Earnings management in family business research: yesterday, today and tomorrow

Accounting scandals that occurred during the first decade of the 20st century increased concern about earnings management (EM) practices (Byun and Roland-Luttecke, 2014), raising interest in the field of family businesses as some of the top financial scandals, such as Cirio, Parmalat and Adelphia, involved family firms, i.e. “organization controlled and usually managed by multiple family members” (Miller et al., 2007). According to Healy and Wahlen (1999, p. 368), “earnings management occurs when managers use judgment in financial reporting and in structuring transactions to alter financial reports to either mislead some stakeholders about the underlying economic performance of the company or to influence contractual outcomes that depend on reported accounting numbers.” Firms may resort to EM for different motivations, such as manipulating information crucial for investors, avoiding debt covenant violations, achieving performance benchmarks required by the top management’s remuneration system, reducing dividends or lowering the taxable base (Prencipe et al., 2008; Achleitner et al., 2014; Stockmans et al., 2010). Earnings may be manipulated through accrual-based earnings management (AEM), namely by exploiting the judgment inherent in certain accounting choices (Jones, 1991), as well as through real earnings management (REM), i.e. by accelerating sales through discounts, increasing production over expected demand, delaying or reducing discretionary expenditures (Roychowdhury, 2006). EM practices may be detrimental to stakeholders (Gavana et al., 2019) as well as to the company itself: AEM may have a strong reputational effect (Rodriguez-Ariza et al., 2016), and REM may negatively affect a firm’s future cash flows, jeopardizing a firm’s long-term value and sustainability (Achleitner et al., 2014).

Family companies are particularly relevant to this issue as they produce over 70% of the world’s gross domestic product and provide employment for over 60% of the world’s workforce ^[1]. Consequently, over the past 20 years, literature has started to study EM in family firms. A range of theoretical perspectives has been used to address the topic, focusing on different aspects.

From the lens of agency theory, researchers have explored mechanisms aimed at mitigating managerial opportunism and EM practices. For instance, the overlap between ownership and management has been examined as a strategy to enhance monitoring and reduce opportunistic behavior (Ali et al., 2007; Cascino et al., 2010). At the same time, ownership concentration has been analyzed as a double-edged sword. While it strengthens control, it can also exacerbate conflicts between family and non-family shareholders, with potential earnings manipulation used to extract private benefits at the expense of minority shareholders (Paiva et al., 2019; Jaggi et al., 2009). Governance characteristics, such as the proportion of independent directors on the board or the presence of CEO duality, further influence the extent of agency conflicts and their implications for EM (Cascino et al., 2010; Oussii and Klibi, 2023).

Shifting focus to stewardship theory, scholars have highlighted the role of family ownership in shaping EM motivations, pointing out the role of the alignment of family interests with long-term firm sustainability in reducing tendencies toward opportunistic EM (Prencipe et al., 2008). Stakeholder theory has also offered insights into how family firms engage with environmental, social and governance (ESG) disclosures, which can act as mechanisms to address broader accountability concerns and influence EM behaviors (Borralho et al., 2022).

Research grounded in socioemotional wealth (SEW) has investigated how nonfinancial goals, intrinsic to family firms, such as family control and influence, identity, emotional connection to the business, transgenerational succession and reputation (Berrone et al., 2012), shape their attitudes toward earnings manipulation. Dimensions of SEW such as the family’s sense of identification with the firm (Calabrò et al., 2022; Sundkvist and Stenheim, 2023), concerns for reputation and image (Martin et al., 2016) and aspirations for intra-family ownership succession (Umans and Corten, 2023) have been shown to reduce EM, particularly REM. Conversely, the desire to maintain family control has been identified as a potential driver of earnings manipulation, highlighting the complexity of motivations within family firms (Stockmans et al., 2010; Achleitner et al., 2014).

The relationship between family control and EM is complex, and a multitude of aspects have been studied. A very recent paper has analyzed 92 papers on the topic published after the 2009 financial crisis (Naz et al., 2024), providing a static picture of the topics of interest addressed in the selected period. Therefore, a systematic literature review of the whole body of literature on EM in family companies, an analysis of the evolution of literature – in terms of past and present trends – and the identification of the most active research groups and institutions are missing. This paper addresses the gaps by posing the following research questions:

This study organizes existing knowledge on EM in family companies, carrying out a bibliometric and systematic literature review of 252 papers from the Scopus and Web of Science (WoS) databases. It is structured to identify the academic contexts where the research was developed and its trends.

This study makes several key contributions to the literature. First, it identifies the most active research groups and institutions, highlighting their limited network expansion and the fragmented nature of collaboration in the field. Second, unlike prior studies that provide a static overview (Naz et al., 2024), this research maps the evolution of EM studies in family firms, offering a dynamic perspective on emerging trends.

Third, from a theoretical standpoint, the study traces a shift from the traditional agency theory framework (Ali et al., 2007; Cascino et al., 2010) toward a multi-theory approach that integrates the SEW, with agency, stakeholder and legitimacy theories. Fourth it points out an increasing focus on stakeholders and a more granular analysis of family firms’ heterogeneity, particularly in how corporate governance attributes and the different dimensions of SEW influence EM behavior (Berrone et al., 2012; Calabrò et al., 2022). Next, it highlights a growing focus on REM over accrual-based practices, with an interest in related party transactions (RPTs) as a mechanism for earnings manipulation (Eng et al., 2019; Gavana et al., 2024).

Finally, this review identifies gaps in the literature and proposes several avenues for future research. The remainder of the article is organized as follows: Section 2 describes the research design, data and methods; Section 3 provides a bibliometric analysis of the literature; Section 4 offers a content analysis of the top cited papers; Section 5 discusses past and recent trends; and Section 6 concludes the paper by pointing out contributions, implications, limitations and suggesting directions for future research.

This research is based on a comprehensive survey and analysis of previous studies examining the interplay between EM and family firm dynamics. Our approach involves applying bibliometric and systematic review methodologies to understand the existing literature thoroughly.

