The Specific Role and Value of Accounting within the Private Firm Context

Dear colleagues, 

‘Decent work and economic growth’ is one of the 17 Sustainable Development Goals. Given that private firms are considered to be one of the main growth engines of an economy (Worldbank, 2019), it is of utmost importance that people and other institutions keep investing in private firms. In this regard, reliability of accounting information or financial statements of these firms is highly relevant. The absence of stock prices and analyst reports make the private firm’s stakeholders almost fully dependent on financial statements. Therefore, this Special Issue aims to examine the specific role and value of accounting within the private firm context. 

The value of financial accounting was long considered minimal for private firms. Shareholders were supposed to obtain the required information directly, by participating in management or through the close (family) relationships that exist within these firms (Fama and Jensen 1983), whereas debtholders were expected to obtain this information throughout their alleged long-term relationship with the private firm (Anderson and Reeb 2003). 

Over the years, more and more studies indicated that financial statements are very important for private firms as well (e.g., Allee and Yohn 2009) given the existence of information asymmetries, entrenchment, family related agency conflicts, altruism, generational conflicts, self-control problems, etc. that may impact the reliability of the financial statements (Chrisman, Chua, Kellermanns, and Chang 2007; Collis 2012). However, the actual value of financial accounting in private firms remains insufficiently examined (e.g., Carey, Simnett, and Tanewski 2000; Niskanen, Karjalainen, and Niskanen 2011; Corten, Steijvers, and Lybaert 2015, 2017a). More specifically, most studies examining the role of accounting for private firms make a direct comparison with listed firms. While valuable, this often led to very general results, in which the group of private firms was considered to be a homogeneous group. Evidently, this is not the case. There is a very large variety of private firms (including start-ups, scale-ups, family firms, large privately owned multinationals, etc.). In order to fully understand the role and value of accounting for private firms, this heterogeneity among private firms has to be taken into account. 

In this Special Issue, we are therefore interested in explaining, optimizing, contextualizing, etc. the importance of accounting (broadly defined, so including auditing) in private firms using traditional theoretical frameworks such as agency theory and information theory, but also by embracing new theories. Moreover, while the influence of the accountant or auditor is often examined in isolation, the work they do involves a lot of interactions with stakeholders of their client (shareholders, the board of directors, management, etc.). All these interactions may affect the quality of the financial statements, as well as how this quality is perceived. It would be interesting to obtain additional knowledge on how management, the board of directors, shareholders, and other stakeholders interact with the accountant and/or auditor and how this may affect accounting outcomes.

Prof. Dr. Tensie Steijvers
Prof. Dr. Maarten Corten
Guest Editors

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• Private (family) firms
• SMEs
• Financial reporting quality
• Voluntary disclosure
• Earnings management
• Audit quality
• Corporate governance
• Accountant