Bank diversification and earnings management: the moderating effect of female directors

Nozha Merzki and Mouna Ben Rejeb

Review of Accounting and Finance, 2023, vol. 22, issue 4, 425-448

Abstract: Purpose - This paper aims to investigate the effect of banking activities diversification on earnings management practices and the effect of female directors on this relationship. Design/methodology/approach - Based on a sample of 122 banks operating in Middle East and North African countries from 2006 to 2018, we use dynamic panel model estimated with generalized method of moments approach to deal with endogeneity issues surrounding the diversification decision. Findings - The results show that diversification increases earnings management and that the presence of female directors on board moderates this relationship. In particular, female managers tend to reduce earnings management practices in diversified banks. Further, diversified conventional banks appear to be more impacted on the earnings management practices than on Islamic banks. Originality/value - The study extends previous research by investigating the relationship between earnings management and diversification of banking activities in emerging countries where earnings management cannot be easily detected and diversification strategy is widely used. It, also, explains this relationship via the moderating effect of female directors as a banks’ internal governance mechanism.

Keywords: Diversification; Earnings management; Female directors (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:rafpps:raf-08-2022-0223

DOI: 10.1108/RAF-08-2022-0223

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