Gender-Diverse Boards and Properties of Analyst Earnings Forecasts

2013 ◽  
Vol 27 (3) ◽  
pp. 511-538 ◽  
Author(s):  
Ferdinand A. Gul ◽  
Marion Hutchinson ◽  
Karen M. Y. Lai
Keyword(s):  
Stock Price ◽  
Audit Quality ◽  
Gender Diversity ◽  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
Corporate Boards ◽  
Price Informativeness ◽  
Board Diversity ◽  
Financial Reports ◽  
Quality Stock

SYNOPSIS Using a sample of 2,200 U.S. listed firm-year observations (2001–2007), this study shows a positive (negative) relation between gender diversity on corporate boards and analysts' earnings forecast accuracy (dispersion), after controlling for earnings quality, corporate governance, audit quality, stock price informativeness, and potential endogeneity. Our findings are important as they suggest that board diversity adds to the transparency and accuracy of financial reports such that earnings expectations are likely to be more accurate for these firms.

Audit Quality and Analyst Forecast Accuracy: The Impact of Forecast Horizon and Other Modeling Choices

2015 ◽  
Vol 35 (2) ◽  
pp. 167-185 ◽  
Author(s):  
Yi (Ava) Wu ◽  
Mark Wilson
Keyword(s):  
Audit Quality ◽  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
Analyst Forecasts ◽  
Data Availability ◽  
Analyst Forecast ◽  
Forecast Horizon ◽  
Financial Reports ◽  
Decision Usefulness ◽  
The Impact

SUMMARY The accuracy and other properties of analyst earnings forecasts represent potentially useful proxies for the impact of audit quality on client financial reports. Extant research in the auditing literature, however, is characterized by diametrically opposite predictions and inconsistent findings regarding the relationship between audit quality and analyst forecast accuracy. We argue that a potential reason for the inconsistency in the literature reflects these studies' focus on end-of-year forecast accuracy, which is subject to competing effects of audit quality. High-quality auditors may simultaneously improve forecast accuracy through their impact on the decision usefulness of clients' prior period reports, and reduce forecast accuracy by constraining client attempts to manage earnings in the direction of the consensus forecast. We argue and present evidence in support of the conjecture that analysts' beginning-of-year forecasts are a superior metric for identifying the impact of audit quality on the properties of analyst forecasts because the decision usefulness effect of audit quality should be dominant with respect to those forecasts. Data Availability: Data are available from sources identified in the article.

Audit quality within adverse selection markets

2016 ◽  
Vol 24 (1) ◽  
pp. 2-18 ◽  
Author(s):  
Bharat Sarath
Keyword(s):  
Private Information ◽  
Stock Price ◽  
Audit Quality ◽  
Information Economics ◽  
Economic Market ◽  
Financial Reports ◽  
Content Type ◽  
General Terms ◽  
Audit Regulation ◽  
Short Run

Purpose – Auditing may be viewed as an arrangement for reducing inefficiencies arising from the fundamental market conflict between a seller who wants as high a price as possible and a buyer who wants to pay as low a price as possible. In more general terms, sellers prefer policies that boost the stock price in the short run whereas buyers would prefer the price to peak when they are ready to sell some time in the future. By framing audited financial reports within this context, the purpose of this paper is to provide some insights regarding both audit institutions and audit regulation. Design/methodology/approach – This paper relies on conceptual arguments and a simple analytical model. Findings – The basic findings are that a unique definition of audit quality is not compatible with the economics of a market where there are conflicts across traders as well a possibility that some traders hold superior information to others. Even an identification of quality with accuracy fails in this setting of conflict. The inference is that audit quality should be approached from a multi-dimensional perspective rather than a unique measure. Research limitations/implications – While the paper points out difficulties in constructing measures of audit quality extant in the literature, it does not provide any clear empirical suggestions for better measures. Originality/value – The paper brings back into focus issues from information economics that form the bedrock for the study of audited financial statements in equity markets. While the paper is partially a survey and synthesis of some of the latest empirical findings, it describes them within the context of a rational economic market where traders may possess private information. Within such a market, the paper outlines both the conflicts and the benefits inherent to the current institutional arrangements where auditors are paid by incumbent shareholders and overseen by regulators.

scholarly journals Board Diversity: More Than a Gender Issue?

