The impact of board diversity on earnings management in Kuwait

Abstract

Purpose

This paper aims to examine the consequences of board diversity (BD) in Kuwait. In particular, it examines the impact of BD (gender, age and nationality) on earnings management (EM).

Design/methodology/approach

The research uses data from 103 non-financial Kuwaiti-listed companies from 2010 to 2017. The data is collected from the companies’ data from secondary sources such as their annual reports. The data analysis methods are correlation, multi-regression and robust regression. EM is measured using the modified Jones model (1995) and Kothari et al. (2005).

Findings

The findings show a negative association between gender diversity (GD) and EM. It also found a positive relationship between age diversity (AD) and EM and no relationship between national diversity (ND) and EM.

Practical implications

This study’s results have significant implications for investors. The practical empirical findings indicate that GD on the board did not impact on EM. Also, it is more important to have senior directors on the board than AD to reduce EM. There is no need to employ any foreigners because they do not affect EM.

Originality/value

It contributes to the growing body of literature on BD by investigating its effect on EM. Furthermore, building on the broader literature on gender, age and ND by highlighting the critical role that women, young people and foreign directors play in improving boards' monitoring role on EM. More specifically, it contributes to existing knowledge, provides a theoretical contribution and makes a methodological contribution.

Citation

Alqatan, A. (2024), "The impact of board diversity on earnings management in Kuwait", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-05-2024-0279