Female executives and earnings management

Abstract

PurposeThe purpose of this paper is to examine the association between earnings management and the gender of the firm's executives.Design/methodology/approachPanel regressions of discretionary accruals on a set of female executive dummies and firm‐specific controls.FindingsThe results provide considerable evidence to suggest that firms with female chief financial officers (CFOs) are associated with income‐decreasing discretionary accruals, thereby implying that female CFOs are following more conservative earnings management strategies.Research limitations/implicationsIn general, the findings indicate that gender‐based differences in conservatism, risk‐aversion, and managerial opportunism may have important implications for financial reporting and corporate governance.Originality/valueThis paper extends prior research by addressing the potential effects of female executives on earnings management. The findings reported in this paper provide novel insights to the empirical financial accounting literature.