دانلود رایگان مقاله تنوع جنسیتی هیئت مدیره و ضعف کنترل داخلی

Abstract

We investigate the role of gender diversity on corporate boards in mitigating internal control weaknesses (ICWs). We predict and find that firms with greater female board representation are less likely to have ICWs. The results are not driven by females sitting on the audit committee. Instead, it appears that females on corporate boards reduce ICWs, regardless of whether they sit on the audit committee or not. Our results are inconsistent with the critical mass theory, showing that even one female board member could reduce the likelihood of ICWs. Taken together, the evidence is consistent with female board members' typical characteristic tendency shown in prior literature (e.g., being more likely to discuss difficult issues, more fiscally conservative, better monitors, and less tolerant of opportunistic behaviors). Our results have implications for board member selection from a policy perspective as well as board member monitoring from an investor and regulator perspective.

6. Conclusion

We investigate whether female presence on a firm's board of directors influences the firm's internal controls. Based on the gender diversity literature (Krishnan & Parsons, 2008), we predict and find that firms with a greater presence of female board members are less likely to report having weak internal controls. Additional analyses reveal that the results are not driven by females on the audit committee. Rather, females on the board of directors are associated with a lower likelihood of internal control issues, regardless of whether they sit on the audit committee. Our results are robust to alternate definitions of female board presence and are inconsistent with the critical mass theory, suggesting that female directors are not merely tokens: even one female director may lead to reduced likelihood of material weaknesses. The results add to the internal control literature by showing that certain characteristics of the firm's board of directors can have a substantial effect on the strength of the firm's internal controls. The study also extends prior literature on gender diversity of corporate boards. While prior literature has shown that gender-diverse boards are associated with higher earnings quality (Srinidhi et al., 2011) and lower likelihood of restatements (Abbott et al., 2012), our findings suggest that this relationship may exist because female board members help reduce internal control weaknesses, and prior literature has established a negative relationship between internal control weaknesses and earnings quality (Ashbaugh-Skaife et al., 2008; Doyle et al., 2007b).