Anderson, Mansi,
& Reeb, 2003). Songini and Gnan (2013) outlined that different
roles of family members in family firms cause distinctive agency
conflicts, and consequently require the need for agency cost
control mechanisms to deal with these conflicts.
It is noteworthy that family businesses do not represent a
homogeneous group, but different types of family firms can be
identified according to some contingency factors, such as the
degree of family involvement, the presence of non-family
members, both in ownership as well as governance and manage-
ment, the generation involved in the company, family stage and
company developmental stage, the listing of the company in the
stock exchange, size of the company, industry, country, and several
others more. To connect family business characteristics and
accounting issues, the specific features of family businesses, as
outlined in previous literature, may be summarized according to
the following three categories: 1. involvement of the family in
ownership, governance and management, 2. socioemotional
wealth and 3. succession.
3.1. Involvement of the family in ownership, governance and
management
Family involvement represents a relevant issue, as it impacts
agency conflicts and costs, and thus both financial accounting
issues (earnings management and quality and voluntary disclo-
sure) as well as managerial accounting issues, due to the impact on
agency cost control mechanisms. However, two distinct
approaches have been followed by previous literature. On the
one hand, a stream of research has highlighted that the classic
conflict between principals and agents does not exist in family
firms, as principals/shareholders and agents/managers are joined
by kinship ties and/or are often the same people, at least with
regard to the founder/first generation stage (Fama & Jensen, 1983).
The consequence is higher quality of earnings reported by family
businesses (Chen, Chen, & Cheng, 2008) and less voluntary
disclosure (Ho & Wong, 2001; Lakhal, 2005). In fact, as Type I
agency conflicts should not (or at least, not as frequently) arise in
family business, there are less incentives for managers to ‘‘use
judgement in financial reporting and in structuring transactions to
alter financial reports to either mislead some stakeholders about
the economic performance of the company or to influence
contractual outcome that depend on reported accounting num-
bers’’ (Healy & Wahlen, 1998, p. 368). Moreover, family owners do
not need to be timely informed on financial and non-financial
performance of the family business, thus reducing the importance
of voluntary disclosure. Moreover, if Type I agency conflicts do not
exist in family business there is also a limited need for formal
control mechanisms to monitor agents’ behavior (Baiman, 1982,
1990; Merchant, 1982; Scapens, 1991). In such a context, clan and
social control mechanism might be more useful than formal and
bureaucratic control mechanisms (Ouchi, 1979; Wilkins & Ouchi,
1983). Consequently, some authors proposed stewardship theory
(Davis et al., 1997) in contrast to agency theory as an appropriate
approach to explain the impact of altruism, kinship obligations and
a sense of loyalty and trust among family members toward the
 L. Songini et al. / Journal of Family Business Strategy 4 (2013) 71–83
organization (Daily & Dollinger, 1992; Moores & Mula, 2000;
Mustakallio & Autio, 2001; Tagiuri & Davis, 1982).
On the other hand, some authors stated that distinctive agency
conflicts in family business arise from sources other than the classic
principal-agent relation, implying the need for agency cost control
mechanisms (Schulze et al., 2001, 2003; Songini & Gnan, 2013).
According to these authors, agency theory may represent a useful
theoretical framework to highlight the motives and impacts of
managerialization and professionalization of family businesses.
With regard to financial accounting issues, this research stream has
considered entrenchment and Type II agency costs (due to the
conflict of interest between dominant/family and minority/non-
family shareholders) as main explanations of earning management
policies, earnings quality and voluntary disclosure of family firms
(Ali, Chen, & Radhakrishnan, 2007). Due to the contradictory
evidence of these two theoretical approaches, more research efforts
are required to fully capture the determinants and consequences of
both earnings management and voluntary disclosure policies, as
well as managerialization and professionalization of family busi-
nesses under the theoretical framework of agency theory.
