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Annotation

Nowadays, there is no consensus about how gender diversity in company's management affects their effectiveness in business and finance. There are studies that demonstrate a positive relationship between the presence of females (on top positions and on the board of directors) and the economic success of firms. On the contrary, some papers show negative relationship and others do not show a statistically significant relationship between females and economic success. In Russia, this issue remains insufficiently investigated.

This paper explores whether the gender of top executives affects earnings quality, using a sample of 135 Russian listed firms over a 5-year (2012-2016) period. We examine how CFO gender and presence of females on corporate boards affects earnings quality of a firm. Also, we examine association between number of females on corporate board and efficiency of a company.

Our results of a panel study show that earnings quality proxies, including earnings persistence, the correctness of current earnings in predicting future cash flows and relationship between earnings and stock returns do not display significant differences for firms with female CFO and male CFO. At the same time, we get that females on the board of directors influence significantly negative on earnings persistence but have a significantly positive effect on effectiveness of a company.



Аннотация

В настоящее время нет единого мнения о том, как гендерное разнообразие в управлении компании влияет на её эффективность в бизнесе и финансах. Существуют исследования, которые демонстрируют позитивную взаимосвязь между присутствием женщин (на высших должностях и в совете директоров) и экономическим успехом фирм. Однако, в некоторых научных статьях проявляется отрицательная зависимость, а у других отсутствует статистически значимая взаимосвязь между женщинами на топовых позициях и эффективностью компании. На сегодняшний день в России этот вопрос остается недостаточно изученным.

В этой статье рассматривается вопрос о том, влияет ли пол топ-менеджеров на качество дохода, используя выборку из 135 Российских компаний, которые торгуются на бирже за 5-летний период (2012-2016). Мы рассматриваем, как пол финансового директора и присутствие женщин в совете директоров влияют на качество дохода фирмы. Кроме того, мы рассматриваем связь между количеством женщин в совете директорови эффективностью компании.

Результаты панельного исследования показали, что прокси-переменные для качества дохода (постоянство прибыли, правильность текущих доходов при прогнозировании будущих денежных потоков и взаимосвязи между доходами и доходами от продажи акций), не показывают значительных различий для фирм с финансовым директором-женщиной и финансовым директором-мужчиной. В то же время, наличие женщин в совете директоров отрицательно влияет на устойчивость доходов во времени, но оказывает статистически значимое и положительное влияние на эффективность компании в целом.



Introduction

The gender effect on human behavior has been one of the discussed and ambiguous questions for a long time. Nowadays, the gender diversity has attracted consideration in business and finance. A lot of European countries issued a law that mandates a minimum number of women on the corporate board of the firms. For instance, Norway has claimed that 40 % of the board members of a firm be female since 2008 while Spain has committed the same condition since 2015 (Kyunga Na and Jooyeon Hong,2017).

This legal motion for gender differences on the board of directors we could explain using results of Betz (1989); Niessen and Ruenzi (2006) that women directors are more likely to be ethical than men directors and with lower probability bear high risks. Thus, we could suppose that female directors on top positions and in the board of directors could increase the transparency of companies. McKinsey&Company (2007) point out that firms with at least three or more females in senior management in Europe and in the United States represent better in their financial performance and corporate governance measures.

In recent days, there was a large attention to the role of females on the top positions, when the advances in female's economic and social positions occurred (McKinsey&Company, 2007). After the Enron scandal in 2001 many researches have been carried out about the composition of board of directors since there is not enough gender diversity (Williams, 2003; Burgess & Fallon, 2003; Farrell & Hersch, 2005; Singh, 2007; Werhane, 2007). Studies on gender diversity basically argued that females are more ethical than males in relations and behaviors (Beltramini, Peterson, &Kozmetsky, 1984; Ferrell & Skinner, 1988; Betz, O'Connell, & Shepard, 1989; Akaah, 1989; Ruegger& King, 1992; Nguyen, Basuray, Smith, Kopka, &McCulloh, 2008). Some articles also examine effect of gender diversity in earnings quality and got positive trend between women in senior management and earnings quality (Bruns & Merchant, 1990). Krishnan and Parsons (2008) indicatethat differences in gender on top positions in corporate governance increase the quality of reported earnings. In addition, Shawver, Bancroft, and Senneti (2006) find out that females accountants in comparison to males, had less probability to engage in earnings management manipulation.

