The role of family businesses and active family members in environmental performance
-
DOIhttp://dx.doi.org/10.21511/ee.14(1).2023.09
-
Article InfoVolume 14 2023, Issue #1, pp. 91-103
- Cited by
- 479 Views
-
79 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
There is a growing concern about environmental issues, particularly carbon emissions, in many countries. Indonesia, with its huge population, also suffers from excessive carbon emissions. This study aims to investigate the effect of family businesses on environmental performance, specifically carbon emission disclosure. This study also explores the role of the family supervisory board and management on the quality of carbon emission disclosure. The study employed 62 non-financial family-listed firms in 2017–2019 (186 observations). The analysis found a positive and significant relationship between family enterprises and the disclosure of carbon emissions, implying that family firms expose more information about their carbon emissions. It also revealed a significant positive association between the family supervisory board and carbon emission performance, suggesting that having family members on the supervisory board aligns with policies for reducing and maintaining accountability for carbon emissions. In summary, the findings suggest that family enterprises prefer to exercise their indirect control by holding a position on the supervisory board and owning a substantial percentage of the company’s stock corresponding to their socio-emotional wealth agenda. Additionally, there is a non-linear association between family firms and the disclosure of carbon emissions. Carbon emission performance decreases as family share ownership rises to 53.1% but increases when family equity exceeds this cut-off point. Finally, family shareholders in non-polluted firms report higher quality of carbon emission disclosure.
- Keywords
-
JEL Classification (Paper profile tab)M14, M41, M48
-
References68
-
Tables7
-
Figures0
-
- Table 1. Study sample
- Table 2. Firm disclosure percentage for each item by year
- Table 3. Percentage of items disclosed by theme and industry group
- Table 4. Descriptive and correlation data
- Table 5. Primary regression – Fixed effect
- Table 6. Non-linearities test results
- Table 7. Large samples and environmentally sensitive firms
-
- Adams, J., Taschian, A., & Shore, T. (1996). Ethics in family and non-family owned firms: An exploratory study. Family Business Review, 9(2), 157-170.
- Ali, A., Chen, T.-Y., & Radhakrishnan, S. (2007). Corporate disclosures by family firms. Journal of Accounting and Economics, 44(1-2), 238-286.
- Anderson, R. C., & Reeb, D. M. (2003). Founding family ownership and firm performance: Evidence from the S&P 500. The Journal of Finance, 58(3), 1301-1328.
- Anderson, R. C., & Reeb, D. M. (2004). Board composition: Balancing family influence in S&P 500 firms. Administrative Science Quarterly, 49(2), 209-237.
- Andres, C. (2008). Large shareholders and firm performance – An empirical examination of founding-family ownership. Journal of Corporate Finance, 14(4), 431-445.
- Arosa, B., Iturralde, T., & Maseda, A. (2010). Ownership structure and firm performance in non-listed firms: Evidence from Spain. Journal of Family Business Strategy, 1(2), 88-96.
- Baalouch, F., Ayadi, S. D., & Hussainey, K. (2019). A study of the determinants of environmental disclosure quality: Evidence from French listed companies. Journal of Management and Governance, 23, 939-971.
- Berrone, P., Cruz, C., & Gómez-Mejía, L. R. (2012). Socioemotional wealth in family firms: Theoretical dimensions, assessment approaches, and agenda for future research. Family Business Review, 25(3), 258-279.
- Berrone, P., Cruz, C., Gómez-Mejía, L. R., & Larraza-Kintana, M. (2010). Socioemotional wealth and corporate responses to institutional pressures: Do family-controlled firms pollute less? Administrative Science Quarterly, 55(1), 82-113.
- Block, J. H., & Wagner, M. (2014). The effect of family ownership on different dimensions of corporate social responsibility: Evidence from large US firms. Business Strategy and the Environment, 23(7), 475-492.
- Boone, A. L., Field, L. C., Karpoff, J. M., & Raheja, C. G. (2007). The determinants of corporate board size and composition: An empirical analysis. Journal of Financial Economics, 85(1), 66-101.
- Brune, A., Thomsen, M., & Watrin, C. (2019). Family firms heterogeneity and tax avoidance: The role of the founder. Family Business Review, 32(3), 296-317.
- Cancela, B. L., Neves, M. E. D., Rodrigues, L. L., & Dias, A. C. G. (2020). The influence of corporate governance on corporate sustainability: New evidence using panel data in the Iberian macroeconomic environment. International Journal of Accounting & Information Management, 28(4), 785-806.
- Casillas, J. C., Moreno-Menéndez, A. M., Barbero, J. L., & Clinton, E. (2019). Retrenchment strategies and family involvement: The role of survival risk. Family Business Review, 32(1), 58-75.
- Cennamo, C., Berrone, P., Cruz, C., & Gómez-Mejía, L. R. (2012). Socioemotional wealth and proactive stakeholder engagement: Why family-controlled firms care more about their stakeholders. Entrepreneurship Theory and Practice, 36(6), 1153-1173.
