Ethics, Diversity Management, and Financial Reporting Quality

Abstract

ethics, diversity, diversity management, governance, financial reporting quality, earnings management, earnings quality,

Does Corporate Governance Influence Earnings Management in Latin American Markets?

“…Z statistics in parentheses Quantitative variables: Int_OWN Internal ownership, measured by the proportion of shares owned by managers and members of Boards (C1 %); OWN_Con Ownership Concentration, measured by the ratio of shares held by the major shareholder of the company (C5 %); Fam_OWN Family Ownership, measured by the proportion of shares held by family members (C5 %), as a percentage of capital that is directly or indirectly in his possession; Inst_OWN Institutional Ownership, measured by the proportion of shares held by institutional investors; Board_SIZE Size of boards of directors, measured by the total number of members of Boards; Board_IND independence of the Board, measured by the proportion of independent members (independent directors/total directors); Board_ACT Activity of Boards, measured by the number of meetings; Log_ASSET Firm size, measured by the natural logarithm of total assets of the companies; Debt Level of indebtedness, measured by the quotient resulting from gross debt to total assets, ROA Economic Return, measured by the ratio of the relation between the result before special items, interest and taxes of year t and the total net assets at the beginning of year t; GROWTH Growth of the Companies, calculated in terms of the ratio of the difference in sales and sales of the previous period of firm i in year t; GOV_Index The degree of law enforcement of each country analyzed, taken from the research project ''Worldwide Governance Indicators'' (WGI) proposed by Kaufmann et al (2010) Dichotomous variables: Boad_IND50 Measured through a dummy variable that takes value of 1 if boards has a majority of independent directors and, 0 otherwise; CEO_Dual Measured through a dummy variable that considers the value of 1 if there is duality of roles between the chairman and CEO of the companies and, 0 otherwise; Big_4 Measured by a dummy variable that takes the value 1 if the firms are audited by one of the big four firms, 0 otherwise; Loss Measured through a dummy variable that takes value of 1 if the companies have had losses in the last 2 years and, 0 otherwise *** Significant at level 1 %, ** significant at level 5 %, * significant at level 10 % effectiveness of government, this seems to influence EM negatively, i.e., it shows an increase in the quality and transparency of the financial information issued by companies, thus showing a reduction of discretionary accruals. The results are in line with those noted by Labelle et al (2010), who point to a higher level of corporate moral development being associated with higher quality financial reporting.…”

Gender and Corruption in Business

“…Soares, Marquis & Lee (2011), for example, find that businesses led by women have higher levels of corporate social responsibility. Labelle, Gargouri & Francoeur (2010) find that boardroom diversity in terms of gender results in a better standard of higher financial reporting. Hafsi & Turgut (2013) report that gender and age have a significant effect on corporate social performance.…”

Modeling Diversity Management Practices in Corporate Ethics: The Spillover Effect

“…A comprehensive literature search found only two empirical studies that examined all three components of diversity management (diversity recruitment, staffing structures, and valuing diversity) concurrently (i.e., Labelle, et al, 2010;Pitts, 2009). The first study by Pitts (2009) is not applicable here as it investigated the effects of the three components of diversity management on employee job satisfaction and employees' performance and did not examine ethics or firm performance.…”

“…Labelle and colleagues assessed diversity management through the Jantzi Research's scoring criteria, which rate Canadian corporations on 10 diversityrelated items (Labelle et al, 2010). However, none of the 10 items included racial diversity.…”

“…Corporate ethics captures the impact of a firm's external ethics and internal ethical functioning (Chun, Shin, Choi, & Kim, 2013;Kaptein, 2011). With the exception of one paper (i.e., Labelle, Gargouri, Francoeur, 2010), the ethical view has not been empirically investigated beyond conceptual propositions of an existing link between diversity practices and ethical considerations (e.g., Alder & Gilbert, 2006;Brown, Treviño, & Harrison, 2005;Gilbert et al, 1999;van Dijk et al, 2012).…”