Khalil Nimer

Type of the article: Research Article

Abstract
Financial reporting accuracy is central to investor confidence in emerging markets, yet the governance mechanisms protecting it remain underexamined in Jordan. This study examines whether board gender diversity and six functional diversity dimensions are associated with higher reporting accuracy, proxied by lower real earnings management (REM), among 105 Jordanian listed non-financial firms over 2017–2023 (735 firm-year observations). REM is estimated using Roychowdhury-type abnormal cash flows and production costs; panel regression models relate board composition to REM, controlling for firm size, leverage, and return on assets. A one-unit increase in female director share is associated with a 0.126 reduction in REM (β = −0.126, p < 0.05). All six functional diversity proxies – financial expertise, multiple directorships, board independence, board size, managerial ownership, and meeting frequency – are significantly and negatively associated with REM, with financial expertise showing the largest marginal effect (β = −0.059, p < 0.001) and meeting frequency the smallest (β = −0.003, p < 0.001). The gender-only model explains 7.9% of REM’s variation (R2 = 0.079); adding functional diversity more than doubles this to 19.0% (R2 = 0.190), indicating substantial incremental explanatory power. Because gender and functional diversity are estimated separately, this pattern is consistent with complementary rather than substitutive effects, though a combined model was not estimated. These results suggest that, in an emerging market such as Jordan, appointing more financially qualified and independent directors, together with modest increases in female representation, can materially improve reported-earnings reliability and should be prioritized in corporate governance reform.