CEO excess compensation and accounting conservatism nexus: The governance role of family ownership in French firms

Abstract

This study examines the relationship between excessive chief executive officer (CEO) compensation and accounting conservatism. It further investigates the moderating role of family ownership in influencing this relationship within French-listed firms. The study adopts an empirical quantitative approach using a sample of 196 firms listed on the CAC All-Shares index from 2018 to 2025. To address potential endogeneity concerns, the analysis employs the two-stage least squares (2SLS) regression method. The results indicate that higher levels of excessive CEO compensation are associated with lower levels of accounting conservatism, suggesting that highly compensated executives may engage in less prudent financial reporting. Conversely, family ownership is found to enhance accounting conservatism and mitigate the negative impact of excessive CEO compensation on conservative reporting practices. The findings provide valuable insights for regulators, investors, and corporate boards by highlighting the importance of ownership structure in maintaining financial reporting quality and strengthening governance mechanisms. This study contributes to the corporate governance and accounting literature by providing empirical evidence on the interaction between excessive executive compensation, family ownership, and accounting conservatism in the context of the French market, where family-controlled firms are highly prevalent.