Consistent with the literature (Aparicio et al., 2021; Rovelli et al., 2022), the first step of this bibliometric and systematic literature review was to define the study’s boundaries in terms of the selection of databases, keywords, research products, period and exclusion criteria.

As for databases, we selected Scopus and Web of Science Core Collection. Both platforms serve critical roles in academic research, enabling scholars to discover, analyze and connect scientific publications with precision and depth (Singh et al., 2021). Echoing the perspectives of AlRyalat et al. (2019) and Pranckutė (2021), Scopus emerges as the favored choice due to several inherent advantages over WoS. On the other hand, several authors (Domański et al., 2018; Vera-Baceta et al., 2019; Zhu et al., 2024) suggest that WoS has some elements not present in Scopus. Moreover, Scopus and WoS index only products that meet strict quality criteria. Google Scholar includes a very wide range of products such as theses, dissertations, preprints, non-peer-reviewed conference proceedings and institutional reports whose references concur in the citation count of papers. Comparing Scopus, WoS and Google Scholar, about half of Google Scholar’s unique citations are not from scientific journals (Martín-Martín et al., 2018). Using Google Scholar would have involved comparing and ranking papers with a very uneven measurement of citations. To ensure greater comparability, we focused on Scopus and WoS.

Based on the Boolean AND/OR operators, we combined the following keywords to develop our search: accounting quality, cash flow, earning manipulation, earnings management, earnings persistence, earnings quality, earnings smoothing, family business*, family compan*, family control, family-controlled firm*, family firm*, family involvement, family ownership, family-owned, financial disclosure, financial statement restatement, predictability of cash flows, stock returns, timeliness of financial reporting, timely loss recognition, tunneling. We searched the terms within the papers’ abstract, title and keywords to ensure the inclusion of all potential documents containing these terms. To ensure the completeness of the analysis, we did not impose a limit on the period for paper publication. We set to include only academic journal papers written in English to ensure the authors’ full understanding of the papers during the selection process, and to base the study only on refereed articles to ensure the quality of the literature reviewed. We excluded articles with titles and/or abstracts out of scope. Figure 1 outlines the data collection and cleansing procedure.

We began with a list of 716 documents obtained through a search performed on November 26, 2024, on both the databases. We merged the papers from Scopus and WoS using R Studio, removed duplicates, and manually filtered out documents based on the inclusion and exclusion criteria (Mariani et al., 2023). The selection process involved two authors to enhance reliability and reduce bias, resulting in a refined sample of 252 documents for analysis. Authorship, source, citations, publication year and references for these documents were downloaded automatically from the Scopus and WoS databases. We conducted a bibliometric analysis on the final sample using Bibliometrix – a bibliometric analysis tool designed for use in R Studio.

We implicitly assume the number of publications and the number of citations, respectively, as measures of productivity and impact on literature. While citations do not necessarily equate to epistemic quality, they are a valuable proxy for measuring involvement in current discourses and sustained visibility within a field (Leydesdorff and Bornmann, 2016). Despite their limitations – such as disciplinary variations in citation practices, potential self-citation biases and the tendency to favor already well-established research – citations remain a widely accepted metric for evaluating the impact of scholarly work (Moed et al., 1985). We focused on the papers’ ranking in terms of absolute number of citations and number of citations per year to limit the effect of the publication year on the number of citations (De Giuli et al., 2023). The time effect could hide recent papers’ ability to impact EM studies in family firms.

Subsequently, we analyzed the content of the 252 articles, collecting the following aspects for each article: theoretical framework, topic, aim, methodological approach, dependent, independent, and moderating variables, setting (country and period) and main findings. The topic was identified through a discussion between the present study’s authors.

Then, we focused on the most impactful papers in terms of per-year number of citations, and we selected ten studies from the papers published up to 2019 (excluded) and ten from 2019 (included) onwards to better point out the changes in research trends over time. This choice aimed to provide a deeper understanding of the most influential publications in the field to get insights into the trends and gaps of research on EM in family firms and provide suggestions for future research.

Authored by a diverse group of 555 contributors and drawing on 159 distinct journals, the study encompasses a rich tapestry of insights into this critical study area. The inclusion of 530 author keywords underscores the meticulous approach adopted to capture the multi-layered dimensions of the subject. Cross-border collaboration involves 38% of the analyzed articles and an average of 2.8 co-authors per document. Moreover, in the sample, 22 single-authored documents underscore the individual contributions that have already significantly impacted the analysis of EM in family firms. The field evolved during the period considered, with an annual growth rate of 15.22%. The average document age of 5.62 years indicates a focus on contemporary issues, and the average of 32.79 citations per document reflects the research’s scholarly impact. The annual scientific production graph (Figure 2) shows a positive trend, culminating in a substantial increase in 2023. It is interesting to note that after the publication of the first document, there was a five-year period without any other paper in this field.

Subsequently, we analyzed the journals with the highest number of publications in the sample. Consistent with the keywords and the journal’s aim, the most represented journals are the Family Business Review and the Journal of Family Business Management, with eight articles each. Considering the percentages, we can confidently state that there is a low concentration among the journals regarding this topic, and the Family Business Review includes 3.5% of the total articles.

The distribution of the literature on the subject among journals indicates that the relevant sources (that have more than three papers) are 24 out of 153, and they include 96 papers out of 252, suggesting that a quite small number of sources tend to produce most of the relevant literature in the field. Moreover, a large number of sources contribute much less significantly.

In addition to a bibliometric review, an integral aspect involves analyzing affiliations, prompting us to examine universities contributing the most affiliations, emphasizing numerical significance. From a geographical point of view, seven are from Asia (Malaysia, China, Bangladesh and Indonesia), pointing out a particular interest by scholars in studying earnings manipulation in emerging economies characterized by weaker minority shareholder protection compared to the European or US settings. The publication trend (Figure 3) provides valuable insights into the evolving scholarly engagement with the topic over the years, pointing out that, over 24 years, interest in the subject matter by these institutions and scholars has predominantly emerged in the last 11 years. Particularly noteworthy is 2019, which boasts the highest article count, featuring 12 articles.

