Eponymous Family Firms’ Reputation Concerns and Auditor Choice: Evidence from the FTSE Italia All-Share

ABSTRACT

Considering family firm heterogeneity and drawing on signaling theory, we examine how family firms’ reputation concerns impact their auditor choices. The sample comprises 891 family firm year observations, for 96 family firms, extracted from 132 Italian nonfinancial listed firms, and for the period 2010 to 2020. Using eponymy as our proxy for family firms with stronger reputation concerns, as expected, we find that compared to noneponymous family firms, eponymous family firms are associated with higher quality auditors (Big 4 auditors and audit industry specialists). This association is robust to a battery of sensitivity and robustness tests, including alternative definitions of family firms and alternative measures of audit industry specialization. Cross-sectional tests further show that the association persists across both stronger and weaker internal corporate governance environments, suggesting that the reputational signaling role of eponymy is not dependent on specific internal governance configurations.

Data Availability: Data used in this study were collected from publicly available sources.

JEL Classifications: G34; M42.