Article2023

Board gender diversity and earnings management: what difference does gender quota legislation make in emerging market?

Mohsen Anwar Abdelghaffar Saleh · Dejun Wu · Shadi Emad Areef Alhaleh · Nana Adwoa Anokye Effah · Azza Tawab Abdelrahman Sayed

11 citations0/0 files storedJournal of financial reporting & accounting

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Gender Diversity and Inequality Auditing, Earnings Management, Governance Corporate Governance and Financial Management

Abstract

Purpose This paper aims to examine the impact of board gender diversity (BOGD) following the adoption of gender quota legislation on earnings management (EM) in an emerging market, Egypt, whose cultural and economic conditions and institutional context are unlike most previously studied countries’ context. Design/methodology/approach The authors use ordinary least squares (OLS) regression to estimate the impact of gender quota legislation on EM using data from listed companies in Egypt from 2015 to 2022. Difference-in-difference (DID) approach estimation was used to validate the robustness of the main results. Findings This paper documents that gender diversity on boards has a significantly negative impact on EM. In addition, this paper provides robust evidence using the DID approach to show that BOGD is significantly negatively linked with EM for the period following gender quota legislation. Furthermore, the results support the critical mass and agency theories. Practical implications The findings of this study have important implications for Egyptian companies, regulatory bodies and investors in emerging markets. Specifically, these results suggest that when choosing board members, enterprises should pay particular attention to BOGD, and female involvement in all listed firms should be monitored by regulators. Social implications This paper provides evidence supporting the positive contribution of women in society by enhancing the economic performance of Egyptian firms and promoting the country’s sustainable development strategy in light of Egypt vision 2030. Originality/value As per the authors' knowledge, this empirical study is unique in investigating the impact of BOGD quota regulation on EM in Egypt. This paper contributes to BOGD as a major factor in improving financial reporting quality in Egyptian companies.

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References

2009Women in the boardroom and their impact on governance and performance☆2003Earnings Management through Real Activities Manipulation 1999A Review of the Earnings Management Literature and Its Implications for Standard Setting 1999Gender differences in risk taking: A meta-analysis.2003Corporate Governance, Board Diversity, and Firm Value 2013Sex Differences in Social Behavior 2009Opaque financial reports, R2, and crash risk☆2007Gender Diversity in the Boardroom and Firm Financial Performance

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