Influence of family control in the practice of earnings management The case of open Brazilian companies

Purpose - The purpose of this paper is to identify if the open Brazilian companies that have family control manage their accounting results in a negative way, and if this influence is in a positive sense of pushing the results down, that is, worsening their present profits due to future results. Design/methodology/approach - The empirical investigation is developed using as a sample 123 Brazilian companies listed on BM& FBovespa, totaling 1.353 observations for a period of 11 years (2000-2010). Data analysis is conducted by means of regression with panel data, method of ordinary least squares (OLS), and random effects. Findings - First, it was found that family-type companies show lower profits compared to profits earned by non-family companies. Nevertheless, it was observed that family businesses have negative discretionary accruals higher than those submitted by non-family firms, and that family control has a positive influence on this type of earnings management. Research limitations/implications - The article provides an extension to earlier work focused on the relationship between family ownership and earnings management results. Practical implications - The paper provides a more critical look at family property, especially as regards the quality of their accounting information. Originality/value - The study not only investigates whether family control is positively related to discretionary accruals of Brazilian companies; it also checks the influence of family property on the production of negative accruals -"take a bath".