Wisdom that Equality Tends to Offer: The Case of Real Earnings Management Practices of Female Directors in IT-friendly Firms of Bangladesh

Abstract

In this study, we analyze how female directorship and real earnings management of IT-friendly firms are empirically interrelated in context of an emerging economy, viz. Bangladesh. We undertake relevant statistical procedures by utilizing a sample of 1914 firm-year observations as listed on the Dhaka Stock Exchangethroughout the period of 2000-2017.Our results imply that firms with female director(s) are more likely to be involved in real earnings management On the other hand, we also underscore that IT-friendly firms are less likely to be engaged in real earnings management and to provide superiorquality financial reports whereas the significance of this observation becomes more pronounced when conjoined with appointment of female directors in similar firms. We also find that IT-friendly firms with female directors are less probable to be involved in earnings management when compared to both ITfriendly firms with male director(s) and non-IT friendly firms. Based on the evidence, we discern that female directors are included in the board not only for fulfillment of stated quotas, but also for their demonstration of due diligence to restrain management from earnings management practices.