Women on board, strength of auditing and reporting standards and analysts' forecasts accuracy: international evidence

Purpose - This paper investigates whether board gender diversity and the strength of auditing and reporting standards are associated with analysts' forecast accuracy and whether the strength of auditing and reporting standards moderates the association between board gender diversity and analysts' forecast accuracy. Design/methodology/approach - The sample covers 24,086 firm-year observations from 37 countries from 2009 to 2018. The data were obtained from various sources: earnings forecast data from the Institutional Brokers' Estimate System (IBES) database; board gender diversity and financial data from Thomson Reuters Fundamentals; and country-level data from World Economic Forum database. The authors measure board gender diversity using four proxies namely, the proportion of women directors on the board, a dummy variable for board with at least one women director, BLAU measurement corresponds to the proportion of group females and males using the formula adopted from the Hirschman-Herfindahl index (Hirschman, 1964) and the proportion of the number of women executives over the total number of directors. The study also uses a series of specification tests using alternative measures for each variable and controlling the global financial crisis and endogeneity issue. Findings - Firms with higher board gender diversity have higher analysts' forecast accuracy. Compared to countries with weak auditing and reporting standards, the authors find firms in countries with strong auditing and reporting standards have more accurate forecasts. Further, the positive relationship between the board gender diversity and analysts' forecast accuracy is weaker for firms in countries with strong auditing and reporting standards, as compared to firms in countries with weak auditing and reporting standards. Research limitations/implications - This study found new evidence on the effect of women directorships on analyst forecasts and this relationship varies between levels of the strength of auditing and reporting standards, which was not addressed in prior studies. Practical implications - This study highlights the importance of strengthening the policy on getting more women on board and the continuous efforts to enhance the strength of auditing and reporting standards of a country as valuable strategies to enhance the quality of analyst forecasts. Originality/value - This is the first study that employs the international dataset to examine the moderating effect of the strength of auditing and reporting standards on the relationship between board gender diversity and analysts' forecast accuracy.