2015 ◽  
Vol 20 (1) ◽  
pp. 123 ◽  
Author(s):  
Michael Adams
Keyword(s):  
Corporate Governance ◽  
Gender Diversity ◽  
Governance Structure ◽  
Share Price ◽  
Corporate Boards ◽  
Board Diversity ◽  
The World ◽  
The Usa ◽  
The 1960S ◽  
The Right

There has been extensive research conducted on the importance of corporate governance around the world. The research seems to demonstrate that, regardless of whether corporations are based in common law or civil code systems, their longevity and sustainability arise from good corporate governance. However, the evidence does not clearly demonstrate a correlation between a particular organisation’s governance structure and practices and its share price. Around the world the question of board diversity is gaining in importance. The beginning of the debate in the 1960s centred on gender. While it is essential to conduct a debate on gender diversity, other aspects of diversity should also be considered. Race, culture and even age may have a direct impact on the performance of a board. Australian companies, particularly those listed on the ASX, have a poor record of instituting any type of diversity. The USA and European Union have a much wider range of policies to promote diversity on corporate boards. The key question is how best to regulate to promote diversity across gender, race, culture and age. The historical approach of regulating diversity by setting targets and requiring disclosure does not seem to have delivered substantial change. Is it the right time to impose mandatory requirements, or are there other alternative strategies? Without doubt change is required, but there will be opposition.

A social capital view of women on boards and their impact on firm performance

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Erin Oldford ◽  
Saif Ullah ◽  
Ashrafee Tanvir Hossain
Keyword(s):  
Social Capital ◽  
Firm Performance ◽  
Ethnic Diversity ◽  
Gender Diversity ◽  
Negative Relationship ◽  
Future Research ◽  
Corporate Boards ◽  
Board Diversity ◽  
Content Type ◽  
Board Gender Diversity

PurposeThe objective of this paper is to leverage a two-sided view of social capital to develop a model of board gender diversity and firm performance using social capital data from Northeast Regional Center of Rural Development.Design/methodology/approachThe authors examine a large sample of 2,322 US publicly listed firms over the period 1996 to 2009. The final sample consists of 14,634 firm-year observations.FindingsThe authors find that when a firm's social network is not supportive of gender diversity, corporate boards have lower levels of female representation. The strength of a social network's social ties exacerbates the relationship between social capital and board gender diversity. The authors also report a negative relationship between female board membership and firm performance in social networks that are not pro-diversity. Robustness tests reveal that the authors’ social capital view of board diversity also applies to board ethnic diversity.Research limitations/implicationsThis study focuses primarily on blue chip firms due to data constraints. It will be interesting for future researchers to investigate a broader spectrum of firms from a broader perspective of diversity beyond the study’s gender and ethnicity findings. Furthermore, this study assesses the US context, and future research could investigate firm sociability in other national contexts.Practical implicationsThis study contributes new insights to the discourse on gender diversity on corporate boards which stand to inform both policy and practice. The results of the study can inform the position of an industry association on board gender diversity, with guidance on how messaging across networks can be more effective should it account for the hidden bias that the authors uncover in the current study. From a manager's perspective, this study can help those managers and boards trying to enhance board gender diversity by providing a more complete understanding of the factors that can limit progress.Originality/valueThis study contributes a social capital view of board gender diversity to the growing literature of corporate governance, board diversity and local environmental influences on corporate policies.

scholarly journals Multiple Layers of Gender Diversity on Corporate Boards: To Force or Not to Force?

