Founding Family Control,Diversification And Earnings Management

For more than 30 years of reform and opening-up,our founding family firms have developed rapidly,which is become a solid strength to promote the development of our national economy and society.On the contrary,the empirical researches about how our founding family firms choose their operational and financial strategy are still in poor.Since the 1990s,although specialization strategy has become the main trend in the listed companies of the developed countries,however,the diversification strategy is still a very common phenomenon in our listed companies.But the researches on diversification mostly focus on the relationship between diversification and corporate performance or governance,rarely about the relationship between diversification and earnings management.Under this background,along with the research idea of "founding family control-diversification-earmings management",our article try to solve the following problems:firstly,if the founding family control influence the choice of diversification strategy?secondly.the diversification strategy will increase or decrease the earnings management?thirdly,if the founding family control influence the choice of earnings management?Fourthly,if the diversification under the founding family firms will increase or decrease earnings management?To solve the four problems,Our study firstly uses the principal-agent theory,stewardship theory,socioemotional wealth theory and information asymmetry theory to analyse the relationship of the three,then uses our main and SME board listed companies to empiricial test the relationship of the three.We finally find that:firstly,the founding family companies have a lower level of diversification;secondly,the diversification will increase the level of up accrued earnings management and real activity earnings management,but will decrease the level of down accrued earnings management;thirdly,the founding family firms have a lower level of earnings management;fourthly,the diversification under the founding family firms have a higher level of earnings management.The innovations and theoretical contributions of our article mainly has the following two points:firstly,our research bases on the socioemotional wealth theory and prospect theory to study on the relationship between founding family control and diversification,between founding farmily control and earnings manangement,the effect of diversification under founding family control on earnings management,our study not only enriches the domestic research on how founding family firms choose their operational and financial strategy,but also explores the complex problem that if and why the divisification under the founding family firms will increase the earnings management.Secondly,our study focus on the the relationship between diversification and earnings management,finds that under the weak external supervision and internal governance environment in our country,the effects of agency conflict and asymmetric information play a major role on the the relationship between diversification and earnings management,so the diversification wil increase the up accrued earnings management and real activity earnings management,enriching the research about the financial consequences of the diversification.