Female Board Presence and the Likelihood of Financial Restatement

• Published in: Accounting horizons Vol. 26; no. 4; pp. 607 - 629
• Main Authors: Abbott, Lawrence J, Parker, Susan, Presley, Theresa J
• Format: Journal Article
• Language: English
• Published: Sarasota American Accounting Association 01.12.2012
• Subjects: Board of directors; Boards of directors; Corporate governance; Decision making; Experimental methods; Female labour; Females; Financial reporting; Financial restatements; Financial statements; Gender; Gender roles; Hypotheses; Impact analysis; Sociology; Studies; U.S.A; United States > US
• ISSN: 0888-7993; 1558-7975
• DOI: 10.2308/acch-50249

This paper investigates the impact of one form of board diversity on the incidence of financial restatement. More specifically, we hypothesize that there is a negative relation between female board presence (defined as whether or not a board has at least one female director) and the likelihood of a financial restatement. Our hypothesis is consistent with a female board presence contributing to the board's ability to maintain an attitude of mental independence, diminishing the extent of groupthink and enhancing the ability of the board to monitor financial reporting. Utilizing the U.S. General Accounting Office (U.S. GAO 2002) report on restatements, we construct a matched-pair sample of 278 annual (187 quarterly) restatement and 278 annual (187 quarterly) control firms. After controlling for other restatement-related factors, we find a significant association between the presence of at least one woman on the board and a lower likelihood of restatement. Our results continue to hold in annual restatements from the post-Sarbanes-Oxley (SOX) time period. [PUBLICATION ABSTRACT]