Abstract
This study considers the effect of foreign board members and age diversity on real earnings management (REM), by controlling the firm size, leverage and growth. This study employed quantitative methodology and longitudinal data for non-financial business firms, quoted on the Amman Stock Exchange from 2011 to 2015. Data were analysed using descriptive statistics and Panel Corrected Standard Errors (PCSE) regression. This study found that foreign boards member, age diversity, leverage and growth had negative and significant associations with REM. Based on the results, a firm should appoint young members to the board in addition to older members to pave the way to cross-ideology that can deter REM activities. At least one foreign director should exist within the board of directors because a foreign board member has different qualifications and experiences that may help to deter REM practices.
Highlights
Board of directors plays their significant role to increase the business performance, through the development of strategic objectives and working for the mission and vision statements (Fama & Jensen, 1983; Johnson, Schnatterly, & Hill, 2013; Chouaibi, Harres, & Brahim, 2016)
This indicates that remaining variation is due to some other factors which are not added in the model
The objective of the study is to explore the link among key factors of board diversity, and real earnings management (REM) of the Jordan listed non-financial companies during 2011-2015
Summary
Board of directors plays their significant role to increase the business performance, through the development of strategic objectives and working for the mission and vision statements (Fama & Jensen, 1983; Johnson, Schnatterly, & Hill, 2013; Chouaibi, Harres, & Brahim, 2016). Elected by a company’s shareholders, the board of directors are responsible for the financial and strategic decisions in the business firms (Alam, Chen, Ciccotello, & Ryan, 2014). It works to serve as per the wishes of their customers and employees (Brammer, Grosvold, & Rayton, 2007) Each of these board diversity categories affects firm-level results through cognition and the recognition of social identity (Kagzi & Guha, 2018). The concept of board diversity considers the significant phenomenon from the context of literature (Hisham Farag & Mallin, 2016; Rao & Tilt, 2016). This idea has put significant attention to the discussion of board diversity in front of various scholars (Hillman, 2015; Mahadeo, Soobaroyen, & Hanuman, 2012)
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