The monitoring role of female directors over accounting quality

Abstract

Recent research in accounting suggests female directors exert more stringent monitoring over the financial reporting process than their male counterparts. However, an emerging literature in finance and economics provides mixed findings and questions whether females in leadership roles significantly differ from their male counterparts. Building on this literature, we reexamine the link between the presence of female directors, gender biases, and financial statements quality. Using a large sample of UK firms we find that a larger percentage of women among independent directors is significantly associated with lower earnings management practices. However, we show that this relation disappears if we focus on firms that do not discriminate against women in the access to directorships. Finally, we provide evidence that gender biases are associated with lower earnings quality. We interpret our results as consistent with (1) prior evidence that males and females do not differ substantially when performing the same role in highly specialized positions, and with (2) discrimination being an important factor explaining the association between female directors and accounting quality.

Gender diversity in the audit committee and the efficiency of internal control and financial reporting quality

“…The AC oversees the internal audit and the ICS process and implementation (Goh, 2009). Moreover, independent female directors reduce earnings management practices (Garc ıa Lara et al, 2017). Gender diversity on boards and an efficient ICS mechanism mitigate agency conflict.…”

Does broad gender diversity affect corporate social responsibility disclosures?

“…They are also considered to be tough individuals due to the prior career challenges that must to overcome before holding board seats (Krishnan & Park, 2005). Reguera-Alvarado et al (2017) added that the increasing number of female on the board position produces higher economic results and the quality of earnings (Srinidhi et al, 2011;Hili & Affess, 2012), enhances the monitoring of directors and shareholder (García Lara et al, 2017), and corporate board effectiveness (Pucheta-Martínez et al, 2016;Huang et al, 2019).…”

El efecto de factores de gobierno corporativo en la calidad de la información financiera en empresas familiares y no familiares

“…In addition, lower levels of earnings management were found in firms in countries where concern with the theme of gender diversity is highest (Kyaw et al, 2015). Thus, the representation of women on the board of directors may be associated with better governance practices, aspects which may influence internal control systems and consequently the quality of financial information (Adams & Ferreira, 2009;Caravaca-Sánchez et al, 2012;Gallego-Álvarez et al, 2010;García-Lara et al, 2017;Pucheta-Martínez et al, 2018). In line with the above arguments, the following research hypothesis can be formally stated:…”

“…We used discretionary accruals as an approximate measure of the quality of financial information (Cascino et al, 2010;Gavana et al, 2017;Mazzioni et al, 2016;Moura et al, 2014;Silva & Costa, 2017) measured by Jones' modified model (Dechow et al, 1995) in its cross-section version, which is estimated by activity sector and year. This model has been used in recent studies (Arun et al, 2015;Ferramosca & Allegrini, 2018;García-Lara et al, 2017). The application of the model, presented in equation 1, consists of calculating total accruals via the difference between the result of the period before outstanding items and cash flow from operations for each firm-year.…”

“…The quality of financial information, taken to be reports on financial performance that are relevant and can be useful in assisting users in decision-making, has been the subject of increasing interest (García-Lara et al, 2017;Gavana et al, 2017). Empirical evidence reveals that the quality of financial reporting depends on the type of firm or the business context (Dechow et al, 2010).…”