Audit Committee Chair Characteristics and Real Earnings Management

Abstract

We examine the relationship between male versus female audit committee chair characteristics and real earnings management (REM). REM occurs when the firm deviates from its normal operations because managers wish to misrepresent true performance. We find that a female audit committee chair and a chair with prior auditor experience, regardless of gender, are both associated with lower REM and thus greater financial statement transparency for investors. Overall, the findings support the ideas that (1) a female audit committee chair and (2) an older audit committee chair, regardless of gender, promote financial statement transparency.