Do board gender diversity and remuneration impact earnings quality? Evidence from Spanish firms
ISSN: 1754-2413
Article publication date: 27 June 2023
Issue publication date: 23 January 2024
Abstract
Purpose
This study aims to investigate how gender diversity and remuneration of boards of directors’ influence earnings quality for Spanish-listed firms.
Design/methodology/approach
The sample includes 105 nonfinancial Spanish firms from 2013 to 2018, corresponding to an unbalanced panel of 491 firm-year observations. The primary empirical method uses a Tobit semiparametric estimator with firm- and industry-level fixed effects and an innovative set of measures for earnings quality developed by StarMine.
Findings
Results exhibit a positive correlation between increased gender diversity and a firm’s earnings quality, suggesting that a gender-balanced board of directors is associated with more transparent financial reporting and informative earnings. We also find a nonmonotonic, concave relationship between board remuneration and earnings quality. This indicates that beyond a certain point, excessive board compensation leads to more opportunistic manipulation of financial reporting with subsequent degradation of earnings quality.
Research limitations/implications
This study only covers nonfinancial Spanish listed firms and is silent about how alternative board features’ influence earnings quality and their informativeness.
Originality/value
This study introduces measures of earnings quality developed by StarMine that have not been used in the empirical literature before as well as measures of board gender diversity applied to a suitable Tobit semiparametric estimator for fixed effects that improves the precision of results. In addition, while most of the literature focuses on Anglo-Saxon countries, this study discusses board gender diversity and board remuneration in the underexplored context of Spain. Moreover, the hand-collected data set comprising financial reports provides previously untested board features as well as a nonlinear relationship between remuneration and earnings quality that has not been thoroughly discussed before.
Keywords
Acknowledgements
Professor Pablo San Martin would like to thank the Research Department of the Universidad Catolica de la Santisima Concepcion for its partial funding of this study through the research grant DINREG 08/2022.
The authors wish to thank Farida Rehab, Nishika Khubchandani, Melissa Haskin and Harry David for their invaluable research assistance. Authors are also thankful for the comments and suggestions of Kirk Tennant, Pablo Swedberg, Xavier Cottini and Bartolomé Pascual Fuster. The authors thank commentary from seminar participants at the INEKA Conference (2019) celebrated by Verona University, Verona, Italy; and the 16th Finance, Risk and Accounting Perspectives Conference (2019), celebrated by Helka University, Helsinki, Finland. Professors Paolo Saona and Laura Muro thank the Scholarship Opportunity Fund of Saint Louis University for the financial support, and Professor Paolo Saona thanks the Spanish Ministry of Science and Innovation for its financial support (PID2020-114797GB-I00), and Universidad Pontificia Comillas for its financial support with the internal research grant PP2022_11. All remaining errors remain our own.
Citation
Saona, P., Muro, L., San Martín, P. and McWay, R. (2024), "Do board gender diversity and remuneration impact earnings quality? Evidence from Spanish firms", Gender in Management, Vol. 39 No. 1, pp. 18-51. https://doi.org/10.1108/GM-04-2021-0113
Publisher
:Emerald Publishing Limited
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