Corporate Disclosures by Family Firms

Compared to non-family firms, family firms face less severe agency problems due to the separation of ownership and management, but more severe agency problems that arise between controlling and non-controlling shareholders. These characteristics of family firms affect their corporate disclosure practices. For Samp;P 500 firms, we show that family firms report better quality earnings and are more likely to warn for a given magnitude of bad news. However, family firms make fewer disclosures about their corporate governance practices. Consistent with family firms making better financial disclosures, we find that family firms have larger analyst following, lower dispersion in analysts' earnings forecasts, smaller forecast errors, less volatile forecast revisions, and smaller bid-ask spreads