DOES GENDER DIVERSE BOARD MEAN LESS FINANCIAL STATEMENT FRAUD?
Keywords:Corporate governance, Financial statement fraud, Board of directors, Board diversity, Restatement
This paper investigates the impact of board gender diversity on financial statement fraud. More specifically, in the first stage, we hypothesise that there is a negative relation between female board presence and the likelihood of financial statement fraud. In the second stage, we examine whether female directorships can be a substitute governance mechanism to the existing governance structure. To produce a comprehensive result, we examine the association between gender diversity and effort to enhance the quality of financial statements, in which effort is measured as the frequency of board meetings. This analysis is to know whether the superior governance performance of gender-diverse boards can be attributed to the greater effort exerted by female directors. Then, we also examine the difference in financial expertise between female and male directors. It is to understand whether the differences in qualifications among female and male directors influence the quality of the financial reporting process monitoring. The findings suggest firms with gender-diverse boards commit fewer financial reporting mistakes and engage in less financial statement fraud. In particular, boards with female directors have fewer restatements and fewer irregularity-type restatements, which tend to be indicative of financial statement fraud. Further, these results hold whether firm governance is weak or strong, suggesting that the benefits of gender-diverse boards can be realised even in already well-governed firms. The results do not seem attributable to other differences between male and female directors, such as differences in qualification or effort.
How to Cite
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.