Earnings Quality and Price Informativeness: The Moderator Role of Gender Diversity
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Dec 2, 2022
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Abstract
Women’s representation on corporate boards has recently drawn increasing attention. This study aims to investigate the moderator role of females on board of directors on the relationship between earnings quality (EQ) and stock price informativeness. This research uses secondary data obtained from the Sahra database that span 158 active firms on the Tehran Stock Exchange from 2017 to 2021. Findings indicated that the presence of female directors on the board had a favorable impact on the correlation between EQ and pricing informativeness. That is, firms with more female board members have a greater association between EQ and pricing informativeness. The practical application of this research relates to female CEOs’ monitoring roles, thereby enhancing the quality of financial reporting.
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References
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[29] Hutton, A.P., Marcus, A.J. and Tehranian, H. 2009. “Opaque financial reports, R2, and crash risk.” Journal of financial Economics, 94(1): 67-86.
[30] Issa, A. and Fang, H.X. 2019. "The impact of board gender diversity on corporate social responsibility in the Arab Gulf states", Gender in Management, 34(7): 577-605
[31] Jensen, M., & Meckling, W. 1976. “Theory of the Firm: Managerial Behavior, Agency Costs, and Capital Structure.” Journal of Financial Economics, 3, 305-360.
[32] Jia, M., & Zhang, Z. 2013. “Critical mass of women on BODs, multiple identities, and corporate philanthropic disaster response: Evidence from privately owned Chinese firms.” Journal of Business Ethics, 118(2): 303-317.
[33] Kamath, B., 2022. “Board Gender Diversity and Intellectual Capital Performance of Firms in India”. Journal of Women's Entrepreneurship and Education, (1-2): 97-116.
[34] Kim, D. and Starks, L.T. 2016. “Gender diversity on corporate boards: Do women contribute unique skills?.” American Economic Review, 106(5):.267-71.
[35] Lara, J.M.G., Osma, B.G., Mora, A. and Scapin, M., 2017. “The monitoring role of female directors over accounting quality.” Journal of Corporate Finance, 45: 651-668.
[36] Lee, P.M. and James, E.H. 2007. “She'‐e‐os: gender effects and investor reactions to the announcements of top executive appointments.” Strategic Management Journal, 28(3): 227-241.
[37] Majdzadeh Tabatabaei, S., Rezaei, G. and Zrinkolah, F., 2019. “The Effect of Board Gender Diversity on the Information Asymmetry for the companies listed on Tehran Stock Exchange.” Quarterly Journal of Women and Society, 10(40):317-338.
[38] Marinova, J., Plantenga, J. and Remery, C., 2016. “Gender diversity and firm performance: Evidence from Dutch and Danish boardrooms.” The International Journal of Human Resource Management, 27(15): 1777-1790.
[39] Matsa, D.A. and Miller, A.R., 2013. “A female style in corporate leadership? Evidence from quotas.” American Economic Journal: Applied Economics, 5(3): 136-69.
[40] Morck, R., Yeung, B., & Yu, W. 2000. “The information content of stock markets: why do emerging markets have synchronous stock price movements? “Journal of financial economics, 58(1-2): 215-260.
[41] Naeem, M.A., Karim, S., Nor, S.M. and Ismail, R., 2022. “Sustainable corporate governance and gender diversity on corporate boards: evidence from COVID-19”. Economic Research-Ekonomska Istraživanja: 1-19.
[42] Nielsen, S. and Huse, M., 2010. “The contribution of women on boards of directors: Going beyond the surface. Corporate governance: An international review”, 18(2):136-148.
[43] Pfeffer, J. and Salancik, G.R. 1978. A resource dependence perspective. In Intercorporate relations. The structural analysis of business. Cambridge: Cambridge University Press.
[44] Reddy, C.N., Adhikari, J. and Chitranshi, J., 2017. “Understanding and managing gender diversity challenges at leadership positions: A review.” Journal of Strategic Human Resource Management, 6(2);40-44
[45] Shoaib, A. and Siddiqui, M.A., 2022. “Earning information content changes based on accrual measures and quality measures: Evidence from member countries of Asia Pacific trade agreement.” International Journal of Finance & Economics, 27(1): 1526-1546.