Finally, networks were used to examine collaborations among authors. A general absence of widespread networks is apparent as the relationships are predominantly confined within individual groups, as indicated by distinct colors in Figure 4. A leading group of authors strongly linked to the rest of the community of researchers does not emerge. The data reveals a lack of a central, leading group that bridges the different research communities. This translates to a complete lack of interaction between author groups, with researchers seemingly favoring collaborations within their established networks, hindering inter-university and international collaborations. This suggests that the subject matter tends to be explored within the confines of the same research groups, with limited efforts to collaborate beyond one’s network of acquaintances. This peculiarity of the network, on the one hand, may curb the development of research integrating different topics; on the other hand, the lack of international collaboration may limit the ability to develop international studies identifying whether and how cultural and institutional contextual factors may differently affect EM in different countries.

To get insights on the key topics of interest, we analyze the usage of words in three different aspects of the papers: title, keywords and abstract. The frequently used words persist consistently, showing only minor percentage variations across the three analyzed facets. We linked the analysis on the most frequent terms to inter-temporality, focusing on the top ten keywords in papers, with a minimum frequency of ten and a number, in a predetermined year, of at least three occurrences.

Upon careful examination of the presented data (Table 1), a discernible correlation emerges between the identified terms and the overarching trend topics, except for a notable outlier: Malaysia. The inclusion of this specific term can be traced to a noteworthy abundance of scholarly articles originating from Universities located in the country, amounting to a substantial total of 42 publications. Finally, it is possible to observe that the term “real earnings management” is relatively new in the sample; this means that there was an evolution of keywords during the considered period that is likely to be related to an increasing interest in this type of EM practice from 2019 onwards.

The keyword co-occurrence analysis of the top 35 keywords (Figure 5) shows four clear groups.

Cluster 1 (Red) is dominated by the themes of EM, corporate governance, and family ownership, underscoring their centrality in the literature. The interrelations between board independence, audit committee and ownership concentration highlight the significant role of governance structures in mitigating or enabling EM practices. The inclusion of agency problems and financial reporting quality reflects the theoretical underpinnings often rooted in agency theory, where conflicts between majority and minority shareholders drive earnings manipulation. This cluster also delves into the unique dynamics of family businesses, with an emphasis on SEW and family control. These keywords highlight the role of nonfinancial objectives, such as legacy and identity, in shaping earnings manipulation behaviors. The emphasis on emotional attachment and family controls further reflects the heterogeneity among family firms, where the presence of founders or family members in leadership roles often leads to diverse EM strategies. Furthermore, the linkage to corporate social responsibility (CSR) reveals a growing recognition of its dual role – either as a mechanism to enhance transparency and reputation or as a potential cover for earnings manipulation. This cluster underscores the complexity of governance in family firms, where ownership concentration and family control intersect to shape a company’s EM behavior.

Cluster 2 (Blue) emphasizes REM and its relationship with contextual factors, particularly geographic nuances such as Malaysia and India. The inclusion of RPTs suggests their role as a prominent mechanism for REM, especially in family firms where operational discretion provides avenues for income smoothing or manipulation. The connection with audit quality highlights the need for robust external monitoring to detect and deter these practices. The emerging focus on REM in this cluster reflects its increasing significance in recent research, driven by its operational nature and value-destroying attitude compared to accrual-based practices. Consistently, the cluster emphasizes the connection between REM, family involvement and SEW preservation. Furthermore, this cluster points to a more granular approach to studying EM, with a focus on specific institutional contexts that may affect the strategies employed by family firms.

Cluster 3 (Green) delves into the unique dynamics of family businesses with a particular focus on empirical analyses. The inclusion of family firms and agency problems points to the tension between family priorities and minority shareholder interests, with a particular interest in real earnings manipulations.

Cluster 4 (Purple) centers on AEM and its relationship with REM. This cluster reflects foundational themes in EM research, its relevance underscores the interest in family firms’ financial reporting quality, but without delving into the internal or contextual factors that may generate heterogeneity in family firms’ EM behavior.

The theme matrices related to pre-2019 (Figure 6) and post-2019 studies (Figure 7) on EM in family firms demonstrate a notable evolution in research focus, pointing out the recent trends in the literature.

The pre-2019 theme matrix reveals that research was primarily concentrated on basic themes such as EM, corporate governance and ownership structure, alongside discretionary accruals and earnings quality as motor themes. These topics focus on AEM and its relationship with family ownership. The positioning of family firms and SEW in the niche themes quadrant reflects early explorations of how emotional and identity-driven factors influence EM behavior in family firms. However, these themes remained underdeveloped, indicating limited integration of socioemotional considerations into mainstream research at the time.

The centrality of EM and its connection to governance structures highlights the dominance of agency theory in this period. Studies often addressed the entrenchment versus alignment effects of family ownership and the implications for earnings quality. CSR and REM do not reach a critical mass of publications sufficient to be captured by the thematic matrix of the period.

The post-2019 theme matrix reflects a paradigm shift, with EM, family firms and REM emerging as motor themes. This change underscores a growing interest in the interplay between REM and family firm characteristics, particularly as REM strategies gain relevance due to their complexity, difficulty to detect and potential value-destroying effect. The transition toward REM can be attributed to advancements in measurement models (e.g. Roychowdhury, 2006) and the recognition of REM’s impact on financial reporting and long-term firm value. Unlike AEM, REM directly affects operational activities, raising concerns about its reputational and sustainability implications, particularly in family firms with a strong focus on SEW.

Including CSR in the emerging themes quadrant signals an increasing scholarly focus on the relationship between sustainability practices and EM. The integration of CSR into EM studies highlights its dual role. While CSR initiatives can mitigate reputational risks and enhance transparency, they may also serve as tools to obscure EM practices, particularly REM. The relevance of the CSR-EM nexus in the literature implies a widening of the focus on the interests of family firms’ stakeholders other than shareholders.

The agency theory retains its relevance as it is increasingly combined with the SEW perspective and/or the stakeholder theory and/or the legitimacy theory in multi-theoretical frameworks (Table 3). This reflects a more holistic approach to understanding family firms’ EM behaviors, as well as a recognition of the heterogeneity within family firms.

