Board gender diversity and accounting quality: on the moderating role of national culture and legal origins

Abstract

Motivated by the growing literature on the role of board gender diversity in shaping firms' outcomes, and by the recent challenges and discussions around accounting quality, this paper proposes to study the extent to which board gender diversity influences accounting quality. We use a difference-in-differences (DiD) approach by exploiting a quasi-natural experiment. We provide evidence that board gender diversity is associated with an improvement in accounting quality. This finding is statistically and economically significant. More precisely, we examine the implications of the proposal of European Union Directive (EU) 2022/2381 on firms' accounting quality. The results from our DiD approach reveal that the positive impact of female directors on improving accounting quality remains robust to the exogenous change in the regulatory context. Our paper makes several contributions to the related literature. First, we provide, to the best of our knowledge, the first consistent evidence on the role that board gender diversity plays in improving a firm's accounting quality. Second, we provide a first attempt at exploring the moderating role of national culture and legal origins in the relationship between board gender diversity and accounting quality. Finally, our work extends the line of research that investigates the relationship between corporate social responsibility and accounting quality.