Authors: Kanellos Toudas, George Georgakopoulos, Ingrid Jansen

Title: Accounting Quality effects of imposing voluntary gender quotas on boards of directors

Abstract

The purpose of this paper is to study whether the voluntary gender quota for the board of directors of the FTSE 100 in the UK has a positive effect on the accounting quality. We examined this for 47 firms of the FTSE 100 covering the period 2010-2015.

We assumed that the voluntary gender quota would lead to improved accounting quality, due to an increase in board capital and therefore the monitoring ability of the board. This increased monitoring ability should translate into less earnings management and a higher accounting quality. We also assumed that this positive effect on the accounting quality would be different between firms that were highly affected by the quota and those that were not. Respectively the treatment and control group. A firm could be highly affected by the quota if she had no female board members in 2011 and/or if she had to hire 2 or more female board members. The findings are however contrary to what we expected.

We found that the new female board members are on average younger and less (executive) experienced than the retained and exiting male board members. This resulted in a lower board capital. Furthermore, the quota caused higher levels of earnings management during the period 2011-2013 for firms who had no female board members in 2011. We also found no differences in earnings management between the treatment and control group.