Mamatzakis, Emmanuel, Neri, Lorenzo ORCID: https://orcid.org/0000-0001-6627-0386, Russo, Antonella ORCID: https://orcid.org/0000-0001-9376-1383 and Ziruolo, Andrea (2025) Board’s interpersonal diversity and financial misreporting: evidence from USA. Review of Quantitative Finance and Accounting. ISSN 0924-865X (Print), 1573-7179 (Online) (In Press)

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Abstract

This study delves into the correlation between board interpersonal diversity and financial misreporting. The measure of interpersonal diversity draws from the 'Out of Africa' hypothesis, which examines how ancestral evolution has shaped individual traits such as cognitive skills, abilities, and levels of interpersonal trust. Extensive literature highlights how diversity in cognitive skills and interpersonal trust enhances board performance and monitoring mechanisms among members. Applying the 'Too-Much-of-a-Good-Thing' (TMGT) effect theory, we examine how the interpersonal diversity of board members in US firms from 1999 to 2019 mitigates agency problems and financial misreporting, particularly earnings management. Our primary finding suggests that higher board interpersonal diversity correlates with lower levels of accrual-based earnings management and real earnings management. We utilize various measures of earnings management and employ strategies to ensure the validity of our findings. These results hold strong across different tests and significantly contribute to the literature and future policy discussions regarding board diversity in companies.

Item Type:	Article
Uncontrolled Keywords:	accrual-based earnings management, board members, corporate governance, financial misreporting, interpersonal diversity
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HG Finance
Faculty / School / Research Centre / Research Group:	Greenwich Business School Greenwich Business School > Political Economy, Governance, Finance and Accountability (PEGFA) Journal of Economic Literature Classification > Political Economy, Governance, Finance and Accountability (PEGFA) Greenwich Business School > School of Accounting, Finance and Economics
Last Modified:	11 Apr 2025 09:15
URI:	http://gala.gre.ac.uk/id/eprint/50184

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