Discussion of: “Family Ownership and the Accrual Anomaly”

Aoun, Doukakis, and Papanastasopoulos (2025) (ADP) explore the extent to which family ownership affects the accrual anomaly     namely, the negative relation between accruals and subsequent stock returns, commonly attributed to investor mispricing of the accrual component of earnings (Sloan, 1996). Using a large international dataset of 27,117 firm-year observations across 34 capital markets from 2007 to 2017, the authors document that the anomaly is more pronounced in family firms. Specifically, their findings suggest that in such firms, accruals are less persistent and more mispriced, yielding higher abnormal hedge returns relative to their nonfamily counterparts. The authors propose three possible mechanisms behind this pattern: (a) reduced accrual persistence (potentially due to earnings management), (b) behavioral underreaction by investors, and (c) limits to arbitrage. The paper establishes a link between family ownership and returns predictability based on accounting information, offering a contribution at the intersection between the asset pricing and corporate governance literatures. Moreover, this topic is particularly relevant given the global presence of family-controlled firms (La Porta et al., 1999; Faccio & Lang, 2002; Franks & Mayer, 2018; Villalonga & Amit, 2006, 2009). In what follows, we highlight several observations to guide future research.