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

Alaa Mansour Zalata (), Collins Ntim, Mostafa Hussien Alsohagy and John Malagila
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Alaa Mansour Zalata: University of Southampton
Mostafa Hussien Alsohagy: University of Westminster
John Malagila: University of Southampton

Review of Quantitative Finance and Accounting, 2022, vol. 58, issue 1, No 4, 136 pages

Abstract: 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.

Keywords: Earnings management; Female directors; Financial expertise; Economic versus social theories (search for similar items in EconPapers)
JEL-codes: G34 J16 M41 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (19)

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DOI: 10.1007/s11156-021-00991-4

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