Board Diversity and the Demand for Higher Audit Effort

43 Pages Posted: 15 Mar 2009

See all articles by Ferdinand A. Gul

Ferdinand A. Gul

Monash University Sunway Campus

Bin Srinidhi

University of Texas at Arlington - Department of Accounting; City University of Hong Kong (CityUHK) - Department of Accountancy

Judy S.L. Tsui

Hong Kong Polytechnic University - School of Accounting and Finance

Date Written: February 1, 2008

Abstract

We examine whether female corporate board membership affects the board's demand for audit effort measured by audit fees. After correcting for selectivity bias and controlling for other known board, firm and industry characteristics, we find significantly higher audit fees in firms that have at least one female director and in firms with a higher proportion of female directors on the board. The effect is also significant for female non-executive director presence and their proportion. Our findings suggest that boards with female directors are more likely to demand higher monitoring in the form of more audit effort, ceteris paribus. Exploratory analysis of the differential effect of female board membership suggests that such boards demand incremental audit effort in situations of high information asymmetry, complexity and ethical dilemma.

Keywords: Audit Fees, Corporate Governance, Female director, Gender diversity

JEL Classification: M41

Suggested Citation

Gul, Ferdinand A. and Srinidhi, Bin and Tsui, Judy S.L., Board Diversity and the Demand for Higher Audit Effort (February 1, 2008). Available at SSRN: https://ssrn.com/abstract=1359450 or http://dx.doi.org/10.2139/ssrn.1359450

Ferdinand A. Gul

Monash University Sunway Campus ( email )

Jalan Lagoon Selatan
Selangor Darul Ehsan
Bandar Sunway, 46150
Malaysia

Bin Srinidhi (Contact Author)

University of Texas at Arlington - Department of Accounting ( email )

Arlington, TX 76013
United States

City University of Hong Kong (CityUHK) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

Judy S.L. Tsui

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

M715, Li Ka Shing Tower
Hung Hom, Kowloon, Kowloon
Hong Kong
852 2766 7828 (Phone)
852 2334 7830 (Fax)

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