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The authors motivate this research on the gender diversity of the board because of the recent increases in the number of women in top executive teams (Francis et al., 2015), which has probably been the result of the adoption of legislation for gender quotas as well as the establishment of corporate governance recommendations for gender diverse boards in several countries. The purpose of this study is to consider the quality of board directors when examining the effect of female directors on earnings management.

The analyses follow the system generalized method of moment to address endogeneity concerns (e.g. a board with higher quality is more likely to have female directors on board and vice versa). Besides the lags of the endogenous variables, the authors use the female industry ratio as an additional instrument (Liu et al., 2014), as female directors might be inspired by other female directors according to industrial sectors (measured by the two-digit industry codes), where competitors are likely to follow gender diversity practices of other firms within the same industrial sector.

The authors’ findings show a negative and significant association between board gender diversity and earnings management (EM), suggesting that independent female directors are the drivers of such effect. High-quality boards decrease the incidence of EM but hinder the potential involvement from female directors towards reducing EM. The incumbent effect of high-quality boards on female director’s contribution on EM reverses with less powerful CEOs.

The authors contribute to the extant literature by recognizing that the effectiveness of a female director on decreasing EM is a function of the environment in which decision-making takes place (i.e. board quality/powerful CEOs).

The purpose of this research is to expand on the available literature that suggests a positive effect of R&D activities and dividend payments on firms' value by considering three additional aspects that differ from previous research.

The analysis of the valuation model is performed in a panel dataset of UK firms from 1994 to 2005 (8,559 observations). The methodology consists in applying General Method of Moments (GMM) to control for endogeneity, firm‐specific effects and time effects.

The findings indicate that the use of GMM in the valuation model is adequate, given the statistical properties of the data. R&D stock is shown to be positively associated with corporate value, but its impact is lower than for R&D expenditure. Both special dividends and ordinary dividends are found to be positively associated with corporate value, supporting the signalling hypothesis which presupposes that managers might use dividends as a signal about companies' future profitability.

This paper contributes to the empirical literature of corporate finance, not only with respect to the effect of special dividends and R&D stock on corporate value, as opposed to R&D expenditure and ordinary dividends (as in previous studies for the UK), but also in confirming that, after endogeneity has been controlled, there is a significant and positive effect of these variables but with a different impact.