In this article, we examine the factors determining the representation of women on boards of directors by considering three main questions. The first question deals with the relationship between characteristics of ownership and governance on one side, and female directorship on the other. The second major question concerns the demographic attributes of women directors, such as nationality, foreign experience, educational level, business expertise, and connections to external sources. The third important question refers to women in senior positions on French boards (...) (e.g., as independent members or board subcommittee members) in relation to firm characteristics and women’s demographic attributes. Our study focuses on French large- and mid-capitalized companies belonging to the SBF120 stock market index during a 5-year period running from 2000 to 2004. First, our results give evidence that the appointment of women directors is strongly related to family ownership and board or firm size. Second, the appointment of women directors is related to their professional services, valuable skills, and network links. Furthermore, we show that women face a double glass-ceiling problem, and note that French firms rely more on the demographic attributes of their women directors when they are appointed to senior board positions. Our study sheds light on issues concerning the law that comes into force in 2016, which imposes quotas of women members on boards of directors in French companies. (shrink)

The aim of this study is to examine whether gender diversity on audit committees influences financial reporting quality by using panel data of Spanish listed firms. The financial reporting quality of firms is measured by the type of opinion received in the audit report. We estimate various panel data models of audit opinions and control for factors that are traditionally found to impact audit opinions. This study provides evidence to support the hypotheses that the percentage of females on ACs reduces (...) the probability of qualifications due to errors, non-compliance or the omission of information. Furthermore, the results also find that the percentage of female directors on ACs, the percentage of independent female directors on ACs and ACs chaired by females increase the likelihood of further transparency by disclosing audit reports with uncertainties and scope limitation qualifications. (shrink)

The readability of 10-K reports, in terms of linguistic complexity, determines the usefulness of information disclosure for stakeholders, particularly individual investors. Since investors largely depend on the financial communication in 10-K reports, firms have an ethical and legal responsibility to present disclosures in a language investors can understand. However, motivated by self-interest, managers obfuscate such disclosures to mask their own actions and hide unfavourable information. Building on the managerial obfuscation hypothesis grounded in stakeholder-agency and ethical-sensitivity theories, I hypothesize and empirically (...) test the relationship between board gender diversity and the readability of narrative disclosure in 10-K reports. Based on a relatively large sample of Russell 3000 firms for the years 2002–2018, I find a significant positive impact of BGD on 10-K reports’ readability, which in turn improves firm performance. Channel analysis reveals that the findings are driven by female independent directors, and their representation on audit and compensation committees; however, board activity does not appear to drive this relationship. Finally, I find that although gender discrimination in the appointment of directors spurs complex readability, the BGD-readability relationship is consistent in gender-biased and non-discriminant firms. I also check the robustness of our main empirical results in several ways. My study has important regulatory and managerial implications in that corporate governance is an important determinant of the readability of disclosure documents. (shrink)

The question of whether females tend to act more ethically or risk-averse compared to males is an interesting ethical puzzle. Using a large sample of US firms over the 1992–2014 period, we investigate the effect that the gender of a chief executive officer has on earnings management using classification shifting. We find that the pre-Sarbanes–Oxley Act period was characterized by high levels of classification shifting by both female and male CEOs, but the magnitude of such practices is, surprisingly, significantly higher (...) in firms with female CEOs than in those with male CEOs. By contrast, our results suggest that following the passage of the punitive SOX Act, classification shifting by female CEOs declined significantly, whilst it remained pervasive in firms with male CEOs. This suggests that the observable differences in financial reporting behavior between male and female CEOs seem to be because female CEOs are more risk-averse, but not necessarily more ethically sensitive than their male counterparts are. The central tenets of our findings remain unchanged after several additional checks, including controlling for alternative earnings management techniques, corporate governance mechanisms, CEO and chief financial officer characteristics and propensity score-matching. (shrink)

This study investigates the key factors that elicit financial reporting fraud among companies in Malaysia. Using enforcement action releases issued by the Security Commission of Malaysia and Bursa Malaysia, we identify a sample of 76 firms that had committed financial reporting fraud during the period of 1996–2016. We use the fraud triangle framework and the Malaysian International Standards on Auditing 240 to identify the factors. Since the simple probit model fails to address the identification problem, we estimate our results using (...) a bivariate probit model. The new model estimates the effects of pressure, opportunity, and rationalization on the probability of fraud likelihood by disentangling the detection probability of fraud. Among several proxies used for pressure, our results suggest that aggressive tax reporting and financial difficulties increase the likelihood of fraud commission. In regard to opportunity, we find that dedicated institutional investors, independence of the board, effective audit committee, and the presence of a female on the board provide active monitoring and oversight in reducing fraud occurrence. Results for rationalization suggest that prior violations and frequent changes of external auditors increase the chances of fraud occurrence. This research offers possible insights to auditors, managers, and regulators to prevent, detect, and react to fraud. Specifically, it highlights the specific factors that may exacerbate the fraudulent intentions of firms. (shrink)

We investigate whether female board representation and firms’ financial performance are related and whether the relationship differs for firms located in more prejudicial environments. As a proxy for prejudicial environment, we use two geographical indicators: whether a firm is headquartered in a conservative “red” state or in a liberal “blue” state and whether the firm is located in regions where residents possess more stereotypical attitudes about gender equality. We find that both financial performance and female board representation are lower for (...) firms headquartered in red states when compared to those in blue states, and we find similar results for firms located in regions where residents hold more gender-stereotypical views. However, financial performance improves when female directors are present regardless of the firm’s location. Evidence also shows that the incremental improvement in performance measured by Tobin’s q is greater in red-state than in blue-state companies and in regions where residents hold more gender-stereotypical views. The overall results imply that gender stereotyping holds back financial performance and that female directors help improve financial performance. (shrink)