2014 ◽  
Vol 19 (1) ◽  
pp. 1 ◽  
Author(s):  
Jean Du Plessis ◽  
James O'Sullivan ◽  
Ruth Rentschler
Keyword(s):  
Best Practice ◽  
Critical Mass ◽  
Gender Diversity ◽  
Business Case ◽  
Corporate Boards ◽  
Corporate Board ◽  
Board Diversity ◽  
Historical Perspectives ◽  
Board Gender Diversity ◽  
The Right

This article examines diversity on corporate boards, focussing on gender diversity and taking both contemporary and historical perspectives. Australia forms a particular focus of this article, but, as far as mandatory quota legislation is concerned, other jurisdictions provide comparisons. The authors illustrate how Australian corporate board gender diversity is starting from a low base in contrast to some other types of boards. Arguments for and against more women on boards are analysed in order to provide a comprehensive examination of extant research. The article also examines briefly whether a business case can be made for board gender diversity within the wider framework of board diversity. The authors acknowledge that there are unanswered questions about the right gender balance on boards and whether, without mandatory quota legislation, a voluntary system can achieve best practice targets. They explore the notion of critical mass - the idea that, upon board representation reaching approximately 15 per cent, efforts to further redress the imbalance may lose momentum. Their conclusion is that, in the Australian jurisdiction, progress is being made belatedly towards increasing gender diversity on corporate boards. However, substantial challenges are envisaged if significant progress is not made imminently to increase the number of women serving on corporate boards.

Audit Quality and Properties of Analyst Earnings Forecasts

2008 ◽  
Vol 83 (2) ◽  
pp. 327-349 ◽  
Author(s):  
Bruce K. Behn ◽  
Jong-Hag Choi ◽  
Tony Kang
Keyword(s):  
Financial Reporting ◽  
Audit Quality ◽  
Forecast Accuracy ◽  
Reporting Quality ◽  
Earnings Forecasts ◽  
Earnings Forecast ◽  
Forecast Dispersion ◽  
Industry Specialization ◽  
Big 5 ◽  
Analyst Earnings

Under the assumption that audit quality relates positively to unobservable financial reporting quality, we investigate whether audit quality is associated with the predictability of accounting earnings by focusing on analyst earnings forecast properties. The evidence shows that analysts' earnings forecast accuracy is higher and the forecast dispersion is smaller for firms audited by a Big 5 auditor. We further find that auditor industry specialization is associated with higher forecast accuracy and less forecast dispersion in the non-Big 5 auditor sample but not in the Big 5 auditor sample. Overall, our results suggest that high-quality audit provided by Big 5 auditors and industry specialist non-Big 5 auditors is associated with better forecasting performance by analysts.

Would diversified corporate boards add value? The case of banking institutions in Malaysia

2018 ◽  
Vol 10 (2/3) ◽  
pp. 218-228 ◽  
Author(s):  
Ribed Vianneca W. Jubilee ◽  
Roy W.L. Khong ◽  
Woan Ting Hung
Keyword(s):  
Firm Value ◽  
Banking Sector ◽  
Gender Diversity ◽  
Governance Structure ◽  
Corporate Boards ◽  
Board Diversity ◽  
Content Type ◽  
Banking Institutions ◽  
The Government ◽  
The Impact

Purpose Board diversity has gained increasing attention and has been widely posited as a driver for firm value. The purpose of this paper is to provide empirical evidence on the relation of gender diversity of corporate boards with the value of banking institutions in Malaysia. Design/methodology/approach The sample comprised of ten banking institutions listed on Bursa Malaysia with data observations from 2007 to 2016. Panel data techniques were employed to investigate the relationship between having female directors and firm performance in terms of values generated as indicated by Tobin’s Q. Findings The results revealed a positive relationship between the proportion of female director and the value of the bank. Interestingly, this study found that appointment of female independent directors tends to be negatively related to the value of such institutions. Practical implications There remains a shortage of research studying the impact of gender equality on corporate boards in Malaysia generally and in the banking sector specifically. Thus, this study contributes a significant knowledge on the value implication of board diversity. The findings also provide useful insights on the developmental policy initiated by the government to increase female participation in the top management. Originality/value This study contributes to the literature by bridging the knowledge gap on board diversity in the governance structure of banking institutions. It also provides theoretical contributions to the development of regulatory policy in relation to gender diversification in corporate leadership.

scholarly journals Are Analysts Overoptimistic about the Prospects of Sin Firms?

