Does female human capital constrain earning management: The case of the United Kingdom

This paper examines how the presence of female directors on corporate boards influences the practice of real and accrual earning management in U.K. firms. We account for the endogeneity of a range of corporate governance measures, including female board representation, with regards to earning management and demonstrate that ignoring this problem may lead to perverse results. We find that female board representation constrains both forms of earning management. Our results provide evidence that female directors bring considerable and diverse human capital, enhance board monitoring and contribute to a qualitative shift in the decision-making process in the boardroom. We suggest that boards’ gender diversity and earning management is an overlooked area in the United Kingdom and globally and may require the attention of regulators.