Takeover Risk of Family-Owned Companies in Market Response to Profit Division Announcements and Accounting Distortions

Subject Areas : Ethics and accounting

Vahid  Bekhradi Nasab ¹ (Ph.D., Department of Accounting, Najaf Abad Branch, Islamic Azad University, Najaf Abad, Iran)
Ali  Khoshdel ² (Ph.D. Student, Department of Accounting, Central Tehran Branch, Islamic Azad University,Tehran, Iran)

Received: 2022-09-24 Accepted : 2023-10-28 Published : 2022-11-22

Keywords: Profit Division Announcement,  Accounting Distortions, Market Response, Takeover Risk,

Abstract :

Purpose: Financial reporting mistakes are under the influence of family ownership in companies and the impact of accounting distortions and mistakes on market response to profit announcement occurs more in family-owned companies compared to non-family corporations. Hence, as family ownership increases and when takeover risk from family control is high, the market response to profit division announcements declines. Thus, the company's response to the market is a common function of accounting methods and ownership. In this regard, the purpose of the present study is to review accounting distortions, market response to profit division announcements, and the threat of taking over the ownership of family-owned companies.Method: The research statistical population consisted of all corporations accepted in Tehran Stock Exchange from 2009 to 2021. The research sample based on convenient sampling included 142 companies. The research method in the first hypothesis testing was logistic regression, and in the second hypothesis testing was least square regression based on mixed data.Findings: The results convey that by the increase of family control, accounting distortions decrease and the market shows positive response to the profit division announcements of family-owned companies. Another research result indicates the negative impact of takeover risk on the market response to profit division announcements of family-owned companies. The obtained results in this research are consistent with the referred documents in the theoretical framework and financial literature review.Conclusion: Accounting information with high quality plays a main role in designing mechanisms to decrease contradiction between different agencies among shareholders, directors, and foreign investors. Due to widespread family-owned corporations throughout the world, several studies have attempted to research the relationship between family ownership/control and accounting information quality. However, the obtained results from the current studies are not confirmed yet. Furthermore, there is still insufficient information on whether family control is effective on the reaction of investors to change accounting information quality and how it occurs.

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