In this section, to gain insights on the most impactful literature leading EM studies in family firms over time, we provide a content analysis of the top ten studies published up to 2019 (excluded) (Table 2) and the top ten papers published from 2019 (included) onwards (Table 3). We ranked the papers by the number of citations per year to curb the effect of time on citations and also point out recent impactful papers.

Agency theory is the leading theoretical perspective when we sort pre-2019 papers by the normalized number of citations. The agency view informs all the papers in this group, except for the study by Achleitner et al. (2014), which relies on the sole SEW construct, and Martin et al. (2016) and Stockmans et al. (2010), which integrate the agency theory with the SEW perspective.

The most cited paper per-year number of citations and absolute number is Ali et al. (2007), one that investigates earnings quality in terms of AEM, cash flow predictability and earnings persistence showing a better quality of reported earnings for family firms, confirming the results of Wang (2006) for the same setting. Consistently, Cascino et al. (2010) detect a negative relation between family ownership and AEM, while Siregar and Utama (2008) point out that family ownership favors using AEM for efficient contracting in stand-alone firms. Conversely, Chi et al. (2015) find that family ownership favors AEM, and board independence mitigates the relationship. The effect of corporate governance on the relationship between family ownership and EM appears to be a basic and motor topic, differently declined by the top cited papers for CPY. Jaggi et al. (2009) point out that board independence reduces AEM, but family control and influence on the board lower this effect. Sáenz González and García-Meca (2014), controlling for several corporate governance attributes, confirm that board independence lowers AEM, but they do not find a significant association between family ownership and AEM. Martin et al. (2016) provide evidence that family control reduces AEM, CEO tenure amplifies, and a dual-class stock structure lowers the effect. Stockmans et al. (2010), controlling for the generational stage, find that first-generation family companies are more prone to resort to AEM. The most impactful literature of the period is mainly focused on AEM measured relying on different models where the most commonly used are the original (Jones, 1991) or modified Jones model (Dechow et al., 1995) and Kothari model (Kothari et al., 2005) as indicated in Table 2. The study by Achleitner et al. (2014) is the only one of the top-cited papers that studies both AEM and REM, finding that family firms exhibit a higher level of negative discretionary accruals and a lower level of REM than non-family companies. This dual focus highlights the nuanced trade-offs in EM strategies within family firms, where financial and nonfinancial objectives intersect.

Moving to the top ten articles from 2019 onwards, Ghaleb et al. (2020) examine how agency conflicts shape REM, showing that family ownership reduces this type of EM. Drawing on institutional theory, Eng et al. (2019) compare REM between Chinese and US family and non-family firms before and after the financial crisis of 2008. REM is always greater for family firms than non-family companies, although the difference between the USA and China, respectively, increases and decreases after the financial crisis. Paiva et al. (2019), relying on the agency and SEW perspectives, find that family control increases AEM, but the level of analyst coverage reduces the effect. The other top-cited papers from 2019 onwards focus on different types of EM and draw on a variety of theories. Wan Mohammad and Wasiuzzaman (2020), relying on the alignment versus entrenchment effect theory, find that family ownership lowers AEM, although audit committee independence increases AEM as family ownership grows. Following a SEW perspective, Avabruth and Padhi (2023) study the association of EM with debt covenants among family firms, providing evidence that AEM and REM are complementary to each other, although companies prefer REM where banks and financial institutions provide the majority of debt. Integrating the agency theory with SEW, Gavana et al. (2024) study the relationship between RPTs and different types of EM, showing that family companies use RPTs in association with downward AEM and as a substitute for REM and corporate governance attributes moderate the relationships. (Mnif and Cherif, 2021), from a multi-theoretical perspective, deepen the effect of board gender diversity, pointing out that family female directors increase AEM, reflecting the unique dynamics of gender in family-controlled boards. The other top-cited recent articles address the link between CSR issues and EM. Combining stakeholder, legitimacy and agency theories, Kumala and Siregar (2021) study the association of CSR disclosure and EM, pointing out that family ownership increases the lowering effect of nonfinancial disclosure on AEM. From the stakeholder and agency perspectives, Borralho et al. (2022) – the first cited paper of the period – confirm these results. Conversely, relying on the SEW framework, Rahman and Zheng (2023) provide evidence that family ownership reduces the positive relationship between CSR performance and AEM. In contrast to the earlier period, post-2019 studies show a heightened emphasis on REM, reflecting its growing recognition as a complex and impactful EM strategy, although literature interest in AEM is still relevant. As in the previous period, the measurement of AEM continues to be based on different models, while REM is homogeneously measured by Roychowdhury’s (2006) model (see Table 3).

Overall, the empirical evidence indicates that family firms may have a different propensity towards AEM and REM than non-family companies. However, despite the number of papers on this issue, results on the effect of family ownership on AEM and REM are mixed.

The divergence in findings can be attributed to multiple factors. First, methodological choices play a significant role. While some studies rely on discretionary accruals estimated using the modified Jones model (Dechow et al., 1995) or the Kothari model (2005), others adopt alternative specifications that may lead to different inferences regarding EM practices. The measurement of REM is more consistent across studies – typically based on Roychowdhury’s (2006) model – but results are not homogeneous, likely due to variations in sample periods and country contexts.

Institutional and cultural differences across countries may also play a critical role in influencing the results. Legal frameworks, investor protection levels and enforcement mechanisms vary significantly across jurisdictions, potentially shaping the incentives for EM in family firms. For example, Eng et al. (2019) show that Chinese family firms engage in less REM than their US counterparts after the 2008 financial crisis, possibly due to differences in market structures and regulatory responses. However, cross-country comparisons remain relatively limited in scope. As observed above, a limited number of impactful studies focus on more than one country. International comparisons are limited to a few countries, often in a binary fashion (e.g. US vs China, France vs Spain), rather than conducting broader multi-country analyses. This narrow focus may fail to capture the full impact of institutional and cultural aspects on family firms’ EM behavior. We identify this as an important gap in the literature, highlighting the need for future research to incorporate larger-scale international studies that account for variations in legal, regulatory and cultural environments.