3.2. Socioemotional wealth
Broadly speaking, the concept of socioemotional wealth
summarizes the impact of family values, personal ties and family
objectives on a company’s vision, strategic goals, organizational
dynamics, time horizon of decisions, intangible resources, capa-
bilities, and relevant stakeholders. Socioemotional wealth implies
a shift from the narrow focus on economic objectives, share-
holders’ interests and short-term decision-making to the consid-
eration of a wider range of non-financial goals, stakeholders’
interests and long-term planning in strategic and operational
objectives and decision-making. The consequence is that company
performance can no longer be assessed merely in terms of financial
results (profitability, shareholder value, cash flow etc.), but instead
requires the considering of non-financial aspects, such as family
and company reputation among stakeholders, long-term survival
of the company as a family business, preservation of familiness and
accumulation of social capital (Carney, 2005; Miller and Le Breton-
Miller, 2005). According to Gómez-Mejı́a et al. (2007, p. 131) ‘‘for
family firms a key criterion, or at least one that has greater priority,
is whether their socioemotional endowment will be preserved . . .
for non family firms, financial criteria seem to be most important
when it comes to assessing the value of a business decision’’.
The fact that family businesses pursue not only economic but
also non-economic goals may explain divergent results of previous
studies which have compared family to non-family firms (Sacris-
tan-Navarro, Gomez-Anson, & Cabez-Garcia, 2011), and highlights
the fact that the measurement of overall performance is far more
complex in family businesses than in non-family enterprises.
Previous empirical research has found different results, such that
some family businesses outperform non-family businesses (Ander-
son & Reeb, 2003; Aronoff & Ward, 1995; Kirchhoff & Kirchhoff,
1987; Mazzi, 2011), some have lower performance in the long run
(Adams, Taschian, & Shore, 1996), and that family ownership is not
at all associated with firm performance (Tsao, Chen, Lin, & Hyde,
2009). Gomez-Mejia et al. (2011) presented various aspects that
may affect firm performance in family business. But divergent
findings of research could be also the consequence of inadequate
performance measurement. If socioemotional wealth represents a
distinctive feature of family businesses, then corporate objectives
and performance measures for family businesses should be
redefined and adjusted to incorporate both financial and non-
financial dimensions.
In this challenge, managerial accounting may provide relevant
value to family business. In fact, socioemotional wealth asks for
77
innovative approaches in performance measurement and evalua-
tion, and a balanced scorecard approach, which considers long-
term, intangible and non-economic aspects jointly, may be well
suited for this purpose (Craig & Moores, 2005, 2010). Moreover,
formal and diagnostic control systems may be substituted or
integrated with social control, belief systems and interactive
systems. In fact, socioemotional wealth may also explain the
reluctance of some family businesses to involve non-family
members in ownership, governance and management, and to
adopt formal managerial mechanisms. Informality (Mayson &
Barrett, 2006) helps in developing a feeling of teamwork and strong
social relationships and in increasing workers’ motivation (Marlow
& Patton, 2002). Hiring non-family members may benefit the
family business, as they may be more apt to distinguish between
company and family context, favoring a separation between
business goals and family decisions. Non-family managers are
found to promote the adoption of managerial mechanisms to cope
with business complexity and growth, smooth the succession
process and introduce formal and transparent performance
evaluation, compensation and incentive systems that rely on
merit (Chittor & Das, 2007; Reid & Adams, 2001; Speckbacher &
Wentges, 2007). However, delegating responsibilities to non-
family managers may decrease family control over strategic
decisions, increase information asymmetries between managers
and owners, and generate conflicts between family and non-family
members with regard to the vision and objectives of the company
(Gomez-Mejia et al., 2011). According to some authors, family
businesses’ recruitment policies focus more on the match of the
applicant’s profile to the general needs and culture of the business
than on specific job requirements (Carroll, Marchington, Earnshaw,
& Taylor, 1999). Ram and Holliday (1993) stated that family
businesses ask newcomers to bring not only professional
competences, but also the ability to fit into existing norms of
workers and management. Moreover, family ties ensure a supply of
reliable workers prepared to work for long hours, which can help
resolve problems of trust and delegation (Ram & Holliday, 1993).
With regard to financial accounting, the goal to preserve
socioemotional wealth along with minor emphasis on short-term
financial performance may impact the need to use innovative
approaches to measure family business performance consistent
with the integrated reporting approach.7 Moreover, socioemo-
tional wealth may explain why family businesses are less tax
aggressive, less likely to manage earnings, and less prone to
voluntary disclose their performance. According to Chen et al.
