Gender diversity in employees and discretionary accruals : the Korean evidence

Purpose: This paper aims to investigate the relation between gender diversity in employees and earnings quality. Specifically, how gender diversity among full-time and part-time employees is associated with discretionary accruals in Korea is examined. Design/methodology/approach: The author analyzes the association between women ratio among full-time (part-time) employees and discretionary accruals by using 3,687 firm-years of Korean listed companies from 2010 to 2012. The regression model used in Barua et al. (2010) is adopted. The dependent variables, the absolute value of discretionary accruals, are proxied by the Modified Jones Model of Dechow et al. (1995) and the Performance Matched Model of Kothari et al. (2005). Findings: First, a higher ratio of women among full-time workers is related to lower discretionary accruals, whereas that of part-time female employees is not related to discretionary accruals. Second, the effect of gender diversity in employees varies depending on the possibility of earnings management. Third, the results are robust with sample firm-years without female executives, thereby suggesting that the results are not driven by the existence of female executives, and robust to accounting standards and firm-year clustering. Originality/value: This paper expands the understanding about the determination of discretionary accruals by demonstrating the impact of full-time female employees on earnings quality. Previous studies demonstrated that female workers are more ethical in the workplace, and the quality of accounting information disclosed by firms with female CFOs or directors, i.e. high ranking officers, is higher. It is observed that accounting information quality is higher when firms simply have more female workers, regardless of their relative position in the firm. This complements the results of previous studies and indicates gender diversity among employees is a sign of accounting information quality.