Gender Diversity and Audit Fees across Institutional Settings

Kurt A. Desender*
Department of Business Administration, Universidad Carlos III.
Calle de Madrid, 123; 28903 Getafe (Madrid), Spain.
Email: [email protected]

Mónica LópezPuertas-Lamy
Department of Business Administration, Universidad Carlos III.
Calle de Madrid, 123; 28903 Getafe (Madrid), Spain.
Email: [email protected]

This version: May 2024

Abstract

This study investigates the relationship between gender diversity and financial reporting
quality by examining independent auditors' assessments of material misstatement risk
Specifically, we examine the link between gender diversity at the board and Top
Management Team (TMT) levels, as well as firms' commitment to the UN’s Sustainable
Development Goal on Gender Equality (SDG 5) and audit fees. Utilizing a large global
dataset spanning 2018-2022 and employing firm-fixed effects regression analysis, our
findings indicate a positive relationship between board gender diversity and audit fees,
suggesting that diverse boards play an active monitoring role. Conversely, we observe no
significant effect from TMT gender diversity or commitment to SDG 5. Furthermore, we
find that the relationship between board gender diversity and audit fees is more
pronounced in countries without mandatory board gender quotas and in environments
characterized by lower corruption perception and higher female parliamentary
representation. These results contribute to the literature on corporate governance and
audit practices by highlighting the nuanced effects of gender diversity across different
institutional contexts.

Keywords: Audit Fees; Financial Reporting Quality; Gender Diversity; Sustainable

Development Goals (SDGs); Institutions

*Corresponding author
The authors acknowledge the financial support from the Spanish Agencia Estatal de
Investigación (PID2022-140026NB-I00 and PID2019-111143GB-C32).

1
 Introduction

The lack of gender diversity on corporate boards and in leadership roles has

emerged as a significant issue in corporate governance in recent years (Gow, Larcker, and

Watts, 2023). Regulators, politicians, and investors are increasingly urging companies to

address this imbalance at the board and executive levels (Zattoni et al., 2023). For

example, the 'Women on Boards' law, approved by the European Parliament in November

2022, mandates that women must comprise at least 40% of non-executive board members

at large companies in the European Union by mid-2026. Additionally, major institutional

investors launched a campaign in 2017 to increase board gender diversity, resulting in

U.S. corporations appointing 2.5 times more female directors in 2019 compared to 2016

(Gormley et al., 2023).

These regulatory and investor pressures underscore the perceived advantages of

gender diversity on corporate boards, a topic that has received increasing attention in the

literature. Numerous studies examine these advantages, indicating that increased gender

diversity can stimulate creative thinking and introduce novel perspectives into board

discussions (e.g., Benton, 2021; Perryman, Fernando, and Tripathy, 2016). Supporting

this, a 2022 survey of U.S. corporate directors revealed that gender diversity was highly

valued for introducing new ways of thinking to the boardroom (PwC Report, 2022). Prior

research also indicates that women, compared to men, have less tolerance for engaging in

opportunism (Bernardi and Arnold, 1997; Krishnan and Parsons, 2008; Thorne, Massey,

and Magnan, 2003) and place less importance on self-interest (Arlow, 1991). These

characteristics enhance strategic decision-making (Perryman et al., 2016) and reduce

financial misconduct (Adams and Ferreira, 2009; Chen, Crossland, and Huang, 2016;

Cumming, Leung, and Rui, 2015; Post and Byron, 2015).1

1
In line with these benefits, the United Nations (UN)' Sustainable Development Goal 5 (SDG 5) aims to
achieve gender equality and empower all women and girls by 2030. Achieving gender equality is seen as

2
 Financial reporting quality is a cornerstone of corporate governance, serving as

the foundation for transparency, accountability, and oversight (Aguilera, Desender, and

LópezPuertas-Lamy, 2021). Accurate and reliable financial information enables investors

and other stakeholders to hold company management and boards accountable. In the

contemporary business landscape, the audit function plays a critical role in ensuring the

reliability and integrity of financial reporting (Aguilera et al., 2021). This study focuses

on the growing importance of diversity at all organizational levels and its impact on

financial reporting quality, adopting the perspective of external auditors, who are

professionally trained to assess this quality. The research question we seek to address is:

“How does gender diversity at various levels influence auditors' perceived risk of material

misstatements?” Additionally, we explore how institutional factors shape this

relationship."

To this end, we analyze auditors' proprietary evaluations of the reporting quality

of firms with varying levels of gender diversity, inferred from audit engagement pricing.

The purpose of the external audit is to obtain reasonable assurance that financial

statements are free from material misstatements. The auditor's cost of gathering and

verifying evidence, and rendering an opinion, depends on the audit effort, which is a

function of the risk threshold for issuing an incorrect opinion on the financial statements

(i.e., audit risk) that the auditor is willing to accept (Hay, Knechel, and Wong, 2006;

Simunic, 1980; Simunic and Stein, 1996). According to the audit risk model, auditors aim

to maintain overall audit risk at an acceptably low level. This involves choosing an

acceptable level of audit risk and then assessing inherent and control risks to determine

the desirable level of detection risk (Houston, Peters, and Pratt, 1999). Evaluating

inherent risk involves examining the entity’s operational nature, strategic objectives, and

integral to the success of other SDGs, as it contributes to economic growth, poverty reduction, and
improved health outcomes (UN Women, 2018).

3
governance strategies, including management integrity and competence, transaction

complexity, and accounting practices. Control risk evaluation reviews the effectiveness

of internal control mechanisms, information systems robustness, and risk mitigation and

oversight by management and the board (Ghosh and Tang, 2015; Johnstone, Grambling,

and Rittenberg, 2014).

If auditors perceive that a client's financial reporting quality is low due to high

inherent or control risk, they must set a lower detection risk to maintain acceptable audit

risk levels. This adjustment requires modifications in audit procedures, impacting audit

planning and procedures (Bedard and Johnstone, 2004; Bell, Landsman, and Shackelford,

2001). Perceived poor financial reporting quality and increased risk of financial statement

manipulation typically lead auditors to allocate more resources to scrutinize high-risk

accounts, resulting in higher audit fees (Simunic, 1980; Simunic and Stein, 1996).

Moreover, auditors may employ more specialized personnel to reduce detection risk,

further increasing audit fees (Bell et al., 2001).

