The Effect of Board Diversity on Real Earnings Management: Empirical Evidence From Jordan

Abstract

This study considers the effect of foreign board members and age diversity on real earnings management (REM), by controlling the firm size, leverage and growth. This study employed quantitative methodology and longitudinal data for non-financial business firms, quoted on the Amman Stock Exchange from 2011 to 2015. Data were analysed using descriptive statistics and Panel Corrected Standard Errors (PCSE) regression. This study found that foreign boards member, age diversity, leverage and growth had negative and significant associations with REM. Based on the results, a firm should appoint young members to the board in addition to older members to pave the way to cross-ideology that can deter REM activities. At least one foreign director should exist within the board of directors because a foreign board member has different qualifications and experiences that may help to deter REM practices.