(2008, p. 45) ‘‘although family firms on average provide less
voluntary disclosure than non-family firms, they are more likely to
give earnings warnings to preempt the negative publicity that can
result from not issuing warnings’’. Moreover, ‘‘family owners also
have incentives to protect the family reputation or the ‘family
name’ since they generally view their firms as legacies to be passed
on to the next generations, not wealth to be consumed during their
lifetime’’ (Chen et al., p. 45). Finally, according to Gomez-Mejia
et al. (2011, pp. 671–672) ‘‘for family principals, preserving the
family’s socioemotional wealth supersedes any financial advan-
tages that could be gained by a tax aggressive policy . . . when it
comes to earnings management, preserving socioemotional wealth
by maintaining a good reputation and projecting a positive family
image once again seems to weigh more heavily in the minds of
family principals than the achievement of financial objectives’’.
It is noteworthy that the inclusion of non-financial goals among
both family and company objectives impacts also on what ‘‘value’’
means to family firm owners, thus affecting the valuation of the
business (Astrachan & Jaskiewicz, 2008; Zellweger & Dehlen, 2012;
Zellweger, Kellermanns, Chrisman, & Chua, 2012). Previous
7
For a definition of integrated reporting, see: http://www.theiirc.org/the-iirc/.
78 L. Songini et al. / Journal of Family Business Strategy 4 (2013) 71–83
literature discussed mainly non-financial business goals, particu-
larly in the context of management systems (Grunert, Norden, &
Weber, 2005; Kaplan & Norton, 1992). Non-financial family and
private goals pursued by family business owners have rarely been
studied (Zellweger, 2006). Thus, Astrachan and Jaskiewicz (2008, p.
139) proposed ‘‘an expanded definition of what ‘‘value’’ is to a
family business owner by arguing that it includes both financial
and nonfinancial (emotional) components and that like financial
components, nonfinancial considerations can both add to and
detract from the business’s value from the owner’s perspective’’. As
a consequence, financial accounting can contribute in the
assessment of the family firm’s value, especially in the case of
mergers and acquisitions, company sales, and new ventures
formation, just to mention a few promising areas for possible
application.
3.3. Succession
Succession represents a critical issue in family business. The
Family Firm Institute estimated that only 30% of all US family
businesses survive into the second generation, only 12% make it to
the third generation, and as few as 3% make it to the fourth
generation or beyond.8 The PwC Family Business Survey (2010)
showed a similar trend. Merely 36% of analyzed companies
survived the passage to the second generation, with the percentage
rapidly declining thereafter. Twenty-seven percent of the compa-
nies in the sample – rising to a remarkably 36% in emerging
markets – are expected to change hands within the next five years.
Over half of the respondents who anticipate a change of ownership
think the business will remain in the family. The older the
company, the more likely the desire for continued family
ownership. To cite the report, ‘‘66 per cent of proprietors running
firms that have been trading for more than 50 years plan to pass the
wheel to their offspring, compared with just 35 per cent of those
running firms that have been trading for less than 20 years’’ (PwC,
2010, p. 20). This evidence explains why many authors consider
succession the most important issue in family business manage-
ment, and why it is a widely researched topic in the family business
literature (Ayers, 1990; Lane, 1989).
Family business succession has been defined as the passing of
the leadership baton from a managing or incumbent owner to a
successor, who can either be a family or a non-family member
(Beckhard & Dyer, 1983). The succession planning process typically
includes the actions, events and organizational mechanisms by
which leadership, sometimes along with ownership, of the firm are
transferred. The main conceptual frameworks on the succession
process proposed in the literature are as follows: the relay-race
model (Dyck, Mauws, Starke, & Miske, 2002), the relationships
model (Fox, Nilakant, & Hamilton, 1996), and the stages-of-
succession model (Sharma, Chua, & Chrisman, 2000; Le Breton-
Miller, Miller, & Steier, 2004). If succession is a critical issue in
family business, it should be managed with appropriate mecha-
nisms and processes, both at the family and the business level.