The main accounting research papers also examine how the gender diversity effects on the quality of accruals or earnings quality. Some papers investigate that companies with females and males on the board of directors or a female CFOs have higher quality of accruals (Krishnan and Parsons 2008; Barua et al. 2010; Peni and Va?ha?maa 2010). In contrast, El-Mahdy (2015) discovers that women CFOs are less likely to manipulate with earnings or financial reporting in comparison to men.

The proportion of women on the boards of directors and on the top positions of Russian firms is not so high. According to the prior literature the gender diversity of the management structure positively affects the firm's quality and performance (Kyunga Na and Jooyeon Hong, 2017;Peni and Va?ha?maa, 2010;El-Mahdy, 2015). However, there are almost no such studies about the association of gender top executives and effectiveness of the firm in Russia. That is why the main motivation aspect of my work is the lack of such research in Russia.

In this paper, we investigate whether the gender of top executives affects earnings quality for a sample of Russian companies.The main aim of this work is to examine how thegenderdiversity of top executives influence on earnings quality. Specifically, the gender ofChiefFinancial Officers (CFO) and presence of females on the Board of Directorson earnings persistence and firm's effectiveness. Our sample was conducted by collecting information about 135 Russian listed firms from Bloomberg Terminal, RBC and Riarating over 5-year (2012-2016) period. The novelty of this work is that we introduce dummy variable AuditorAuditor is a dummy variable equal to 1 when the company i is audited by Big-4 auditor in year t, and 0 otherwise. and control it on the earnings persistence, also, we include share of independent directors. One more aspect of novelty is that our sample consists of Russian companies and this research was not conducted in Russia previously.

This paper has several important distinguishes from the previously mentioned studies. Firstly, the aim of other researches is the CEO gender (Kyunga Na and Jooyeon Hong, 2017;Peni and Va?ha?maa, 2010;El-Mahdy, 2015), while we consider the effect of CFO gender, because CEOs and CFOs have distinct roles and tasks in management decision making. The CEO has the government to make judgement for a company, at the same time, the CFO is mostly responsible for financial reporting. Consequently, gender of CFO could influence on the earnings management of a company in different ways from that of CEO.

Also, we examine heterogeneity in the board of directors, because there is also exist some relationship between females on corporate boards and firm performance (Carter, 2003; Adams and Ferreira, 2003; Agrawal and Knoeber, 2001).Secondly, the early papers mainly concentratedon the average level of abnormal accruals or abnormal real activities with annual reports (Kyunga Na and Jooyeon Hong, 2017). On contrary, our research looks at the earnings quality proxies, including earnings persistence, the correctness of current earnings in predicting future cash flows and the relationship between earnings and stock returns. (Dechow&Schrand, 2004; Hribar& Nichols, 2007).

The paper is organized in the following way: the first part will be devoted to the literature review and hypotheses development. The second part presents our research design. This is followed by a description of our sample and a descriptive analysis. The next part will consist of the discussion of the study's results. Concluding comments complete the paper.



Chapter 1. Literature review and Hypothesis development

company earnings capitalization financial

Executive gender diversity has been broadly studied in terms of earnings quality.The main literature claims that males and females indicate different approaches for unethical business behavior, also, they have different views in values and interests (Gilligan, 1982; Betz, 1989). Women are more focused on balanced relationships and helping others, and are less to be unethical, while men are more interested in career success and economic benefit (Butz& Lewis, 1996). Males with higher probability can break up the rules to get their purpose (Betz, 1989; Butz& Lewis, 1996; Mason &Mudrack, 1996).

