Corporate anticorruption disclosure and earnings management: the moderating role of board gender diversity

Abstract

Purpose

Corruption and manipulation of earnings remain a serious concern all over the globe. In addition, corporate disclosure of anticorruption information is still in its infancy in developing and emerging countries. Studies have also highlighted the importance of female directors in corporate disclosures and mitigating earnings management (EM). Therefore, the purpose of this study is to examine the moderating effect of board gender diversity on the relationship between anticorruption disclosure (ACD) on EM among listed firms in the East Africa Community (EAC) partners states.

Design/methodology/approach

The study used an ACD check list developed from recent studies and the Global Reporting Initiative (GRI) 205 on anticorruption reporting standards. The sample comprising of 58 firms listed across EAC partner states stock/securities exchanges over the period between 2013 and 2022. The hypotheses were tested using the fixed effect regression model.

Findings

This study found low disclosure of anticorruption practices among the selected firms. The regression results revealed that ACD and board gender diversity negatively affected EM. In addition, the study found that board gender diversity moderated the relationship between ACD and EM. The study used the system generalized method of moment (GMM) model to address endogeneity concerns.

Practical implications

The study will help policymakers and accounting standards setters in determining if mandatory ACD can reduce harmful EM practices. Furthermore, the findings can be helpful to corporate governance standards setters in deciding whether to implement gender quotas to enhance the effect of ACD on EM.

Originality/value

To the best of the author’s knowledge, this is the first paper that empirically examines the effect of ACD on EM in EAC. The study further adds to the empirical literature by assessing the moderating effect of board gender diversity, which has not been examined by earlier studies on ACD and EM.

Citation

Githaiga, P.N. (2024), "Corporate anticorruption disclosure and earnings management: the moderating role of board gender diversity", Corporate Governance, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/CG-02-2024-0100