Compared to non-family firms, family firms face less severe agency problems due to the separation
of ownership and management, but more severe agency problems that arise between controlling and
non-controlling shareholders. These characteristics of family firms affect their corporate disclosure
practices. For S&P 500 firms, we show that family firms report better quality earnings, are more
likely to warn for a given magnitude of bad news, but make fewer disclosures about their corporate
governance practices. Consistent with family firms making better financial disclosures, we find that
family firms have larger analyst following, more informative analysts’ forecasts, and smaller bid-ask
spreads.