Papers pre-2019 mostly rely on agency theory (Ali et al., 2007; Siregar and Utama, 2008; Jaggi et al., 2009; Sáenz González and García-Meca, 2014) also opposed to stewardship theory (Chi et al., 2015), or declined in terms of entrenchment versus alignment effect (Wang, 2006; Cascino et al., 2010) and, in the latter years of the period, combined with the SEW construct (Stockmans et al., 2010; Martin et al., 2016). The evidence from the most impactful papers suggests that research was mainly oriented to studying EM in family firms as an outcome of the severity of conflicts between managers and owners, minority and majority shareholders. The agency theory proposes an opportunistic perspective (Figure 8) and suggests that incentives for companies to manipulate earnings are related to the various forms of agency conflicts (Jensen and Meckling, 1976). The first type of agency conflict derives from the dichotomy between ownership and control, making shareholders encounter significant challenges in overseeing managerial decisions. Family-owned companies are distinguished by a concentration of ownership, wherein the owning family frequently jeopardizes a substantial portion of its wealth in the company (Bennedsen et al., 2010), thus providing a compelling incentive to vigilantly oversee managerial actions and mitigate EM (Ali et al., 2007). Moreover, the tendency for family members to occupy senior management positions further promotes the alignment of interests between managers and the controlling family (Blanco-Mazagatos et al., 2016). The second form of agency conflict manifests between majority and minority shareholders. In instances where ownership is significantly concentrated, as is in family firms, a controlling shareholder may exert undue influence on the managerial decision-making process to appropriate private benefits at the expense of minority shareholders, resulting in earnings manipulations (Jaggi et al., 2009). The effect of ownership concentration on the quality of accounting numbers in family firms has also been analyzed from two divergent perspectives. Following the “alignment hypothesis,” high ownership concentration is deemed advantageous as it mitigates first-type agency conflicts, lowering incentives for EM (Cascino et al., 2010). Conversely, the “entrenchment hypothesis” posits a diminished quality of accounting information within firms characterized by substantial ownership concentration as these firms present reduced incentives to furnish high-quality accounting information (Fan and Wong, 2002; Razzaque et al., 2016). Contrary to the managerial/majority shareholders opportunism hypothesis, the stewardship theory relies on family firms’ long-term perspective in predicting family business EM behavior (Figure 8). Under this view, family managers and owners are motivated by altruism and long-term goals and prioritize the good of the organization and its stakeholders over personal benefits, lowering EM (Chi et al., 2015). Furthermore, this perspective suggests that family firms engaging in EM act less for short-term profit and more for long-term stability (Prencipe et al., 2008).

The agency perspective has also been integrated by the SEW approach to take into account how the preservation of family members’ stock of affective values embedded in the firm shapes agency conflicts and how SEW salience determines heterogeneity in family firms’ EM behavior (Martin et al., 2016).

The study by Achleitner et al. (2014) is the first research and the only paper, together with the one by Gomez-Mejia et al. (2014), in the whole literature pre-2019, focusing solely on SEW. Under this view, the nonfinancial returns of family owners are related to the preservation of different dimensions, such as family control and influence, family identity and transgenerational succession (Berrone et al., 2012). EM behavior depends on which dimensions family owners prioritize (Gomez-Mejia et al., 2014). The preservation of family control and influence increases EM (Stockmans et al., 2010), the family sense of identification with the firm enhances earnings quality to preserve reputation (Martin et al., 2016), while the concern for succession favors AEM over REM as less detrimental to a firm’s long-term value (Achleitner et al., 2014). Over the last five years, research has presented a broader spectrum of theoretical frameworks: institutional theory (Eng et al., 2019); stakeholder theory combined with agency theory (Borralho et al., 2022) and also with the legitimacy perspective (Kumala and Siregar, 2021); entrenchment vs alignment effect theory (Ghaleb et al., 2020; Wan Mohammad and Wasiuzzaman, 2020); SEW framework combined with agency theory (Gavana et al., 2024; Al-Hadi et al., 2022; Brahem et al., 2022; Umans and Corten, 2023) or with agency and stewardship theory (Borralho et al., 2020); SEW as a standalone construct (Tsao et al., 2019; Calabrò et al., 2022; Zhong et al., 2022; Rahman and Zheng, 2023; Avabruth and Padhi, 2023). The plurality of theories used is related to three main recent trends:

1. the focus on a wider range of stakeholders other than shareholders;

2. papers addressing more than one topic; and

3. a more-grained analysis of family firms’ heterogeneity.

The growing interest in stakeholders and the focus on more than one topic – for example, family ownership and CSR – have resulted in the adoption of multi-theoretical frameworks and in the combination of the agency theory with the stakeholder theory or the legitimacy theory to analyze family firms’ EM behavior better. The Stakeholder perspective suggests that family firms prioritize long-term relationships and reputation, leading to lower EM, and within family businesses, earnings quality depends on a company’s commitment to maintaining credibility with stakeholders (Borralho et al., 2022). From the legitimacy perspective, firms should act ethically and legally to be legitimated by society in continuing their operation (Deegan, 2002). This view may occur in two different predictions. On the one hand, family firms’ long-term perspective would enhance the level of CSR disclosure and financial reporting quality (Siregar and Utama, 2008), on the other hand, family firms engaging in EM may increase CSR disclosure to divert attention from their unethical accounting practice (Gavana et al., 2017).

Other theoretical frameworks used in EM studies have been adopted in a very marginal way by scholars focusing on family firms. This is the case of the signaling theory and the upper echelon theory. According to the former, firms may manipulate earnings to send a signal to investors, suggesting the likelihood of an improvement in future financial performance (Gavana et al., 2017). The latter supports that a company’s EM practices are affected by top management and the CEO’s characteristics (Oussii and Klibi, 2023; Al-Begali and Phua, 2023).

