Corporate social responsibility, board gender diversity and real earnings management: The case of Jordan

Figures & data

Table 1. Sample of the study

Sample sector	Obs.	%
Industry	260	0.55
Chemical Industries	43	0.09
Electrical Industries	18	0.04
Engineering and Construction	36	0.08
Food and Beverages	42	0.09
Mining and Extraction Industries	59	0.12
Pharmaceutical and Medical Industries	24	0.05
Printing and Packaging	6	0.01
Textiles, Leathers and Clothing	20	0.04
Tobacco and Cigarettes	12	0.03
Services	215	0.45
Commercial Services	48	0.10
Educational Services	36	0.08
Health Care Services	24	0.05
Hotels and Tourism	35	0.07
Media	6	0.01
Technology and Communication	6	0.01
Transportation	42	0.09
Utilities and Energy	18	0.04
Total	475	1.00

Table

$CF{O}_t$	=	Operations cash flow in period t
$As{s}_{t-1}$	=	the lagged total assets
$S_t$	=	the annual sales
$\mathrm{\Delta }{S}_t$	=	the change in sales relative to the prior period
$\mathrm{\Delta }{S}_{t-1}$	=	the sales in year t-1 less sales in year t-2
$PR{C}_t$	=	the sum of the cost of goods sold $\left(COG{S}_t\right)$ and changes in inventory ($\mathrm{\Delta }INV$) during the year
$DI{E}_t$	=	the total of discretionary expenses in the period t (sum of advertising expenses, R&D expenses, and SG&A)
$S_{t-1}$	=	the lagged total sales
ACFO	=	the abnormal cash flow from operations calculated as a residual from Equation (1)(1) $\frac{CF{O}_t}{As{s}_{t-1}}={\beta }_1\left(\frac{1}{As{s}_{t-1}}\right)+{\beta }_2\left(\frac{S_t}{As{s}_{t-1}}\right)+{\beta }_3\left(\frac{\mathrm{\Delta }{S}_t}{As{s}_{t-1}}\right)+{\epsilon }_t$(1)
APRC	=	the abnormal production costs calculated as a residual from Equation (2)(2) $\frac{PR{C}_t}{As{s}_{t-1}}={\beta }_1\left(\frac{1}{As{s}_{t-1}}\right)+{\beta }_2\left(\frac{S_{it}}{As{s}_{t-1}}\right)+{\beta }_3\left(\frac{\mathrm{\Delta }{S}_t}{As{s}_{t-1}}\right)+{\beta }_4\left(\frac{\mathrm{\Delta }{S}_{t-1}}{As{s}_{t-1}}\right)+{\epsilon }_t$(2)
ADIE	=	the abnormal discretionary expenses calculated as a residual from Equation (3)(3) $\frac{DI{E}_t}{As{s}_{t-1}}={\beta }_1\left(\frac{1}{As{s}_{t-1}}\right)+{\beta }_2\left(\frac{S_{t-1}}{As{s}_{t-1}}\right)+{\epsilon }_t$(3)
REM	=	the aggregate value of the standardised ACFO (−1), standardised APRC, and standardised ADIE (−1), calculated by Equation (4)(4) $REM=ACFO\left(-1\right)+ADIE\left(-1\right)+APRC$(4) to measure overall REM.