Previous research has examined the link between board gender diversity and

(post-audit) financial reporting quality2, but findings are mixed and limited to single-

country studies (e.g., Huang, Huang, and Lee, 2014; Lai et al., 2017; Nekhili et al., 2020;

Sultana, Cahan, and Rahman, 2020). Compared to studies that rely on reporting quality

models, which is mostly confined to analyzing one dimension of reporting quality (e.g.,

discretionary accruals), analyzing audit fees has several distinct advantages (Ghosh and

Tang, 2015). First, audit fee models are typically well-specified with large R-squared

values, which reduces the concerns on correlated omitted variables (DeFond and Zhang,

2014). Second, measures of accounting quality based on realized earnings may capture

2
The existing literature on the link between gender diversity and financial reporting quality focuses on
earning quality constructs that are computed based on financial reports that are issued after the
completion of the audit. We therefore refer to this stream of literature as linking gender diversity to (post-
audit) financial reporting quality.

4
other firm characteristics, such as performance, in addition to reporting quality (Liu and

Wysocki, 2007). Third, audit fees is a comprehensive measure, as it incorporates

information from the financial statements and its footnotes, while financial reporting

quality models tend to focus mainly on accruals (LópezPuertas-Lamy, Desender, and

Epure, 2017). In addition, the audit fees contain the auditors’ proprietary information

about reporting quality, while accounting quality models are limited to public information

(Ghosh and Tang, 2015).

Drawing on global data from Refinitiv Eikon for the period 2018-2022 and

controlling for firm- and year-fixed effects, we find a robust positive relationship between

board gender diversity and audit fees, suggesting that female directors play an active

monitoring role. In contrast, we find no significant effect linked to TMT gender diversity

or the firm’s commitment to SDG 5. We also examine under which conditions the positive

link between board gender diversity and audit fees is more pronounced. Specifically, we

examine the importance of board gender quotas, perception of corruption in society, and

the proportion of females in parliament. Consistent with the idea that board gender quotas

may induce tokenism, we find that the relationship between board gender diversity and

audit fees is stronger in countries without mandatory board gender quotas, i.e., where

board gender diversity is voluntary. We also show that the relationship between board

gender diversity and audit fees is stronger in countries with lower corruption perception

and higher female parliamentary representation.

This paper makes several contributes to the literature. By examining the

relationship between gender diversity and the auditor’s assessment of the risk that the

financial report contains material misstatements, our analysis helps to provide a better

understanding of whether gender diversity is linked to more transparent and reliable

financial information provided by the firm (i.e., the pre-audit financial reporting quality).

5
Our results points to audit effort as a mechanism through which board gender diversity

may influence the firm’s financial reporting quality. In particular, our findings suggest

that audit fees may be an important omitted variable for prior studies that examine the

relationship between gender diversity and (post-audit) financial reporting quality.

Additionally, our study responds to the call by Zattoni et al. (2023) who suggest that

“future studies should theorize and investigate how different legal, regulatory, social and

cultural contexts may affect the relationship between board diversity, processes, and

outcomes.” Specifically, our study is the first to investigate whether the relationship

between gender diversity and financial reporting quality varies across institutional

dimensions. Finally, we are the first to examine the influence of a firm’s commitment to

SDG 5 on audit fees, addressing evolving dynamics in corporate governance and audit

practices.

In the next section, we review the relevant literature. Following that, we develop

our hypotheses and describe our research design, including data collection and variable

measurement. Subsequently, we present our empirical results, discuss our findings, their

implications, and the limitations of our study, and suggest avenues for future research.

We finish with a short conclusion.

Prior Literature

Prior research shows important differences between women and men, on

dimensions such as opportunism and accountability. Specifically, when compared to men,

women have less tolerance for engaging in opportunism (Bernardi and Arnold 1997;

Krishnan and Parsons 2008) and place less importance on self-interest (Arlow 1991).

Interestingly, Thorne et al. (2003) indicate that female auditors resolve moral issues in

auditing by applying more prescriptive reasoning than male auditors. These studies

6
highlight individual attributes of female directors and indirectly suggest that boards with

female directors are likely to demand greater accountability from managers and assurance

of the financial reporting quality.

Focusing on group-level interactions, several studies suggest that gender diverse

boards are more likely to avoid group thinking and have a more diverse perspective and

creative thinking (Benton, 2021) and are less inhibited in discussing difficult and sensitive

issues (Huse and Solberg 2006; McInerney-Lacombe, Billimoria, and Salipante 2008).

Moreover, Post and Byron (2015) conduct a meta-analysis of the effects of women on

boards on financial performance and conclude that female board representation is

positively associated with board monitoring. In this line, McInerney-Lacombe et al.

(2008) suggest that female directors are more likely to challenge the opinions of other

directors and seek objective evidence to justify their position on the board, while Adams

and Ferreira (2009) and Srinidhi, Sun, and Zhang (2015) provide evidence that female

directors self-select into monitoring roles. In contrast, Reddy and Jadhav (2019) review

the empirical evidence from both developed and emerging markets and find that the

impact of board gender diversity on firm performance present inconclusive results. They

argue that some studies find positive impacts, while others report negligible or even

negative effects.

Several studies have focused on examining the link between board gender

diversity and (post-audit) financial reporting quality. Krishnan and Parsons (2008)

examine the effect of board gender diversity on earnings quality and find that firms with

gender-diverse boards exhibit higher earnings quality, indicating more accurate and

reliable financial reporting. Similarly, Srinidhi, Gul, and Tsui (2011), who find that

gender-diverse boards are associated with higher quality earnings, suggest that female

directors contribute to more diligent financial oversight and improved financial reporting

7
standards. In the same line, Bravo and Alcaide-Ruiz (2019) find that firms with gender-

diverse boards were less likely to engage in earnings management, while Garcia-Sanchez,

Martinez-Ferrero, and Garcia-Meca (2017), who analyzed European firms, reveal that

gender diversity positively influences the quality of financial reporting by reducing

earnings manipulation and enhancing the informativeness of earnings.

The findings from the link between board gender diversity and audit fees are

however mixed and often limited to single-country studies. For example, Lai et al. (2017)

find that firms with gender-diverse boards in the U.S. incur in higher audit fees,

suggesting that diverse boards may engage in more rigorous oversight, leading to

increased audit efforts and costs. This finding aligns with the idea that gender-diverse

boards enhance monitoring effectiveness, thereby demanding more thorough audits.

Similarly, Ittonen, Miettinen, and Vähämaa (2010) explore the association between

female board representation and audit fees in Finland. They find that the presence of

female directors is linked to higher audit fees. The authors suggest that the result indicates

more thorough auditing processes in response to enhanced board oversight.

In contrast, Nekhili et al. (2020) observe a negative effect in French firms, where

gender diversity on boards is linked with lower audit fees. The authors contend that

female independent directors and female audit committee members, by improving board

monitoring effectiveness, affect the auditor's assessment of audit risk, resulting in lower

audit fees.

Interestingly, Sultana, Cahan, and Rahman (2020) note that the positive

association between audit committee gender diversity and audit quality becomes weaker

after the introduction of diversity guidelines in Australia. This suggests that mandatory

diversity guidelines could lead to tokenism, where the presence of female directors

becomes more about compliance rather than enhancing board effectiveness.

