THE IMPACT OF GENDER DIVERSITY ON EARNINGS QUALITY OF LISTED FINANCIAL SERVICES FIRMS IN NIGERIA: ANALYSIS OF TWO-STAGE LEAST SQUARES

Abstract

This study investigates the impact of gender diversity on the earnings quality of listed financial service firms in Nigeria, focusing on the role of gender diversity and board size. Utilizing a correlation research design, it aims to test and predict the relationships among these variables. The sample consists of 36 financial service firms listed on the Nigerian Exchange Group, selected based on criteria ensuring the availability of relevant data from 2008 to 2022. Secondary data from these firms' annual financial reports provided the basis for analysis. To address potential endogeneity, a two-stage least squares (2SLS) regression was used, with instrumental variables estimating the endogenous variables. Additionally, Generalized Least Squares (GLS) and Feasible Generalized Least Squares (FGLS) methods were applied to handle heteroskedasticity and autocorrelation issues. The econometric model assessed earnings quality as the dependent variable, with female financial experts, female CEOs, and female board members of foreign nationality. Earnings quality was measured using the accruals quality model, evaluating the reliability of reported earnings. The findings reveal significant relationships between board attributes and earnings quality, emphasizing the role of gender diversity in enhancing the integrity of financial reporting. The results reveal significant positive relationships between the presence of female financial experts and female CEOs on the board with improved earnings quality, suggesting that gender diversity contributes to more reliable financial reporting. Diagnostic tests, including Multicollinearity, Autocorrelation, Heteroskedasticity, and Normality, confirmed the robustness of the results. This research contributes to the understanding of corporate governance by highlighting how board composition influences earnings quality, highlighting the relevance of gender diversity in corporate boards, and providing valuable insights for policymakers, investors, and stakeholders in the financial industry.

Keywords

• Analysis of two-stage least squares
• earnings quality
• gender diversity