Unpacking the Mediating Effect of the Likelihood of Fraud on the Relation Between Board Gender Diversity and Accounting Conservatism

Abstract

This study aims to examine the effect of the presence of women as a proxy of board gender diversity on accounting conservatism and investigate whether the likelihood of fraud has a mediating role in the relationship between women and accounting conservatism. Utilizing manufacturing companies’ data from 2015 to 2018, this study concludes with two favorable findings. First, women have a significant positive impact on accounting conservatism. Second, fraud has a moderating role instead of a mediating role. This implies that women alone can enhance conservatism, and thus, regulators are required to promote good corporate governance practices to enhance conservatism. Nevertheless, the role of women will not be effective if there is the likelihood of fraud. Therefore, the role of women, coupled with control mechanisms and anti-fraud measures, is needed to encourage companies to adopt conservative accounting principles so that they can guard investor interests and maintain investor confidence.