8
 The evidence on TMT is much more limited. Huang, Huang, and Lee (2014) find

that firms with female CEOs are associated with higher audit fees for a sample of U.S

firms. Harjoto, Laksmana, and Lee (2015) find that U.S. firms with female and ethnic

minority CEOs pay significantly higher audit fees than those with male Caucasian CEOs,

and that firms with female CEOs have shorter audit delay than firms with male CEOs.

Hypothesis development

To the extent that gender diverse board adopt a stronger monitoring role, board

gender diversity can affect audit fees in two opposite directions.

A negative relationship is expected if a gender-diverse board takes an active role

in improving the design of internal controls and corporate governance in general. Gender-

diverse boards may be more diligent in their oversight functions, leading to more effective

internal control systems. Empirical evidence supports this argument. For instance,

Krishnan and Parsons (2008) found that firms with gender-diverse boards exhibited

higher earnings quality, suggesting that these boards are more effective in overseeing

financial reporting processes. Effective internal controls reduce the perceived risk for

auditors, as they can rely more on these controls to ensure the accuracy of financial

reporting. When auditors perceive that a firm has strong internal controls, they can place

greater reliance on these controls, thereby reducing the extent of required substantive

testing (Cohen, Krishnamoorthy, and Wright, 2007; Collier and Gregory, 1996).

Conversely, a positive relationship between board gender diversity and audit fees

may emerge if a gender-diverse board, instead of actively improving internal controls and

overall reliability of financial reporting, shares information and concerns with the external

auditor about internal control weaknesses and other accounting issues. This disclosure

may prompt the auditor to increase the audit procedures to gather sufficient evidence to

9
address these issues. This increased audit effort, aimed at mitigating audit risk, leads to

higher audit fees (Hay, Knechel, and Ling, 2008). This scenario is supported by the idea

that a more vigilant and questioning board will identify and communicate potential risks

and weaknesses more openly with auditors. Empirical studies provide support for this

perspective. Carcello et al. (2002) and Knechel and Willekens (2006) found that greater

board independence, which can be analogous to the diversity of perspectives brought by

gender-diverse boards, is associated with higher audit fees due to increased audit efforts

to address identified risks.

Given the opposing arguments, we propose two competing hypotheses for board

gender diversity:

H1a. Board gender diversity is positively associated with higher audit fees

H1b. Board gender diversity is negatively associated with higher audit fees

A diverse TMT could either raise or reduce the auditors’ concerns about material

misstatements. On one hand, a diverse TMT may lead to innovative thinking and

enhanced decision-making capabilities, which can foster foresight capacity and a

heightened sense of accountability among the team. Specifically, diverse leadership teams

bring a variety of perspectives and problem-solving approaches, which can enhance the

quality of strategic decisions and internal controls (Carter, Simkins, and Simpson, 2003).

Enhanced decision-making capabilities can lead to better management of financial

reporting risks, thus lowering the perceived risk for auditors. If auditors perceive that the

TMT is effectively managing financial reporting risks, they are likely to reduce the extent

of their substantive testing, resulting in lower audit fees.

Conversely, diversity within the TMT could also introduce concerns that might

increase audit fees. If the diversity within the TMT results in unclear or inconsistent

10
strategic direction due to conflicting viewpoints, or if it leads to delays in decision-making

(Krause, Priem, and Love, 2015), auditors might perceive increased risks. In addition,

TMT diversity initiatives, though designed to promote inclusivity, can inadvertently lead

to perceived tokenism within an organization (Knippen, Shen, and Zhu, 2019). Tokenism,

where individuals are seen as being selected based on their minority status rather than

their qualifications, can have detrimental effects on group dynamics and overall talent

retention. When diversity efforts are perceived as tokenistic, it can alienate talented

individuals who feel that their contributions are undervalued or overshadowed by

assumptions that they were promoted for diversity reasons (Jones et al., 2016). If auditors

perceive that the TMT gender diversity is tokenistic, auditors might perceive increased

risks. This increased audit effort, driven by the need to gather more evidence, would result

in higher audit fees.

Additionally, the relationship between TMT diversity and audit outcomes might

not be significant if the diversity does not lead to observable changes in strategic or

accounting decisions. Given these arguments, the direction of the relationship between

TMT gender diversity and audit fees is ex-ante unclear. We therefore propose two

competing hypotheses:

H2a. TMT gender diversity is positively associated with higher audit fees

H2b. TMT gender diversity is negatively associated with higher audit fees

On 25 September 2015, the United Nations (UN) General Assembly adopted the

2030 Agenda for Sustainable Development, a pledge to “transform our world” and ensure

no one is left behind in the economic, social, and environmental aspects of development

(UN, 2015). This agenda is centered on 17 Sustainable Development Goals (SDGs),

defining the sustainable development aspirations of UN Member countries and their

11
stakeholders (Fukuda-Parr, 2014). Given that the SDGs are voluntary, lack sanctions, and

have limited enforcement mechanisms, the 2030 Agenda constitutes a form of “soft”

international law (Van Zanten and Van Tulder, 2018). While a large stream of research

has developed around understanding the consequences of increased gender diversity,

much less is known about the impact of a firm’s commitment towards the Sustainable

Development Goal (SDG) on gender diversity (Beloskar, Haldar, and Gupta, 2024).3

SDG 5, which aims to achieve gender equality and empower women, reflects a

firm's broader commitment to ethical standards and social responsibility. This

commitment may influence auditors' perception of the risk of material misstatements in

two opposing ways. A firm’s genuine commitment to SDG 5 may signal robust corporate

governance and a proactive approach to compliance with evolving societal norms. Firms

that authentically integrate gender diversity into their operational and strategic

frameworks might exhibit stronger ethical behavior and better risk management practices.

These firms are likely to implement comprehensive internal controls and transparent

reporting practices, thereby reducing the perceived risk of material misstatement. This

enhanced trust could potentially result in a lower perceived risk of material misstatements,

thus reducing the need for extensive substantive testing and, consequently, lowering audit

fees (Cohen et al., 2007; Collier and Gregory, 1996).

Conversely, if a firm's commitment to SDG 5 is perceived as superficial and

symbolic, auditors may remain skeptical of the firm's true dedication to ethical practices

and effective governance. This skepticism could arise if the firm’s initiatives lack depth

or tangible outcomes, leading auditors to question the reliability of the financial reporting

process. In such cases, auditors may increase their audit procedures to mitigate the

3
Only a few studies have used firm’s commitment towards the Sustainable Development Goal (SDG) on
gender diversity (SDG 5), either as dependent or independent variable. For example, Desender and
LópezPuertas-Lamy (2024) show that ESG performance is an important driver of SDG 5 for a sample of
Latin-American companies.

