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Audit committee gender differences and earnings management

Audit committee gender differences and earnings management Purpose – The purpose of this paper is to investigate whether gender diversity of audit committees has a significant impact on the firm's earnings management. Design/methodology/approach – This paper uses a performance‐adjusted discretionary accrual model to examine the association between gender variables and the firm's earnings management. Regression analysis is applied using 320 firms from the S&P Small Cap 600 . Findings – The authors find consistent evidence to show that the presence of a female director on the audit committee constrains earnings management by increasing negative (income‐decreasing) discretionary accruals. Research limitations/implications – Future research can explore the behavior of female managers by applying the gender theory. Furthermore, the paper's evidence has implications for regulators and policy makers, since the presence of a female director in the audit committee may affect management decisions and audit quality in a positive way. Therefore, gender diversity on the board should be more strongly emphasized. Moreover, the presence of female members on the board may further enhance public confidence. Originality/value – This research contributes to the existing literature on gender in four aspects. First, this research provides new evidence to reinforce the existing gender literature that women are more risk averse, cautious and ethical than men. Second, the findings showcase that gender theory can be applied into the research of management behavior. Third, the findings are significantly important in contemporary corporate governance discussions over the SOX enactment and audit committee characteristics Fourth, this study sheds further light on the importance of having women on corporate boards and the positive outcomes that are associated with it, thereby serving as an encouraging force against the existence of the glass ceiling effect. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Gender in Management: An International Journal Emerald Publishing

Audit committee gender differences and earnings management

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1754-2413
DOI
10.1108/17542411111175469
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to investigate whether gender diversity of audit committees has a significant impact on the firm's earnings management. Design/methodology/approach – This paper uses a performance‐adjusted discretionary accrual model to examine the association between gender variables and the firm's earnings management. Regression analysis is applied using 320 firms from the S&P Small Cap 600 . Findings – The authors find consistent evidence to show that the presence of a female director on the audit committee constrains earnings management by increasing negative (income‐decreasing) discretionary accruals. Research limitations/implications – Future research can explore the behavior of female managers by applying the gender theory. Furthermore, the paper's evidence has implications for regulators and policy makers, since the presence of a female director in the audit committee may affect management decisions and audit quality in a positive way. Therefore, gender diversity on the board should be more strongly emphasized. Moreover, the presence of female members on the board may further enhance public confidence. Originality/value – This research contributes to the existing literature on gender in four aspects. First, this research provides new evidence to reinforce the existing gender literature that women are more risk averse, cautious and ethical than men. Second, the findings showcase that gender theory can be applied into the research of management behavior. Third, the findings are significantly important in contemporary corporate governance discussions over the SOX enactment and audit committee characteristics Fourth, this study sheds further light on the importance of having women on corporate boards and the positive outcomes that are associated with it, thereby serving as an encouraging force against the existence of the glass ceiling effect.

Journal

Gender in Management: An International JournalEmerald Publishing

Published: Oct 4, 2011

Keywords: United States of America; Women; Audit committees; Gender; Earnings management; Corporate governance; Female member

References