The Effect of Board Diversity on Real Earnings Management: Empirical Evidence From Jordan

Abstract

This study considers the effect of foreign board members and age diversity on real earnings management (REM), by controlling the firm size, leverage and growth. This study employed quantitative methodology and longitudinal data for non-financial business firms, quoted on the Amman Stock Exchange from 2011 to 2015. Data were analysed using descriptive statistics and Panel Corrected Standard Errors (PCSE) regression. This study found that foreign boards member, age diversity, leverage and growth had negative and significant associations with REM. Based on the results, a firm should appoint young members to the board in addition to older members to pave the way to cross-ideology that can deter REM activities. At least one foreign director should exist within the board of directors because a foreign board member has different qualifications and experiences that may help to deter REM practices.

Board Powers and Unethical Accounting of Public Quoted Corporations in Nigeria

“…Therefore, they could assist much in preventing unethical accounting. The finding is in line with the findings of Almashaqbeh et al (2019), and Musa and Aminu (2018) and contrary to the findings of Osayantin andEmbele (2019), andHooghiemstra et al (2015).…”

“…Neffati et al (2011) contend that, the high risk rises, the further the manager would be moved to manage earnings, the manager wishes to display his skills by satisfying numerous views and charming fresh investors. Almashaqbeh et al (2019) found that board capability reduces manipulative Accounting. The rise of board age assortment in the board of directors, lead toa rise in the supervising task of the board of directors, thereby lessening the practice of real earnings management.…”

“…Board nationality was found to have an adverse and substantial connection with real incomes management. A minimum of one foreign director should be present in the board for the reason that a foreign director has different experiences and qualifications that may assist to discourage real earning management practices (Almashaqbeh et al, 2019). Wicaksana et al (2017) contend that, board nationality can be used as effective and efficient corporate governance supervising mechanism in declining the level of unethical accounting in firms.…”

Internal Corporate Governance Mechanism: A Review

“…Board member variety, which includes people of diverse ages, will provide the board a sense of individuality, helping them to work together successfully to make good decisions (Ibrahim & Hanefah, 2016;Xu, Zhang, & Chen, 2018). The beneficial relationship between age diversity and company success is linked to the capability to effectively monitor the chances of falsification in financial reporting (Xu et.al, 2018;Almashaqbeh, Shaari, & Abdul-Jabbar, 2019). Directors who are young and not overworked are more effective at journal.ump.edu.my/jgi ◄ monitoring than directors who are older and overworked.…”

“…This is consistent with the stakeholder theory. In addition, a board with a larger number of ethnic groups is connected with better supervision, which is linked to a decreased inspiration to engage in the falsification of accounting information and misstatements (Nasir, Ali, & Ahmed, 2018;Almashaqbeh, Shaari, & Abdul-Jabbar, 2019). However, researchers discovered that ethnic variety makes it difficult for the directors to reach an agreement on contentious issues (Zwet & Kroos, 2015).…”