12
perceived higher risk of material misstatements, which would result in higher audit fees

(Simunic, 1980; Hay et al., 2008).

Given these opposing possibilities, the relationship between a firm's commitment

to SDG 5 and audit fees could manifest in two distinct ways. Therefore, we propose two

competing hypotheses:

H3a: There is a negative relationship between a firm’s commitment to SDG 5 on

gender diversity and audit fees.

H3b: There is a positive relationship between a firm’s commitment to SDG 5 on

gender diversity and audit fees.

Research design

An extensive body of literature has examined the level and nature of audit fees in

organizations. Most existing research on audit fees is based on the seminal work by

Simunic (1980), who was the first to develop a positive model on the determinants of

audit fees. Building on his initial model, the audit pricing literature has further developed

(e.g., Ghosh and Lustgarten, 2006; Hay et al. 2006; Hogan and Wilkins, 2008;

LópezPuertas-Lamy et al., 2017; Liu, Lobo and Yu, 2021; enhancing the list of relevant

control variables. Building on the extensive audit fee literature, we specify the following

enhanced audit fee pricing model:

Audit-Feesit = α + β1Board-Gender-Diversityit + β2TMT-Gender-Diversityit + β3SDG5-

Gender-Equalityit + β4Firm Sizeit + β5Leverageit + β6 Return-on-Assetsit + β7RSales-

Growthit + β8Loss-in-current-yearit + β9 β12Current-Assets-to-Total-Assetsit + β10ESG-

Scoreit + β10Board-Independenceit + β10CEO-Dualityit + β10Auditor-Changeit +

β10Auditor-Tenureit + Firm- Dummies + Year-Dummies + εit (1)

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 Consistent with the audit literature, we define our dependent variable (Audit-fees)

as the natural logarithm of the total fees charged by the auditor for the financial statement

audit work. Our three main variables of interest are Board-Gender-Diversity, which is

calculated as the percentage of female board members over the total number of board

members. TMT-Gender-Diversity, which is calculated as the percentage of female TMT

members over the total number of TMT members. Finally, SDG5-Gender-Equality is an

indicator variable equal to one when the firm has committed itself to the UN’s SDG Goal

5 on Gender Equality.

The control variables related to client characteristics are defined as follows. Size

is the natural logarithm of total assets. Size is one of the most important determinants of

audit fees, as larger firms tend to have more accounts and more complex transactions, and

thus larger audit fees (Hay et al., 2006). Leverage is the ratio of the sum of the long-term

and short-term debt to total assets. We expect a positive effect of leverage on audit risk

since leverage is linked to the risk of a client failing, which potentially exposes the auditor

to loss (Hay et al., 2006). Return-on-assets is the ratio of net income to total assets. Higher

return-on-assets ratios are expected to reflect lower financial risk and therefore a negative

association with audit fees is expected (LópezPuertas-Lamy et al., 2017). Sales-growth is

the percentage growth in sales. Positive signs are expected for both of these variables’

coefficients since firms with large amounts of current assets and high growth ratios may

require additional audit attention (LópezPuertas-Lamy et al., 2017). Loss-in-current-year

is an indicator variable equal to one when the current year’s net income is negative, and

zero otherwise (Desender et al., 2016). Reporting a loss in the current year indicates

higher financial risk and is expected to be positively related to audit fees (Desender et al.,

2016). Current-Assets-to-Total-Assets is the ratio of current assets to total assets. We

14
expect a positive relation between this variable and audit fees since large amounts of

current assets may require additional audit attention (LópezPuertas-Lamy et al., 2017).

The control variables related to the firm’s corporate governance characteristics are

as follows. ESG-Score is the ESG score produced by Refinitiv Eikon. We expect a

positive sign as ESG has been linked with stronger stakeholder ties and ethical standards

(similar to Kim, Park, and Wier, 2012). We also control for Board-Independence which

is the ratio of independent board members to the total number of board members. We

expect a positive sign for board independence, as an active monitoring board is likely to

share information and concerns with the external auditor about internal control

weaknesses and other accounting issues (Carcello et al., 2002; Hay, Knechel and Ling,

2008; Desender et al., 2016). CEO-duality is an indicator variable equal to one when the

CEO also holds the chair position, and zero otherwise. CEO duality is often viewed as an

impediment to the board’s monitoring of top executives (Aguilera and Jackson, 2003) and

can serve to entrench a CEO within an organization by compromising the board’s ability

to monitor and discipline management. We expect a negative sign for CEO-duality

(similar to Desender et al., 2013).

The control variables related to auditor characteristics are auditor-tenure and

auditor-specialization. Auditor-tenure is defined as the number of years of the audit

engagement. Following the mixed evidence in previous studies (Hay et al., 2006), we

have no clear prediction on the direction of this variable. We expect a positive sign for

the coefficient of auditor specialization, as specialized personnel may be more costly (Bell

et al., 2001). Auditor-Change is an indicator variable equal to one when the client engages

a new auditor in a given year and zero otherwise. Changing auditors is usually related to

lower audit fees (Hay et al., 2006), which may be the result of discounts being offered to

attract new business (a practice known as low-balling). In addition, due to the particular

15
characteristics of our international sample, and to reduce omitted variable concerns, we

add firm and year dummies.

In additional analyses, we consider the impact of board gender quotas and two

relevant institutional dimensions. For each year, we identify whether a firm is subject to

mandatory board gender quotas or not, using the latest report by Deloitte (2024) which

summarizes the gender quota initiatives for each country and year. To examine the impact

of gender quotas, we estimate equation (1) for two subsamples, i.e., the sample with firms

that are subject to mandatory gender quotas and the sample that is not. At the institutional

level, we draw on data from the World Bank Database to obtain two relevant institutional

dimensions: Control of Corruption and Women in Parliament. Control of Corruption is

an index variable that measures the extent to which public power is exercised for private

gain; lower corruption levels are linked to transparent and merit-based business practices,

potentially enhancing gender diversity. Women in Parliament measures the proportion of

seats held by women in national parliaments. This metric represents the percentage of

parliamentary seats in a single or lower chamber that are occupied by women, and reflect

broader societal attitudes towards gender roles and equality. Societies that elect more

women to legislative positions often have more progressive views on gender diversity

and support for women in leadership roles. Conversely, low representation may indicate

persistent gender biases and barriers. To examine the impact of the institutional context,

we add the interaction between board gender diversity and the institutional dimension to

equation (1). All variables are defined in the Appendix.