However, most studies have focused on the family level, while
relatively few authors (for example, Le Breton-Miller et al., 2004)
signaled the need to manage the family’s succession consistently
with the business’s evolution. Few authors considered the
presence of non-family managers as an element supporting the
succession process. Chittor and Das (2007) proposed that non-
family, professional managers smooth the succession process, lead
to superior post-succession performance and contribute to a
managerial culture that spreads widely into the organization.
Ward (1988) emphasized the characteristics of a successful
succession process by introducing the concept of planning as a
8
See: http://www.ffi.org/?page=GlobalDataPoints.
condition for a successful and smooth passage. Ward (1988)
pointed out that many family business owners lack a conceptual
framework for assessing their company and planning for its future.
Thus, Carlock and Ward (2001) suggested to develop two distinct
strategic plans in family business: the company’s strategic plan,
which deals with the company’s mission, strategic direction,
objectives and programs on one side, and the family’s strategic
plan on the other, which aims at making explicit personal and
professional objectives of family members and systematically
coping with family issues such as: the future family involvement
and commitment to the company, the uncertainty in the
succession process, the rivalry among brothers, sisters and cousins,
or the uncertainty about the future commitment of the founder.
In the light of the evidence of previous studies, we can
summarize that a gap in current literature exists that requires
further analysis of the role of managerial mechanisms, especially
strategic planning and professional managers, such as the CFO, in
the context of family business succession. Financial accounting can
give useful advice on the family business succession process in
conjunction with other disciplines, such as finance, tax planning,
governance, law and psychology. In fact, typical issues that families
need to cope with in planning and managing succession concern
legal aspects and instruments to transfer ownership rights (family
acts, trusts, etc.), business valuation and tax planning. The
inclusion of non-financial goals among both family and business
objectives, which largely affects what ‘‘value’’ means to a family
business owner, has also an influence on how to determine offer
price ranges in acquisitions or company sales, and what acceptable
returns might be that family business owners desire from new
ventures or acquisitions (Astrachan & Jaskiewicz, 2008). The
valuation of the family business is also of relevance when it comes
to the exit of current owners from the company.
4. Objectives and contents of the special issue
This special issue aims to critically review and advance
theorizations and methodological applications in the study of
accounting in family business, highlighting the relevance of
different theories and research approaches. The previous discus-
sion of the distinctive characteristics of family businesses
emphasized the relevant role that financial and managerial
accounting can play in a family business context. The composition
and characteristics of the family business shareholders, gover-
nance issues (such as the role of the board of directors and the
family council), strategic objectives and decisions, socioemotional
wealth, organizational roles and responsibilities (i.e., family versus
non-family managers), relations between internal and external
stakeholders, together with peculiarities of the succession process
all represent specific features of family business which can benefit
from the accounting perspective and the principles, knowledge
and tools that it provides.
Among the main topics of financial accounting, which can be
relevant in the context of family business, we may point out the
following: differences in disclosure practices and the impact of
capital markets, voluntary disclosure (also corporate social
responsibility and sustainability reporting) and the impact on
stakeholder engagement, earnings management and earnings
quality, the impact of financial accounting practices on family
firm performance, corporate governance issues in family business
and the impact on accounting policies, compulsory and voluntary
disclosure, fair value accounting in family firms, tax planning, and
business evaluation. Conversely, we propose that managerial
accounting represents a field in family business that requires
increasing attention from accounting scholars, primarily due to the
limited number of contributions in this area and the benefits that
managerialization and professionalization can offer to family
 L. Songini et al. / Journal of Family Business Strategy 4 (2013) 71–83
business. In particular, we suggest the following accounting
aspects should be examined in more depth in the context of
family business: mechanisms to control agency costs, formal and
informal management control practices, management accounting
systems across different family and business life cycle stages,
performance measurement with a focus on financial and non-
financial information, the linkages among performance measure-
ment, incentives and compensation, the role of strategic planning
and its link with operational planning and budgeting, the
involvement of non-family managers, the role of the CFO, the
accountant and the controller, the impact of managers on
managerial mechanisms, as well as the role of managerialization
and professionalization in succession.