Empirical evidences related to the business ethical differences between genders are ambiguous. Collins (2000) considered forty-seven papers which was issued in Journal of Business Ethics during 1982-1999. Thirty-two of these articles claimed that females are more ethically tender than males (Collins, 2000). On the other hand, fifteen other researchers reveal that gender has no influence on ethical relationship and behavior (Collins, 2000). Ford and Richardson (1994) reviewed fourteen surveys about any connection among gender and ethics. Seven of these articles suggested that there are no gender differences in ethical relationships and proceeding (Ford and Richardson, 1994). At the same time, another seven papers said that women have more ethical consciousness than men (Ford and Richardson, 1994). To sum up, in accordance to the prior literature and studies, gender impact on ethical behavior is not substantial, however, when the diversity identified, women emerge to be more ethical than men.

Vinkenberg (2011) insisted on that males are pay more attention to promotion than females, because men have higher motivation to manage earnings. Betz (1989) argued that males are more sensitive to be involved in unethical behavior. Through a study of 213 business school students Betz (1989) finds that a half of male respondents are ready to purchase stocks using insider information, in comparison to 31% of female respondents. In contrast, Adams and Funk (2012) in their considered the effect of gender diversity on the actions of the board of directors and concluded that women directors are more gracious and less power-oriented, meaning that females are more risk-averse than males directors.

During the recent years, many researchers consider gender in relation to the performance and characteristics of the firm. Previous articles claimed that female managers usually try to avoid risk. For example, Khan and Vieito (2013) argued that women CEOs are positively connected with firm performance, and negatively related to the risk, approximately by the standard deviation of return. This outcome offers that females on the top-positions are more risk-averse than males, which is coherent with the results of Niessen and Ruenzi (2006) and Liu (2014). Niessen and Ruenzi (2006) examined the diversity in investment strategies between men and women fund managers and found out that women fund managers prefer to make investments with less risk. According to Liu (2014) female CEOs and three or more female board members are positively related with their firm's performance.

Another stream of studies investigated the association between gender and accounting information. Krishnan and Parsons (2008) investigated that if firms have a high level of gender differences in top management, then these firms have greater earnings quality in terms of consistency, appropriate conditions, conservatism, and loss avoidance trend. In addition, women accountants took part in less earnings governance than the men counterparts (Krishnan and Parsons, 2008; Shawver 2006). Barua (2010) and Peni and Va?ha?maa (2010) consideredrelationship between accrual quality and gender diversity of the Chief Financial Officers. They argued that female CFOs have large accrual quality pronounced by reduce discretionary accruals and lower accruals volatility (Barua, 2010;Peni and Vahamaa, 2010).

The presence of females on corporate boards has also been shown in relationship between firm performance and its characteristics. Carter (2003), Adams and Ferreira (2003), and Agrawal and Knoeber (2001), argued that there is a positive association between firm size and the presence of females on the board of directors.Adams and Ferreira (2003) claims that larger companies have greater demands for gender diversity. They insist on a strong negative relation between variability in stock returns and the proportion of women on the board. They say that the group homogeneity is more valuable when uncertainty is high(Adams and Ferreira, 2003). According to the research carried out by McKinsey&Company (2007), companies where female are widely represented on the board of directors or at top-level management show better financial performance and governance.

In this study we are going to empirically examine the relationship between top executive gender and firm earnings quality using actual reported financial numbers for a sample of Russian listed firms. Concretely, we explore whether the gender of Chief Executive Officers (CEO), Chief Financial Officers (CFO) and composition of the Board of Directors influence firm effectiveness and earnings persistence among Russian listed companies. CEO and CFO are the senior executives who are more likely to affect financial reporting decisions. Also, CFOs are responsible for financial reporting process in their organizations, in addition, Cullinan and Sutton (2002) point out that over 70% of financial statement frauds directly involve firm CEOs/presidents. Thereby, in our research we formally state our hypothesis as follows:

Hypothesis 0: Companies with female Chief Executive Officers will exhibit better earnings persistence in Russia.

