Earnings Quality of Indonesian Family Businesses

Many Indonesian firms started from family business. Many of them are now big public firms that contribute significantly to the Indonesian economy. As public firms, their reports are used by investors to value their traded shares. A firm’s reported earnings are important information for investors. This study aims to examine the earnings quality of Indonesian listed family businesses and compare this information with their counterparts. Using earnings persistence and predictability as proxies for earnings quality, this study finds that the earnings of Indonesia family businesses are less persistent than their counterpart’s earnings, due to type II agency problem and business diversification. However, there is no difference found in earnings predictability of both businesses. Thus, this study concludes that Indonesian family businesses have poor earnings quality compared to their counterparts.