Gender Differences in Executive Compensation on British Corporate Boards: The Role of Conditional Conservatism

Posted: 24 Aug 2019 Last revised: 26 Aug 2019

See all articles by Habiba Al-Shaer

Habiba Al-Shaer

Newcastle University Business School

Mostafa Harakeh

Lebanese American University

Date Written: July 31, 2019

Abstract

We exploit the effectiveness of the Davies Report (2011), which urged FTSE 350 companies to increase female representation on corporate boards to examine the potential effect that this may have on the gender pay differential at the executive level. To this end, we employ a multivariate regression and a difference-in-differences approach that compare executive compensation between all-male executive boards and boards with at least one female executive. Using a sample of FTSE 350 companies that spans the period 2008-2015, we find that the differential executive compensation exists in bonus and equity compensation following the Davies Report (2011). Given that the differential compensation exists in the components that are primarily determined by the firm’s reported earnings and that female directors are prone to exhibit higher conditional conservatism in their financial reporting, we examine whether the firm’s financial reporting practice plays a role in determining the differential executive compensation. Our investigation reveals that the presence of female executive directors on board makes the effect of conditional conservatism more prominent, resulting in lower bonus and equity-based compensation.

Keywords: Executive Compensation, Female Executives, Conditional Conservatism, Davies Report

JEL Classification: G30, M40

Suggested Citation

Al-Shaer, Habiba and Harakeh, Mostafa, Gender Differences in Executive Compensation on British Corporate Boards: The Role of Conditional Conservatism (July 31, 2019). International Journal of Accounting, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3442340

Habiba Al-Shaer

Newcastle University Business School ( email )

Department of Accounting and Finance
5 Barrack Road
Newcastle, NE1 4SE
United Kingdom

Mostafa Harakeh (Contact Author)

Lebanese American University ( email )

P.O.Box 36
Chouran-Beirut 1102 2801
Beirut
Lebanon

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