However, there are no women CEO in our sampleOur sample was conducted by using rating of firms from RBC and Riarating about of the largest Russian companies in terms of capitalization. among Russian listed companies for the 2012-2016 period.Thus, we exclude this hypothesis from our research.

Hypothesis 1: Companies with female Chief Financial Officers will exhibit better earnings persistency in Russia.

Hypothesis 2: Companies with presence of females on corporate boards will exhibit better earnings persistency in Russia.

Hypothesis 3: Companies with more females on corporate boards will exhibit better efficiency.

Chapter 2. Research design

Dechow and Schrand (2004) offer that a good indicator for current and future operating performance is high-quality earnings and it is a helpful measure to evaluate company value. Dechow and Schrand (2004) determine high-quality earnings when earnings are more persistent, highly related with future cash flows, and more connected with stock price performance.

1. Earnings persistence

One of the significant indicators for earnings quality is earnings persistence. Persistent series of earnings is expected to show how the current shock comes on the entire stream of future revenue series implementations. Current earnings will be suitable indicator of future earnings in the case when managers manipulate less with earnings. High quality of earnings provides more opportunity to observe persistent earnings (Kyunga Na and Jooyeon Hong, 2017).According Krishnan and Parsons (2008), we define earnings persistence as the slope coefficient in the following model:

SOIit+1 = ?0 + ?1SOIit + ?2FTEit*SOIit + ?3FTEit + ?4Leverageit + ?5Ln(Asset)it + ?6Tangibilityit + ?7Auditorit + ?8SHIndDirectit + ?9Auditorit*SOIit + ?it SOIit+1 = ?0 + ?1SOIit + ?2NumFemit + ?3Leverageit + ?4Ln(Asset)it + ?5Tangibilityit + ?6Auditorit + ?7SHIndDirectit + ?8Auditorit*SOIit + ?it (1)

where

· SOIit is operating income divided by total assets at the beginning of the year for company i in year t;

· FTE1 is a dummy variable equal to 1 for companies with female CFO, and 0 otherwise;

· FTE2 is a dummy variable equal to 1 for companies with presence of a women in Corporate Board and 0 otherwise;

· NumFem is a quantitative variable showing the number of females in Corporate Boardfor company i in year t;

?1 and (?1+?2) determine the earnings persistence of companies with men and women top executives respectively. Therefore, if ?2 is significantly positive, then for companies with female CFO and firms with females on the board of directors earnings are more permanent than those with male top executives. We use two regression equations on earnings persistence model because we have both dummy and numerical variable as an independent variable in our hypothesis.

Following the prior literature (Dechow&Schrand, 2004; Hribar& Nichols, 2007; K. Ye & R. Zhang, 2010) we include some variables in the regressionto control earnings quality:

· Ln(Asset) is the natural logarithm of total assets for company i in year t. This variable helps to control size of the companies in the regression model;

· Tangibility is a tangible asset divided by total assets for company i in year t, provided additional control on industries in equations;

· Leverage is a ratio of borrowed capital to owners for company i in year t. The value of leverage shows the structure of financing of the company, so it is useful earnings indicator;

· Auditor is a dummy variable equal to 1 when the company iis audited by Big-4 auditor in year t, and 0 otherwise. We introduce variable Auditor to control earnings quality in our regression model because there could be anassociationof auditor with earnings persistence.

· SHindDirect showing the share of independent directors on the Board of Directors for company i in year t.

· Year and industry effect are also controlled in the regression.

2. The correctness of current earnings in predicting future cash flows

Firm value is the discounted present value of firm's future cash flows (Krishnan and Parsons (2008). Thus, a stronger relationship between current earnings and future cash flows could help investors better evaluate company value taking current earnings number. According to Dechow, Kothari, and Watts (1998), we study the possibility of current earnings to forecast future cash flows using the following model:

CFOit+1 = ?0 + ?1SOIit + ?2FTEit*SOIit + ?3FTEit + ?4Leverageit + ?5Ln(Asset)it + ?6Tangibilityit + ?7Auditorit + ?8SHIndDirectit + ?9Auditorit*SOIit + ?it CFOit+1 = ?0 + ?1SOIit + ?2NumFemit + ?3Leverageit + ?4Ln(Asset)it + ?5Tangibilityit + ?6Auditorit + ?7SHIndDirectit + ?8Auditorit*SOIit + ?it (2)

where

· CFOit+ 1 is the cash flow from operations for company i in year t+1, divided by total assets at the beginning of year t+1. All other variables are determined as in equation (1).

