The moderating effect of institutional ownership on the impact of board independence and gender diversity on earnings quality in India: a static and dynamic panel regression analysis

Nimisha Kapoor and Sandeep Goel

Applied Economics, 2025, vol. 57, issue 15, 1655-1669

Abstract: The present study empirically examines the moderating effect of institutional ownership (IO) on the impact of board independence (BI) and gender diversity (GD) on earnings management (EM) practices of large listed companies in an emerging economy like India. To test the moderating effect of IO, it examines the agility of the relationship between IO and EM, especially the monitoring efficiency of Domestic Institutional Investment (DII) vis-à-vis Foreign Institutional Investment (FII). The study employs static and dynamic panel-data analysis to examine the importance of institutional ownership and its confounding effect in influencing the quality of earnings among large public companies in India. The results indicate that institutional ownership positively moderates the relationship between board independence, gender diversity and earnings quality in Indian enterprises with testable ‘agency’ propositions. It further shows that institutional ownership as a whole and DII are more effective at monitoring earnings management in Indian firms with a positive correlation with earnings quality, validating monitoring hypothesis. The study has wider economic implications as it aids firms in concentrating on increasing institutional ownership to lessen ‘agency’ conflict and raise quality of earnings, both of which will enhance the firm value for shareholders.

Date: 2025
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DOI: 10.1080/00036846.2024.2449218

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