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Eurasian Business Review

Erschienen in:

12.05.2022 | Regular Article

Board diversity and financial statement comparability: evidence from China

verfasst von: Ding Ning, Irfan-Ullah, Muhammad Ansar Majeed, Aurang Zeb

Erschienen in: Eurasian Business Review | Ausgabe 4/2022

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Abstract

We investigate the relationship between board diversity (relation-oriented diversity, task-oriented diversity, and overall board diversity) and financial statement comparability. We find that diverse boards are positively associated with financial statement comparability, suggesting that board diversity improves governance mechanisms by alleviating agency conflicts, leading to higher comparability than homogenous boards. We also find that institutional ownership positively affects the association between board diversity and financial statement comparability. Furthermore, the positive effect of diversity, institutional ownership, and comparability are more pronounced in non-state-owned firms and non-crisis periods. Our findings remain consistent with a battery of econometric techniques and measures of comparability. This study provides new insights regarding the role of boardroom diversity in shaping the qualitative aspect of financial reporting, i.e., financial statement comparability.

Vorheriger Artikel Non-linearity between family control and firm financial sustainability: moderating effects of CEO tenure and education

Nächster Artikel Corporate philanthropy and employee wellbeing: do types of corporate philanthropy matter?

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Certain European countries introduced gender-based quotes and non-compliance could result in delisting. However, in US companies are required to define the diversity where some firms may consider gender, age and race as diversity and others may consider tenure and expertise as diversity.

ST and PT refers to special treatment and particular treatment firms. The firm is labeled as ST if its recent financial profit is negative for two consecutive years. ST firms will be relabeled as PT if it is unable to be revived within two years.

Although not primarily, De Franco et al. (2011) incorporate losses for computing earnings comparability as discussed in their study in Footnote 11. They justify the addition of this “piece-wise linear regression technique” by saying that ‘‘asymmetric earnings timeliness [is] a potential source of bias in our comparability measure (Ball et al., 2000; Basu, 1997).’’ We choose this De Franco et al. version since it better depicts comparability in our context. Our focus is on a situation in which significant economic losses occur (i.e., large negative stock returns).

We use Hausman test to make a choice between fixed and random effect model. The test reveals that FEM is an appropriate choice for our estimation analyses.

IndMeanRD, IndMeanTD, and IndMeanBD are the industry mean of relation diversity, task diversity, and overall board diversity, respectively.

Also see Lin et al. (2013), An et al. (2016), Jiang and Yuan (2018), and Chen (2015).

We do not report the results of the first stage regressions due to brevity.

We change our board diversity indexes to dummy variables and define higher (lower) board diversity on the board. RD_dummy is the indicator variable equaling one if the board has higher relation diversity, otherwise zero. We repeat the same process for task diversity (TD_dummy) and overall board diversity (BD_dummy).

We also find the impact of board diversity for Covid-19 (2020). The un-tabulated results show that board diversity has no effect on comparability during Covid-19.

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Titel: Board diversity and financial statement comparability: evidence from China
verfasst von: Ding Ning
Irfan-Ullah
Muhammad Ansar Majeed
Aurang Zeb
Publikationsdatum: 12.05.2022
Verlag: Springer International Publishing
Erschienen in: Eurasian Business Review / Ausgabe 4/2022
Print ISSN: 1309-4297
Elektronische ISSN: 2147-4281
DOI: https://doi.org/10.1007/s40821-022-00214-3

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