?1 and (?1+?2) evaluate the correctness of current earnings in forecasting future cash flows for companies with men and women top executives respectively. A significantly positive ?2 indicates that the current earnings are a better indicator of future cash flows when firms have female CFO and companies with presence of females on the board of directors.

3. Therelationship between earnings and stock returns

Stock prices are in general taken as a summary assessment of the company performance. If earnings are less subject to manipulation, the correlation between earnings and firm performance will increase, provided that the stock markets are efficient (Dechow, 1994). We exercise the following regression model to investigate whether women top executives improve the possibility of earnings to measure company performance:

Returnit= 0 + 1SOIVit + 2FTEit*SOIVit + 3FTEit + 4Leverageit + 5Ln(Asset)it + 6Tangibilityit + 7Auditorit + 8SHIndDirectit + 9Auditorit*SOIVit+ ?itReturnit= 0 + 1SOIVit + 2NumFemit + 3Leverageit + 4Ln(Asset)it + 5Tangibilityit + 6Auditorit + 7SHIndDirectit + 8Auditorit*SOIVit + ?it

where

· Returnitis the buy-and-hold stock return (including dividends) for company i in year t, minus the value-weighted market index (including dividends) during year t;

· SOIVit is operating income for company i in year t, scaled by the beginning-of-period price.

All other variables are denoted as in equation. (1). We cooperate FTEit with SOIVit to explore whether the simultaneous relationship between accounting earnings and stock returns is significantly differ for observations with female CFO and females on the board of directors relative to observations with male counterparts. If ?2 is significantly positive, then we could conclude that earnings become a more useful evaluation of company performance when female CFO and females in the board of directors.

Chapter 3. Database and Descriptive statistics

The sample consists of the list of the largest Russian companies in terms of capitalization, which listed on RBC and Riarating. While these firms are traded on the exchange, the main information is publicly disclosed with firms' annual reports. Listed companies' financial data were drawn from the Bloomberg terminal.

The most challenging data limitation was that in Russia, there is no database or systematic collection of data about variables and parameters which include gender of top executives and gender of the board of directors, auditors, share of independent directors on board and so on. So, we collect corporate governance data by ourselves from web sites of companies and annual reports, because it is available andofficial.Hence, it makes the data information more objective, transparent and valid.

Firstly, we took rating of the 200 largest companies in terms of capitalization, thenbanks, financial services and electronic power industries were excluded from the sample. We also deleted companies without sufficient financial data to determine the required financial variables.Finally, we get all necessary data about 135 listed companies for 5-year (2012-2016) period.Our panel is balanced, because in every year we have 135 firms.

The results of correlation matrix show that correlations between all variables are not so high and significant, thus, multicollinearity is not the problem of this study: see TableA1in Appendix. These results will be proved further using VIF statistics. Tables A2-A4in Appendix show frequencies for all categorical variables over 5-year period.

Table 1: Descriptive statistics

Source: own estimations on Bloomberg Terminal data

Table 1 shows the result of descriptive statistics for all variables in our model. The mean and median values of FTE1 are 0.12 (12% of total sample for female CFO) and 0, showing that the majority of sample companies appoint male CFO.The coefficient of mean of NumFem is 0.95, so it means that on average, there is about 0.95 women on the board of directors among the firms.Also, we see that on average 59% companies is audited by auditors from Big-4. The mean and median values of SHIndDirect are 0.26 and 0.25, displaying that on the board of directors, on average, about 25% is Independent Directors.



