Female directors and accounting quality: a quasi-natural experiment research

ABSTRACT

This study capitalises on the unique setting created by the enactment of a board gender quota in Norway, which led to an unprecedented increase in the number of female directors within a short timeframe. To examine the impact of female board presence on accounting quality, the study employs a difference-in-differences methodology, taking advantage of this quasi-natural experiment context. Given the inherently endogenous nature of the research topic, the interpretation of the relationship between the number of female directors on the board and accounting quality reported in some prior studies as casual relationships poses challenges. In that regard, this study aims to shed light on an unresolved issue with the implementation of a research design that is particularly robust to endogeneity concerns. The empirical analysis produces compelling results, firmly rejecting any significant impact of female directors on accounting quality. The findings hold strong across various checks.

KEYWORDS:

• Female directors
• abnormal accruals
• accounting conservatism
• earnings response coefficients
• difference-in-differences

JEL CLASSIFICATION:

• M41
• M48

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. For example, Gul et al. (2011) reported an average of only one female director on boards, and Thiruvadi and Huang (2011) found that 80% of firms had no female directors in the audit committee. In contrast to these studies, our sample shows that female directors hold approximately 40% of the board seats.

2. See, in parentheses, the VIFs for the independent variables: SIZE (2.09); CFFO (2.31); LEVERAGE (1.52); GROWTH (1.37); ROA (1.23); LAGLOSS (1.02); AGE (1.15).