Dr. San Martín-Mosqueira, Pablo

2024, Dr. San Martín-Mosqueira, Pablo, Saona, Paolo, Muro, Laura, McWay, Ryan

Purpose: This study aims to investigate how gender diversity and remuneration of boards of directors’ influence earnings quality for Spanish-listed firms. Design/methodology/approach: The sample includes 105 nonfinancial Spanish firms from 2013 to 2018, corresponding to an unbalanced panel of 491 firm-year observations. The primary empirical method uses a Tobit semiparametric estimator with firm- and industry-level fixed effects and an innovative set of measures for earnings quality developed by StarMine. Findings: Results exhibit a positive correlation between increased gender diversity and a firm’s earnings quality, suggesting that a gender-balanced board of directors is associated with more transparent financial reporting and informative earnings. We also find a nonmonotonic, concave relationship between board remuneration and earnings quality. This indicates that beyond a certain point, excessive board compensation leads to more opportunistic manipulation of financial reporting with subsequent degradation of earnings quality. Research limitations/implications: This study only covers nonfinancial Spanish listed firms and is silent about how alternative board features’ influence earnings quality and their informativeness. Originality/value: This study introduces measures of earnings quality developed by StarMine that have not been used in the empirical literature before as well as measures of board gender diversity applied to a suitable Tobit semiparametric estimator for fixed effects that improves the precision of results. In addition, while most of the literature focuses on Anglo-Saxon countries, this study discusses board gender diversity and board remuneration in the underexplored context of Spain. Moreover, the hand-collected data set comprising financial reports provides previously untested board features as well as a nonlinear relationship between remuneration and earnings quality that has not been thoroughly discussed before.