ISSN: 2225-8329
Open access
Earnings management is an activity that damages the quality of company earnings. This results in distrust of users of financial statement information on earnings information. In the case of Indonesia, during 2019-2020 more than 10 cases of accounting scandals threatened investors confidence in companies listed on the Indonesian stock exchange, and interestingly the scandal was dominated by male directors. This condition strengthens the hypothesis that it is necessary to have women on the board of directors. Many studies have shown that the presence of women can reduce the likelihood of corporate fraud, improve earnings quality, and reduce the likelihood of restating financial statements. The purpose of this study was to empirically determine the influence of female directors networks (interlocked female directors, kinship with other directors (BoD), board of commissioners, and/or majority shareholders, and membership of female directors in social organizations), external financing, on earnings quality in public companies on the Indonesia Stock Exchange for the period 2015-2018. The test tool of this research is multiple linear regression with the classical assumption test to test the data. The results of the study found that (1) interlocked female directors had a positive relationship with earnings quality; (2) the relationship of the female director with other directors, the board of commissioners, and/or the majority shareholder is positively related to earnings quality; (3) membership in the social organization of female directors has a positive relationship with earnings quality; (4) external financing strengthens the relationship between female directors networks and earnings quality
Abdul Wahab, E. A., Jamaludin, M. F., Agustia, D., & Harymawan, I. (2020). Director Networks, Political Connections, and Earnings Quality in Malaysia. Management and Organization Review, 16(3), 687–724. https://doi.org/10.1017/mor.2020.26
Alves, S. (2013). The impact of audit committee existence and external audit on earnings management. Journal of Financial Reporting and Accounting, 11(2), 143–165. https://doi.org/10.1108/jfra-04-2012-0018
Angeline, A. (2019). Analisis Pengaruh Karakteristik Komite Audit terhadap Manajemen Laba pada Perusahaan yang Terdaftar di Bursa Efek Indonesia. Undergraduate Thesis, Universitas Internasional Batam.
Arun, T. G., Almahrog, Y. E., & Aribi, A. Z. (2015). Female directors and earnings management: Evidence from UK companies. International Review of Financial Analysis, 39, 137–146. https://doi.org/10.1016/j.irfa.2015.03.002
Azzahra, S. (2020). Pengaruh Interlocking Directorship, Diversifikasi Operasi, Diversifikasi Geografis, dan Kompensasi Bonus Terhadap Manajemen Laba. Skripsi S1, UNI Syarif Hidayatullah.
Boonlert-U-Thai, K., & Sen, P. K. (2019). Family ownership and earnings quality of Thai firms. Asian Review of Accounting, 27(1), 112–136. https://doi.org/10.1108/ARA-03-2018-0085
Braswell, M. and Daniels, R. B. (2018). Alternative Earnings Management Techniques: What Audit Committees and Internal Auditors Should Know. Corporate Accounting and Finance.
Capezio, A., & Mavisakalyan, A. (2016). Women in the boardroom and fraud: Evidence from Australia. Australian Journal of Management, 41(4), 719–734.
https://doi.org/10.1177/0312896215579463
Chi, C. W., Hung, K., Cheng, H. W., & Tien Lieu, P. (2015). Family firms and earnings management in Taiwan: Influence of corporate governance. International Review of Economics and Finance, 36, 88–98. https://doi.org/10.1016/j.iref.2014.11.009
Chiu, P. C., Teoh, S. H., & Tian, F. (2013). Board interlocks and earnings management contagion. Accounting Review, 88(3), 915–944. https://doi.org/10.2308/accr-50369
Connelly, B. L., & Van Slyke, E. J. (2012). The power and peril of board interlocks. Business Horizons, 55(5), 403–408. https://doi.org/10.1016/j.bushor.2012.03.006
Darmadi, S., & Sodikin, A. (2013). Information disclosure by family-controlled firms: The role of board independence and institutional ownership. Asian Review of Accounting, 21(3), 223–240. https://doi.org/10.1108/ARA-01-2013-0009
Darmayanti, Y., and Md Kassim, A. A. (2020). External Connectedness of Female Directors and Earnings Quality. Proceeding of 8th International Seminar of Entrepreneurship and Business.