2017 ◽  
Vol 8 (4) ◽  
pp. 99 ◽  
Author(s):  
Jin Zhang ◽  
Haeyoung Shin
Keyword(s):  
Stock Price ◽  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
Positive Association ◽  
Negative Association ◽  
Analyst Forecast ◽  
Earnings Forecast ◽  
Absolute Value ◽  
Forecast Bias ◽  
The Difference

We investigate the association between the bias and accuracy of consensus analysts’ earnings forecasts and whether a firm is a sin firm or not. We measure analyst forecast bias as the difference between the consensus earnings forecast and the actual earnings, scaled by the stock price. We measure analyst forecast accuracy as the negative of the absolute value of the difference between the firms’ forecasted and actual earnings, scaled by the stock price. We find a positive association between the level of forecast optimism and sin firm membership. We find a negative association between the level of forecast accuracy and sin firm membership. Overall, these results imply that analysts tend to issue over-optimistic and less accurate earnings forecasts on sin firms.

scholarly journals Transparency Regulation and Stock Price Informativeness: Evidence from the European Union's Transparency Directive

2019 ◽  
Vol 18 (2) ◽  
pp. 89-113 ◽  
Author(s):  
Olena V. Watanabe ◽  
Michael J Imhof ◽  
Semih Tartaroglu
Keyword(s):  
Stock Price ◽  
Stock Return ◽  
Data Availability ◽  
Price Informativeness ◽  
Financial Reports ◽  
Corporate Transparency ◽  
Financial Disclosures ◽  
Stock Price Informativeness ◽  
Transparency Directive ◽  
Jel Classifications

ABSTRACT We examine changes in stock price informativeness following the European Union's Transparency Directive (TPD). The TPD, implemented by country between 2007 and 2009, enhanced corporate transparency through mandating regular firm financial disclosures and facilitating the dissemination of financial reports. Using stock return synchronicity as a proxy for stock price informativeness, we find that price informativeness improved following implementation of the TPD. This improvement was more pronounced in countries with strong regulatory environments than those with weak regulatory environments. We additionally examine a later amendment to the TPD that eliminated the requirement of quarterly financial disclosures and document an increase in stock return synchronicity following the amendment. Our findings support prior research suggesting that transparency regulations improve financial information. JEL Classifications: F30; G15; G30; M4. Data Availability: Data are available from the sources cited in the text.

Contextualizing comprehensive board diversity and firm financial performance: Integrating market, management and shareholder’s perspective

2018 ◽  
Vol 24 (5) ◽  
pp. 634-678 ◽  
Author(s):  
Rohail Hassan ◽  
Maran Marimuthu
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Negative Impact ◽  
Panel Data Analysis ◽  
Gender Diversity ◽  
Muslim Women ◽  
Listed Companies ◽  
Corporate Boards ◽  
Board Diversity ◽  
Firm Financial Performance

AbstractThe study investigates demographic diversity, cognitive diversity and internal diversity within Islam among top-level management of firms and their impacts on the financial performance of Malaysian-listed companies. In addition, Muslim and non-Muslim women and Islamic religious diversity on corporate boards are investigated. Even though numerous organisations desire to be socially diverse, the significance of diversity for organisational performance remains uncertain. Are profitable companies inclined to improve board diversity or do other characteristics of the company contribute to firm performance? Does the participation of Muslim and non-Muslim women on corporate boards affect firm performance? Does internal diversity within Islam affect firm performance? Data from 330 Malaysian-listed companies in eleven full fledged sectors were used for the period from 2009 to 2013. This study employed econometrics methodology from panel data analysis to fill the research gap in the current management literature. This study used the interaction approach to examine empirically diverse corporate boards and their impacts on firm performance. This discussion included: (1) a combination of gender diversity and ethnic diversity and (2) a combination of gender diversity and foreign participation. The findings suggest that demographic, cognitive and internal diversity within Islam are significant predictors of a firm’s financial performance. Ethnic women on boards have a significant and negative impact on firm performance. Hence, companies having high profits are more accountable for encouraging diversity among top-level management.

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