From a theoretical point of view, family firms’ heterogeneity in EM practices may be explained in terms of a firm’s internal or external factors, respectively, by the SEW perspective or by the institutional theory. The institutional theory explains EM in family firms by highlighting how variations in the institutional environment in terms of regulations, norms and cultural expectations can affect managerial/majority shareholders’ opportunism, leading to deviations in EM in family companies compared to non-family firms and within family business located in different countries (Eng et al., 2019). Literature has drawn on these two theories separately or, in the case of SEW, in combination with the agency theory. Nevertheless, it could be useful to rely on a multi-theoretical framework encompassing the SEW and the institutional theory to analyze the combined effect of a firm’s internal as well as institutional context in shaping family companies’ heterogeneity in EM behavior.

The role of family ownership in EM is the most discussed topic by top-cited papers and literature on earnings manipulations in family firms as a whole. Older articles have studied the relationship between family ownership and several earnings quality variables: AEM (Prencipe et al., 2008; Cascino et al., 2010); AEM, earnings informativeness and persistence of transitory loss components (Wang, 2006); fraudulent financial reporting (Hasnan et al., 2013), AEM together with REM (Achleitner et al., 2014). Siregar and Utama (2008) have addressed the motivation of EM by focusing on the relationship between family ownership and opportunistic versus efficient AEM. Researchers concentrating on the association between family ownership and EM have also considered some firms’ internal and external contextual factors, mainly in single-country settings. As for the former, capital structure has been considered in terms of the level of debt and type of lender (Avabruth and Padhi, 2023) and equity structure (Alzoubi, 2016). The association has been investigated, also controlling for a firm’s political connection (Hashmi et al., 2018). More recently, analyst coverage (Paiva et al., 2019) and the 2008 financial crisis (Eng et al., 2019) have been investigated as external contextual factors affecting the association between family ownership and, respectively, AEM and REM. During the last five years, a first trend has emerged in the literature in terms of a more-grained analysis of family firms’ heterogeneity in EM practices. Indeed, research developed the analysis of the relationship between family ownership and EM in the light of the effect of some of the SEW dimensions identified by Berrone et al. (2012): family control and influence, family members’ identification with the business, emotional attachment and the renewal of family bonds to the company through succession. The effect of family control and influence on EM has been addressed, underlining different aspects: the presence of the founder acting as CEO or board chair (Zhong et al., 2022; Ansari et al., 2021), family members involvement as directors or executives (Al-Hadi et al., 2022) as well as the use of debt as a means of retaining family control over the business (Avabruth and Padhi, 2023). Family identification with the business has been codified by distinguishing family-named companies (Sundkvist and Stenheim, 2023). The combined effect of the two dimensions has also been studied by creating a SEW endowment index (Calabrò et al., 2022). The impact of the emotional attachment dimension on EM has been investigated by controlling for kinship composition among family members (Qingmei et al., 2022). The last SEW dimension has been studied by focusing on the intention of transferring ownership to family or non-family members as a determinant of EM (Umans and Corten, 2023). From the SEW perspective, scholars have addressed the role of reputational concerns, using a firm’s generational stage as a moderator in the relationship between family firms and EM (Borralho et al., 2020) and relying on a firm’s visibility as a moderator which differently may affect EM in family and non-family companies (Gavana et al., 2019).

According to Naz et al. (2024), the content analysis results point out that corporate governance is one of the leading topics for research on EM in family firms. In particular, our analysis indicates board independence as a major point of interest among corporate governance attributes. Literature has examined the effect of board independence on AEM (Lee and Liao, 2004; Chi et al., 2015; Setia-Atmaja et al., 2011) and, more recently, on REM (Alhebri et al., 2021). A more detailed analysis has been provided by older papers, focusing on the possible moderators of the association between independent directors and EM in family companies, namely the presence of family directors (Jaggi et al., 2009) and of agency conflicts between controlling and minority shareholders (Stockmans et al., 2013). During the last period, a family business’ generational stage has been investigated as a source of heterogeneity in family firms that moderates the relationship between board independence and EM (Bansal, 2022). As for the effect of board committees on EM in family firms, the audit committee is the most investigated topic – as underlined by the bibliometric analysis – as a company’s internal governance structure that may effectively curb EM, depending on its attributes (Wan Mohammad and Wasiuzzaman, 2020). After the first papers focusing on the effect of the voluntary establishment of audit committees on AEM (Jaggi and Leung, 2007) and on the choice of EM type (Siregar and Utama, 2008), research began to deal with the impact of audit committee characteristics: independence (Wan Mohammad et al., 2014), gender diversity (Abdullah and Ismail, 2016), financial expertise (Haji-Abdullah and Wan-Hussin, 2015). During the last five years, papers developed the analysis of the audit committee process characteristics in terms of tenure and number of meetings, committee demographic diversity (Helal, 2022), accounting expertise (Suprianto et al., 2019), as well as demographic characteristics and expertise of the audit committee chairman (Al-Absy et al., 2019).

A second trend is related to the growing relevance of CSR issues. The first article in Scopus that linked the topic to earnings manipulations investigated how family involvement in the business may affect EM, directly or indirectly, through CSR activities (Liu et al., 2017). In the same year, another paper investigated the possible use of sustainability reporting to divert attention from earnings manipulation (Gavana et al., 2017). During the last five years, research has shown an increasing interest in taking into account stakeholders’ salience, expressed in terms of CSR performance (González et al., 2019; Brahem et al., 2022), engagement (Rahman and Zheng, 2023) and disclosure (Kumala and Siregar, 2021; Borralho et al., 2022; Pramono et al., 2023) in EM practices. The increased interest in the role of the relationship between companies and their stakeholders has also resulted in a focus on the effect of ESG disclosure as separate components of nonfinancial reporting (Borralho et al., 2022) to understand the effect of the different CSR components on EM for family and non-family firms.

The third trend that has emerged in the last five years is a multi-faced approach. Some authors have studied EM in family firms by combining different theories and/or addressing more than one topic (Borralho et al., 2020; Wan Mohammad and Wasiuzzaman, 2020; Gavana et al., 2024; Rahman and Zheng, 2023), pointing out a tendency to develop research from a holistic approach.

