Journal of Business Ethics

, Volume 93, Issue 2, pp 335–353 | Cite as

Ethics, Diversity Management, and Financial Reporting Quality

  • Réal Labelle
  • Rim Makni Gargouri
  • Claude Francoeur
Article
First Online:

Abstract

This article proposes and empirically tests a theoretical framework incorporating Reidenbach and Robin’s (J Bus Ethics 10(4):273–284, 1991) conceptual model of corporate moral development. The framework is used to examine the relation between governance and business ethics, as proxied by diversity management (DM), and financial reporting quality, as proxied by the magnitude of earnings management (EM). The level of DM and governance quality are measured in accordance with the ratings of Jantzi Research (JR), a leading provider of social and governance research for institutional investors. This DM score is part of an index developed by JR that investment managers use to integrate DM criteria into their investment decisions. As expected, a negative relation between corporate DM development and financial reporting quality is found while controlling for other factors known in the literatures on governance and accounting choices to affect earnings quality. Despite some caveats presented in conclusion, this study contributes to the ethics, governance, and financial reporting literatures by studying the dynamics between governance and ethics in the prevention of EM.

Key words

ethics diversity diversity management governance financial reporting quality earnings management earnings quality 
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Copyright information

© Springer Science+Business Media B.V. 2009

Authors and Affiliations

  • Réal Labelle
    • 1
  • Rim Makni Gargouri
    • 2
  • Claude Francoeur
    • 1
  1. 1.HEC MontrealMontrealCanada
  2. 2.FSEG SfaxSfaxTunisia

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