Table 2: Number of firms in each industry

Source: own estimations on RBC and Riarating data

Table 2 presents how many firms in our sample in each industry. We have 13 different industries and 135 Russian companies.From this table we can observe the greatest number of the firms in our sample is from Machinery industry and the smallest number is from Holding. There is an equal number - for ten firms in Telecommunication, Trade and Chemistry industries.

Table 3: Female CFOs vs. Male CFOs

Source: own estimationson firms' web-sites data

Table3 reports the number of female CFOs and male CFOs in companies over 2012-2016 years. As we can see from the table,the number of male CFOs is much larger than women CFO over all 5-year period. On the other hand, according to the results, we can conclude that there is a gradual increase in number of female CFOs in Russian companies.

Table4:Number of females on corporate boards

Source: own estimations onfirms' web-sites data

The result of table 4 demonstrate number of females on corporate boards for 5-year period. We can see thatmore than fifty companies do not have women on their board of directors in each year. About forty-five firms out of 135 listed companies have one women on the corporate boards. A little bit more than twenty firms have two females on the board of directors in each year. At the same time, nearly ten firms have three females on their board of directors. And finally, less than five companies out of 135 firms have on their corporate boards four females.



Table 5: Share of femaleson corporate boards

Source: own estimations on firms' web-sites data

Table 5 indicates that on average during 5-years period, no females were in 41.3% of firms, then one woman on the board of directors was in 33.9% Russian companies, two women were in 15.9%, three females were in 6.4% and four females were only in 2.5% Russian companies. These results show that number of females on the board of directors in Russian companies is low.

Сhapter 4. Main results

As we conduct a panel study for 5-year (2012-2016) period we use three methodsto correctly identify the regression equation in our model. These methods are pooled (between), fixed effect (within) and random effect regressions in our model. Then we carried out three tests to distinguish the most suitable regression for our research design. The first test was Haussmann test to choose between fixed and random regression model. After that was Vald test to select between fixed and pooled regressions. The next was Breusch-Pagan test to choose between pooled and random regressions. Also, we check our final regression model on the presence of heteroskedasticity and serial autocorrelation (Wald test for heteroskedasticity and Wooldridge test for autocorrelation). All these steps were done for each equation and regression model. Also, all tables and additional information from STATA are represented in appendix.

Table 6: Association of gender top executives and earnings persistence

Source: own estimations on Bloomberg Terminal and firms' web-sites data

Note: FTE1: a dummy variable equal to 1 for firms with female CFO, and 0 otherwise; FTE2: a dummy variable equal to 1 for firms with presence of a women in Corporate Board; NumFem: it is a quantitative variable showing the number of females in Corporate Board; SOIit: operating income divided by total assets at the beginning of the year; SHindDirect: share of independent directors in the Board; Auditor: a dummy variable equal to 1 when the firm is audited by Big-4 auditor, and 0 otherwise; Ln(Asset): the natural logarithm of total assets; Tangibility: tangible assets divided by total assets; Leverage: ratio of borrowed capital to owners;CFOit+1: cash flow for company i at year t+1 divided by total assets at the beginning of the year t; Return: stock return for company i in year t, minus market index during year t; SOIVit: operating income for company i in year t divided by the beginning-of-period price; Robust standard errors are in parentheses. T-statistics calculated using standard errors corrected for heteroskedasticity and serial autocorrelation. *, **, and *** indicate significant at 0.1; 0.05 and 0.01 level respectively

We investigate the influence of women top executives on earnings quality and persistence of the company using three gender variables, i.e., the CFO gender, presence of females on corporate board and number of females on corporate board. Table 6 shows the summary of the tests on association between gender executives (CFOs gender and presence of females on the boards of directors) and earnings persistence. The coefficients of persistence for companies are positive and significant in all regressions, which is correspond to the main literature. The coefficients on operating income is positive and significant in all regressions, indicating that current earnings are a suitable measure of future cash flows.

