Gender diversity and earnings management: the case of female directors with financial background

Abstract

Past evidence generally suggests that the presence of female directors on corporate boards tends to improve earnings quality due to these directors’ superior monitoring abilities. However, it is not clear which characteristics and skills of female directors drive such abilities. In this paper, we focus on the financial background of female directors, an area which remains largely unexplored in existing literature. The results show that the participation of female directors with relevant financial background improves earnings quality more than the participation of female directors without such background. In addition, our findings suggest that only female directors possessing relevant financial background and having fewer outside directorships are able to mitigate earnings management and therefore overcommitting expert female directors with more outside directorships would diminish their monitoring ability. We did not find any evidence suggesting that female directors without relevant financial background are able to mitigate earnings management, irrespective of their outside directorships or tenure. We interpret our findings within a theoretical framework that draws on a number of economic and social theories. The results are generally robust after controlling for potential endogeneity problems.

Corporate governance, working capital management, and firm performance: Some new insights from agency theory

“…Composition of the board is considered to be one of the CG attributes that ensure the existence of appropriate balance of power on the board, for the reason that the dominance of an individual or a group of individuals in the board decision making process can be avoided (Zalata et al, 2021). Boards are considered to be effective and independent, when most of the directors on boards are outside independent directors, when outside independent directors do not share major family relationships, professional services, financial relationships, employment, and interlocked directorships with the management team (Ayuso & Argandoña, 2009; Shivdasani & Zenner, 2004).…”

The impact of board characteristics on the extent of earnings management: conditional evidence from quantile regressions

“…Prior studies pointed out that female directors' presence on the board consolidates their efficiency and effectiveness (Zalata et al, 2019(Zalata et al, , 2022. Women are assumed to be more ethically minded than their male counterparts and are expected to abstain from unethical activities such as EM (Komal et al, 2021;Nekhili et al, 2022).…”

لجنة المراجعة الفعالة وجودة التقاریر المالیة: الأثر الوسیط لجودة المراجعة دلیل من المملکة العربیة السعودیة(باللغة الانجلیزیة)

“…Some studies found a positive association between gender diversity in the audit committee on the quality of financial reports (e.g., Gul et al, 2007;Wahid, 2019). In contrast, some studies have found that women members in the audit committee negatively affect financial reports' quality (e.g., Ud Din et al, 2021;Zalata, 2022).…”