Does the strength of women in the upper echelon influence earnings quality? The application of critical mass theory

Globally, several financial scandals were witnessed within the first decade of the 21st century that necessitated a robust corporate governance mechanism to improve financial reporting quality. Empirical evidence shows that men dominate the boards involved in these scandals. In an attempt to restore the confidence of stakeholders in the financial report, financial regulatory authorities in European Union economies recommend a well-constituted gender-diverse board where the marginalised gender is at least 40 percent of the board. However, in Nigeria, there is little research on women's participation in corporate board decisions taken into cognizance of critical mass theory. Thus, the study investigates how the critical mass of female representation on the corporate board and audit committee affects earnings quality. The study employs a longitudinal design by collecting secondary data on eleven deposit money banks from 2011-2022. The study uses data collected after testing endogeneity problems using Hausman's test. The results show that females on the board and audit committee significantly affect the quality of earnings when reaching the critical mass threshold. The study provides policy implications for supporting more significant involvement of women in board and audit committees based on business cases rather than social justice. Hence, this study proposes a mandatory thirty percent threshold compliance for board gender diversity, which the Central Bank of Nigeria voluntarily recommended.