The role of the gender diversity of audit committees in modelling the quality of management earnings forecasts of initial public offers in Malaysia

Bibliographic Data

ID12920741
AuthorsMohammed Abdullah Ammer (0000-0003-2386-1340, King Faisal University, corresponding author), Nurwati A Ahmad‐Zaluki (0000-0002-3279-0700, Northern University of Malaysia)
Year2017
Volume32
Issue6
Pages420-440
Publication date2017-06-26
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueGender in Management An International Journal (JOURNAL)
Journal identifiersISSN: 1754-2413 • E-ISSN: 1754-2421
PublisherEmerald Publishing Limited (PUBLISHER • GB)
DOI10.1108/gm-09-2016-0157
OpenAlexW2712562219
LanguageEN
Citations received4
References cited49

Purpose Presently, one of the major governance issues faced by management and shareholders of organizations is the gender composition of the boards of directors and audit committees. This study aims to examine the impact of gender diversity in audit committees on the accuracy of management earnings forecasts disclosure in initial public offering (IPO) prospectuses. Design/methodology/approach The study sample comprises 190 Malaysian companies issuing IPOs that transformed into public companies during the period 2002-2012. Earnings forecasts accuracy (quality) is proxied by absolute forecast error and the study model is developed based on the frameworks of the signalling theory, the agency theory and the resource-dependence theory. Findings The study proposes that female directors introduce a set of specific features in the boardroom that serve to improve investor protection and efficient monitoring of management. However, findings reveal an insignificantly positive relationship between gender diversity in audit committees and absolute forecast error, which shows that more female directors in audit committees could translate into more errors and less accuracy in earnings forecasts. Practical implications Considering the recent regulatory developments that encourage the number of women on the board of directors, the findings obtained have significant implications for policymakers. The study findings can also be invaluable to investors, investment analysts, market players and researchers. Originality/value The composition of the board of directors and audit committees in terms of gender plays a significant role in the promotion of effective corporate governance practices. This study is one of the pioneering studies that examines the advantages of gender diversity in the board of directors. It is also the first study to extend IPO literature by investigating the role of gender diversity in audit committees in the enhancement of accurate management earnings forecasts included in the IPO prospectuses

Audit · Audit Committee · Business · Corporate governance · Diversity (politics · Earnings · Earnings Management · Gender diversity · Initial public offering · Internal audit · Joint audit · Political science · Principal–agent problem · Promotion (chess · Prospectus · Quality audit · Shareholder · Auditing, Earnings Management, Governance · Corporate Finance and Governance · Gender Diversity and Inequality · Accounting · Finance

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