Female directorship and real earnings management in Bangladesh: Towards an analytical assessment

Nitai Chandra Debnath,B.C.M Patnaik,Ipseeta Satpathy

doi:10.5267/j.msl.2019.6.018

Abstract

Female directorship and real earnings management in Bangladesh: Towards an analytical assessment

Highlights

We have studied the relationship between the persistence of female directorship on the board and real earnings management utilizing a sample of Bangladeshi firms listed on the Dhaka Stock Exchange during the period 2000-2017
We have found presence of female directors, proportion of female directors, and prevalence of independent female directors were positively and significantly associated with real earnings management
These findings have indicated that the listed firms of Bangladesh which appoint female director on the board were more likely to be involved in earnings management

Summary

Introduction

Existing literature on board diversity and firms' performance corroborates on the broad view that women representatives on the board increases firm's financial performance(see, Adams & Ferreira, 2009; Campbell & Mínguez-Vera, 2008; Carter et al, 2003; Erhardt et al, 2003; Farrell & Hersch, 2005) In comparison with males, females on the board are represented at a much lower proportion. Davies (2011) documents that the level of under-representation of the women on the board in all over the world, ranging from as low as 3.6% in Asia- Pacific to the highest of 23% in Sweden whereas in Bangladesh the rate stands at 14%. Under Generally Accepted Accounting Principles, corporate managers have discretion over reporting earnings to maximize the value of information relevant to the firms. Some people state that earnings manipulation ranges from earnings frauds (violating Generally Accepted Accounting Principles, GAAP) to earnings management (complying GAAP). Within GAAP, the sources of earnings management include different application methods, timing of acquisition and merger, choice of accounting methods, accounting policies, and accounting estimates (Teoh et al, 1998). Management can modify these methods or their applications at any phase to fulfill their own objective at shareholder’s cost

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