The Impact of Board Composition and Gender Diversity on Financial Reporting Quality: An Empirical Study of Norwegian Museum Foundations

Abstract

Purpose – This paper investigates how board size, board gender diversity, auditor gender and CEO gender influence the financial reporting quality of 86 Norwegian museum foundations during the period from 2021 to 2022.

Design/methodology/approach – To examine the impact of board composition and gender diversity on financial reporting quality (FRQ), this study uses a Random Effects Model (REM).

Findings – The results do not show an inverted U-shape relationship between board size and financial reporting quality. Additionally, the study finds that female auditors reduce the level of abnormal accruals, and thereby have a positive impact on financial reporting quality. However, there is no evidence that board gender diversity or CEO gender affect the quality of financial reporting.

Research limitations – Due to the study’s focus on Norwegian museum foundations, the findings may not be generalizable to other sectors. Additionally, since three out of four test variables were statistically insignificant, future research could consider other attributes such as educational background, experience, and tenure of board members, auditor, and CEO.

Practical implications – This study provides evidence to better understand the factors affecting financial reporting quality.

Originality/value – This thesis contributes to the limited research on financial reporting quality in non-profit organizations, specifically focusing on museums foundations in Norway.

Keywords – Financial reporting quality, Museums, Foundations, Non-profit organizations, Board size, Board of directors, Auditor, CEO, Norway.