[46] Simionescu, L.N., Gherghina, Ş.C., Tawil, H. and Sheikha, Z. 2021. “Does board gender diversity affect firm performance? Empirical evidence from Standard & Poor’s 500 Information Technology Sector.” Financial Innovation, 7(1):1-45.
[47] Singh, V., Vinnicombe, S., & Johnson, P. 2001. " Women Directors on Top UK Boards", Corporate Governance: An International Review”, 9: 206–216.
[48] Terjesen, S., Sealy, R. and Singh, V., 2009. “Women directors on corporate boards: A review and research agenda.” Corporate governance: an international review, 17(3): 320-337.
[49] Todea, A., 2018. “Financial Literacy and Stock Price Informativeness: a Cross-Country Study.” Studia Universitatis Babes Bolyai-Oeconomica, 63(1):.63-72.
[50] Todea, A. and Buglea, A.M., 2017. “Individualism and stock price reaction to market-wide information.” Economics Letters, 160:4-6.
[51] Van der Walt, N. and Ingley, C. 2003. “Board dynamics and the influence of professional background, gender and ethnic diversity of directors. Corporate governance: An international review”, 11(3):218-234.
[52] Wagana, D.M. and Nzulwa, J.D., 2017. “Corporate governance, board gender diversity and corporate performance: A critical review of literature. European Scientific Journal March 2016 edition vol.12, No.7.
[53] Weigold, I. K., & Robitschek, C. 2011. “Agentic personality characteristics and coping: Their relation to trait anxiety in college students”. American Journal of Orthopsychiatry, 81(2): 255–264.
[54] Williams, K.Y. and O'Reilly III, C.A. 1998. “Demography and. Research in organizational behavior,” 20: 77-140.
[55] Zhou, J., 2008. “Earnings quality, analysts, institutional investors, and stock price synchronicity.: PhD Diss. Hong Kong Polytechnic University.
[2] Adams, R.B. and Ferreira, D. 2009. “Women in the boardroom and their impact on governance and performance.” Journal of Financial Economics, 94(2):291-309.
[3] Agyemang-Mintah, P. and Schadewitz, H., 2019. “Gender diversity and firm value: evidence from UK financial institutions.” International Journal of Accounting & Information Management, 26(1); 2-26
[4] aribi, Z.A., Alqatamin, R.M. and Arun, T. 2018. “Gender diversity on boards and forward-looking information disclosure: evidence from Jordan.” Journal of Accounting in Emerging Economies, 8(2): 205-222.
[5] Arun, T.G., Almahrog, Y.E. and Aribi, Z.A. 2015. “Female directors and earnings management: Evidence from UK companies.” International Review of Financial Analysis, (39):137-146.
[6] Aveh, F.K. and Awunyo-Vitor, D. 2017. “Firm-specific determinants of stock prices in an emerging capital market: Evidence from Ghana Stock Exchange.” Cogent Economics & Finance, 5(1); 1339385.
[7] Avolio, B., Alcalá, P., Rurush, M., Vilca, P. and Zelaya, D., 2016. “Strategies for the Professional Development of Executive Women: Empirical Evidence in Latin America.” Journal of Women's Entrepreneurship and Education, (3-4); 81-101.
[8] Baltagi, B. 2008. Econometrics. Verlag Berlin Heidelberg: Springer
[9] Barbuto, J.E. and Gifford, G.T. 2010. “Examining gender differences of servant leadership: An analysis of the agentic and communal properties of the Servant Leadership Questionnaire.” Journal of Leadership Education, 9(2), pp.4-21.
[10] Beaman, L., Chattopadhyay, R., Duflo, E., Pande, R. and Topalova, P., 2009. “Powerful women: does exposure reduce bias?” The Quarterly journal of economics, 124(4):.1497-1540.
[11] Bilimoria, D. 2006. “The relationship between women corporate directors and women corporate officers.” Journal of Managerial Issues, 18(1): pp.47-61.