The analysis of the top-cited papers suggests a shift in the type of EM that the literature has focused on. Research pre-2019 is mainly focused on AEM (Ali et al., 2007; Chi et al., 2015; Jaggi et al., 2009; Martin et al., 2016; Sáenz González and García-Meca, 2014; Wang, 2006; Cascino et al., 2010; Stockmans et al., 2010) while only a limited number of studies have considered REM as well as AEM (Achleitner et al., 2014). Since 2019 onwards, the attention of the top-cited literature has been mainly focused on REM (Eng et al., 2019; Ghaleb et al., 2020), AEM and REM (Borralho et al., 2022; Rahman and Zheng, 2023), the association or substitution effect between AEM and REM (Calabrò et al., 2022; Avabruth and Padhi, 2023). The rising attention to REM has prompted research to study RPTs as a form of real earnings manipulation. Literature has focused on the relationship between RPTs and EM, controlling for the effect of board diversity on the association to capture heterogeneity among family firms (Gavana et al., 2024) as well as for the effect of external CEOs and external board chairs and the possible moderating effect of a company’s reputation (Jiang et al., 2022). The rather recent interest in REM is due to the fairly recent history of its measurement models (Roychowdhury, 2006) compared to the elaboration of the first measurement model of AEM (Jones, 1991). Nevertheless, scholars’ attention to REM is likely related to the prominent theoretical frameworks that have informed recent research. REM, although difficult for a company’s stakeholders to discover, is negatively related to family firms’ reputation (Salehi et al., 2020). At the same time, it implies a departure from normal business operations by anticipating sales and overproducing or reducing discretionary expenses (Roychowdhury, 2006). Therefore, it is a value-destroying practice for shareholders and stakeholders at large as it puts future cash flows at risk and may reduce social and environmental expenses, among other expenditures. These aspects are particularly salient from a SEW perspective. On the one hand, the difficulty in detecting REM meets family firms’ reputational concerns related to the family’s sense of identification with the business. On the other hand, it undermines a company’s sustainability, family control and transgenerational control by succession.

This study is a timely, systematic and bibliometric review of the body of knowledge on EM in family firms, based on 252 papers published from 2000 to 2024; that is, the total number of articles available on Scopus and WoS on November 26, 2024. This research set out to answer two key research questions. The first was: What are the most active research groups and institutions studying EM in family firms? The bibliometric analysis pointed out that the area of research on EM in family firms is characterized by a rather limited number of small and unconnected research groups. The most active institutions are concentrated in Asia – notably Malaysia, China, Bangladesh and Indonesia – which have significantly contributed to the field in recent years, although collaboration among them is limited. The findings suggest that EM research in family firms lacks extensive international networks, which may limit the integration of different research topics.

The second was: What are the past and recent trends in research on EM in family firms? The systematic literature review identifies several trends in the literature. The least recent research has been based primarily on agency theory to examine the impact of agency conflicts within family firms on EM practices. Recent studies rely on several theories, such as SEW, institutional theory, stakeholder theory and legitimacy theory, to analyze a broader range of influences on EM and show a tendency to adopt multi-theoretical frameworks. Recent research shows a shift from a prevailing focus on AEM to increasing attention on REM, mainly due to its more subtle yet potentially value-destructive nature. Furthermore, literature increasingly addresses the role of corporate governance mechanisms and of the various nonfinancial goals in moderating EM practices, providing a more-grained analysis of family businesses’ heterogeneity. The intersection between CSR and EM also emerged as a relevant topic in the last few years, with some studies exploring whether CSR initiatives serve as a transparency mechanism or a tool for earnings manipulation.

A systematic review is an effective method to analyze the current state of research, selecting papers by rigorous inclusion and exclusion criteria and identifying the literature gaps (Mariani et al., 2023). The bibliometric analysis points out the body of papers that have a major impact on shaping literature trends and allows us to contribute to research by highlighting institutions and research groups that drive the debate on EM in family businesses. The systematic review allowed us to contribute to the literature in several ways. We identify the recurrent topics in top-cited papers that are leading research on EM: family ownership, corporate governance, board independence, audit committee and CSR. We contribute to family firm literature by pointing out recent research trends: a wider range of theoretical frameworks, the focus on a broader spectrum of stakeholders other than shareholders, a more-grained analysis of family firms’ heterogeneity, particularly based on the different dimensions of SEW, and an increasing interest in real earnings manipulations also in terms of RPTs. We contribute by highlighting that some of the most cited recent studies address more than one topic, suggesting that research on EM in family firms is developing by following a more comprehensive approach. Furthermore, in the following subsection, we add to the literature by pointing out the theoretical, methodological and research context gaps, suggesting lines for future research. Our study has significant implications for investors and other stakeholders, highlighting that CSR disclosure signals a lower tendency to manipulate earnings, board independence curbs EM – although the association is moderated by family control and involvement in the board – while the level of independence of the audit committee is not a clear indicator of earnings quality. For investors and creditors, the findings emphasize the role of corporate governance and CSR disclosure as signals of reduced EM risk, potentially influencing investment decisions and credit evaluations. Moreover, for employees and customers, EM practices, particularly REM, can jeopardize long-term value and sustainability, affecting job security and trust in the firm. Regulators and policymakers can leverage these insights into governance structures to design frameworks that promote transparency and accountability. Our results have implications for family firms by indicating that the balance between family control and board independence curbs EM, a practice that may affect their reputation (Salehi et al., 2020) or long-term survival. Balancing SEW priorities with external governance standards may create resistance, particularly in firms with concentrated family control. Smaller firms might face resource constraints when adopting governance reforms or CSR initiatives. Addressing these challenges requires phased approaches, such as gradual governance changes or policy incentives to support compliance, ensuring that family firms can align their internal priorities with broader accountability standards. Best practices derived from the analysis of cases of virtuous family firms’ disclosure may effectively support this process.

The systematic review indicates theoretical, methodological and research context gaps.

From a theoretical point of view, the literature lacks a comprehensive multi-theoretical approach that integrates both internal (e.g. SEW) and external (e.g. institutional theory) factors shaping EM behavior. Addressing this gap is crucial because it acknowledges the complexity and heterogeneity of family firms, considering their unique priorities and the broader institutional environment. Future studies should adopt a combined SEW–institutional theory framework to capture these intertwined dynamics, providing deeper insights into family firms’ EM practices.