Table 2. Variables Measurement

Variable	Proxy /Measurement
REM	An aggregate measure of real earnings management calculated by Equations (1$\begin{array}{rl}\mathrm{R}\mathrm{E}\mathrm{M}=& {\beta }_0+{\beta }_1\mathrm{C}\mathrm{S}{\mathrm{R}}_{\hspace{0.17em}}+{\beta }_2\mathrm{B}\mathrm{G}\mathrm{E}\mathrm{N}\mathrm{D}+{\beta }_3\mathrm{B}\mathrm{I}\mathrm{N}\mathrm{D}+{\beta }_4\mathrm{B}\mathrm{E}\mathrm{X}{\mathrm{P}}_{\hspace{0.17em}}+{\beta }_5\mathrm{O}\mathrm{W}\mathrm{N}\mathrm{C}+{\beta }_6\mathrm{L}\mathrm{E}\mathrm{V}\mathrm{E}+{\beta }_7\mathrm{A}\mathrm{F}\mathrm{E}\mathrm{E}\\ +& {\beta }_8\mathrm{R}\mathrm{O}{\mathrm{A}}_{\hspace{0.17em}}+{\beta }_9\mathrm{M}\mathrm{T}\mathrm{B}\mathrm{V}+{\beta }_{10}\mathrm{F}\mathrm{S}\mathrm{I}\mathrm{Z}{\mathrm{E}}_{\hspace{0.17em}}+{\beta }_{11}\mathrm{F}\mathrm{A}\mathrm{G}{\mathrm{E}}_{\hspace{0.17em}}+\mathrm{I}\mathrm{N}\mathrm{D}\mathrm{U}+\mathrm{Y}\mathrm{E}\mathrm{A}\mathrm{R}\end{array}$)–(4(4) $REM=ACFO\left(-1\right)+ADIE\left(-1\right)+APRC$(4) )
CSRscore	An unweighted measure of CSR disclosure, 0 or 1, with total disclosure score 42.
CSRdumm	The binary variable takes the value 1 if the firm’s CSR score is higher than the median of the sample, and 0 otherwise.
BGENDperc	The proportion of female directors to the number of directors on the board.
BGENDnumb	The number of female directors on the board.
BGENDdumm	The binary variable takes 1 if the firm has at least one female director and 0 otherwise.
BIND	The proportion of independent directors on the board
BEXP	The proportion of directors with financial qualifications
OWNC	The proportion of shares held by the largest shareholder
LEVE	The ratio of total liabilities divided by total assets
AFEE	The natural log of audit fees
ROA	The ratio of net income divided by total assets
MTBV	The ratio of market value divided by the book value per share
FSIZE	The natural log of total assets
FAGE	The natural log of the number of years since the establishment of the firm
INDU	The industry sector dummies
YEAR	The year dummies

Table 3. Descriptive statistics

Variable	Mean	SD	Median	Min.	Max.
REM	0.000	2.144	0.402	−18.952	6.765
CSRscore	0.316	0.116	0.310	0.071	0.667
CSRdumm	0.526	0.500	1	0	1
BGENDperc	0.031	0.065	0	0	0.333
BGENDnumb	0.253	0.554	0	0	3
BGENDdumm	0.208	0.407	0	0	1
BIND	0.406	0.243	0.400	0	0.909
BEXP	0.426	0.221	0.400	0	1
OWNC	0.608	0.222	0.645	0.056	0.987
LEVE	0.343	0.212	0.307	0.011	1.042
AFEE	9.451	0.734	9.253	6.908	11.870
ROA	0.027	0.094	0.030	−0.463	0.394
MTBV	1.279	1.050	0.982	−3.617	8.640
FSIZE	17.300	1.353	17.168	13.733	21.310
FAGE	2.981	0.665	2.996	1.099	4.369

The sample size is 475 firm-year observations. Variables definitions are summarised in Table 2.

Table 4. Pearson correlations for research variables

Variables	REM	CSRscore	BGENDperc	BIND	BEXP	OWNC	LEVE	AFEE	ROA	MTBV	FSIZE	FAGE	VIF
REM	1.000
CSRscore	−0.139**	1.000											1.61
BGENDperc	−0.089*	−0.105**	1.000										1.13
BIND	−0.024	−0.071	−0.202***	1.000									1.36
BEXP	0.060	0.064	0.002	−0.032	1.000								1.06
OWNC	−0.024	−0.076*	0.019	−0.382***	0.158***	1.000							1.36
LEVE	0.172***	0.105**	−0.164***	−0.152***	−0.064	−0.057	1.000						1.49
AFEE	−0.072	0.471***	0.008	−0.257***	0.094**	0.217***	0.252***	1.000					2.68
ROA	−0.312***	0.165***	0.085*	−0.002	0.050	0.074	−0.278***	0.079*	1.000				1.31
MTBV	−0.289***	0.194***	0.023	−0.193***	0.038	0.182***	0.163***	0.197***	0.279***	1.000			1.25
FSIZE	0.000	0.537***	0.023	−0.225***	0.042	0.129***	0.331***	0.765***	0.157***	0.227***	1.000		3.00
FAGE	0.065	0.255***	−0.070	0.073	0.119**	−0.071	0.195***	0.267***	0.011	0.127***	0.209***	1.000	1.19

Note: *** p < 0.01, ** p < 0.05, * p < 0.1. Variables definitions are summarized in Table 2.

