Outside the Family: The Impact of Non-Family CEOs on Accounting Irregularities in Family Businesses

Introduction. Family businesses are increasingly appointing non-family CEOs to navigate corporate governance complexities and ensure legacy continuity. New dynamics are being introduced that affect the ethical landscape of the firm and the propensity for corporate misconduct. Despite growing literature on non-family CEOs in family firm’s, their influence on corporate misconduct, particularly in relation to financial health and market competition, remains underexplored. Purpose. The study should reveal the effect of non-family CEOs on accounting irregularities in family businesses, focusing on the moderating effects of financial health and competitive market environment. Methods. The research employs a combination of descriptive statistics, correlation analysis, t-tests, and multivariate regression analysis to examine the relationship between non-family CEOs and corporate misconduct. Robustness tests, including alternative dependent variable specifications, propensity score matching (PSM), and redefining the family firm, ensure the reliability of the findings. Results. The study finds that non-family CEOs are more likely to engage in corporate misconduct, particularly in financially healthy firms and less competitive markets. On average, 17.1 % of listed family firms in China exhibited misconduct behavior between 2008 and 2022, with a frequency of 0.234. The correlation coefficients between the likelihood of misconduct and the key independent variable and between the frequency of misconduct and PCEO are significantly positive at the 1% level. T-tests show a statistically significant difference between family firms with family CEOs and those with non-family CEOs for both the likelihood of violation and the frequency of violations. Multivariate regression analysis confirms that non-family CEOs are positively and significantly associated with both the likelihood and frequency of corporate violations at the 1 % significance level. Prospects. Future research could explore the role of non-family CEOs in different economic and cultural contexts, investigate the long-term effects of non-family CEO leadership on family firm performance and sustainability.