Getting to the Bottom Line: An Exploration of Gender and Earnings Quality

By Gopal V. Krishnan, Linda M. Parsons. 2008

538 citations recorded by the source corpus.

For stakeholders, such as investors and lenders, to appropriately assess a company’s financial performance, the reported accounting earnings must closely reflect the economic reality of the organization’s financial activity throughout the reporting period. The degree to which reported earnings capture economic reality is called earnings quality. Managers have an ethical obligation to report high quality earnings to interested stakeholders in a timely matter. Accounting research has identified conditions within an organization, such as management compensation contracts and pending litigation that can impact earnings quality. We extend this line of research by exploring whether another characteristic of an organization, gender diversity in senior management, influences the quality of reported earnings. Companies with more women in senior management are found to be more profitable and have higher stock returns after initial public offerings than those with fewer women in the management ranks. Our findings suggest that the improved bottom line for companies with more women senior executives is not produced through the management of earnings or lower quality earnings. Instead, earnings quality is positively associated with gender diversity in senior management.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/48f206ca6d43561742da9d79ad5801153d1e97d5

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Citations in the corpus

Does Board Gender Diversity Have a Financial Impact? Evidence Using Stock Portfolio Performance (2013, background): “Studies in accounting examine financial outcomes such as earnings quality (Krishnan and Parsons 2008), earnings management (Srinidhi et al. 2011) and analyst forecast accuracy (Gul et al. 2011) as a function of diverse boards and/or management.”
Do women in top management affect firm performance? Evidence from Indonesia (2013, background): “In the accounting literature, previous studies have addressed the association between gender diversity and accounting earnings quality (Krishnan and Parsons, 2008; Ye et al., 2010), social responsibility (Coffey and Wang, 1998; Siciliano, 1996), and intellectual capital performance (van der Zahn,…”
Beyond gender diversity: How specific attributes of female directors affect earnings management (2017, background): “All stakeholders and users of financial information require tools that can moderate managers’ tendency to engage in earnings management (Krishnan & Parsons, 2008).”
Board Diversity and Corporate Social Responsibility: Empirical Evidence from France (2020, background): “In fact, women have different academic backgrounds and professional experiences than men: they could bring to light new perspectives on specific areas of CG, which improves, therefore, the governance quality (Conyon and He 2017; Pucheta-Martinez et al. 2016; Elstad and Ladegard 2012; Krishnan and Pa”
Ceo gender and firm performance (2013, background): “Krishnan and Parsons (2008) find that firms with gender diversity in senior management are associated with higher earnings quality.”
Ethics, Diversity Management, and Financial Reporting Quality (2010, result): “To our knowledge, one exploratory (Krishnan and Parsons, 2008) and two unpublished studies (Francis et al.”
Does Female Representation on Audit Committees Affect Audit Fees (2011, unknown): “10 Krishnan and Parsons (2008) document that gender diversity in the top managerial positions improves the”
Gender Differences in Financial Reporting Decision-Making: Evidence from Accounting Conservatism (2015, unknown): “Recent studies find that gender diversity in top management and boardroom positively affects earnings quality, we therefore expect both management gender diversity and board gender diversity to positively impact conservatism (e.g., Krishnan and Parsons 2008; Labelle et al. 2010; Gul et al. 2011).”
Corporate Governance and Earnings Management: A Survey of Literature (2013, background): “2013 The Clute Institute http://www.cluteinstitute.com/ 407 Further, female directors are more likely to be less tolerant of opportunistic activities and behavior than male directors (Krishnan and Parsons, 2008; Thorne, Massey, and Magnan, 2003 59 ).”