The Impact of Mandated Board Gender Diversity on Earnings Management: Evidence From California Senate Bill 826

Jiayu Sun, Xudong Tang, Han Bao and Pengdong Zhang

Australian Accounting Review, 2026, vol. 36, issue 2, 150-169

Abstract: Prior research on board gender diversity and earnings management yields mixed findings due to endogeneity concerns and institutional differences. This study exploits California's Senate Bill 826, the first mandatory board gender quota in the United States, as a regulatory shock to examine whether mandated board gender diversity is associated with accrual‐based earnings management. Using a difference‐in‐differences design, we find that firms subject to a binding SB 826 requirement increased female board representation and subsequently exhibited lower absolute discretionary accruals across three accrual models. The estimated reductions range from 21.0% to 24.2% of the sample mean. Cross‐sectional tests reveal stronger effects in firms with weaker prior governance and when new female directors have financial expertise. The study provides U.S.‐based quasi‐experimental evidence on reporting outcomes associated with mandated board gender diversity.

Date: 2026
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