Data and sample description

For our empirical investigation, we start from all the firms for which there is

detailed audit fee data and corporate governance information available in the Refinitiv

16
Eikon database over the period 2018-2022. As the gender diversity debate has become an

important topic in the last years (Gormley et al., 2023), it is important to focus on recent

data. We start our time period in 2018, as this is the first year for which data on the firms’

commitment to SDG 5 is available for a large sample. Firm-level financial data are

obtained from Refinitiv Eikon. We restrict our sample to firms that have a Big-4 auditor

for consistency (only about ten percent of the initial observations had a non-Big-4

auditor). Finally, we winsorize our main variables at the one percent top and bottom levels

to avoid outlier-related problems. Our final sample comprises 26,965 firm-year

observations from 33 countries.

[Table 1 about here]

Table 1 presents the summary statistics of the main variables used in the audit fee

regressions. The mean audit fees are $2.9 million. The mean level of board gender

diversity is 23.3 percent, while the mean TMT gender diversity is 15.5 percent. Close to

30 percent of all firms have made a commitment to SDG 5 on Gender Equality. Regarding

the client firms’ control variables, the mean total assets are $11.1 billion, while the mean

leverage is 52.6 percent. The average return on assets is 2.0 percent, while 22.5 percent

of firms report a negative net income in our sample. The mean growth in sales is 11.5

percent, while the ratio of current assets to total assets is 42.5 percent. The average board

independence is 60.1 percent, while in only 32 percent of firm does the CEO hold the

chair position. The average auditor tenure in our sample is around 8.3 years.

[Table 2 about here]

Table 2 presents the correlation matrix. The correlation between the Board gender

diversity and audit fees is positive with a level of 0.17, which is indicative of a significant

overall positive effect in the absence of relevant controls. TMT gender diversity shows a

much weaker correlation of only 0.01, while commitment to the SDG Goal 5 on Gender

17
equality shows a positive correlation of 0.18. Furthermore, audit-fees show relatively high

correlation coefficients with firm size, leverage, current to total assets, ESG score, board

independence, CEO duality and auditor tenure.

[Table 3 about here]

Table 3 presents a sample breakdown by country and present the mean values of

board gender diversity and TMT gender diversity, the proportion of firms with a

commitment to SDG 5 on Gender Equality. We have included the proportion of women

in parliament to allow a comparison between corporate and political leadership. We also

show for each country the 5-year change in board and TMT gender diversity and the 4-

year change in the commitment to SDG 5 on Gender Equality by country. The country

with the highest level of board gender diversity is France, standing at 44.3 percent,

followed by Norway at 41.5 percent. In stark contrast, Korea records the lowest at only

5.8 percent, followed by Brazil (at 9.3 percent). Similarly, Malaysia stands out for its high

TMT gender diversity, at 30.3 percent, followed by New Zealand (at 25.8 percent). On

the other hand, Japan has the lowest TMT gender diversity with a mere 2.8 percent,

followed by Korea (at 3.8 percent). When examining commitments to Sustainable

Development Goal 5, which focuses on gender equality, Turkish firms score highest with

73.9 percent of Turkish firms showing this commitment. Finland has the second highest

proportion of firms committed to the SDG 5. Conversely, the United States lags

significantly behind with the lowest score, at 13.6 percent. Looking at the representation

of women in parliament as a measure of comparison, Sweden features the highest

percentage of women in parliament at 46.8 percent, whereas Japan shows a much lower

female involvement in parliament with a score of 9.9 percent.

In terms of changes over time from 2018 to 2022 in board gender diversity, Turkey

and Spain witnessed the most substantial increase, improving by 20.2 percent and 13.2

18
percent, respectively. Poland and Japan, however, experienced a decline in board gender

diversity, reducing by 3 percent. For TMT gender diversity over the same period, Portugal

saw the most significant improvement, with an increase of 11.6 percent, while Belgium

saw a decline, each dropping by about 2.7 percent. Additionally, concerning changes in

commitment to SDG 5 from 2019 to 2022, Brazil and Turkey both experienced notable

increases, whereas India showed the smallest change at just 0.017.

Empirical results

In Table 4, model (1) estimates the baseline audit fee model with firm and year

fixed effects (equation 1). In model (2), we include Board Gender Diversity, while in

model (3) we include TMT Gender Diversity. In model (4) we include the firm’s

commitment to the SDG 5 as our main variable of interest. Finally, model (5) includes all

three dimensions of gender diversity.

The results for model (1) shows the expected signs for the control variables.

Specifically, larger and less profitable firms tend to incur higher audit fees. Leverage also

significantly impacts audit fees, with higher leverage leading to increased audit costs.

This indicates that firms with greater financial risk are subject to more rigorous audit

procedures, as auditors need to address the heightened risk of financial misstatements.

Sales growth is another significant factor, with higher growth rates associated with

increased audit fees. Lastly, the ratio of current assets to total assets is significantly

negatively related to audit fees. Firms with a higher proportion of current assets tend to

have lower audit fees, possibly because current assets are generally simpler to audit

compared to non-current assets, reducing the overall audit effort required.

[Table 4 about here]

19
 In model (2), the coefficient of Board Gender Diversity is positive and significant

at the one percent level. This result suggests that after controlling for other factors, a 10

percent increase in Board Gender Diversity is associated with an increase in the audit fees

by 1 percent. This result is in line with the idea that gender-diverse boards, shares

information and concerns with the external auditor about internal control weaknesses and

other accounting issues, leading to more extensive audit procedures.

In Model (3), we shift our focus to TMT Gender Diversity. Diverse TMTs may

introduce innovative thinking and varied approaches to problem-solving, which could

affect the firm’s operations and, subsequently, its audit fees. Alternatively, TMT Gender

Diversity could introduce added complexities that require additional audit scrutiny. The

coefficient is close to zero, and the result do not lend support to either H2a or H2b.

Model (4) introduces the firm’s commitment to Sustainable Development Goal

(SDG) 5. A firm’s commitment to SDG 5 reflects its adherence to broader ethical

standards and social responsibility. From an auditor’s perspective, this commitment can

influence the perceived risk of material misstatements. If a firm genuinely integrates

gender equality into its operations, it may signal robust governance and ethical behavior,

potentially reducing audit fees. Conversely, if auditors perceive this commitment as

superficial or as greenwashing, it could lead to increased audit procedures and higher fees

to mitigate the perceived risks. The coefficient is close to zero, and the result do not lend

support to either H3a or H3b.

Finally, Model (5) incorporates all three dimensions of gender diversity: Board

Gender Diversity, TMT Gender Diversity, and the firm’s commitment to SDG 5. When

we consider all gender diversity dimensions in the same regression, the result for board

gender diversity remains significant with a slightly larger magnitude. These results

highlight the importance of board diversity for the external audit process, in line with our

20
hypothesis 1a. The positive effect is in line with the idea that a gender diverse board,

instead of actively improving internal controls and overall reliability of financial

reporting, share information and concerns with the external auditor about internal control

weaknesses and other accounting issues. This information then leads the auditor to

increase the amount of audit evidence and, hence, the audit fees. The coefficients for

TMT gender diversity and the firm’s commitment to SDG 5 are not significant.

