Female Directors And Earnings Quality

In recent years, there is a spate of legislative changes in countries, such as Norway that has legislated40percent female board representation with penalties for noncompliance and Spain and Sweden that require future female board representation of40percent and25percent, respectively. There are two main reasons for the continuous improvement of the proportion of the female directors. On the one hand, the efforts of feminist movement make contribution to the "accelerated debut".On the other hand, it benefits from theoretical research and empirical evidence. There are a lot of studies have confirmed the positive role of female directors for the company’s performance and corporate governance. Most of these studies are based on the idea:the diversity of gender, educational background and other demographic characteristics makes contribution to the company’s benign and sustainable development. These scholars maintained that women are different from men in personality traits, risk preferences, moral awareness, perspective. Therefore, they can provide new style, new perspective and new ideas for development strategy and corporate governance to help correct the bias due to the lack of information caused by the heterogeneityPrior research shows the effectiveness of corporate governance influence the earnings quality and the structure of the board plays an important role in corporate governance. Moreover, the directors bear the legal responsibility to ensure the reliability of financial reporting. Therefore, the characteristics of the board inevitably affect the quality of accounting information. So as one of the characteristics of the board, whether the proportion of female directors in the board affect the earnings quality of listed companies? This paper argues that female directors improve the oversight function of the board,which in turn is likely to improve the earnings quality.however, the effects of female directors participation on board governance depend on the managerial power. Therefore, this paper introduces the variable of managerial power. We subdivide the sample by the variable of managerial power to examine whether managerial power influences the relationship between female directors and earnings quality.In this paper, the author examine whether Chinese listed companies with higher proportion of. female directors exhibit high-quality earnings In our analysis, we control for firm-specific factors such as size, age and growth, board-specific factors such as the proportion of non-executive directors, number of board meetings and the average number of outside directorships held by the board members and after controlling for these variables, we find that firms with at least two female directors and firms with a higher proportion of female directors exhibit higher-quality earnings. However, the positive effect of gender diversity on earnings quality exists only when managerial power is lower. In addition, we find that female directors are more willing or better at provide oversights over the upward earnings management behavior.This paper contributes to the literature in following ways. First, this is the first empirical research to examine the relationship between female directors and earnings quality, which using a large sample of Chinese companies. Second, the results suggest that boards should include female directors since their risk averse and ethical characteristics are likely to be useful in promoting earnings quality. Third, this paper enriches the theory of managerial power. Finally, this paper makes contributions to eliminate gender discrimination.But still, drawbacks beyond control exist to be eliminated with future research going further. First, the indicator of managerial power is too difficult to measure, which may affect the conclusions of this paper. Second, this paper do not distinguish the independent female directors and non-independent female and do not consider whether the female directors have financial, legal and other expertise, tenure and other non-gender factors, and these personal characteristics may also affect the quality of earnings. This is exactly what I believe the future research direction.