- Chau, G. K., & Gray, S. J. (2002). Ownership structure and corporate voluntary disclosure in Hong Kong and Singapore. The International Journal of Accounting, 37(2), 247-265.
- Chen, S. X., Chen, X., & Cheng, Q. (2008). Do family firms provide more or less voluntary disclosure? Journal of Accounting Research, 46(3), 499-536.
- Chi, C. W., Hung, K., Cheng, H. W., & Lieu, P. T. (2015). Family firms and earnings management in Taiwan: Influence of corporate governance. International Review of Economics and Finance, 36, 88-98.
- Choi, B. B., Lee, D., & Praros, J. (2013). An analysis of Australian company carbon emission disclosures. Pacific Accounting Review, 25(1), 58-79.
- Chrisman, J. J., Chua, J. H., Pearson, A. W., & Barnett, T. (2012). Family involvement, family influence, and family-centered non-economic goals in small firms. Entrepreneurship Theory and Practice, 36(2), 267-293.
- Chua, J. H., Chrisman, J. J., & Sharma, P. (1999). Defining the family business by behavior. Entrepreneurship Theory and Practice, 23(4), 19-39.
- Cooke, T. E. (1993). Disclosure in Japanese corporate annual reports. Journal of Business Finance & Accounting, 20(4), 521-535.
- Cooper, D. R., & Schindler, P. S. (2003). Business research methods (8th ed.). Boston, U.S.: McGraw-Hill, Irwin.
- Craig, R., & Diga, J. G. (1998). Corporate accounting disclosure in ASEAN. Journal of International Financial Management and Accounting, 9(3), 246-274.
- Cruz, C., Larraza-Kintana, M., Garcés-Galdeano, L., & Berrone, P. (2014). Are family firms really more socially responsible? Entrepreneurship Theory and Practice, 38(6), 1295-1316.
- Cuadrado-Ballesteros, B., Martínez-Ferrero, J., & García-Sanchez, I. M. (2017). Board structure to enhance social responsibility development: A qualitative comparative analysis of US companies. Corporate Social Responsibility and Environmental Management, 24(6), 524-542.
- Davids, J. H., Schoorman, F. D., & Donaldson, L. (1997). Toward a stewardship theory of management. Academy of Management Review, 22(1), 20-47.
- De Massis, A., Frattini, F., & Lichtenthaler, U. (2013). Research on technological innovation in family firms: Present debates and future directions. Family Business Review, 26(1), 10-31.
- Demsetz, H., & Lehn, K. (1985). The structure of corporate ownership: Causes and consequences. Journal of Political Economy, 93(6), 1155-1177.
- Diamond, D. W., & Verrecchia, R. E. (1991). Disclosure, liquidity, and the cost of capital. The Journal of Finance, 46(4), 1325-1359.
- Dick, M., Wagner, E., & Pernsteiner, H. (2021). Founder-controlled family firms, overconfidence, and corporate social responsibility engagement: Evidence from survey data. Family Business Review, 34(1), 71-92.
- Dyer, W. G., & Whetten, D. (2006). Family forms and social responsibility: Preliminary evidence from the S&P 500. Entrepreneurship Theory and Practice, 30(6), 785-802.
- El Ghoul, S., Guedhami, O., Wang, H., & Kwok, C. C. Y. (2016). Family control and corporate social responsibility. Journal of Banking & Finance, 73, 131-146.
- Fan, J. P. H., & Wong, T. J. (2002). Corporate ownership structure and the informativeness of accounting earnings in East Asia. Journal of Accounting and Economics, 33(3), 401-425.
- Garcia-Sanchez, I.-M., Cuadrado-Ballesteros, B., & Sepulveda, C. (2014). Does media pressure moderate CSR disclosures by external directors? Management Decision, 52(6), 1014-1045.
- Ghazali, N. A. M. (2007). Ownership structure and corporate social responsibility disclosure: Some Malaysian evidence. Corporate Governance, 7(3), 251-266.
- GlobeAsia. (2019). Family businesses: Maintaining relevance in the modern era. BeritaSatu Media Holdings, Jakarta.
- Gómez-Mejía, L. R., Cruz, C., & Imperatore, C. (2014). Financial reporting and the protection of socioemotional wealth in family-controlled firms. European Accounting Review, 23(3), 387-402.
- Gomez-Mejia, L. R., Cruz, C., Berrone, P., & De Castro, J. (2011). The bind that ties: Socioemotional wealth preservation in family firms. The Academy of Management Annals, 5(1), 653-707.
- Gómez-Mejía, L. R., Haynes, K. T., Núñez-Nickel, M., Jacobson, K. J. L., & Moyano-Fuentes, J. (2007). Socioemotional wealth and business risks in family-controlled firms: Evidence from Spanish olive oil mills. Administrative Science Quarterly, 52(1), 106-137.
- Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of Accounting & Economics, 40(1-3), 3-73.
