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The objective of this study is to understand the linkages among executive compensation, corporate governance and performance of the Indian family and non-family firms. Further, the study also analyzes the level of shareholding pattern of the Indian family firms on their performance and the executive compensation.

The authors have collected panel data of the companies listed on the National Stock Exchange of India Limited. The data set consists of 284 companies (both family and non-family) for the period 2005–2014. The authors have made use of a dynamic panel data model with generalized method of moments (GMM) estimation to formulate the hypotheses and used fixed-effects regression model to check the robustness of our findings.

The authors find support for the agency theory, stewardship theory and resource dependence theory in the paper. Specifically, variables related to executive compensation, corporate governance (board size, proportion of independent directors on board, chief executive officers duality and other directorships held by the executive directors outside the company), firm performance (Tobin’s Q), leverage and shareholding pattern of the family are significant in this study.

The study has practical implications for all stakeholders of the family and non-family firms, especially in the emerging market economies. It can be used as a reference guide by various other stakeholders of the family firms, viz., customers, educators, tax authorities, government and society.

The authors confirm that their research is original and provides valuable insights on the Indian family firms. The authors study cross-holding of directorships, inter alia, in the Indian family business groups. As most of the previous studies in the Indian context ignored this important aspect, this study is unique in nature.

Given the unique nature of Indian family firms and the recent failure of many business houses (Bhushan Steel Ltd., Hotel Leela Ventures Ltd. etc.) it is important to understand the relationship between the earnings management practices of the family firms and the debt. In this paper an attempt towards this has been made.

This study makes use of an empirical approach to understand the relationship between earnings management and debt in the Indian context. This study was conducted by considering a large sample data of 16,629 family firm years spread across nine years. This study makes use of fixed effects and Generalized Method of Moments (GMM) regressions to test our hypothesis.

First and foremost, this research supports the socioemotional wealth theory. It indicates that maintaining the control of the business is one of the socioemotional factors for the Indian family business and Indian family businesses ladened with debt engage in earnings management to protect their socio emotional wealth (control of the business). Evidence for higher earnings management practices for firms with above average debt has also been documented. Further, the fact that real activity earnings management is the preferred earnings management choice over the accrual-based earnings management as majority of debt is from the banks and financial institutions has also been demonstrated. Finally, the analysis indicates that accrual-based earnings management and real activity earnings management are complementary to each other. However, real activity earnings management can also act as a substitute for the accrual-based earnings management but the reverse is not true. Even among the real activity earnings management, cost-based real activity earnings management was preferred over the revenue-based real activity earnings management as the former is more elusory.

This research is limited to the listed family firms of India. Since the family firms around the world are heterogeneous the findings from this research might not be extended to other economies.

The study has meaningful insights for policy making and monitoring of the family firms. It also aides the investors in taking investment decisions with respect to family firms in India.

The study is unique as it integrates the family firms, debt and various types earnings management. Previous studies have focused mainly on accrual-based earnings management. The study also provides insights on the relationship between earnings management practices and debt covenants at various levels of family holdings.

The purpose of this paper is to examine the relationship between accounting conservatism and pledging of shares by controlling shareholders of a firm to obtain a loan. The pledging of shares by the controlling shareholders of a firm results in alterations to the payoff and risk structure for these shareholders. Since accounting numbers have valuation implications, pledging of shares by a controlling shareholder has an impact on accounting policy choices made by the firm. The purpose of this paper is to examine the impact of controlling shareholder share pledging to obtain a loan on a specific accounting policy choice, namely, conservatism.

The paper uses a large data set from India comprising 14,786 firm years consisting of 1,570 firms belonging to 58 industries for a period of 11 years (2009–2019). The authors use ordinary least square regression with robust standard errors. The authors conduct robustness checks and the results are consistent across alternative statistical methodologies and alternative measures of the primary dependent and independent variables.

The primary results show that pledging of shares by the controlling shareholders results in higher conditional conservatism and lower unconditional conservatism. Further analysis reveals that the relationship is stronger when the controlling shareholder holds a majority ownership in the firm. Additionally, the results show that for business group affiliated firms, which are unique to developing countries, both the conditional and the unconditional conservatism are incrementally lower when the controlling shareholder pledges the shares. For family firms with a family member as CEO, the conditional conservatism is incrementally higher and the unconditional conservatism is incrementally lower. Finally, the authors show that the results hold when the pledge intensity variable is measured with a one-year lag and finally, the authors show that conditional conservatism is incrementally higher in the year of the increase in the pledge and the year after, but there is no such incremental impact on unconditional conservatism.

The research is limited to the listed firms in India. Since majority of the listed firms are controlled by families and the family firms around the world are heterogeneous the findings of the research may not be applicable to other countries.

The study has implications for policy-making and monitoring of the pledging by the controlling shareholders. It also helps the investors in making investment decisions with respect to family firms in India.

The study is unique as it focuses on the relationship between pledging of shares by the controlling shareholders and its impact on accounting conservatism. To the best of the authors’ knowledge, this is the first research integrating these two aspects.