Audit committee gender differences and earnings management

Abstract

Purpose -The purpose of this paper is to investigate whether gender diversity of audit committees has a significant impact on the firm's earnings management. Design/methodology/approach -This paper uses a performance-adjusted discretionary accrual model to examine the association between gender variables and the firm's earnings management. Regression analysis is applied using 320 firms from the S&P Small Cap 600. Findings -The authors find consistent evidence to show that the presence of a female director on the audit committee constrains earnings management by increasing negative (income-decreasing) discretionary accruals. Research limitations/implications -Future research can explore the behavior of female managers by applying the gender theory. Furthermore, the paper's evidence has implications for regulators and policy makers, since the presence of a female director in the audit committee may affect management decisions and audit quality in a positive way. Therefore, gender diversity on the board should be more strongly emphasized. Moreover, the presence of female members on the board may further enhance public confidence. Originality/value -This research contributes to the existing literature on gender in four aspects. First, this research provides new evidence to reinforce the existing gender literature that women are more risk averse, cautious and ethical than men. Second, the findings showcase that gender theory can be applied into the research of management behavior. Third, the findings are significantly important in contemporary corporate governance discussions over the SOX enactment and audit committee characteristics Fourth, this study sheds further light on the importance of having women on corporate boards and the positive outcomes that are associated with it, thereby serving as an encouraging force against the existence of the glass ceiling effect.

Female directors and earnings management: Evidence from UK companies

“…In a similar vein, Krishnan and Parsons (2008) found that the quality of earnings management is higher for firms with more female directors, and argued that women are likely to be more ethical in their judgement and behaviour than men. However, in contrast to these findings, Sun et al (2011) found no evidence of the impact of female representation on audit committees and earnings management, while Thiruvadi and Huang (2011) found that the presence of female directors on the audit committee is negatively related to earnings management. In light of the differing views, we are enquiring into the relationship between female directors and earnings management in the UK.…”

Gender Diversity of Audit Committees and Audit Fees: Evidence from Chinese Listed Companies

“…GENDER is the explanatory variable representing the audit committee's gender diversity. As per Ittonen, et al (2010) and Thiruvadi and Huang (2011), we use three proxies to measure diversity: FSIZE denotes the number of women members; FEM is a dummy variable set to 1 if there is at least one female on the audit committee; and FPCT denotes the percentage of female members to total number of directors on the committee.…”

“…independence, expertise and activity) and association between audit committee quality, auditor independence and internal control (Bedard, Chtourou & Courteau, 2004;Carcello & Neal, 2000;Zhang, Zhou & Zhou,2007). Recently, some studies find that gender diversity of audit committees plays an important role in corporate governance (Gavious, Segev& Yosef, 2012;Ittonenet al 2010;Thiruvadi & Huang, 2011), but these studies are based on U.S. data and generally do not examine situations unique to emerging and transitional nations, thus their findings may not be applicable to Chinese firms.…”

Women in Board of Directors and Real Earnings Management: Accretive Share Buyback in Malaysia

“…Regarding earnings management, prior studies reveal that the quality of earnings is higher for firms with more women directors (Krishnan & Parsons, 2008;Peni & Vähämaa, 2010;Thiruvadi & Hua-Wei Huang, 2011). Further, Gavious et al (2012) and Barua, Davidson, Rama, and Thiruvadi (2010) reveal that firms with women CEOs have fewer earnings management than those with males, and document a negative relationship between women executives and earnings management.…”