Earnings Management in UK Private Firms: The Role of Women Directors

Abstract

Analysing a sample of 20,851 UK private firms from 2007 to 2019, we report evidence of a negative relationship between board gender diversity and earnings management. The results indicate that the presence of a sole woman director mitigates earnings management. Further analysis reveals that earnings management mitigation is more pronounced when three or more women directors are on the board. We find that younger, longer-tenured and less busy women directors are attributes associated with better private firm earnings quality. The results call for greater firm and regulatory attention to increasing private firm women director representation to improve earnings quality.