"Family firms, Income smoothing and Financial Crisis: Evidence from European Countries"

The work investigates how the different utilities of corporate leaders shape firm responses as the intensity of stakeholder demands varies, challenging the assumption of invariant stakeholder demands underlying prior works in institutional fields. By comparing how the recent financial crisis affected income smoothing behaviour of family and nonfamily firms, we argue that decision makers´ diverse preference and goals will affect firms’ response to raising external pressures by influencing the extent to which changes in outsiders’ demand are perceived as a legitimacy related threat or opportunity. Empirical evidence based on a European sample during the period 2001-2010 supports our arguments. Firms are more likely to smooth earnings as capital market conditions deteriorate. Yet, family firms are less likely to do and this is particularly the case when the firm faces bad financial conditions. Moreover, by looking at performance consequences of income smoothing, we demonstrate that family firms are less like...