Dewi, A. M. R. (2013). Pengaruh CEO Duality dan Interlocking Directorship terhadap Prediktabilitas Laba. Skripsi S1, STIE Perbanas Surabaya.
Dignah, A., Latiff, R. A., Karim, Z. A., & Abdul-Rahman, A. (2016). Fair value accounting and the cost of equity capital of Asian banks. Jurnal Pengurusan, 48. https://doi.org/10.17576/pengurusan-2016-48-10
Drago, C., Millo, F., Ricciuti, R., & Santella, P. (2015). Corporate governance reforms, interlocking directorship and company performance in Italy. International Review of Law and Economics, 41, 38–49. https://doi.org/10.1016/j.irle.2014.09.003
Mrizak, E. S. (2011). Interlocking Directorates and Firm Performance: Evidence from French Companies. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1369353
Gallo, A. (2015). A refresher on debt-to-equity ratio. Harvard Business Review Digital Articles, 2–5.
Garcia Lara, J. M., García Osma, B., Mora, A., & Scapin, M. (2017). The monitoring role of female directors over accounting quality. Journal of Corporate Finance, 45(2016), 651–668. https://doi.org/10.1016/j.jcorpfin.2017.05.016
Geletkanycz, M. A., & Boyd, B. K. (2011). CEO outside directorships and firm performance: A reconciliation of agency and embeddedness views. Academy of Management Journal, 54(2), 335–352. https://doi.org/10.5465/AMJ.2011.60263094
Gerayli, M., Ma’atofa, S., & Yane Sari, A. M. (2011). Impact of audit quality on Earnings Management: From Iran. International Research Journal of Finance and Economics, 66.
Hashim, U. J. B., & Rahman, R. B. A. (2011). Audit report lag and the effectiveness of audit committee among malaysian listed companies. International Bulletin of Business Administration, 10(10), 50–61. https://www.scribd.com/doc/65902120/Audit-Report-Lag-and-the-Effectiveness-of-Audit-Committee-Among-Malaysian-Listed-Companies
Huang, H., Wang, Q. and Zhang, X. (2009). The effect of CEO ownership and shareholder rights on cost of equity capital. Corporate Governance: The International Journal of Business in Society, 9(3), 255–270.
Huang, J., & Kisgen, D. J. (2013). Gender and corporate finance: Are male executives overconfident relative to female executives? Journal of Financial Economics, 108(3), 822–839. https://doi.org/10.1016/j.jfineco.2012.12.005
Hyun, E., Yang, D., Jung, H., & Hong, K. (2016). Women on boards and corporate social responsibility. Sustainability (Switzerland), 8(4), 1–26. https://doi.org/10.3390/su8040300
Jia, N., Shi, J., Wang, C., & Wang, Y. (2020). Parasites and Paragons: Ownership Reform and Concentrated Interest among Minority Shareholders. Journal of Management Studies, 57(1), 129–162. https://doi.org/10.1111/joms.12537
Khanna, V., Kim, E. H., & Lu, Y. (2015). CEO Connectedness and Corporate Fraud. Journal of Finance, 70(3), 1203–1252. https://doi.org/10.1111/jofi.12243
Levi, M., Li, K., & Zhang, F. (2014). Director gender and mergers and acquisitions. Journal of Corporate Finance, 28, 185–200. https://doi.org/10.1016/j.jcorpfin.2013.11.005
Lisic, L. L., Myers, L. A., Seidel, T. A., & Zhou, J. (2019). Does Audit Committee Accounting Expertise Help to Promote Audit Quality? Evidence from Auditor Reporting of Internal Control Weaknesses. Contemporary Accounting Research, 36(4), 2521–2553.
https://doi.org/10.1111/1911-3846.12517
Nahomy, H. H. (2019). Pengaruh Mekanisme Corporate Governance terhadap Manajemen Laba (Studi Empiris pada Perusahaan Perbankan yang Terdaftar di Bursa Efek Indonesia Tahun 2013-2017. Undergraduate (S1) Thesis, Universitas Bakrie.
Nasih, K. M. (2016). Hubungan Antara Kualitas Laba, Asimetri Informasi, Dan Biaya Modal Ekuitas: Pengujian Menggunakan Analisis Jalur (The Relationship Between Earnings Quality, Information Asymmetry, And Cost Of Equity Capital: A Test Using Path Analysis). Jurnal Akuntansi Dan Keuangan Indonesia, 13(2), 221–242.