- Gray, R., Kouhy, R., & Lavers, S. (1995). Corporate social and environmental reporting a review of the literature and a longitudinal study of UK disclosure. Accounting, Auditing and Accountability Journal, 8(2), 47-77.
- Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure and the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Economics, 31(1-3), 405-440.
- Ibrahim, N., & Angelidis, J. (1995). The corporate social responsiveness orientation of board members: Are there differences between inside and outside directors? Journal of Business Ethics, 14, 405-410.
- Iyer, V., & Lulseged, A. (2013). Does family status impact US firms’ sustainability reporting? Sustainability Accounting, Management and Policy Journal, 4(2), 163-189.
- Jensen, M. C. (1993). The modern industrial revolution, exit and the failure of internal control systems. Journal of Finance, 48(3), 831-880.
- Jizi, M. (2017). The influence of board composition on sustainability development disclosure. Business Strategy and the Environment, 26(5), 640-655.
- Joni, J., Ahmed, K., & Hamilton, J. (2020). Politically connected boards, family business groups and firm performance: Evidence from Indonesia. Journal of Accounting & Organizational Change, 16(1), 93-121.
- Lam, K., Mok, H. M. K., Cheung, I., & Yam, H. C. S. (1994). Family groupings on performance of portfolio selection in the Hong Kong stock market. Journal of Banking and Finance, 18(4), 725-742.
- Li, S., Fetscherin, M., Alon, I., Lattemann, C., & Yeh, K. (2010). Corporate social responsibility in emerging markets. Management International Review, 50(5), 635-654.
- Lipton, M., & Lorch, J. (1992). A modest proposal for improved corporate governance. The Business Lawyer, 48(1), 59-77.
- Mallin, C., & Michelon, G. (2011). Board reputation attributes and corporate social performance: An empirical investigation of the US best corporate citizens. Accounting and Business Research, 41(2), 119-144.
- Martin, G., Campbell, J. T., & Gomez-Mejia, L. (2016). Family control, socio-emotional wealth and earnings management in publicly traded firms. Journal of Business Ethics, 133, 453-469.
- Martinez-Ferrero, J., Lozano, M. B., & Vivas, M. (2021). The impact of board cultural diversity on a firm’s commitment toward the sustainability issues of emerging countries: The mediating effect of a CSR committee. Corporate Social Responsibility and Environmental Management, 28(2), 675-685.
- Morck, R., Shleifer, A., & Vishny, R. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20(1), 293-315.
- Prencipe, A., & Bar-Yosef, S. (2011). Corporate governance and earning management in family-controlled companies. Journal of Accounting, Auditing and Finance, 26(2), 119-227.
- Ramon-Llorens, M. C., Garcia-Meca, E., & Pucheta-Martinez, M. C. (2021). Female directors on boards. The impact of faultlines on CSR reporting. Sustainability Accounting, Management and Policy Journal, 12(1), 156-183.
- Rees, W., & Rodionova, T. (2015). The influence of family ownership on corporate social responsibility: An international analysis of publicly listed companies. Corporate Governance: An International Review, 23(3), 184-202.
- Rokhmawati, A. (2020). The nexus between type of energy consumed, CO2, emissions, and carbon-related costs. International Journal of Energy, Economics and Policy, 10(4), 172-183.
- Shen, H., Zheng, S., Adams, J., & Jaggi, B. (2020). The effect stakeholders have on voluntary carbon disclosure within Chinese business organizations. Carbon Management, 11(5), 455-472.
- Stockmans, A., Lybaert, N., & Voordeckers, W. (2010). Socioemotional wealth and earnings management in private family firms. Family Business Review, 23(3), 280-294.
- Tate, G., & Yang, L. (2015). Female leadership and gender equity: Evidence from plant closure. Journal of Financial Economics, 117(1), 77-97.
- Tran, M. D., & Adomako, S. (2021). How CEO social capital drives corporate social performance: The roles of stakeholders, and CEO tenure. Corporate Social Responsibility and Environmental Management, 28(2), 819-830.
- Verrecchia, R. E. (2001). Essays on disclosure. Journal of Accounting & Economics, 32(1-3), 97-180.
- Walls, J. L., Berrone, P., & Phan, P. H. (2012). Corporate governance and environmental performance: Is there really a link? Strategic Management Journal, 33(8), 885-913.
- Wang, D. (2006). Founding family ownership and earnings quality. Journal of Accounting Research, 44(3), 619-656.
- Wennberg, K., Wiklund, J., Hellerstedt, K., & Nordqvist, M. (2011). Implications of intra-family and external ownership transfer of family firms: Short-term and long-term performance differences. Strategic Entrepreneurship Journal, 5(4), 352-372.
- Zellweger, T. M., Nason, R. S., Nordqvist, M., & Brush, C. G. (2013). Why do family firms strive for non-financial goals? An organizational identity perspective. Entrepreneurship Theory and Practice, 37(2), 229-248.