Founding Family Ownership and its Impact on Earnings Quality: A quantitative study on Swedish public firms

Sammanfattning: This study examines the relationship between founding family ownership and earnings quality, by using data on companies listed on the Stockholm Stock Exchange between 2009 and 2019. There are two opposing theories as to how family ownership and earnings quality are associated, the alignment effect and the entrenchment effect. We estimate this association with the help of two different proxies for earnings quality, discretionary accruals and timely loss recognition. We find that founding family firms on average are characterized by lower levels of discretionary accruals and timelier recognition of losses, indicating higher earnings quality in family firms than non-family firms. These results are in favor of the alignment effect. Our study contributes to and expands the existing literature on family ownership and earnings quality by applying earnings quality proxies to new geographical settings. Our results confirm the findings of previous research within the field.