Exploring the Relationship Between Gender Diversity and Earnings Management: Does Critical Mass Matter?

Building on the critical mass theory, we explore whether the number of women on a board impacts earnings management. Our results suggest that female directors are associated with fewer income-increasing discretionary accruals, which implies that they are more conservative regarding financial reporting. In addition, we find evidence that a nonlinear relationship exists between gender diversity and earnings management. Our evidence suggests that boards with female directors can have different dynamics depending on the number of women on the board. When a higher percentage of women are on the board, the results show no differences, suggesting that women blend into the group.