This special issue contributes to research on accounting in
family business in several ways. Foremost, this is the first special
issue of this kind to feature both financial and managerial
accounting articles. Given the distinctive features, aims and foci
of financial and managerial accounting, this special issue points
out that it is difficult, if not impossible, to treat each of them and
their potential applications in family business exhaustively using
the same research approach. Instead, distinctive research ques-
tions, methodologies, and theoretical frameworks are needed to
study financial accounting and managerial accounting in a family
business context. Especially with regard to managerial accounting,
this special issue highlights a number of relevant aspects that have
yet to be studied in depth in the context of family business. This
special issue is distinct from the earlier and noteworthy
contribution of Salvato and Moores (2010) in that it points out
that accounting comprises two main areas: financial accounting
and managerial accounting. Therefore, unlike Salvato and Moores
(2010), we decided not to consider auditing, as it represents a
separate domain in our opinion, although it is strongly linked with
financial accounting.9 Therefore, this special issue does not
comprise any articles on auditing in family business.
This special issue deals with a wide range of financial and
managerial accounting issues relevant to family business, which
have not yet been analyzed jointly before, highlighting the
potential richness of this stream of research for both family
business and accounting studies. The articles in this special issue
cover the following topics: the impact of board characteristics in
constraining earnings management (Stockmans, Lybaert and
Voordeckers), compensation issues and stock option plans (Tiscini
and Raoli), the adoption of an efficiency approach to more
accurately measure family firm performance (Erbetta, Menozzi,
Corbetta and Fraquelli), the role of family monitoring as an efficient
device of management control (Audretsch, Huelsbeck and Leh-
mann), the role of management control systems in affecting
strategy implementation and performance relationships
(Acquaah), and the role of the CFO in family business (Hiebl). In
particular, aspects such as the role of management control
systems, strategic planning and the CFO are outlined, which have
rarely been addressed in previous literature.
The articles in this issue use a variety of theoretical frameworks
including agency theory, stewardship theory, resource-based view
of the firm, optimal contracting theory and control theory. The
special issue features both conceptual and empirical articles using
various methodologies, such as cluster analysis, multinomial
logistic regression, regression analysis and DEA, but also case study
analysis. The empirical articles draw on different samples and
9
It is noteworthy that the emphasis of both the editorial and the articles in the
special issue edited by Salvato and Moores (2010) was mainly on financial
accounting issues, especially earnings management and earnings quality, along
with auditing. Only in the editorial to the special issue, a few considerations were
made with regard to the role of managerial accounting and strategic planning. Thus,
the Family Business Review special issue was more focused on financial accounting
and, to a lesser extant, on auditing in family business.
79
contexts, such as privately owned family businesses in Belgium,
large enterprises as well as SMEs in Germany (family and non-
family owned), listed and non-listed family companies in Italy, and
family enterprises in Ghana. A summary of the main contents of
the different articles is provided in the following.
Stockmans, Lybaert and Voordeckers investigate how corporate
governance issues, such as the proportion of outside directors on
the board and CEO duality, limit earnings management when
private family firms face strong agency conflicts between
controlling and non-controlling shareholders. The article confirms
that, also in the family business context, the board of directors is
one of the key constraining mechanisms on earnings management.
By looking at how board characteristics of family firms experienc-
ing higher agency conflicts reduce the discretion that managers
have in reporting earnings, the authors respond to the call for
research on corporate governance and accounting choices in family
firms. The authors state that in family firms, governance controls
have a clear role in limiting agency conflicts amongst controlling
and non-controlling shareholders. Thus, in family firms, the
conditional nature of their corporate governance setting might
enhance financial reporting quality.
Tiscini and Raoli propose that idiosyncratic private benefits
provide an alternative explanation for stock option plans with
family directors as beneficiaries than rent extraction theory and
optimal contracting theory. The authors support the presence of
private benefits of control in family business, which include
‘‘idiosyncratic private benefits’’, remunerating some family-
specific resources that key family figures contribute to the firm.
