Women on boards and earnings management: What really matters?
Abstract
The diversity of gender and income conservatism has been intriguing topics over the last decade. The effect of women who are more likely to be financially conservative than men will bring impact on the practices of conservative accounting, particularly when determining revenues for corporate governance. Therefore, we investigate the effects of women leaders in corporate business and their impacts on earnings management. The population of the study includes companies indexed in the Indonesia Stock Exchange, except for banking corporates. By using purposive sampling, 341 companies were selected for observation within six years. Total population sampling is 2046 data (firm-years). Hypothesis testing employed the multiple regression model on panel data with the Ordinary Least Square (OLS) approach. The estimation result of the Jones Model indicates women in top supervisory have no significant effect on earnings management while women in top management have a negative significant effect on earnings management. In addition, the hypothesis testing with the Kothari model demonstrates a negative significant effect of both women in top supervisory and women in top management toward earnings management. Therefore, we justify that women in top supervisory and women in top management bring prominent contributions to corporate business mainly in the financial sector, particularly in the improvement of financial reports by reducing the likelihood of earnings management practices.
JEL Classification: D22, J16, G34
Keywords
Full Text:
PDFReferences
Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 94(2), 291-309. https://doi.org/10.1016/j.jfineco.2008.10.007
Beasley, M. S. (1996). An Empirical Analysis of the Relation between the Board of Director Composition and Financial Statement Fraud. The Accounting Review, 71(4), 443-465. Retrieved from https://www.jstor.org/stable/248566
Byrnes, J. P., & Miller, D. C. (1999). Gender differences in risk-taking: A Meta-Analysis. Psychological Bulletin, 125(3), 367-383. https://doi.org/10.1037/0033-2909.125.3.367
Campbell, K., & Minguez-Vera, A. (2008). Gender diversity in the boardroom and firm financial performance. Journal of Business Ethics, 83(3), 435-451. https://doi.org/10.1007/s10551-007-9630-y
Cornett, M. M., McNutt, J. J., & Tehranian, H. (2009). Corporate governance and earnings management at large U.S. bank holding companies. Journal of Corporate Finance, 15(4), 412-430. https://doi.org/10.1016/j.jfineco.2007.03.003
Darmadi, S. (2013). Do women in top management affect firm performance? Evidence from Indonesia. Corporate Governance, 13(3), 288-304.
https://doi.org/10.1108/CG-12-2010-0096
Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting earnings management. Accounting Review, 70(2), 193-225.
Einer, M., & Soderqvist, J. 2016. Earnings management and female representation on the board of directors. Master Thesis in Accounting. School of Business, Economics, and Law, University of Gothenburg.
Enofe, A. O., Iyafekhe, C., & Eniola, J. O. (2017). Board ethnicity, gender diversity and earnings management: Evidence from quoted firms in Nigeria. International Journal of Economics, Commerce, and Management, V(6), 78-90
Fan, Y., Jiang, Y., Zhang, X., & Zhou, Y. (2019). Women on boards and bank earnings management: From zero to hero. Journal of Banking & Finance, 107. https://doi.org/10.1016/j.jbankfin.2019.105607
Gavious, I., Segev, E., & Yosef, R. (2012). Female directors and earnings management in high-technology firms. Pacific Accounting Review, 24(1), 4–32. https://doi.org/10.1108/01140581211221533
Farrell, K. A., & Hersch, P. L. (2005). Additions to corporate boards: The effect of gender. Journal of Corporate Finance, 11(1-2), 85-106. https://doi.org/10.1016/j.jcorpfin.2003.12.001
Fischer, M., & Rosenzweig, K. (1995). Attitudes of students and accounting practitioners concerning the ethical acceptability of earnings management. Journal of Business Ethics 14(6), 433-444. https://doi.org/10.1007/BF00872085
Gul, F. A., Srinidhi, B., & Ng, A. C. (2011). Does board gender diversity improve the informativeness of stock prices? Journal of Accounting and Economics, 51(3), 314–338. https://doi.org/10.1016/j.jacceco.2011.01.005
Gull, A. A., Nekhili, M., Nagati, H., & Chtioui, T. (2018). Beyond gender diversity: How specific attributes of female directors affect earnings management. The British Accounting Review, 50(3), 255-274. https://doi.org/10.1016/j.bar.2017.09.001
Gulamhussen, M. A., & Santa, S. F. (2015). Female directors in bank boardrooms and their influence on performance and risk-taking. Global Finance Journal, 28, 10-23. https://doi.org/10.1016/j.gfj.2015.11.002
Harakeh, M., El-Gammal, W., & Matar, G. (2019). Female directors, earnings management, and CEO incentive compensation: UK evidence. Research in International Business and Finance, 50, 153-170. https://doi.org/10.1016/j.ribaf.2019.05.001
Harris, O., Karl, J. B., & Lawrence, E. (2019). CEO compensation and earnings management: Does gender really matters? Journal of Business Research, 98, 1-14. https://doi.org/10.1016/j.jbusres.2019.01.013
Hooghiemstra, R., Hermes, N., Oxelheim, L., & Randøy, T. (2019). Strangers on the board: The impact of board internationalization on earnings management of Nordic firms. International Business Review, 28(1), 119-134. https://doi.org/10.1016/j.ibusrev.2018.08.007
Indonesian Stock Exchange. (2012). Fact Book 2012-2017. Jakarta: Indonesian Stock Exchange.
