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    Female Board Presence and the Likelihood of Financial...
    research summary posted October 31, 2013 by Jennifer M Mueller-Phillips, tagged 12.0 Accountants’ Reports and Reporting, 12.03 Restatements, 13.0 Governance, 13.01 Board/Audit Committee Composition 
    Female Board Presence and the Likelihood of Financial Restatement
    Practical Implications:

    Female board presence has a beneficial impact on a board of director’s governance function and is negatively associated with financial restatements, a costly ordeal for any company. Increasing board diversity through many characteristics (culture, age, etc.) helps avoid the pitfalls of groupthink and leads to better corporate governance.

    For more information on this study, please contact Lawrence J. Abbott at the University of Wisconsin-Milwaukee (


    Abbott, L. J., S. Parker, and T. J. Presley. 2012. Female Board Presence and the Likelihood of Financial Restatement. Accounting Horizons 26 (4): 607-629

    board gender diversity; corporate governance; restatement.
    Purpose of the Study:

    A large amount of research has been devoted to understanding the relationship between board member independence and financial restatements. However, the overall results have been mixed with evidence for and against the idea that director independence leads to better governance. The study tests whether a more diverse board leads to greater independence and therefore a lower likelihood of restatement. The measure the authors use for diversity is the presence of a female board director.

    The authors motivate their study based on the idea of “group-think,” which is a mode of thinking group members engage in when seeking consensus rather than pursuing other, possibly better courses of action. Gender diversity has been shown to decrease this tendency in groups and this paper tests whether that leads to better corporate governance when at least one board member is female.

    Design/Method/ Approach:

    The results of this study are based on firm restatements included in the GAO report from 1997 through 2002. All firms in the study were non-Fortune 1000 firms. The authors believe larger firms may have more pressure to have a “token” female board member and so this sample of smaller firms better represents the true effect of having a female present on the board. The authors matched a sample of firms with restatements with a control sample of firms that did not restate during the same period. The control firms were matched with a firm in the restatement sample as best as possible using characteristics such as market value of equity and industry code to ensure that they represented the best possible match for a similar firm that did not have to restate during the same time period.


    About 65 percent of firms in the sample had boards that did not include a single female director. Results from the study show a significant reduction in the likelihood of a financial restatement when the board contains at least one female board member. However, the authors admit that it may not actually be the female presence on the board that leads to a lower likelihood of restatements. For example, firms with better overall corporate governance may be more likely to appoint female board members for real or perceived benefits. Better corporate governance could drive both likelihood for restatement and the presence of a female board member.

    Accountants' Reporting, Governance
    Board/Audit Committee Composition, Restatements