The earnings persistence between firms with female CFO and male CFO are not significant in regression, where depending variable is SOIit. The outcome means that observations with women CFO do not show higher earnings persistence. Also, where depending variable is CFOit+1, there is no difference for firms with female CFO relative to male CFO taking current earnings in predicting future cash flows. The result of the regression, where depending variable is Return, shows that relationship between earnings and stock returns doesn't significantly different for companies with female and male CFO. According these results we can conclude that there is no association between CFO gender and earnings quality of a company. At the same time, one more possible interpretation of this results is that in Russia the number of women financial directors is small,so it can give abnormal results.

Table 6 also demonstrates empirical results about association of presence of females on a corporate boards and earnings quality. As can be seen from the first equation, where dependent variable is SOIit, the coefficient on earnings persistence is negative and significant, hence we can conclude that earnings are considered less permanent for companies with presence of females in the board of directors. Also, in equation (2) with dependent variableCFOit+1, FTE2 and FTE2*SOIit are negatively significant, providing the usefulness of current earnings in forecasting future cash flows when firms have females on the board of directors. Final equation with dependent variable Return, suggests that females on the board of directors influence significantly negative on earnings persistence and earnings quality.

In addition, coefficients on leverage are significant in all regressions, so the structure of financing of the company influence on earnings quality and persistence. Also, we can conclude that company is confident in stream of earnings today and in the future, i.e. the company will be able to pay off its debt obligations. Firms which auditor is from Big-4, demonstrate more earnings persistent, because their variables are significant. Thus, auditor from Big-4 stimulates managers to manipulate less with earnings. With higher share of independent directors in the corporate board earnings quality and effectiveness of company arise, because this variable is statistically significant. Also, there is more relationship between current earnings and future cash flows when higher share of independent directors in the board of director present.



Table 7: Association of gender top executives and companies' efficiency

Source: own estimations on Bloomberg Terminal and annuals reports data

Note:NumFem: it is a quantitative variable showing the number of females in Corporate Board; SOIit: operating income divided by total assets at the beginning of the year; SHindDirect: share of independent directors in the Board; Auditor: a dummy variable equal to 1 when the firm is audited by Big-4 auditor, and 0 otherwise; Ln(Asset): the natural logarithm of total assets; Tangibility: tangible assets divided by total assets; Leverage: ratio of borrowed capital to owners; CFOit+1: cash flow for company i at year t+1 divided by total assets at the beginning of the year t; Return: stock return for company i in year t, minus market index during year t; SOIVit: operating income for company i in year t divided by the beginning-of-period price; Robust standard errors are in parentheses. T-statistics calculated using standard errors corrected for heteroskedasticity and serial autocorrelation. *, **, and *** indicate significant at 0.1; 0.05 and 0.01 level respectively

The results of Table 7 represent relationship between number of females on the board of directors and companies' efficiency. The diversity in earnings persistence between companies in the equation where depending variable is SOIit are positive and significant, hence we can conclude that earnings are considered more permanent for companies with higher number of females in the board of directors. From the equation, where dependent variable CFOit+1, significantly positive coefficients indicate that high-quality earnings are a properly indicator for future and current operating performance and a helpful measure to evaluating company value when there is high number of females on the board of directors. As coefficient on the number of females in the board of directors is significant in regression with dependent variable Return, we can conclude that there is a high relationship between current earnings and future cash flows when firms have more females in corporate board. To sum up, we could say that with higher number of females in the board of directors companies are more efficient.

The stability of the results was verified by the fact that there were different dependent variables, and a robustness check was also made. Namely, our regression equations for the subsamples were tested. Sub-samples we formed by the size of the company, took the average Ln (asset) and cut off the company "before" this value and "after", thus obtaining two subsamples. Further, we tested our hypotheses and got the same result almost everywhere.



Conclusion

Research paper (McKinsey&Company, 2007) reports that firms in the United States and Europe with a higher share of female executives at their board of directors or top management perform better than those without such gender diversity in senior management. This study investigates whether top executive gender diversity affects earnings quality in Russia.