Additional Analyses: The role of Board Gender Quotas

To better understand the positive effect of board gender diversity on audit fees,

we next examine whether these results are weaker or stronger in countries that enforce

gender quotas.

While gender quotas may induce a critical mass of female directors on the one

hand, thereby strengthening the monitoring ability of female directors, it could also lead

to tokenism and symbolic compliance, which could weaken their monitoring ability (Solal

and Snellman, 2019). The concept of a critical mass suggests that once a certain threshold

of female representation on boards is reached, female directors are more likely to exert

significant influence on board decisions and governance practices (Torchia, Calabrò, &

Huse, 2011). On the other hand, the implementation of gender quotas may also lead to

tokenism, where female directors are appointed to meet regulatory requirements rather

than based on their qualifications and potential contributions. Tokenism can undermine

the effectiveness of female directors by isolating them and subjecting them to increased

scrutiny and pressure (Knippen et al., 2019). To the extent that board gender quotas would

induce symbolic compliance, it may weakening the monitoring role of female directors.

To examine the relevance of board gender quotas, in Table 5 we split our sample

between countries with (model 7) and without board gender quotas (model 6). The results

21
show a strong significant sign for board gender diversity for our subsample of firms in

countries without board gender quotas. For countries with board gender quotas, the

coefficient is also positive, but not significant. These results are in line with the idea that

board quotas may induce a greater level of tokenism, which could limit the ability of

female directors to influence board monitoring, and financial reporting quality.

[Table 5 about here]

Additional Analyses: The importance of institutions

Scholars working in the fields of comparative capitalism and cross-national

governance have long acknowledged that institutions matter for explaining firms'

adoption of certain structures and practices, and that substantial variation exists across

countries in terms of the institutions that matter most (Aguilera and Jackson, 2003; Bell,

Filatotchev and Aguilera, 2014; Desender et al., 2020; Hall and Soskice, 2001). Different

countries feature different institutional configurations, reflecting the "rules of the game"

with respect to social relations as well as economic activity (Matten and Moon, 2008). To

better understand the positive link between board gender diversity and audit fees, we next

explore whether board gender diversity plays a stronger role in societies that facilitate

trust, transparency and gender equality.

Whitley et al. (1996) argue that when there is a lack of generalized trust in society,

managers tend to rely on informal networks and trust, often based on family or clan

relationships (Kong, 2016). Conversely, societies characterized by trust and social capital

tend to foster altruistic behavior and discourage self-serving conduct (Onyx and Bullen,

2000). In the context of corporate boards, McDonald and Westphal (2013) suggest that

women's exclusion from elite social networks limits their access to social capital,

mentoring, and patronage resources, which are important for influential board

22
appointments. Additionally, Allemand et al. (2022) propose that recruitment practices

based on networks may impact board gender diversity, as different genders tend to belong

to different networks, and directors' and CEOs' networks influence their appointments.

Promoting equality and civil liberties is also linked to higher representation of women in

top government positions, such as parliament (Inglehart et al., 2002), implying that

talented women may aspire to similar positions in other organizations, including

corporations. In this line, Carrasco et al. (2015) find that a nation's tolerance for equality

is associated with greater representation of women on corporate boards. We therefore

expect that countries characterized by higher social capital and trust may provide a

supportive environment for women to pursue leadership roles, thereby leading to a greater

influence on board monitoring.

To capture a society's orientation toward trust and equality, we focus on two

measures. Our first measure is "Control of Corruption" an index developed by the World

Bank. This measure reflects perceptions of the extent to which public power is exercised

for private gain, including both petty and grand forms of corruption, as well as "capture"

of the state by elites and private interests, taking into account various dimensions such as

the frequency of extra-legal payments to obtain favorable judicial decisions and the

prevalence of nepotism in the civil service . Our second measure "Women in Parliament",

provided by the World Bank, measures the proportion of parliamentary seats held by

women in a country's national legislature. This indicator measures the role of women in

political decision-making at the highest levels.

Table 5 shows the regression results when we consider the two interaction terms,

in models (8) and (9). In model (8), we interact board gender diversity with control of

corruption, and find that the effect of board gender diversity on audit fees critically

depend on the institutional context. In settings where corruption is perceived to be high,

23
board gender diversity is negatively related to audit fees, while the relationship becomes

positive as control of corruption improves. This result provide support to the idea that

female directors have a greater influence in settings that emphasize transparency and

fairness. Model (9) find a similar result, when we consider the proportion of women in

parliament. For countries with low female political representation, the relationship

between board impendence and audit fees is negative, but this relationship becomes

positive as female political representation increases.

Discussion

The lack of gender diversity of corporate boards and leadership has been one of

the most significant issues in corporate governance in recent years (Gow et al., 2023).

Previous literature (e.g., (Adams and Ferreira, 2009; Chen et al., 2016; Cumming et al.,

2015; Post and Byron, 2015) presented a two-sided debate on how gender diversity at the

board or TMT level may affect financial reporting quality. While one side of the debate

argues that enhanced gender diversity is linked to enhanced creative thinking and

decision-making and a lower likelihood to engage and accept opportunistic behaviors, the

other side explains the pressure on gender diversity could lead to tokenism, where the

presence of female directors becomes more about compliance than enhancing board and

TMT effectiveness. The prior research that has examined the link between board gender

diversity and financial reporting quality has mostly focused on a single dimension of

gender diversity in a single country, and presents mixed evidence.

In this study, we provide a comprehensive examination of whether and how

gender diversity at the board and TMT level, as well as the firm’s commitment to the

UN’s Sustainable Development Goal on Gender equality (SDG5) influences financial

reporting quality, by studying the independent auditors’ assessment of the risk of material

misstatements. To the extent that gender diverse boards adopt a stronger monitoring role,
24
board gender diversity can affect financial reporting quality, and in particular, audit fees

in two opposite directions. First, a negative relationship is expected if a gender diverse

board takes an active role in improving the design of internal controls and internal

governance in general. A greater reliance on internal controls would therefore result in

less substantive audit testing and a lower audit fee (Cohen et al., 2007; Collier and

Gregory, 1996). Second, a positive relation is expected if a gender diverse board, instead

of actively improving internal controls, shares information and concerns with the external

auditor about internal control weaknesses and other accounting issues. This information

obtained from a more engaged board may lead the auditor to increase the amount of audit

evidence and hence the audit fees. When considering diversity at the TMT level or the

firm’s commitment to the UN’s Sustainable Development Goal on Gender equality, the

same set of arguments does not necessarily apply, as the role of the board and the TMT

is fundamentally different. A diverse Top Management Team (TMT) can lead to both

increased and decreased audit concerns about material misstatements. On one hand,

diversity can enhance decision-making and strategic oversight, thereby reducing the

perceived risk of material misstatements and potentially lowering audit fees. On the other

hand, tokenism could potentially increasing audit risks and resulting in higher audit fees.

