Boardroom Gender Diversity's Effect on the Relationship Between Corporate Charitable Donations and Earnings Management: Evidence From Borsa Istanbul

Corporate charitable donations, a form of corporate social responsibility (CSR) initiative, are increasingly important for improving a firm's reputation and fostering long-term societal benefits. Nevertheless, despite the increasing level of interest in corporate donations among managers, academics, and the business community, literature on how and whether corporate donations impact earnings management is still scarce. As a result, this study aims to examine the relationship between corporate charitable donations and earnings management (EM) practices, considering the interacting role of boardroom gender diversity. Based on stakeholder theory, we posit that donating firms behave ethically to meet shareholders' needs and society expectations, thereby eliminating the opportunistic perspective of earnings management. Furthermore, the presence of female directors' acts as a signal for financial reporting quality and mitigates the agent-principal conflicts of interests. By using a fixed effect regression on panel data of 79 Turkish-listed firms from 2008 to 2022, the results show that corporate donations are positively associated with discretionary accruals, suggesting that donating firms are more likely to engage in earnings management. The results also show that gender diversity on boards helps greatly in mitigating the positive link between corporate donations and income-increasing abnormal accruals. Our findings have important implications for investors when assessing donating firms since such donations may be used as a strategy mechanism to window-dress their reputation. This article advances our understanding of the interplay among corporate donations, board gender diversity, and earnings management in an emerging market.