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BOARD ETHNIC AND RACIAL DIVERSITY: DOES IT IMPACT EARNINGS QUALITY?
- Date Issued:
- 2021
- Abstract/Description:
- I examine whether and how racially/ethnically diverse board impacts the quality of reported earnings. Agency theory suggests that the board of directors acts as a robust governance mechanism to reduce opportunistic managerial behavior that may harm shareholders' wealth. Further, diversity coalesces a variety of attributes from different directors that are valuable in predicting organizational outcomes. The majority of extant literature focuses on gender-diverse boards and various firm outcomes, while little is known about how directors' race/ethnicity affects earnings quality. Using a sample of firms publicly traded in the U.S., I find that increased board racial/ethnic diversity is associated with better earnings quality as proxied by lower discretionary accruals and lower probability of internal control weaknesses and financial statement restatements. I further examine whether firms with increased diversity (racial/ethnic and gender diversity) enjoy incrementally higher earnings quality than other firms. However, I fail to find support that racial/ethnic and gender intersectionality is associated with improved earnings quality. Lastly, based on critical mass theory, I test whether an industry descriptive norm is necessary for firms to enjoy increased earnings quality. I find that racial/ethnic directors have a meaningful impact on a firm's earnings quality regardless of the level of diversity; even firms with lower than the industry descriptive norm of racial/ethnic diversity enjoy improved earnings quality.
Title: | BOARD ETHNIC AND RACIAL DIVERSITY: DOES IT IMPACT EARNINGS QUALITY?. |
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Name(s): |
Mungai, Ann W. Nduati, author Thevenot, Maya, Thesis advisor Florida Atlantic University, Degree grantor School of Accounting College of Business |
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Type of Resource: | text | |
Genre: | Electronic Thesis Or Dissertation | |
Date Created: | 2021 | |
Date Issued: | 2021 | |
Publisher: | Florida Atlantic University | |
Place of Publication: | Boca Raton, Fla. | |
Physical Form: | application/pdf | |
Extent: | 163 p. | |
Language(s): | English | |
Abstract/Description: | I examine whether and how racially/ethnically diverse board impacts the quality of reported earnings. Agency theory suggests that the board of directors acts as a robust governance mechanism to reduce opportunistic managerial behavior that may harm shareholders' wealth. Further, diversity coalesces a variety of attributes from different directors that are valuable in predicting organizational outcomes. The majority of extant literature focuses on gender-diverse boards and various firm outcomes, while little is known about how directors' race/ethnicity affects earnings quality. Using a sample of firms publicly traded in the U.S., I find that increased board racial/ethnic diversity is associated with better earnings quality as proxied by lower discretionary accruals and lower probability of internal control weaknesses and financial statement restatements. I further examine whether firms with increased diversity (racial/ethnic and gender diversity) enjoy incrementally higher earnings quality than other firms. However, I fail to find support that racial/ethnic and gender intersectionality is associated with improved earnings quality. Lastly, based on critical mass theory, I test whether an industry descriptive norm is necessary for firms to enjoy increased earnings quality. I find that racial/ethnic directors have a meaningful impact on a firm's earnings quality regardless of the level of diversity; even firms with lower than the industry descriptive norm of racial/ethnic diversity enjoy improved earnings quality. | |
Identifier: | FA00013754 (IID) | |
Degree granted: | Dissertation (Ph.D.)--Florida Atlantic University, 2021. | |
Collection: | FAU Electronic Theses and Dissertations Collection | |
Note(s): | Includes bibliography. | |
Subject(s): |
Boards of directors Ethnic diversity Corporate profits |
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Persistent Link to This Record: | http://purl.flvc.org/fau/fd/FA00013754 | |
Use and Reproduction: | Copyright © is held by the author with permission granted to Florida Atlantic University to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder. | |
Use and Reproduction: | http://rightsstatements.org/vocab/InC/1.0/ | |
Host Institution: | FAU | |
Is Part of Series: | Florida Atlantic University Digital Library Collections. |