These resources have positive effects on future results. However, in
the interim they are not contractible and their value cannot be
assessed as shareholders’ capital. The article provides an explana-
tion for the use of stock option plans in listed family firms as a way
to extract remunerative private benefits. The authors argue that
corporate governance characteristics of listed family firms influ-
ence the design of stock option plans between interest alignment
(or optimal contracting) plans, rent extraction plans and idiosyn-
cratic private benefits plans. The article opens new research
streams on compensation issues in family firms, as it shows that
the presence of stock option plans explained by the idiosyncratic
private benefits approach can be associated with higher involve-
ment of the family in the governance system of the firm.
Erbetta, Menozzi, Corbetta and Fraquelli suggest the adoption
of an efficiency approach to more accurately measure family firm
performance. While the family business literature on the
relationship between governance and performance indicates
contrasting positions, using a non-parametric frontier analysis
method called Data Envelopment Analysis, the authors are able to
show that family firms have higher profitability than non-family
firms. However, family firms seem to have lower efficiency and a
tendency to overuse labor and capital compared to their non-
family counterparts. The article introduces the concept of X-
efficiency as a performance measure for family firms that allows to
evaluate the connections between an agency decision context and
one where agency relationships are reduced, such as in family
firms. X-efficiency refers to the effectiveness between inputs and
outputs. Adopting the X-efficiency measure can help to identify a
set of indicators that might provide a better understanding and
more accurate measurement of family firm performance.
Audretsch, Huelsbeck and Lehmann investigate a national
context, Germany, where companies have to adopt a two-tier
governance system, distinguishing between the management role
and the monitoring role of the board of directors. The authors
argue that the separation of family members involved in
management decisions from those engaged in monitoring
activities will expand the role of family monitoring as an efficient
device of management control and, thereby positively affect
80 L. Songini et al. / Journal of Family Business Strategy 4 (2013) 71–83
family firm performance. The authors also suggest that family
members should refrain from management positions, leaving
managerial positions ‘‘market’’ open to the best available
competences. As a distinctive consequence, investors will
probably face comparative advantages in investing in family
monitored firms, since ‘familiness’ cannot be bought or trans-
ferred.
Acquaah examines how management control systems affect the
impact of a certain business strategy (cost leadership or
differentiation) on firm performance. The findings show that a
diagnostic use of management control systems positively affects
the implementation of cost-leadership strategies, whereas inter-
active management control systems are better suited for the
implementation of differentiation-based strategies. The latter
connection is stronger for family firms than for non-family firms.
In addition, in family firms the adoption of interactive manage-
ment control systems and the dynamic tension between the two
approaches (diagnostic and interactive) are found to better balance
control with innovation and learning, thereby positively influenc-
ing strategy implementation. Therefore, leveraging the distinc-
tiveness of family firms allows them to adopt management control
systems to exploit greater competitive advantages than their non-
family counterparts. Thus, leveraging the unique features of family
firms and adopting diagnostic and interactive management control
systems stimulates the development of an open context for
nurturing employees’ creativeness and innovativeness.
Hiebl proposes that as long as family firms increase their
strategic complexity, accounting professionalization passes
through appointing non-family member Chief Financial Officers
(CFOs), who are often the first non-family manager hired. CFOs
usually safeguard the long-term survival of family firms by
reducing the financial risk for the controlling families. In other
terms, a non-family member CFO might help the CEO to mitigate
financial distress and enhance the performance of the manage-
ment team and the company as a whole. The appointment of non-
family member CFOs will engage individuals with former work
experience in family firms and especially with longer working
tenures in accounting and financial management. Further, CFOs are
proposed to play a more restricted and traditional role in family
businesses compared to non-family businesses and have a lower
level of responsibility. On the management side, since they will
perceive the higher level of trust and cohesion in family businesses,
non-family CFOs will be subject to less rigid control mechanisms,
therefore experiencing fewer monitoring efforts than CFOs in non-
family businesses. On the governance side, if a non-family CFO is
appointed as a board director, he/she acts as a financial advisor to
the family CEO, maintaining the strategic decision-making power
of the CEO. Hiebl’s article provides a behavioral perspective by
opening the black box of the adoption of accounting roles and the
consequent introduction of accounting mechanism. The family
influence, the past experience of individuals and the higher levels
of mutual trust seem to play a fundamental role in defining the
background of the accounting systems in family businesses.