[12] Campbell, K., & Mı´nguez-Vera, A. 2008 "Gender Diversity in The Boardroom and Firm Financial Performance", Journal of Business Ethics, 83(3): 435–451
[13] Daily, C.M., Certo, S.T. and Dalton, D.R. 1999. “A decade of corporate women: Some progress in the boardroom, none in the executive suite.” Strategic management journal, 20(1): 93-100.
[14] Chan, K. and Hameed, A. 2006. “Stock price synchronicity and analyst coverage in emerging markets.” Journal of Financial Economics, 80(1): 115-147.
[15] Connell, V. 2007. “Dealing With Panel Data in Accounting and Managerial Finance Research.” International Journal of Managerial Finance, 3(4): 372-389
[16] Dechow, P.M. and Dichev, I.D., 2002. “The quality of accruals and earnings: The role of accrual estimation errors.” The accounting review, 77(S-1):.35-59.
[17] Eagly, A.H. and Carli, L.L. 2003. “The female leadership advantage: An evaluation of the evidence.” The leadership quarterly, 14(6): 807-834.
[18] Eagly, A.H. and Chin, J.L., 2010. “Diversity and leadership in a changing world.” American psychologist, 65(3): 216-224.
[19] Eagly, A.H. and Johannesen‐Schmidt, M.C. 2001. “The leadership styles of women and men.” Journal of social issues, 57(4):781-797.
[20] Fama, E.F., 1970. “Efficient capital markets: A review of theory and empirical work.” The journal of Finance, 25(2): 383-417.
[21] Gao, Y. (2018). “Board Gender Diversity, Earnings Quality and Stock Price Informativeness.” American Journal of Industrial and Business Management, 8(02), 306-312
[22] Gujarati, D. N. (2003). Basic econometrics. New York: McGraw-Hill
[23] Gull, A.A., 2018. Gender-diverse boards and financial statements quality: The role of female directors’ attributes” PhD diss, Le Mans University, France. Retrieved from https://tel.archives-ouvertes.fr/tel-01834561/document
[24] Gull, A.A., Nekhili, M., Nagati, H. and Chtioui, T., 2018. “Beyond gender diversity: How specific attributes of female directors affect earnings management.” The British Accounting Review, 50(3): 255-274.
[25] Hair, J., Black, W., Babin, B., & Anderson, R. 2010. Multivariate Data Analysis. Prentice Hall
[26] Hedija, V. and Němec, D., 2021. “Gender diversity in leadership and firm performance: Evidence from the Czech Republic.” Journal of Business Economics and Management, 22(1):156-180.
[27] Hillman, A., & Dalziel, T. 2003. " Boards of Directors and Firm Performance: Integrating Agency and Resource Dependence Perspectives", Academy of Management Review, 28(3): 383–396.
[28] Hillman, A.J., Shropshire, C. and Cannella Jr, A.A. 2007. “Organizational predictors of women on corporate boards.” Academy of management journal, 50(4): 941-952.
[29] Hutton, A.P., Marcus, A.J. and Tehranian, H. 2009. “Opaque financial reports, R2, and crash risk.” Journal of financial Economics, 94(1): 67-86.
[30] Issa, A. and Fang, H.X. 2019. "The impact of board gender diversity on corporate social responsibility in the Arab Gulf states", Gender in Management, 34(7): 577-605
[31] Jensen, M., & Meckling, W. 1976. “Theory of the Firm: Managerial Behavior, Agency Costs, and Capital Structure.” Journal of Financial Economics, 3, 305-360.
[32] Jia, M., & Zhang, Z. 2013. “Critical mass of women on BODs, multiple identities, and corporate philanthropic disaster response: Evidence from privately owned Chinese firms.” Journal of Business Ethics, 118(2): 303-317.
[33] Kamath, B., 2022. “Board Gender Diversity and Intellectual Capital Performance of Firms in India”. Journal of Women's Entrepreneurship and Education, (1-2): 97-116.
[34] Kim, D. and Starks, L.T. 2016. “Gender diversity on corporate boards: Do women contribute unique skills?.” American Economic Review, 106(5):.267-71.
[35] Lara, J.M.G., Osma, B.G., Mora, A. and Scapin, M., 2017. “The monitoring role of female directors over accounting quality.” Journal of Corporate Finance, 45: 651-668.
