Disclosure strategy development in financial distress

The study found that the company's financial problems preceded the development of its disclosure strategy, which was tailored to satisfy powerful stakeholders like banks. Meanwhile, internal whistleblowers acted as a low-cost way to inform weaker stakeholders like employees and suppliers.

"The company's disclosure tactics were tightly managed by the top decision-makers," explained researcher Professor Mattias Nordqvist of the House of Innovation. "They formed collaborative teams, organized stakeholders based on financial strength, and meticulously controlled the timing and content of voluntary disclosures."

Influence over information in crisis communication

The research suggests family firms use disclosure strategically to influence rather than inform stakeholders. By attributing financial difficulties to external causes, the company directed attention away from internal missteps. The presence of the family owner also reassured employees despite the uncertain future.

"Our findings indicate that voluntary disclosures are designed to shape impressions and reactions before disclosing critical events," said Professor Nordqvist. "This allows decision-makers to get ahead of the story."

Key research findings

• The strategic apex significantly influences the development of disclosure strategies in family firms, especially during crises.
• Financial distress triggers the formation of these strategies, emphasizing the role of voluntary disclosures to manage stakeholder relationships.
• Internal whistleblowers emerge as a low-cost tool for informing stakeholders, highlighting the complex dynamics in family-owned businesses.
• The strategic apex's decisions on content and timing of disclosures play a crucial role in managing public opinion and stakeholder interactions.

Policy implications and corporate transparency
The study has implications for policymakers concerned about financial reporting quality and compliance. It highlights how concentrated ownership and weak enforcement enable firms to delay transparent communication until it's too late for stakeholders to respond effectively.

Navigating crisis communication in family businesses
Overall, the research sheds light on how family businesses strategically leverage disclosure during challenging circumstances to maintain reputations and relationships. The findings from this study contribute to a deeper understanding of how family-owned firms navigate crisis communication. They highlight the need for further research on the specific roles and influences of family members within the strategic apex, the impact of such strategies on long-term business reputation, and the implications for corporate governance in family businesses.

Meet the researchers

• Mattias Sandgren: Jönköping International Business School
• Timur Uman: Jönköping International Business School
• Mattias Nordqvist: House of Innovation, Stockholm School of Economics