Papanastasopoulos, G., Thomakos, D., & Wang, T. (2011). Accruals and the performance of stock returns following external financing activities. British Accounting Review, 43(3), 214–229. https://doi.org/10.1016/j.bar.2011.06.007
Pappas, K., Walsh, E., & Xu, A. L. (2019). Real earnings management and loan contract terms. British Accounting Review, 51(4), 373–401. https://doi.org/10.1016/j.bar.2019.03.002
Persakis, A., & Iatridis, G. E. (2015). Earnings quality under financial crisis: A global empirical investigation. Journal of Multinational Financial Management, 30, 1–35. https://doi.org/10.1016/j.mulfin.2014.12.002
Ratnawati, V., Abdul-Hamid, M. A., & Johnson Popoola, O. M. (2016). The influence of agency conflict types I and II on earnings management. International Journal of Economics and Financial Issues, 6(4), 126–132.
Sarun, A. (2015). Corporate Governance , Earnings Quality and Firm Value?: Evidence from Malaysia (Issue March).
Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. Journal of Finance, 52(2), 737–789.
Shu, P. G., Yeh, Y. H., Chiu, S. B., & Yang, Y. W. (2015). Board external connectedness and earnings management. Asia Pacific Management Review, 20(4), 265–274.
https://doi.org/10.1016/j.apmrv.2015.03.003
Singh, D., & Delios, A. (2017). Corporate governance, board networks and growth in domestic and international markets: Evidence from India. Journal of World Business, 52(5), 615–627. https://doi.org/10.1016/j.jwb.2017.02.002
Taras, V., Memili, E., Wang, Z., & Harms, H. (2018). Family involvement in publicly traded firms and firm performance: a meta-analysis. Management Research Review, 41(2), 225–251. https://doi.org/10.1108/MRR-05-2017-0150
Wang, T. S., Lin, Y. M., Werner, E. M., & Chang, H. (2018). The relationship between external financing activities and earnings management: Evidence from enterprise risk management. International Review of Economics and Finance, 58(April), 312–329.
https://doi.org/10.1016/j.iref.2018.04.003
Wu, M. (2019). CEO/CFO Relevance and Corporate Earnings Management. Modern Economy, 10(03), 778–796. https://doi.org/10.4236/me.2019.103052
Abdul Wahab, E. A., Jamaludin, M. F., Agustia, D., & Harymawan, I. (2020). Director Networks, Political Connections, and Earnings Quality in Malaysia. Management and Organization Review, 16(3), 687–724. https://doi.org/10.1017/mor.2020.26
Alves, S. (2013). The impact of audit committee existence and external audit on earnings management. Journal of Financial Reporting and Accounting, 11(2), 143–165. https://doi.org/10.1108/jfra-04-2012-0018
Angeline, A. (2019). Analisis Pengaruh Karakteristik Komite Audit terhadap Manajemen Laba pada Perusahaan yang Terdaftar di Bursa Efek Indonesia. Undergraduate Thesis, Universitas Internasional Batam.
Arun, T. G., Almahrog, Y. E., & Ali Aribi, Z. (2015). Female directors and earnings management: Evidence from UK companies. International Review of Financial Analysis, 39, 137–146. https://doi.org/10.1016/j.irfa.2015.03.002
Azzahra, S. (2020). Pengaruh Interlocking Directorship, Diversifikasi Operasi, Diversifikasi Geografis, dan Kompensasi Bonus Terhadap Manajemen Laba. Skripsi S1, UNI Syarif Hidayatullah.
Boonlert-U-Thai, K., & Sen, P. K. (2019). Family ownership and earnings quality of Thai firms. Asian Review of Accounting, 27(1), 112–136. https://doi.org/10.1108/ARA-03-2018-0085
Braswell, M., and Daniels, R. B. (2018). Alternative Earnings Management Techniques: What Audit Committees and Internal Auditors Should Know. Corporate Accounting and Finance.
