This study examines how board gender diversity (BGD), critical mass and market power shape earnings management (EM) in African microfinance institutions (MFIs). Using a panel of 3,419 MFI-year observations from 311 institutions across nine African countries during 2012–2022, financial reporting quality is proxied by accrual-based earnings management measures. Employing panel fixed-effects models supported by an instrumental-variables robustness design, the findings indicate that higher female representation on boards is associated with significantly lower earnings management. This relationship strengthens once women hold at least 30% of board seats, consistent with critical mass theory. Furthermore, market power, measured by the Lerner Index, conditions this governance effect gender-diverse boards exert stronger oversight in MFIs operating under weaker competitive pressure, where short-term performance constraints are less dominant. These results suggest that board gender diversity functions as an effective governance mechanism when supported by sufficient representation and enabling market conditions. From a policy perspective, the findings support the adoption of competence-based targets for female board representation in MFIs, particularly in institutions facing intense informational asymmetries and limited external monitoring. The study contributes to governance research in emerging markets by clarifying when and under what conditions gender-diverse boards enhance financial reporting quality in mission-driven financial institutions.
Nihel Halouani (Tue,) studied this question.