[36] Lee, P.M. and James, E.H. 2007. “She'‐e‐os: gender effects and investor reactions to the announcements of top executive appointments.” Strategic Management Journal, 28(3): 227-241.
[37] Majdzadeh Tabatabaei, S., Rezaei, G. and Zrinkolah, F., 2019. “The Effect of Board Gender Diversity on the Information Asymmetry for the companies listed on Tehran Stock Exchange.” Quarterly Journal of Women and Society, 10(40):317-338.
[38] Marinova, J., Plantenga, J. and Remery, C., 2016. “Gender diversity and firm performance: Evidence from Dutch and Danish boardrooms.” The International Journal of Human Resource Management, 27(15): 1777-1790.
[39] Matsa, D.A. and Miller, A.R., 2013. “A female style in corporate leadership? Evidence from quotas.” American Economic Journal: Applied Economics, 5(3): 136-69.
[40] Morck, R., Yeung, B., & Yu, W. 2000. “The information content of stock markets: why do emerging markets have synchronous stock price movements? “Journal of financial economics, 58(1-2): 215-260.
[41] Naeem, M.A., Karim, S., Nor, S.M. and Ismail, R., 2022. “Sustainable corporate governance and gender diversity on corporate boards: evidence from COVID-19”. Economic Research-Ekonomska Istraživanja: 1-19.
[42] Nielsen, S. and Huse, M., 2010. “The contribution of women on boards of directors: Going beyond the surface. Corporate governance: An international review”, 18(2):136-148.
[43] Pfeffer, J. and Salancik, G.R. 1978. A resource dependence perspective. In Intercorporate relations. The structural analysis of business. Cambridge: Cambridge University Press.
[44] Reddy, C.N., Adhikari, J. and Chitranshi, J., 2017. “Understanding and managing gender diversity challenges at leadership positions: A review.” Journal of Strategic Human Resource Management, 6(2);40-44
[45] Shoaib, A. and Siddiqui, M.A., 2022. “Earning information content changes based on accrual measures and quality measures: Evidence from member countries of Asia Pacific trade agreement.” International Journal of Finance & Economics, 27(1): 1526-1546.
[46] Simionescu, L.N., Gherghina, Ş.C., Tawil, H. and Sheikha, Z. 2021. “Does board gender diversity affect firm performance? Empirical evidence from Standard & Poor’s 500 Information Technology Sector.” Financial Innovation, 7(1):1-45.
[47] Singh, V., Vinnicombe, S., & Johnson, P. 2001. " Women Directors on Top UK Boards", Corporate Governance: An International Review”, 9: 206–216.
[48] Terjesen, S., Sealy, R. and Singh, V., 2009. “Women directors on corporate boards: A review and research agenda.” Corporate governance: an international review, 17(3): 320-337.
[49] Todea, A., 2018. “Financial Literacy and Stock Price Informativeness: a Cross-Country Study.” Studia Universitatis Babes Bolyai-Oeconomica, 63(1):.63-72.
[50] Todea, A. and Buglea, A.M., 2017. “Individualism and stock price reaction to market-wide information.” Economics Letters, 160:4-6.
[51] Van der Walt, N. and Ingley, C. 2003. “Board dynamics and the influence of professional background, gender and ethnic diversity of directors. Corporate governance: An international review”, 11(3):218-234.
[52] Wagana, D.M. and Nzulwa, J.D., 2017. “Corporate governance, board gender diversity and corporate performance: A critical review of literature. European Scientific Journal March 2016 edition vol.12, No.7.
[53] Weigold, I. K., & Robitschek, C. 2011. “Agentic personality characteristics and coping: Their relation to trait anxiety in college students”. American Journal of Orthopsychiatry, 81(2): 255–264.
[54] Williams, K.Y. and O'Reilly III, C.A. 1998. “Demography and. Research in organizational behavior,” 20: 77-140.
[55] Zhou, J., 2008. “Earnings quality, analysts, institutional investors, and stock price synchronicity.: PhD Diss. Hong Kong Polytechnic University.