CORPORATE GOVERNANCE TRANSPARENCY, CRITICAL MASS GENDER DIVERSITY ON AUDIT COMMITTEES, AND EARNINGS QUALITY: A THEORETICAL AND EMPIRICAL INVESTIGATION IN EMERGING MARKETS

Abstract

This study investigates how corporate governance transparency and audit committee gender diversity impact earnings quality, drawing on agency, resource dependence, and critical mass theories. Analyzing 1,380 firm-year observations from 276 non-financial listed firms (2020– 2024), the research utilizes panel fixed effects, 2SLS, and propensity score matching to test these relationships. Findings reveal that transparency significantly enhances earnings quality ($\beta = -0.037, p < 0.001$) by reducing information asymmetry and constraining managerial opportunism. Similarly, audit committee gender diversity is positively associated with earnings quality ($\beta = -0.102, p < 0.01$); however, this effect is contingent upon achieving a "critical mass" of at least three female members, as token representation remains statistically insignificant. Notably, transparency policy positively moderates this relationship ($interaction \beta = -0.053, p < 0.05$), suggesting that diverse committees are most effective in hightransparency environments. These results imply that gender mandates should prioritize 30– 40% representation rather than tokenism and must be implemented alongside robust disclosure frameworks. Practically, regulators should strengthen enforcement mechanisms, while boards should proactively recruit multiple female members with financial expertise. Investors are encouraged to incorporate both transparency and diversity scores into their risk assessment frameworks. Future research should address cross-country variations and the behavioral mechanisms underlying these effects.