eThesis - School of Business electronic theses

This thesis analyzes whether a diversified board of directors is negatively related to the level of earnings management during the financial crisis in the year 2008. The factors of diversity concerned in this context are the portion of female and foreign directors, directors aged less than 65 years and the presence of independent directors.

The study includes data from 100 Eurozone companies from eight different countries for the time period 2007-2010 which results in 400 firm-year observations. The data was gathered from annual reports, webpages and the database Orbis. All firms report under International Financial Reporting Standards (IFRS).

To observe the relation between earnings management and the four measures of diversity a regression model is developed and analyzed. This thesis uses discretionary accruals as a proxy for earnings management. To estimate discretionary accruals the modified Jones model is applied.

The results of the OLS regression are not significant regarding the important coefficients concerning the diversity of the board of directors and thus do not support the hypothesis that a diversified board is negatively related with the level of earnings management. This thesis adds to the current knowledge on diversity and earnings management and represents a basis for further research in this area.