The Effects and the Mechanisms of Board Gender Diversity: Evidence from Financial Manipulation
This study examines the impact of board gender diversity on financial misconduct. The findings suggest firms with gender-diverse boards commit fewer financial reporting mistakes and engage in less fraud. The findings hold after accounting for the potentially endogenous nature of board demographic characteristics via instrumental variable approach. Furthermore, the findings are consistent in pre- and post-regulation (Sarbanes–Oxley) periods and hold for firms with good and bad governance. The findings do not seem driven by differences in effort or quality, in terms of independence and expertise, of female and male directors. The benefit derived from increasing the number of female directors on corporate boards seems to diminish at higher levels of gender diversity, indicating that impact of gender diversity on decreasing the likelihood of financial misconduct may be a result of a change to board group dynamics.
KeywordsCorporate governance Board of directors Gender Board composition Board diversity Accounting quality Restatement
JEL ClassificationG10 G30 G38 J10 J16 M41
I gratefully acknowledge financial and research support at Harvard Business School and Rotman School of Management at the University of Toronto. I think seminar participants at Harvard University and University of Toronto
There are no funding sources to report; all data are obtained from publicly available sources or accessed via subscription-based databases paid for by the research funds provided by the University.
Compliance with Ethical Standards
Conflict of interest
I declare that I have no conflict of interest.
This article does not contain any studies with human participants or animals performed by any of the authors.
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