According to Krishnan and Parsons (2008) earnings quality is positively and significantly related to high gender diversity on top positions in the context of U.S. Nevertheless, our empirical results using a sample of Russian listed companies show that, during the period 2012-2016, there is no significant earnings quality difference for firms managed by female CFO and male CFO. One of the possible interpretation of this result is that in Russia the position of CFO is mainly executed by males. The number of women financial directors is small that it can give an abnormal result. At the same time, potentially, we can believe that in Russia for companies managed by female CFO and male CFO there is no essential difference in earnings quality as an indicator for current and future operating performance. Thus, gender of CFO is not associated with earnings quality.

Also, we examine heterogeneity in the board of directors, as previous studies indicate some association between females on corporate board and earnings quality. The proportion of women on the boards of directors of Russian firms is not so high. Nevertheless, our regression results demonstrate that females on the board of directors influence significantly negative on earnings persistence, but, at the same time, have a significantly positive effect on effectiveness of a company. But, we cannot exclude reverse effect, when the effectiveness of firms affects the gender diversity in the management structure. This may be due, for instance, to the desire of successful enterprises to improve the reputation among investors.

Implication policy of our results, which coincide with scientific research around the world, could be the following: if companies want to improve their efficiency, they should increase amount of women on the board of directors. At the same time, lack of association between CFO gender and firm earnings quality suggests that companies and their directors should realize other roles that women play on top positions in the corporate governance. Namely, hiring more female senior managers could bring fresh ideas, new perspectives and different styles to the management team.

On the whole, this research provides a one of the foundations for future studies in gender diversity of top executives. Future research papers could examine how and to what extent other characteristics of top management, such as education, experience tenure and age affect efficiency of a company and its earnings quality.

To sum up, in Russia there is no such gender diversity in the management structure like in Europe and the United States. Especially in top positions like CEO, CFO, Chair of the Board and in the board of directors. At the same time, the number of women on top positions and on the board of directors is becoming more and more every year. The result of this study supports prior literature that effectiveness of a company is positively and significantly related to high number of women on the corporate board. Many developed countries set strict quotas for public companies about the minimum number of women in the board of directors (T.Garanina&A.Muravyov, 2018). In Russia, such norms do not exist and the Code of Corporate Governance, adopted in 2014, which has an advisory character, does not contain any references to the gender composition in the board of directors (T.Garanina&A.Muravyov, 2018).



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Appendix

Table А1: Correlation matrix of main independent variables

Tables A2: Descriptive statistics of variables



Tables A3: Descriptive statistics of variables

Tables A4: Descriptive statistics of variables



Tables A5:Regression in STATA, dependent variable = SOIit+1 and independent is FTE1 Multicollinearity test for dependent variables (no variable with VIF>10, then no multicollinearity problem)



Tables A6:Regression in STATA, dependent variable = SOIit+1 and independent is FTE2 Multicollinearity test for dependent variables (no variable with VIF>10, then no multicollinearity problem)



Tables A7:Regression in STATA, dependent variable = SOIit+1 and independent is NumFem Multicollinearity test for dependent variables (no variable with VIF>10, then no multicollinearity problem)



Tables A8:Regression in STATA, dependent variable = CFOit+1 and independent is FTE1 Multicollinearity test for dependent variables (no variable with VIF>10, then no multicollinearity problem)



Tables A9:Regression in STATA, dependent variable = CFOit+1 and independent is FTE2 Multicollinearity test for dependent variables (no variable with VIF>10, then no multicollinearity problem)



Tables A10:Regression in STATA, dependent variable = CFOit+1 and independent is NumFem Multicollinearity test for dependent variables (no variable with VIF>10, then no multicollinearity problem)



Tables A11:Regression in STATA, dependent variable = Returnitand independent is FTE1 Multicollinearity test for dependent variables (no variable with VIF>10, then no multicollinearity problem)



Tables A12:Regression in STATA, dependent variable = Returnitand independent is FTE2 Multicollinearity test for dependent variables (no variable with VIF>10, then no multicollinearity problem)



Tables A13:Regression in STATA, dependent variable = Returnitand independent is NumFem Multicollinearity test for dependent variables (no variable with VIF>10, then no multicollinearity problem)

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