Board Gender Diversity and Internal Control Weaknesses

Chen, Yu; Eshleman, John Daniel; Soileau, Jared S.

doi:10.1016/j.adiac.2016.04.005

Cited by 83 publications

(94 citation statements)

References 58 publications

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“…The findings in panel A show that 45% of the final sample of 1,494 firm‐year observations reported ICWs. Although this percentage is considerably different from that of Chen et al () in the United States (19%), in contrast, it is not noticeably different from that of Ji et al () in China (52%). Also, the mean number of ICWs (NUM‐ICWs) is 1,596.…”

Section: Resultscontrasting

confidence: 79%

“…We include measures of firm complexity, such as the client's business segment diversification (DIVERSIFICATION) and foreign operations (FOREIGN). Along the same lines, we control for other firm characteristics based on prior literature, including firm size (SIZE), sales growth (SG), inventory (INVT), and firm age (FIRMAGE; Ashbaugh‐Skaife et al, ; Hoitash, Hoitash, & Bedard, ; Chen, Eshleman, & Soileau, , ). The model controls for the financial health of the client via indicator variables for losses in the current year (LOSS) and the prior year (LAGLOSS) as well as financial distress (ZSCORE; Chen, Eshleman, et al, ; Ashbaugh‐Skaife et al, ).…”

Section: Methodsmentioning

confidence: 99%

“…< .10.; ** p < .05.; *** p < .01. signs of the control variables are generally in line with prior literature.Specifically, ICWs are negatively linked with foreign operations, financial health, board independence, and ownership concentration(Ashbaugh-Skaife et al, 2007;Johnstone et al, 2011;Chen, Knechel, et al, 2017;Ji et al, 2015) and positively related to firm size, loss, restatement, and litigation risk(Ashbaugh-Skaife et al, 2007;Chen et al, 2016;Chen, Eshleman, et al, 2017).…”

mentioning

confidence: 99%

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CEO financial background and internal control weaknesses

Oradi

Asiaei

Rezaee

2020

Corporate Governance

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Research question/issue The existing literature documents that the functional expertise of Chief Executive Officers (CEOs) in finance reduces poor performance risk, improves financial reporting quality, and mitigates audit risk. In this study, we examine the association between CEOs' financial background and internal control weaknesses (ICWs). Research findings/insights Using a sample of Iranian listed companies for the period 2007–2017, we find a significant negative association between CEOs with financial expertise and ICWs. Furthermore, we show that the negative association between CEO financial expertise and ICWs is stronger if the CEO is recruited from inside the firm. Our main results are robust after controlling for the potential selection issue, random effects at the firm level, and the impact of the new Iranian internal control regulations. Moreover, our results remain unchanged after controlling for other CEO characteristics, audit committee characteristics, audit fees, and using an alternative measure of financial expertise. Theoretical/academic implications Our study contributes to the extant literature by examining the association between CEOs' financial background and ICWs, a theme that remains largely unexplored in previous research. We also extend the literature on CEO succession origin. Practitioner/policy implications This study has important implications for regulators regarding the improvement of financial reporting quality and the effectiveness of internal controls, especially in the emerging markets. Particularly, our findings may be of benefit to auditors when assessing the risks regarding their clients' material weaknesses, as well as to shareholders and boards of directors when hiring a new CEO.

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Section: Resultscontrasting

confidence: 79%

Section: Methodsmentioning

confidence: 99%

mentioning

confidence: 99%

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CEO financial background and internal control weaknesses

Oradi

Asiaei

Rezaee

2020

Corporate Governance

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“…Chen et al . () report that female board members reduce the likelihood of material weakness disclosures. In opposite Parker et al .…”

Section: Resultsmentioning

confidence: 99%

Corporate Social Responsibility and Internal Control Effectiveness

Kim

2017

Asia-Pac J of Fin Stud

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This study empirically examines whether corporate social responsible firms exhibit more effective internal control over financial reporting. Specifically, we investigate whether socially responsible firms apply business practices to ensure financial transparency and accountability for their stakeholders. Using various measures of corporate social responsibility (CSR) and a battery of robust regression analysis over the period from 2004 to 2012, we find that CSR firms are more likely to have effective internal control under Section 404 of the Sarbanes-Oxley Act (SOX). Our results are robust to the propensity matching of firm characteristics, considering various measures of CSR, and adjusting for several endogenous problems.

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“…Appointing female directors is highly associated with a board's effectiveness (Adams and Ferreira 2009;Jurkus et al 2011;Abbot et al 2012;Srinidhi et al 2011;Kyaw et al 2015;Chen et al 2016) in terms of: (1) better governance and a good atmosphere in the board room; (2) accountability and transparency in financial reporting; (3) improved decision-making in investment and financing decisions. Appointing female directors to firms with strong governance, which is proxied by the large firms, leads to the problem of over-monitoring.…”

Section: Firm Size Effectmentioning

confidence: 99%

Female Directors and Firm Performance: Evidence from UK Listed Firms

Pasaribu

2017

GADJAH MADA INT. J. BUS.

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Abstract:The impact of female directors on firm performance has lacked consistency in the previously conducted empirical studies, which may be due to the endogeneity problem, or certain characteristics (i.e. governance, industry, competition). This study examines the relationship between female directors and firm performance by addressing those problems. This study analyses all non-financial UK listed firms during the period 2004-2012 and employs several econometric models. The regression results indicate that there is little evidence that female directors have a positive and strong relationship with firm performance. But, further analysis reports that the UK's small listed firms experience a positive significant effect, because small firms do not suffer from the problem of over-monitoring and they have more flexibility in composing their boards of directors.

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Board Gender Diversity and Internal Control Weaknesses

Cited by 83 publications

References 58 publications

CEO financial background and internal control weaknesses

CEO financial background and internal control weaknesses

Corporate Social Responsibility and Internal Control Effectiveness

Female Directors and Firm Performance: Evidence from UK Listed Firms

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