Using Accounting Standards to Delineate Family and Non-Family Controlled Firms

Recent capital market research evidence suggests that a large proportion of public companies worldwide are characterized by controlling stockholders who are more often families, usually the founder(s) or their descendants. There has been considerable debate on whether 'family' firms can indeed be properly delineated from 'non-family' firms given the diversity and abundance of 'family business' definitions in the literature. The primary objective of this paper is to provide a robust definition of family business for the purposes of capital market research. Using an accounting-based definition of family business, more than 17% percent of listed companies on the Australian bourse have been identified as family controlled. The paper outlines a four-step procedure that provides validation for identifying family controlled companies listed on the Australian Stock Exchange. By combining common themes with authoritative definitions and explanations in accounting standards and legislation, an operational definition of family business is derived. This outcome adds a new dimension to the family business, accounting and finance literatures and has the potential to contribute significantly to future research in these fields. One of the significant features of the research methodology was the reliance on data collected from the corporate regulator, i.e. the Australian Securities and Investments Commission. Having access to this restricted data enabled the researchers to establish important links between directors and their private related entities