Board Gender Diversity and Earnings Management in the Context of Financial Distress
Christina Nwachukwu & John U. Ihendinihu
Department of Accounting, College of Management Sciences,
Michael Okpara University of Agriculture, Umudike,
This study analyses small positive net profit (earnings management proxy) and investigates the probability that female directors of financially distressed firms will likely reduce managers’ net profit manipulation. Using a sample of 179 firm- year observations obtained by implementing Edward Altman’s 1968 Z score model for listed non-financial firms in Nigeria during the period 2011 to 2020, binary logistic regression analysis reveals that more female director participation is associated with the likelihood of lower levels of net profit manipulation. This finding aligns well with behavioural, economic and psychology theories which supports female directors’ monitoring efficacy and note that female directors are more conservative and risk-averse than their male counterpart. Excitingly this result hold for financially distressed listed companies in Nigeria. The study recommends that female participation on corporate boards should be given kin priority since such policies when implemented have been empirically proven to serve as a substitute mechanism for corporate governance in curbing earnings management activities of managers thus provide interested stakeholders with higher quality earnings reports.
Keywords: Board Gender Diversity, Earnings Management, Financially Distressed Firms, Binary Logistic Regression