Regarding the methodology, two gaps emerge. First, the measurement of AEM has been approached using diverse methodologies, with a limited number of studies checking the robustness of the results by using different models. This diversity restricts the ability to compare results and draw generalizable conclusions regarding earnings quality between family and non-family firms and within family firms. Second, only a limited portion of the literature examines both AEM and REM, an approach that is valuable for providing a comprehensive understanding of EM strategies in family businesses.

As for the research context, leading research has investigated EM in family firms, mostly in single-country settings, providing mixed results. Moreover, the bibliometric analysis evidences that research on this issue has been largely developed by the same small research groups that engage a limited number of universities and countries, highlighting the lack of widespread networks able to identify better possible cultural and institutional factors that may affect family firms’ EM behavior. Literature not focusing on family firms suggests that national culture affects EM practices (Han et al., 2010); therefore, the mixed results on the effect of family ownership on EM may be because the association has been studied in different settings where relevant country-related factors may affect the relationship.

Future studies could investigate the following research question:

We suggest investigating how cultural factors and institutional contexts shape EM practices in family firms across different regions and industries. Comparing family firms operating in diverse environments can provide valuable insights into the relative importance of cultural norms, regulatory frameworks, and market conditions in influencing financial reporting behavior. Therefore, it could be interesting to develop a cross-institutional/cultural survey on a large sample of family firms in a setting of developed and developing economies, by engaging larger groups of scholars from different countries to discuss and better identify the varied cultural and institutional aspects that may affect the association between family ownership and EM. As for institutional aspects, it may be relevant to evaluate the legal regime, the enforcement of law, the efficiency of the judicial system, and the development of financial markets. As for national culture, it might be useful to consider certain countries’ cultural dimensions (Hofstede, 1984), in particular the effect of the level of individualism, uncertainty avoidance, and long-term orientation as they affect business ethics (Scholtens and Dam, 2007; Nevins et al., 2007). The level of these cultural factors varies between emerging economies and developed countries, as well as within the two groups ^[2]. Another external contextual factor that deserves consideration is business munificence – defined as the ability of the environment to support a company’s growth (McArthur and Nystrom, 1991) – as the level of resource availability might affect family firms’ EM behaviour across countries and industries.

Recent research has studied the role of SEW dimensions in EM, but some research questions deserve to be explored:

Research might investigate board tenure – as long tenure may increase the alignment with the owning family’s goals (Huybrechts et al., 2013) – and directors’ work and professional networks, as well as interlocks, as possible sources of contagion for EM practices that may affect the role of SEW. Among family firms, the effect of family involvement on the board has been addressed in terms of the percentage of family directors: the analysis could be deepened by investigating the effect of family directors’ diversity in terms of gender, education and generational diversity. In particular, future research could explore whether and how increased female representation in family firm boards influences the adoption of EM, focusing on countries with strong gender equality regulations, such as Norway, compared to countries without such requirements.

Regarding generational diversity, the coexistence of multiple generations on the board may lead to conflicts of interest or affect the focus on long-term reputation. Future investigations could assess how multigenerational involvement affects the type of EM practiced, differentiating between REM and accrual-based manipulation. Finally, the presence of directors with connections to other firms through interlocking board memberships could facilitate the diffusion of EM practices. Comparative studies across countries with varying degrees of regulation on board interlocks could provide deeper insights into the influence of such networks on financial reporting behaviors.

Moreover, the literature has dedicated much attention to the audit committee’s structural and demographic characteristics due to its monitoring role, but it could be of interest to delve in-depth into the effect of the nomination committee attributes, owing to its role in appointing directors:

Future research could investigate how family dynamics, such as family power structures, trust and cohesion, interact with EM practices, by developing qualitative studies or mixed-methods approaches to catch the nuances of family members’ relationships and their influence on financial reporting decisions. Future studies may analyze how the levels of trust and cohesion among family members – measured through the administration of questionnaires – affect the propensity for EM, controlling for the possible moderating effect of collectivist cultures (e.g. Japan) and individualist ones (e.g. the USA):

Research could explore key stakeholders’ (including family members, executives and employees) perceptions, attitudes and experiences related to cultural and social factors within the firm and their potential impact on EM practices. For example, by administering questionnaires to family members working in the firm, non-family executives and employees, the research could examine how the level of shared family organizational culture within the firm influences the propensity for EM.

Succession processes may influence the alignment of interests between incoming chief executives and other stakeholders. Succession might pressure new chief executives to meet short-term financial goals, incentivizing EM practices. Moreover, leadership transitions may bring cultural changes that potentially influence the propensity for earnings manipulation. Therefore, scholars could develop case studies examining EM across three key phases: succession planning, leadership transition and the post-transition period. The research question is:

Finally, the line of research on the association between CSR and EM in family firms focused on the behavior of family businesses in manipulating profits. The following research question remains to be explored:

We suggest investigating how various stakeholders, including investors, creditors, employees, and customers, perceive and respond to EM practices in family firms in terms of weight and activism of institutional investors, weight of long-term vs short-term creditors, employee turnover rates or customer loyalty metrics. Understanding stakeholders’ reactions can inform regulatory policies and corporate governance practices aimed at promoting transparency and accountability in family-owned businesses.

This study has certain limitations as it relies solely on a set of papers meeting rigorous inclusion and exclusion criteria indexed by Scopus and WoS. The selection of Scopus and WoS guarantees the timely availability of new research (Pranckutė, 2021). While the publications within our sample encompass relevant literature, the utilized search databases may potentially exclude some family firms’ studies on EM, and using a different source, such as Google Scholar, might yield slightly different results due to the varying coverage of this platform in scientific journals. Moreover, we applied stringent criteria to ensure the quality of the analyzed literature, including peer-reviewed papers and excluding book chapters and proceedings. The omission of studies might limit the generalizability of the results, and excluding unpublished research might obscure emerging trends in the literature.

Funding: This work was supported by MUR–M4C2 1.5 of PNRR, funded by the European Union—NextGenerationEU (ECS00000036).