The Association between Family Firms and Conference Calls : Agency Problems and Firm Reputation

This paper uses conference call as a disclosure metric to examine whether family firms are more likely to provide additional voluntary disclosure compared with nonfamily firms. Using Taiwan data, we also examine how family firms' disclosure is affected by the conflict between large shareholders and small shareholders. A distinguishing feature of this study is the comprehensive consideration of the impact of family firms' reputation on financial reporting quality. Specifically, we instead of grouping all family into one homogenous group but distinguish family firms according to their reputation of integrity. We find that family firms are more likely to provide conference calls and are willing to disclosure more in comparison with nonfamily firms, suggesting that the benefit to family owners from a reduced cost of capital through providing a conference call outweigh the costs (e.g., proprietary costs). However, family firms of poor reputation or family firms facing agency problems due to the separation of controlling and non-controlling shareholders exhibit a lower likelihood of providing a conference call. These results suggest that the differential degree on the likelihood of providing a conference call of family firms is primarily driven by firms' integrity and the detachment of control rights from cash flow rights induces lower levels of voluntary disclosure