Finally, while a firm’s genuine commitment to SDG 5 may signal ethical practices,

potentially lowering the perceived risk of material misstatements and audit fees,

superficial compliance might lead to skepticism and higher audit fees due to increased

audit procedures.

Employing a large global dataset, we find a positive relationship between board

gender diversity and audit fees, which is consistent with an active monitoring role by the

board. These results are in line with the findings of Lai et al. (2017) for a U.S. sample and

Ittonen et al. (2010) for Finnish firms, and go against the findings of Nekhili et al. (2020)

25
who find a negative effect in French firms. In contrast, we do not find a significant effect

of TMT gender diversity, nor for the firm’s commitment to the SDG 5 on Gender

Equality. Compared to our findings at the TMT level, Huang, Huang, and Lee (2014) find

that firms with female CEOs are associated with higher audit fees for a sample of U.S.

firms over the period 2003-2010.

In addition, we find that the relationship between board gender diversity and audit

fees is mainly driven by firms in countries without mandatory board gender quotas. This

result is in line with the findings of Sultana, Cahan, and Rahman (2020), who note that

the positive association between audit committee gender diversity and audit quality

becomes weaker after the introduction of diversity guidelines in Australia. We also show

that the relationship between board gender diversity and audit fees is especially strong in

settings where there is a lower perception of corruption and a greater representation of

females in parliament.

Our results reinforce the importance of board gender diversity for effective

corporate governance, but also highlight the need to consider local institutional factors

when implementing diversity policies. This nuanced understanding aids in reconciling

the mixed results from previous studies and provides a richer perspective on how gender

diversity influences financial reporting and audit practices globally. This study also opens

an avenue for future research that re-examines the importance of institutional factors to

better understand international differences in audit pricing. Comparative studies across

countries with different regulatory environments, cultural norms, and levels of gender

equality could provide valuable insights into how these factors interact with

organizational gender diversity to influence corporate governance and audit practices.

Further research could also explore the interaction between gender diversity and other

dimensions of diversity, such as racial and ethnic diversity, to examine their combined

26
effects on corporate governance and audit outcomes. Investigating these interactions

could reveal whether different types of diversity complement or substitute for each other

in enhancing governance and reducing audit risk. Additionally, incorporating qualitative

data through case studies or interviews could offer richer insights into the roles and

influence of female directors and executives within organizations, thereby providing a

more nuanced understanding of gender diversity’s impact.

One important limitation of our study relates to the measurement of gender

diversity, which focuses on gender diversity at the board and TMT level. However, this

approach may not fully capture the complexity and nuances of gender diversity within

organizations. For instance, merely having female directors and executives does not

necessarily mean they have significant influence or roles within the organization. Another

limitation of our study is the inability to rule out endogeneity. While the models in this

study include a comprehensive set of controls, and audit fees reflect an independent and

expert perspective, unobserved variables may still influence both the independent and

dependent variables, potentially biasing our results.

Conclusions

Our study investigates the influence of gender diversity at the board and Top

Management Team (TMT) levels, as well as firms' commitment to the UN’s Sustainable

Development Goal on Gender Equality (SDG5), on audit fees. Through a comprehensive

analysis of a large global dataset from 2018-2022, we find a significant positive

relationship between board gender diversity and audit fees, indicating that gender-diverse

boards engage in more active monitoring, thereby increasing the perceived audit risk and

associated fees. In contrast, we do not find a significant effect for TMT gender diversity

and commitment to SDG5. Additionally, we show that the effect of board gender diversity

27
on audit fees is more pronounced in countries without mandatory gender quotas and in

environments with lower corruption and higher female parliamentary representation.

These findings underscore the complex role of gender diversity in corporate governance

and its varying implications across different institutional settings, enriching the current

understanding of how gender dynamics influence audit practices and financial reporting

quality.

28
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 Table 1. Descriptive statistics
Variable Observations Mean St.dev Min Max
Ln(Audit Fees) 26,965 13.824 1.398 10.003 18.201
Board Gender Diversity 26,965 0.223 0.144 0.000 1.000
TMT Gender Diversity 26,965 0.155 0.158 0.000 1.000
SDG Goal 5 - Gender equality 26,965 0.297 0.457 0.000 1.000
Ln(Total Assets) 26,965 21.586 1.770 14.758 27.780
Leverage 26,965 0.526 0.223 0.033 1.467
ROA 26,965 0.020 0.130 -1.075 0.300
Sales Growth 26,965 0.115 0.349 -0.937 3.290
Loss in past year 26,965 0.225 0.418 0.000 1.000
Current to Total Assets 26,965 0.425 0.238 0.000 1.000
ESG score 26,965 45.431 20.556 0.900 95.640
Board Independence 26,965 0.605 0.240 0.000 1.000
CEO duality 26,965 0.319 0.466 0.000 1.000
Auditor Change 26,965 0.084 0.278 0.000 1.000
Auditor Tenure 26,965 8.340 6.470 1.000 36.000
Control of Corruption 26,965 1.099 0.746 -1.323 2.403
Women in Parliament 26,965 0.277 0.094 0.012 0.504
This table describes the main variables used for the analysis. All variables span the 2018-2022 period and
correspond to 26,965 firm-year observations from 33 countries. Variable definitions are provided in the
Appendix.

