What's in a Name? Eponymous Private Firms and Financial Reporting Quality

This study examines the relation between financial reporting quality (FRQ) and eponymy, that is, naming a firm after the founder. We hypothesize that compared with noneponymous firms, eponymous firms have higher FRQ because of reputation concerns. Using a sample of 2,271 large Italian private firms, we document that eponymy is positively associated with accrual-based FRQ measures, a Benford's law-based FRQ measure, and a tax-related misstatement-based FRQ measure. Consistent with the reputation concern rationale, we find that the positive association between eponymy and FRQ is attributable to eponymous firms that have rarer names or receive more press coverage. Furthermore, the positive association between FRQ and eponymy is similar whether the top executives/board members belong to the founding family's first or later generations. We also find that eponymous firms are more conditionally conservative. Collectively, the results suggest that reputation concerns act as a disciplining mechanism for FRQ in private firms.