The Moderating Role of Board Gender Diversity in the Relationship Between Board Characteristics and Earnings Management: Evidence from Bangladesh's Manufacturing Sector
Year: 2025
Type: article
Abstract: Purpose – The purpose of this study is to examine the relationship between board characteristics and earnings management and the moderating effect of board gender diversity on such a relationship for the listed manufacturing companies of Bangladesh. Design/Methodology/Approach – The study involved 125 businesses listed on the Dhaka Stock Exchange in Bangladesh for a period of five years, from 2019 to 2023. The modified cross-sectional Jones model (Dechow et al., 1995) has been employed to assess accrual-based earnings management and the two-step System Generalised Method of Moments (System GMM) model has been employed as the principal methodological technique to test the hypotheses, owing to the dynamic characteristics of Accrual-based Earnings Management (AEM) and the potential endogeneity of governance factors. The robustness of GMM findings has been evaluated using three alternative estimation techniques: Feasible Generalised Least Squares (FGLS), Random Effects (RE) based on the Hausman Test, and Pooled Ordinary Least Squares (OLS). Findings – The results reveal that female participation on board (FPB) significantly reduces AEM, demonstrating that gender diversity enhances the monitoring function of corporate boards. However, the significant and positive interaction terms between FPB and other governance mechanisms — such as board size and board independence — highlight that the effectiveness of broader board dynamics is contingent upon female directors. Research Implication – The findings of the current study will help policy-makers, regulators, and corporations to improve corporate governance structures, thereby promoting gender diversity in the board of directors and encouraging the adoption of financial reporting best practices.
Authors: Tanzina Haque, Sadia Islam Taspia
Institutions: University of Dhaka, United International University
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W7077154202
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