Abstract

This research aims to address a persistent challenge within the realm of initial public offerings (IPOs), namely, the asymmetry of information between IPO issuers and prospective investors regarding the future financial performance of companies. Specifically, the study investigates how various attributes of family governance, such as family monitoring, the presence of a family chairman, and the appointment of a family CEO, affect the accuracy of forecasted earnings. Employing the ordinary least squares (OLS) regression method, the research analyses data from 330 Malaysian IPOs listed between 2002 and January 2019. The findings suggest that forecasted earnings tend to be more precise for companies under family control compared to those without family involvement. Additionally, family control demonstrates a negative correlation with earnings forecast errors, indicating a positive association with the accuracy of earnings forecasts. Moreover, the examination of family governance variables indicates that family monitoring, the presence of a family chairman, and the appointment of a family CEO positively impact the accuracy of earnings forecasts. Notably, however, only the relationship with the presence of a family CEO is statistically significant. This study extends existing literature in the fields of accounting, finance, family business, and corporate governance. It particularly contributes by focusing on the context of a developing country, Malaysia. The implications of these findings are twofold: firstly, they inform policymakers about potential enhancements to regulations concerning the disclosure of forecasted earnings. Secondly, they offer insights for traders and investors to make more informed decisions. Furthermore, the study underscores the significance of family involvement as a control mechanism for companies in terms of governance monitoring.