5. Conclusions
The points of strength of this special issue concern the variety of
topics, contexts and research methodologies covered, which
confirms the increasing interest of scholars in accounting issues
in family business, as well as the potential of this stream of
research to inform both accounting and family business studies.
Financial accounting issues as well as relevant aspects in
managerial accounting are addressed, the latter of which have
been rather underdeveloped in family business studies to this
point. We propose that managerial accounting in family business
in particular represents an area that shall attract increasing
interest in the future, as it does not yet apply universally its set of
procedures and mechanisms to the broad range of family firms, but
instead adopts mainly a contingency approach that considers
specific values, goals and strategies of a particular group of firms.
Besides managerial accounting, we also suggest that financial
accounting should play a more significant role in family business
research than it has to this point; mainly with regards to
succession, business valuation, especially when used in tandem
with law, finance, governance, taxation, psychology and other
disciplines.
In fact, we tend to agree with Salvato and Moores (2010, p. 200)
when they refer to auditing and state that ‘‘increasing extent of
regulation in capital markets . . . significantly reduced the interest
in this type of research over time’’. We would extend the validity of
this statement to include financial accounting. In fact, financial
accounting is bounded by formal criteria, rules, regulations and
conventions issued by institutional bodies and agencies that
require firms to conform. Moreover, a movement toward global
standards in financial reporting has been launched by the IASB and
IFRS Foundation with the aim to ‘‘develop, in the public interest, a
single set of high-quality, understandable, enforceable and
globally accepted financial reporting standards based upon clearly
articulated principles. In pursuit of this goal, the IASB works in
close cooperation with stakeholders around the world, including
investors, national standard-setters, regulators, auditors, aca-
demics, and others who have an interest in the development of
high-quality global standards. Progress toward this goal has been
steady. All major economies have established time lines to
converge with or adopt IFRSs in the near future’’.10 Again, the
International Integrated Reporting Council (IIRC) has launched a
project aimed to develop a global standard of disclosure, which
combines actual compulsory and voluntary disclosure standards
and proposals into a single integrated reporting framework. IIRC’s
mission is to ‘‘create the globally accepted International <IR>
Framework that elicits from organizations material information
about their strategy, governance, performance and prospects in a
clear, concise and comparable format. The Framework will
underpin and accelerate the evolution of corporate reporting,
reflecting developments in financial, governance, management
commentary and sustainability reporting. The IIRC will seek to
secure the adoption of <IR> by report preparers and gain the
recognition of standard setters and investors’’.11
In the near future, the consequence of these movements shall be
witnessed in terms of decreasing autonomy of the single company
in financial accounting policies, as a result of greater standardiza-
tion of accounting rules, regulations and principles. Simplified
proposals have been developed only for SMEs, and specific
guidelines are proposed for a few industries, while large and
listed enterprises will have to conform to all protocols and
guidelines. Thus, the firm’s policy and decisions concerning
financial accounting issues will be increasingly influenced by
some characteristics of the business, such as company size, being a
listed enterprise, the industry in which the firm operates, its
solvency situation, other than merely being a family business.
Finally, in this special issue, various European countries are
considered, such as Italy, Germany and Belgium, and also an
African country, Ghana, while most of the previous literature
focused on the Anglo-Saxon context. Continental and Southern
Europe, Africa, Anglo-Saxon countries (USA, UK and Australia) and
various Asian countries are characterized by different national
business systems, as well as distinct political, financial, education,
labor and cultural systems (Matten & Moon, 2008). This implies
10
See: http://www.ifrs.org/Use-around-the-world/Pages/Use-around-the-world.
aspx.
11
See: http://www.theiirc.org/the-iirc/.
 L. Songini et al. / Journal of Family Business Strategy 4 (2013) 71–83
that the features of enterprises, including family businesses, vary
across countries. With regard to accounting, previous studies have
shown that different national contexts and the characteristics of
capital markets, can differently impact family business behavior in
terms of tax aggressiveness, earnings management and voluntary
disclosure (La Porta, Lopez-de-Silanes, & Shleifer, 1999). However,
how enterprises operating in different national business systems
may adopt different managerial accounting choices remains an
open question that future research should explore in greater depth.
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