The relationship between board gender diversity and audit quality in Egypt

Abstract

PurposeThis paper aims to examine whether female representation on boards is significantly associated with audit fees paid by top Egyptian listed companies.Design/methodology/approachThe authors collect data on audit fees, board of directors' characteristics and financial data for the top 100 companies listed on the Egyptian Exchange (EGX100) for a period of six years. The authors employ an ordinary least squares regression model to capture the relationship between board diversity (i.e. the proportion of female board directors) and the natural logarithm of audit fees while controlling for firm and industry fixed effects as well as other known firm characteristics.FindingsThe authors find that audit fees are significantly associated with the proportion of females serving on firms' boards of directors. The findings suggest a complementary relationship between females on boards, as a quality-enhancing board attribute; and audit fees, as a proxy for audit effort and audit quality.Research limitations/implicationsLimitations of this study arise first from the relatively small sample size, and second from the fact that inferences may be specific to the Egyptian context and similar markets.Practical implicationsThe results have important implications for Egyptian policy makers and regulators in terms of board composition.Social implicationsThis study provides empirical evidence that further enforces the business case for women's empowerment and the impact of this on the effectiveness of corporate governance.Originality/valueTo the best of the authors’ knowledge, this is the first archival study to examine the association between female board representation and audit fees in Egypt.