Earnings management around founder CEO re-appointments and successions in family firms

This paper studies CEO re‐appointment and succession events in listed family firms with an incumbent family CEO. We explore whether family firms with a founder CEO are more likely to engage in earnings management pre‐event than other family firms. We find evidence of pre‐event upward earnings management for firms that re‐appoint their founder CEO but no for other family firms. These findings suggest that the costs and benefits from earnings management change around founder CEO re‐appointments in family firms. Investors, auditors, policy makers and regulators should be aware of the temptation of founder CEOs to inflate earnings preceding their re‐appointment