Jones, J. J. (1991). Earnings management during import relief investigations. Journal of Accounting Research, 29(2), 193-228. https://doi.org/10.2307/2491047
Kothari, S. P., Leone, A. J., & Wasley, C. (2005). Performance matched discretionary accrual measures. Journal of Accounting and Economics, 39(1), 163-197. https://doi.org/10.1016/j.jacceco.2004.11.002
Komite Nasional Kebijakan Governance (KNKG). (2010). Pedoman Umum Good Corporate Governance Indonesia. Jakarta.
Kouaib, A., & Almulhim, A. (2019). Earnings manipulations and board's diversity: The moderating role of audit. The Journal of High Technology Management Research, 30(2). https://doi.org/10.1016/j.hitech.2019.100356
Krishnan, G. V. & Parsons, L. M. (2008). Getting to the bottom line: An exploration of gender and earnings quality. Journal of Business Ethics, 78(1-2), 65-76.
https://doi.org/10.1007/s10551-006-9314-z
Kusumawati, A. (2007). Kepemimpinan dalam perspektif gender adakah perbedaan? Jurnal Administrasi Bisnis, 1(1).
Kyaw, K., Olugbode, M., & Petracci, B. (2015). Does gender diverse board mean less earnings management? Finance Research Letters, 14, 135-141. https://doi.org/10.1016/j.frl.2015.05.006
Liu, Y., Wei, Z., & Xie, F. (2016). CFO gender and earnings management: evidence from China. Review of Quantitative Finance and Accounting, 46(4), 881-905.
https://doi.org/10.1007/s11156-014-0490-0
Lo, A. W. Y., Wong, R. M. K., & Firth, M. (2010). Can corporate governance deter management from manipulating earnings? Evidence from related-party sales transactions in China. Journal of Corporate Finance, 16(2), 225-235. https://doi.org/10.1016/j.jcorpfin.2009.11.002
Lazzem, S., & Jilani, F. (2018). The impact of leverage on accrual-based earnings management: The case of listed French firms. Research in International Business and Finance, 44, 350-358. https://doi.org/10.1016/j.ribaf.2017.07.103
Nurfadilla, S. A. (2016). Analisis pengaruh dewan komisaris independen, gender diversity, kepemilikan institusional dan kepemilikan manajerial terhadap kinerja perusahaan (Studi kasus pada perusahaan yang terdaftar di Indonesia Sharia Stock Index periode 2012-2014). Fakultas Ekonomi dan Bisnis Universitas Diponegoro Semarang.
Riwayati, H. E., Markonah, & Siladjaja, M. (2016). Implementation of corporate governance influence to earnings management. Procedia - Social and Behavioral Sciences, 219, 632-638. https://doi.org/10.1016/j.sbspro.2016.05.044
Rose, C. (2007): Does female board representation influence firm performance? The Danish evidence. Corporate Governance: An International Review, 15(2), 404–413.
https://doi.org/10.1111/j.1467-8683.2007.00570.x
Saleem, E., & Alzoubi, S. (2018). Audit quality, debt financing, and earnings management: Evidence from Jordan. Journal of International Accounting, Auditing, and Taxation, 30, 69-84. https://doi.org/10.1016/j.intaccaudtax.2017.12.001
Shan, Y. G. (2015). Value relevance, earnings management and corporate governance in China Emerging Markets Review, 23, 186-207. https://doi.org/10.1016/j.ememar.2015.04.009
Park, Y. W., & Shin, H. (2004). Board composition and earnings management in Canada. Journal of Corporate Finance, 10(3), 431-457.
https://doi.org/10.1016/S0929-1199(03)00025-7
Shu, P-G., Yeh, Y-H., Chiu, S-B., & Yang, Y-Y. (2015). Board external connectedness and earnings management. Asia Pacific Management Review, 20(4), 265-274. https://doi.org/10.1016/j.apmrv.2015.03.003
Sun, J., Liu, G., & Lan, G. (2011). Does female directorship on independent audit committees constrain earnings management? Journal of Business Ethics, 99(3), 369-382.
https://doi.org/10.1007/s10551-010-0657-0
Thiruvadi, S., & Huang, H-W. (2011). Audit committee gender differences and earnings management. Gender in Management 26(7), 483-498. https://doi.org/10.1108/17542411111175469
Xie, B., Davidson, W., & Dadalt, P. (2003). Earnings management and corporate governance: the role of the board and the audit committee. Journal of Corporate Finance, 9(3), 295-316. https://doi.org/10.1016/S0929-1199(02)00006-8
Xiong, J. (2016). Chairman characteristics and earnings management: Evidence from Chinese listed firms. Open Journal of Accounting, 5(4). https://doi.org/10.4236/ojacct.2016.54008
Zalata, A. M., Tauringana, V., & Tingbani, I. (2018). Audit committee financial expertise, gender, and earnings management: Does gender of the financial expert matter? International Review of Financial Analysis, 55, 170-183. https://doi.org/10.1016/j.irfa.2017.11.002
DOI: https://doi.org/10.26905/jkdp.v23i4.3439
Refbacks
- There are currently no refbacks.
Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)
Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang
Published by University of Merdeka Malang
Mailing Address:
2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: -
Email: [email protected]
This work is licensed under a Creative
Commons Attribution-ShareAlike 4.0