Author(s): Emna Miladi, Jamel CHOUAIBI
Purpose – We examine how women in top management team (TMT) influence earnings management in banking industry and the role of audit quality on the effect of women in TMT on bank earnings management. Design/methodology/approach – This study used data collected from Datastream, complemented by information hand collected from financial report. For a sample of American commercial listed banks covering 2009-2018, several valuation models and regressions are employed. We develop a composite index of audit quality to analyze the moderating effect of audit quality on the link between women in TMT and bank earnings management. For robustness test, three alternative measures of gender diversity in TMT are tested. Findings – Results show that women in TMT are strongly inclined to reduce bank earnings management thereby ensuring an effective and transparent managerial decisions. Our results hold when we use alternative measures of gender diversity in TMT. We also find that audit quality moderates the negative relationship between the presence of women on TMT and bank earnings management. Practical implications – This finding suggests that advocating banks to hire more female managers helps to reduce earnings manipulation practices in US commercial banks. This study not only expands the literature on bank earnings management practice in developed-country, but also provides policy implications for female top executives and audit quality. Originality/value – We extent the literature on the effect of women directors on firm earnings management by particularly focusing on the banking sector, to our knowledge, it is the first study that establishes a link between the presence of women in TMT and earnings management in banking industry.