Capezio, A., & Mavisakalyan, A. (2016). Women in the boardroom and fraud: Evidence from Australia. Australian Journal of Management, 41(4), 719–734.
https://doi.org/10.1177/0312896215579463
Chi, C. W., Hung, K., Cheng, H. W., & Tien Lieu, P. (2015). Family firms and earnings management in Taiwan: Influence of corporate governance. International Review of Economics and Finance, 36, 88–98. https://doi.org/10.1016/j.iref.2014.11.009
Chiu, P. C., Teoh, S. H., & Tian, F. (2013). Board interlocks and earnings management contagion. Accounting Review, 88(3), 915–944. https://doi.org/10.2308/accr-50369
Connelly, B. L., & Van Slyke, E. J. (2012). The power and peril of board interlocks. Business Horizons, 55(5), 403–408. https://doi.org/10.1016/j.bushor.2012.03.006
Darmadi, S., & Sodikin, A. (2013). Information disclosure by family-controlled firms: The role of board independence and institutional ownership. Asian Review of Accounting, 21(3), 223–240. https://doi.org/10.1108/ARA-01-2013-0009
Darmayanti, Y., and Md Kassim, A. A. (2020). External Connectedness of Female Directors and Earnings Quality. Proceeding of 8th International Seminar of Entrepreneurship and Business.
Darmayanti, Y., Hatta, U. B., & Selangor, U. (2020). External Connectedness of Female Directors and Earnings Quality. November, 1–13.
Dewi, A. M. R. (2013). Pengaruh CEO Duality dan Interlocking Directorship terhadap Prediktabilitas Laba. Skripsi S1, STIE Perbanas Surabaya.
Dignah, A., Latiff, R. A., Karim, Z. A., & Abdul-Rahman, A. (2016). Fair value accounting and the cost of equity capital of Asian banks. Jurnal Pengurusan, 48. https://doi.org/10.17576/pengurusan-2016-48-10
Drago, C., Millo, F., Ricciuti, R., & Santella, P. (2015). Corporate governance reforms, interlocking directorship and company performance in Italy. International Review of Law and Economics, 41, 38–49. https://doi.org/10.1016/j.irle.2014.09.003
Mrizak, E. S. (2011). Interlocking Directorates and Firm Performance: Evidence from French Companies. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1369353
Gallo, A. (2015). A refresher on debt-to-equity ratio. Harvard Business Review Digital Articles, 2–5.
García Lara, J. M., García Osma, B., Mora, A., & Scapin, M. (2017). The monitoring role of female directors over accounting quality. Journal of Corporate Finance, 45(2016), 651–668. https://doi.org/10.1016/j.jcorpfin.2017.05.016
Geletkanycz, M. A., & Boyd, B. K. (2011). CEO outside directorships and firm performance: A reconciliation of agency and embeddedness views. Academy of Management Journal, 54(2), 335–352. https://doi.org/10.5465/AMJ.2011.60263094
Gerayli, M., Ma’atofa, S., & Sari, Y. A. M. (2011). Impact of audit quality on Earnings Management: From Iran. International Research Journal of Finance and Economics, 66.
Hashim, U. J. B., & Rahman, R. B. A. (2011). Audit report lag and the effectiveness of audit committee among malaysian listed companies. International Bulletin of Business Administration, 10(10), 50–61. https://www.scribd.com/doc/65902120/Audit-Report-Lag-and-the-Effectiveness-of-Audit-Committee-Among-Malaysian-Listed-Companies
Huang, H., Wang, Q. and Zhang, X. (2009). The effect of CEO ownership and shareholder rights on cost of equity capital. Corporate Governance: The International Journal of Business in Society, 9(3), 255–270.
