Board of director’s gender diversity and its impact on earnings management: an empirical analysis for select European firms
Abstract
From a corporate governance point of view, this paper addresses the question about how board gender diversity influences managerial opportunistic behavior for solving agency conflicts from a sample of European countries. Specifically, we analyzed indexed non-financial companies from Denmark, Finland, France, Germany, Italy, Norway, Portugal, Spain, Sweden, and United Kingdom for the period 2006–2016. Several panel data techniques are used in the empirical analysis to deal with the endogeneity and heterogeneity problems. To the best of our knowledge our research is novel in the literature by providing a multi-country approach in board gender diversity, as well as considering contextual country variables and the role of the regulatory system as determinants of earnings management.
Our results confirm the benefits of having a balanced board in terms of gender diversity. An equilibrated board tends to mitigate earnings management practices, reinforcing the value of the laws passed in recent decades in Europe. Our analysis reveals that the regulatory framework regarding board gender diversity established by each country has a determinant role in reaching equality in decision-making positions, as a founding value of the European Union. We provide several policy recommendations from our main findings.
Keyword : earnings management, corporate governance, gender diversity, board composition, female quotas
How to Cite
Saona, P., Muro, L., San Martín, P., & Baier-Fuentes, H. (2019). Board of director’s gender diversity and its impact on earnings management: an empirical analysis for select European firms. Technological and Economic Development of Economy, 25(4), 634-663. https://doi.org/10.3846/tede.2019.9381
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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García, B., & Gill-de-Albornoz, B. (2007). The effect of the board composition and its monitoring committees on earnings management: Evidence from Spain. Corporate Governance: an International Review, 15(6), 1413-1428. https://doi.org/10.1111/j.1467-8683.2007.00654.x
Gavious, I., Segev, E., & Yosef, R. (2012). Female directors and earnings management in high‐technology firms. Pacific Accounting Review, 24(1), 4-32. https://doi.org/10.1108/01140581211221533
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Greene, W. (2003). Econometric analysis (5th ed.). New Jersey, USA: Prentice Hall.
Gregorič, A., Oxelheim, L., Randøy, T., & Thomsen, S. (2017). Resistance to change in the corporate elite: female directors’ appointments onto Nordic boards. Journal of Business Ethics, 141(2), 267-287. https://doi.org/10.1007/s10551-015-2703-4
Gul, F. A., Fung, S. Y. K., & Jaggi, B. (2009). Earnings quality: Some evidence on the role of auditor tenure and auditors’ industry expertise. Journal of Accounting and Economics, 47(3), 265-287. https://doi.org/10.1016/j.jacceco.2009.03.001
Gull, A. A., Nekhili, M., Nagati, H., & Chtioui, T. (2017). Beyond gender diversity: How specific attributes of female directors affect earnings management. The British Accounting Review, 50(3), 255274. https://doi.org/10.1016/j.bar.2017.09.001
Hassan, O. A. G., & Skinner, F. S. (2016). Analyst coverage: Does the listing location really matter? International Review of Financial Analysis, 46, 227-236. https://doi.org/10.1016/j.irfa.2016.05.008
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