Table 5. Regressions result of the direct relationship between corporate social responsibility, board gender diversity and real earnings management

REM	Regression Model 1		Regression Model 1.1		Regression Model 1.2		Regression Model 1.3
	Coef.	t-value	Coef.	t-value	Coef.	t-value	Coef.	t-value
CSRscore	−2.334***	−2.64			−2.2792**	−2.58	−2.2973**	−2.59
CSRdumm			−0.9358***	−5.43
BGENDperc	−3.324***	−2.75	−3.8538***	−3.29
BGENDnumb					−0.3351**	−2.52
BGENDdumm							−0.5384**	−2.57
BIND	−0.803**	−2.41	−0.9633***	−2.92	−0.8207**	−2.41	−0.7984**	−2.41
BEXP	1.016***	2.87	1.1061***	3.17	1.0081***	2.83	0.9155***	2.63
OWNC	0.077	0.19	−0.2211	−0.57	0.0531	0.13	0.0943	0.24
LEVE	0.879**	2.13	0.7661*	1.87	0.8827**	2.12	0.8625**	2.09
AFEE	−0.617***	−4.14	−0.6749***	−4.51	−0.6227***	−4.18	−0.6146***	−4.14
ROA	−4.594***	−4.16	−4.5667***	−4.14	−4.5298***	−4.11	−4.5520***	−4.12
MTBV	−0.640***	−5.54	−0.6372***	−5.75	−0.6395***	−5.53	−0.6370***	−5.50
FSIZE	0.395***	3.80	0.4626***	4.83	0.4024***	3.85	0.3980***	3.82
FAGE	0.329**	2.31	0.3102**	2.27	0.3307**	2.32	0.3117**	2.20
_cons	−0.794	−0.65	−1.3757	−1.21	−0.859	−0.71	−0.7654	−0.63
YEAR	Yes		Yes		Yes		Yes
INDU	Yes		Yes		Yes		Yes
Obs.	475		475		475		475
R-Squared	0.2645		0.295		0.262		0.265
Prob > F	0.000***		0.000***		0.000***		0.000***

Note: *** p < 0.01, ** p < 0.05, * p < 0.1. Variables definitions are summarized in Table 2.

Table 6. Regressions result of the moderating effect of board gender diversity on the relationship between corporate social responsibility and real earnings management

REM	(A) All Sample (Regression Model 2)		(B) Firms with Female Directors		(C) Firms without Female Directors
	Coef.	t-value	Coef.	t-value	Coef.	t-value
CSRscore	−2.4289***	−2.79	−7.7756***	−4.58	−1.1307	−1.14
BGENDperc	−3.8533***	−3.12
CSR*BGEND	−0.1366*	−1.88
BIND	−0.8202**	−2.45	−2.6970***	−2.95	−0.4528	−1.26
BEXP	0.9937***	2.82	−0.1418	−0.19	0.6046	1.60
OWNC	0.0676	0.17	−2.7613**	−2.63	0.9230**	2.13
LEVE	0.8190**	1.97	−2.2099*	−1.80	1.0786**	2.57
AFEE	−0.6170***	−4.19	0.1907	0.47	−0.7976***	−4.93
ROA	−4.6496***	−4.20	−12.2117***	−3.58	−3.3937***	−2.72
MTBV	−0.6413***	−5.56	−0.4620*	−1.74	−0.6063***	−4.62
FSIZE	0.3944***	3.81	0.5805*	1.84	0.3877***	3.53
FAGE	0.3275**	2.30	0.1056	0.41	0.2514	1.62
_cons	−0.6892	−0.57	−6.6598*	−1.99	0.3324	0.25
YEAR	Yes		Yes		Yes
INDU	Yes		Yes		Yes
Obs.	475		99		376
R-Squared	0.2680		0.6455		0.2078
Prob > F	0.000***		0.000***		0.000***

Note: *** p < 0.01, ** p < 0.05, * p < 0.1. Variables definitions are summarized in Table 2.

Table 7. Regressions result of the study models using one-year lagged value

REM	Regression Model 1		Regression Model 2
	Coef.	t-value	Coef.	t-value
CSRscore t-1	−2.735***	−2.71	−2.830***	−2.91
BGENDperc t-1	−3.971***	−3.00	−4.819***	−3.49
CSR*BGEND t-1			−0.232***	−2.95
BIND t-1	−0.733*	−1.88	−0.753**	−1.95
BEXP t-1	0.898*	2.29	0.872**	2.23
OWNC t-1	0.082	0.18	0.066	0.14
LEVE t-1	0.590	1.24	0.503	1.06
AFEE t-1	−0.563***	−2.90	−0.555***	−2.88
ROA t-1	−4.443***	−3.28	−4.682***	−3.46
MTBV t-1	−0.549***	−4.71	−0.554***	−4.72
FSIZE t-1	0.416***	3.11	0.407***	3.05
FAGE t-1	0.393**	2.47	0.388**	2.43
_cons	−1.584	−1.10	−1.398	−0.97
YEAR & INDU	Yes		Yes
Obs.	394		394
R-Squared	0.220		0.230
Prob > F	0.000***		0.000***

Note: *** p < 0.01, ** p < 0.05, * p < 0.1. t-1 referred to that the value of the variable is based on one-year lagged valued s definitions are summarized in Table 2.