Huang, J., & Kisgen, D. J. (2013). Gender and corporate finance: Are male executives overconfident relative to female executives? Journal of Financial Economics, 108(3), 822–839. https://doi.org/10.1016/j.jfineco.2012.12.005
Hyun, E., Yang, D., Jung, H., & Hong, K. (2016). Women on boards and corporate social responsibility. Sustainability (Switzerland), 8(4), 1–26. https://doi.org/10.3390/su8040300
Jia, N., Shi, J., Wang, C., & Wang, Y. (2020). Parasites and Paragons: Ownership Reform and Concentrated Interest among Minority Shareholders. Journal of Management Studies, 57(1), 129–162. https://doi.org/10.1111/joms.12537
Khanna, V., Kim, E. H., & Lu, Y. (2015). CEO Connectedness and Corporate Fraud. Journal of Finance, 70(3), 1203–1252. https://doi.org/10.1111/jofi.12243
Levi, M., Li, K., & Zhang, F. (2014). Director gender and mergers and acquisitions. Journal of Corporate Finance, 28, 185–200. https://doi.org/10.1016/j.jcorpfin.2013.11.005
Lisic, L. L., Myers, L. A., Seidel, T. A., & Zhou, J. (2019). Does Audit Committee Accounting Expertise Help to Promote Audit Quality? Evidence from Auditor Reporting of Internal Control Weaknesses. Contemporary Accounting Research, 36(4), 2521–2553. https://doi.org/10.1111/1911-3846.12517
Nahomy, H. H. (2019). Pengaruh Mekanisme Corporate Governance terhadap Manajemen Laba (Studi Empiris pada Perusahaan Perbankan yang Terdaftar di Bursa Efek Indonesia Tahun 2013-2017. Undergraduate (S1) Thesis, Universitas Bakrie.
Nasih, K. M. (2016). Hubungan Antara Kualitas Laba, Asimetri Informasi, Dan Biaya Modal Ekuitas: Pengujian Menggunakan Analisis Jalur (The Relationship Between Earnings Quality, Information Asymmetry, And Cost Of Equity Capital: A Test Using Path Analysis). Jurnal Akuntansi Dan Keuangan Indonesia, 13(2), 221–242.
Papanastasopoulos, G., Thomakos, D., & Wang, T. (2011). Accruals and the performance of stock returns following external financing activities. British Accounting Review, 43(3), 214–229. https://doi.org/10.1016/j.bar.2011.06.007
Pappas, K., Walsh, E., & Xu, A. L. (2019). Real earnings management and loan contract terms. British Accounting Review, 51(4), 373–401. https://doi.org/10.1016/j.bar.2019.03.002
Persakis, A., & Iatridis, G. E. (2015). Earnings quality under financial crisis: A global empirical investigation. Journal of Multinational Financial Management, 30, 1–35. https://doi.org/10.1016/j.mulfin.2014.12.002
Ratnawati, V., Abdul-Hamid, M. A., & Popoola, J. O. M. (2016). The influence of agency conflict types I and II on earnings management. International Journal of Economics and Financial Issues, 6(4), 126–132.
Sarun, A. (2015). Corporate Governance , Earnings Quality and Firm Value?: Evidence from Malaysia (Issue March).
Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. Journal of Finance, 52(2), 737–789.
Shu, P. G., Yeh, Y. H., Chiu, S. B., & Yang, Y. W. (2015). Board external connectedness and earnings management. Asia Pacific Management Review, 20(4), 265–274. https://doi.org/10.1016/j.apmrv.2015.03.003
Singh, D., & Delios, A. (2017). Corporate governance, board networks and growth in domestic and international markets: Evidence from India. Journal of World Business, 52(5), 615–627. https://doi.org/10.1016/j.jwb.2017.02.002
Taras, V., Memili, E., Wang, Z., & Harms, H. (2018). Family involvement in publicly traded firms and firm performance: a meta-analysis. Management Research Review, 41(2), 225–251. https://doi.org/10.1108/MRR-05-2017-0150
Wang, T. S., Lin, Y. M., Werner, E. M., & Chang, H. (2018). The relationship between external financing activities and earnings management: Evidence from enterprise risk management. International Review of Economics and Finance, 58(April), 312–329. https://doi.org/10.1016/j.iref.2018.04.003
Wu, M. (2019). CEO/CFO Relevance and Corporate Earnings Management. Modern Economy, 10(03), 778–796. https://doi.org/10.4236/me.2019.103052
In-Text Citation: (Darmayanti, and Md. Kassim, 2020)
To Cite this Article: Darmayanti, Y., and Md. Kassim, A. A. (2020). Female Directors Network, External Financing, and Earnings Quality. International Journal of Academic Research in Accounting, Finance and Management Sciences. 10(3), 562-581.
Copyright: © 2020 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode
2025 © Copyright HRMARS. All rights Reserved.