An examination of the literature review exercise of an academic article: for Accounting and Finance students 02

An examination of the literature review exercise of an academic article: for Accounting and Finance students 02 [information from chatpdf.com]

The article name: "Family identification and earnings management in listed firms" Accounting in Europe.

My question 1: "What are the research objectives of the article?"

The reply: "The research objectives of the article are as follows:

1. Investigate Earnings Management Behavior: The study aims to explore the earnings management behavior of listed family firms that carry the name of the family (eponymous family firms) and compare it with non-family firms.

2. Examine Association with Accrual-Based Earnings Management: The article specifically examines the association between being an eponymous family firm and accrual-based earnings management, looking to identify circumstances under which this association may not hold.

3. Analyze Effects of IFRS to Local GAAP Switch: The research takes advantage of a unique Swiss context where firms can voluntarily switch from IFRS to local GAAP, aiming to assess how this switch impacts earnings management behaviors among eponymous family firms.

4. Assess Family Involvement in Governance: The study also seeks to understand how the involvement of the family in key governance roles, such as the CEO or board chairperson, affects earnings management practices, particularly in terms of preserving the family's reputation versus the potential for misaligned incentives.

Overall, the study seeks to contribute to a more nuanced understanding of the effects of family identification on earnings management incentives within publicly listed firms."

My question 2: "What are the academic theories employed in the study?"

The reply: "The study employs the following academic theories:

1. Behavioral Agency Theory: This theory is central to the framework of the research. It expands upon traditional agency theory by emphasizing the emotional and nonpecuniary factors that influence decision-making in family firms. According to this theory, family members are motivated not only by financial wealth but also by the desire to preserve their socioemotional wealth, which includes their reputation and family legacy .

2. Agency Theory: While not the main focus, traditional agency theory is also referenced, particularly in discussing the complexities of decision-making in family firms compared to non-family firms. It highlights the various incentives and pressures from stakeholders that can influence earnings management practices .

These theories help explain the dynamics of how family identification influences earnings management behavior, particularly in listed firms where the stakes and visibility are higher ."

My question 3: "Did the article evaluate these academic theories individually in its literature review effort?"

The reply: "Yes, the article evaluates the academic theories individually as part of its literature review effort. It specifically discusses the following:

1. Agency Theory: The article outlines traditional agency theory's relevance and limitations, particularly in the context of family firms. It highlights how agency theory often revolves around the conflicts of interest between owners and managers, which may be less pronounced when family members occupy management roles due to their intertwined interests in both economic and nonpecuniary dimensions .

2. Behavioral Agency Theory: The literature review delves into behavioral agency theory, which builds on the shortcomings of traditional agency theory. It emphasizes the emotional ties and the significance of socioemotional wealth for family members, demonstrating how these factors influence decision-making and potentially lead to different earnings management practices compared to non-family firms .

By discussing these theories in the context of existing literature, the article underscores how they contribute to understanding the behavior of family firms regarding earnings management, thereby building a robust theoretical foundation for its hypotheses and findings ."

My question 4: "Did the article conduct literature synthesis on these academic theories?"

The reply: "Yes, the article conducts a literature synthesis on the academic theories mentioned, particularly agency theory and behavioral agency theory. This synthesis is evident in the way the article integrates findings from various studies to highlight the distinct characteristics and implications of these theories for family firms.

1. Synthesis of Agency Theory: The article discusses not only the foundational principles of agency theory but also its applicability and limitations when applied to family firms. It references other studies that have explored the principal-agent conflict within family-owned businesses, noting examples where agency dynamics may differ significantly from non-family firms due to familial ties and interests .

2. Synthesis of Behavioral Agency Theory: The literature review elaborates on behavioral agency theory by linking it to the broader context of family firm behavior. It cites multiple sources to show that family members often prioritize socioemotional wealth alongside financial returns, synthesizing findings that illustrate this dual focus. The article incorporates studies that demonstrate how emotional and attachment factors influence decision-making processes related to earnings management .

Through this synthesis, the article provides a nuanced understanding of how these theories interact and inform the behavior of family firms, especially in relation to earnings management practices  . This approach enriches the theoretical framework and sets the stage for the empirical investigations conducted in the study."

My question 5: "Did the article discuss how these academic theories could inform the research method designs in the study?"

The reply: "Yes, the article discusses how the academic theories, particularly agency theory and behavioral agency theory, could inform the research method designs used in the study. Specifically, the theories help shape both the hypotheses formulated and the analytical approaches employed to investigate the relationship between family identification and earnings management in listed firms.

1. Hypothesis Development: The article frames its hypotheses based on the insights gained from the discussed theories. For instance, it posits that family firms, characterized by higher identification with the firm, may exhibit lower levels of earnings management due to socioemotional incentives tied to family reputation . This hypothesis is rooted in behavioral agency theory, suggesting that the emotional ties of family members to the firm influence their decision-making processes.

2. Contextual Examination: The discussion of the theories informs the study's context by allowing the researchers to explore distinct settings, such as the effects of family involvement at management levels and the impact of switching accounting standards (e.g., IFRS turn away). The behavioral agency theory provides a lens through which to analyze how these variables may alter the baseline expectations regarding earnings management  .

3. Sample Selection and Analysis: The theoretical frameworks guide the criteria for sample selection and the analytical techniques used to assess earnings management. For example, understanding the implications of family ownership structures influences the classification of firms as "eponymous" or "non-eponymous" and allows for a more nuanced analysis of findings related to family involvement and financial behavior .

By integrating these theories into the research methodology, the article not only grounds its empirical work in established academic literature but also enhances the relevance and interpretability of its results  . This connection between theory and method solidifies the study's contributions to the literature on family firms and earnings management."

My question 6: "Did the article explain how the academic theories used can help in addressing the research objectives?"

The reply: "Yes, the article explains how the academic theories employed—namely agency theory and behavioral agency theory—aid in addressing the research objectives. The application of these theories is integral to understanding the dynamics of family firms and their earnings management practices.

1. Understanding Relationship Dynamics: The theories provide a framework to explore the unique relationship dynamics in family firms. Agency theory helps to highlight the conflicts that arise between the different stakeholders (e.g., family owners versus minority shareholders), while behavioral agency theory underscores how socioemotional factors influence decision-making. This understanding informs the research objective of assessing how family identification affects earnings management practices in listed firms  .

2. Historical and Contextual Insight: The literature on behavioral agency theory suggests that family members are motivated by both economic and non-economic factors when making business decisions. By examining these motivations, the article aims to achieve its objective of providing empirical evidence regarding the levels of earnings management in family firms, particularly during specific contexts such as the transition away from IFRS  .

3. Hypothesis Formation and Testing: The theories inform the formulation of the hypotheses tested in the study. For example, the expectation that eponymous family firms exhibit lower levels of earnings management is directly connected to the reputational concerns outlined in the behavioral agency theory. This illustrates how the theories guide the development of specific research questions and hypotheses that the study seeks to empirically investigate  .

4. Analysis of Specific Contexts: The theories also help in addressing research objectives by providing the necessary context for analyzing variations in earnings management due to family involvement in governance structures. The distinction between eponymous and non-eponymous family firms allows the study to explore how different family identities impact financial reporting behavior .

By linking the theories to the research objectives, the article not only situates its empirical findings within a broader theoretical framework but also demonstrates how these theories contribute to a deeper understanding of the accounting behaviors of family firms  . This alignment ultimately strengthens the study's contributions to the field of family business research."

Reference: a collection of blog notes on using chatgpt for research purpose.