Does Religiosity and LGBTQ Inclusiveness Impact The Probability of Financial Statement Manipulation?


  • Benjamin P. Foster College of Business, University of Louisville, USA
  • Dianna Preece College of Business, University of Louisville, USA



Diversity, Religiosity, LGBTQ, Corporate Equality Index, M-score, Earnings Management, Financial Manipulation



Previous research finds that greater gender diversity and inclusion in firms, on boards of directors, and on audit committees, improves the quality of financial reporting, lowers the likelihood of accounting restatements, and decreases the likelihood of financial misconduct. This is the first study to examine whether lesbian, gay, bisexual, transgendered, queer, or questioning (LGBTQ) diversity in companies will also result in higher ethical actions regarding financial statements. With regression analyses, this study examines whether companies’ Corporate Equality Index (CEI) ratings of support for the LGBTQ community, as a measure of diversity, help explain companies’ M-scores or manipulation scores, a measure of accounting-based earnings manipulation. Likewise, we examine if the religiosity of the county where a company is headquartered influences the company’s manipulation score because previous research finds that companies headquartered in more religious areas are less likely to engage in financial misconduct. We conduct OLS and logistic regression analysis with M-score as the dependent variable, and headquarters area religiosity and company CEI ratings as independent variables of interest. Regression results provide little indication that the people's religiosity in the county where a corporate headquarters is located affects the firm’s M-score. However, we find that the higher the CEI rating, the lower the probability of financial statement manipulation as measured by the M-score. This study sheds light on an underexplored aspect of corporate governance and diversity, further reinforcing the notion that diversity benefits companies in many ways, including those tied to governance.


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How to Cite

Foster, B. P., & Preece, D. (2024). Does Religiosity and LGBTQ Inclusiveness Impact The Probability of Financial Statement Manipulation?. Journal of Accounting, Ethics & Public Policy, JAEPP, 25(2), 52.