Financial reporting choices in family firms and socioemotional wealth

Abstract

The paper discusses the theory of socioemotional wealth (SEW) and explains how and why this theory complements the principal-agent theory in the understanding of the financial reporting in family firms. The SEW theory argues that family owners often emphasise other objectives than the traditional economic objective of maximising their return on invested capital. These other objectives might be referred to as socioemotional objectives and may for example be the need to retain control of the firm or to preserve the family's financial wealth over time. Findings from the literature on financial reporting in family firms are discussed in light of Berrone et al. 's (2012) FIBER model. Based on this discussion, we also identify gaps in the literature and future research opportunities.