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Keywords:
Gender Diversity
Earnings Management Practices
Women in Governance Structure
ABSTRACT
We examine the role of gender diverse corporate board, audit committee and senior management in curtailing earnings management practices in view of gender socialization theory through dynamic panel estimation model of Blundell and Bond (1998).We estimate discretionary accruals through the well-known model of Kothari, Leone, and Wesley (2005).Using a sample of 100 listed non-financial firms over the period of 2013 to 2018, we document the negative association of gender diverse corporate board with earnings manipulative practices. Evidence also reveals that women with audit committee membership reduces the problem of manipulative practices related to earnings. Interestingly, the results show that gender diverse corporate boards further strengthen the effectiveness of women as a member of audit committee in curtailing earnings management practices. Further, female CEOs are strongly inclined to reduce earnings management thereby ensuring an effective and transparent managerial decisions.
INTRODUCTION
The corporations are usually evaluated by their shareholders on the bases of the earnings reporting practices (Kouaib & Almulhim, 2019). The week control of shareholders over the management results fraudulent earnings management activities adopted by the senior management (Dong, Wang, Zhang, & Zhou, 2020).These duplicitous management practices have resulted large scale notorious financial scams in the corporations such as Enron, WorldCom of the developed countries. So, by considering the importance of this phenomenon, a growing body of empirical research has emerged in the context of the developed countries and explored the growing influence of managers in misstating corporate financial information(Harris, Karl, & Lawrence, 2019; Fan, Jiang, Zhang, & Zhou, 2019). The scholarly research has identified that corporate managers exploit their discretionary powers for their personal gains and their opportunistic behaviour leads to earnings management practices (Gull et al., 2018).The existing literature supported the well-established notion that gender diversity is substitute monitoring mechanism that can restrict the opportunistic behaviour of management. Theoretically, gender socialization theory postulates that females are conservative risk takers and more likely to abide ethical standards. Hence, the gender diversity plays a pivotal role in curtailing opportunistic approach of management (Kouaib & Almulhim, 2019). On the other side, agency theory also suggests that the presence of women in governance structure results better financial reporting standards (Fan, Jiang, Zhang, & Zhou, 2019). Several...