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 Table 2. Correlations

Variable 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
1 Ln(Audit Fees) 1.00
2 Board Gender Diversity 0.17 1.00
3 TMT Gender Diversity 0.01 0.36 1.00
4 SDG Goal 5 - Gender equality 0.18 0.15 0.05 1.00
5 Ln(Total Assets) 0.66 0.05 -0.02 0.27 1.00
6 Leverage 0.35 0.12 0.03 0.07 0.28 1.00
7 ROA -0.01 0.02 -0.01 0.11 0.23 -0.13 1.00
8 Sales Growth -0.03 0.00 0.00 -0.03 -0.04 -0.03 0.07 1.00
9 Loss in past year 0.00 -0.01 0.01 -0.11 -0.21 0.11 -0.66 -0.05 1.00
10 Current to Total Assets -0.15 -0.13 -0.10 -0.08 -0.27 -0.11 -0.10 0.03 0.04 1.00
11 ESG score 0.48 0.32 0.12 0.44 0.54 0.18 0.18 -0.09 -0.17 -0.16 1.00
12 Board Independence 0.27 0.31 0.16 -0.03 0.00 0.09 -0.09 0.04 0.10 -0.16 0.19 1.00
13 CEO duality 0.14 -0.04 -0.02 -0.05 0.07 0.04 0.00 0.03 0.01 0.03 -0.06 0.08 1.00
14 Auditor Change -0.09 -0.02 0.00 0.00 -0.03 -0.01 -0.01 0.00 0.01 0.01 -0.01 -0.06 -0.04 1.00
15 Auditor Tenure 0.29 0.06 0.04 -0.01 0.17 0.09 0.07 -0.02 -0.05 -0.11 0.09 0.27 0.16 -0.35 1.00
16 Control of Corruption 0.27 0.24 0.05 0.07 -0.06 0.08 -0.08 -0.04 0.08 -0.17 0.13 0.23 -0.10 -0.08 0.12 1.00
17 Women in Parliament 0.02 0.44 0.23 0.04 -0.16 0.10 -0.05 0.03 0.06 -0.13 0.06 0.21 -0.08 0.03 -0.07 0.43
This table presents the correlations of the main variables used for the analysis. All variables span the 2018-2022 period and correspond to 26,965 firm-year observations from 33 countries.
Correlation coefficients that are significant at the 5% level are marked in bold. All variables are defined in the Appendix.

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 Table 3. Sample Breakdown

SDG ΔBoard ΔTMT ΔSDG Goal

Board TMT Goal 5 - Gender Gender 5 - Gender
Gender Gender Gender Women in Diversity Diversity equality
Country Obs Diversity Diversity equality Parliament (2018-2022) (2018-2022) (2019-2022)
Australia 1384 0.271 0.214 0.270 0.320 0.082 0.050 0.289
Austria 137 0.252 0.064 0.496 0.389 0.105 0.060 0.350
Belgium 189 0.357 0.178 0.361 0.412 0.050 -0.028 0.337
Brazil 29 0.093 0.050 0.630 0.155 -0.018 0.056 0.583
Canada 1261 0.253 0.165 0.283 0.292 0.059 0.041 0.224
China 3429 0.143 0.159 0.198 0.249 0.034 0.012 0.233
Cyprus 31 0.168 0.198 0.214 0.161 0.076 -0.006 0.000
Denmark 212 0.281 0.159 0.561 0.402 0.075 0.038 0.394
Finland 266 0.317 0.232 0.321 0.456 -0.020 0.034 0.221
France 627 0.443 0.190 0.531 0.392 0.018 0.072 0.246
Germany 987 0.253 0.091 0.330 0.329 0.013 0.045 0.241
Greece 63 0.118 0.173 0.623 0.209 0.097 -0.018 0.143
India 1223 0.181 0.085 0.313 0.144 0.046 0.031 0.017
Ireland 184 0.257 0.171 0.344 0.224 0.136 0.041 0.438
Israel 88 0.201 0.174 0.173 0.262 0.069 0.029 0.044
Italy 313 0.369 0.118 0.527 0.350 0.042 -0.013 0.347
Japan 2070 0.094 0.028 0.521 0.099 0.063 0.013 0.329
Korea 625 0.058 0.038 0.407 0.181 0.078 0.037 0.233
Luxembourg 123 0.208 0.133 0.472 0.295 0.074 -0.027 0.236
Malaysia 526 0.231 0.303 0.396 0.145 0.019 0.047 0.183
Netherlands 268 0.301 0.154 0.326 0.362 0.129 0.046 0.292
New Zealand 243 0.318 0.258 0.260 0.454 0.085 0.066 0.187
Norway 250 0.415 0.225 0.459 0.429 0.046 0.044 0.343
Poland 100 0.188 0.120 0.293 0.284 -0.030 -0.015 0.226
Portugal 48 0.277 0.180 0.725 0.382 0.130 0.116 0.364
Singapore 314 0.180 0.299 0.297 0.275 0.056 0.072 0.264
South Africa 396 0.308 0.249 0.411 0.457 0.072 0.051 0.277
Spain 251 0.272 0.165 0.607 0.427 0.132 0.081 0.382
Sweden 950 0.338 0.236 0.514 0.468 0.003 0.041 0.315
Switzerland 582 0.186 0.084 0.275 0.403 0.060 0.043 0.336
Turkey 69 0.187 0.109 0.739 0.173 0.202 0.121 0.583
United Kingdom 1984 0.282 0.184 0.327 0.335 0.075 0.048 0.247
United States 7743 0.224 0.162 0.136 0.258 0.080 0.035 0.072
This table presents an overview of the diversity dimensions per country. All variables span the 2018-2022 period and
correspond to 26,965 firm-year observations from 33 countries. All variables are defined in the Appendix.

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 Table 4. Regression results: Gender Diversity and Audit Fees

DV: Ln(Audit Fees) (1) (2) (3) (4) (5)

Board Gender Diversity 0.099*** 0.101***
(0.036) (0.038)
TMT Gender Diversity 0.01 -0.002
(0.030) 0.00 (0.030)
SDG Goal 5 - Gender equality -0.002 -0.001
(0.007) (0.007)
Ln(Total Assets) 0.342*** 0.341*** 0.342*** 0.338*** 0.337***
(0.015) (0.015) (0.016) (0.017) (0.017)
Leverage 0.089** 0.086** 0.090** 0.080* 0.078*
(0.040) (0.040) (0.040) (0.045) (0.045)
ROA -0.308*** -0.307*** -0.306*** -0.310*** -0.307***
(0.039) (0.039) (0.039) (0.043) (0.043)
Sales Growth 0.044*** 0.044*** 0.044*** 0.041*** 0.042***
(0.007) (0.007) (0.007) (0.008) (0.008)
Loss in past year -0.001 -0.001 -0.001 0.000 0.000
(0.007) (0.007) (0.007) (0.008) (0.008)
Current to Total Assets -0.120*** -0.120*** -0.120*** -0.132*** -0.133***
(0.043) (0.043) (0.043) (0.047) (0.047)
ESG score 0.000 0.000 0.000 0.000 0.000
(0.000) (0.000) (0.000) (0.000) (0.000)
Board Independence 0.038 0.032 0.040 0.037 0.033
(0.029) (0.029) (0.029) (0.031) (0.031)
CEO duality -0.015 -0.015 -0.014 -0.019* -0.019*
(0.010) (0.010) (0.010) (0.011) (0.011)
Auditor Change -0.019** -0.019** -0.019** -0.019** -0.019**
(0.008) (0.008) (0.008) (0.009) (0.009)
Auditor Tenure -0.002* -0.002* -0.002* -0.002* -0.002*
(0.001) (0.001) (0.001) (0.001) (0.001)
Constant 6.388*** 6.402*** 6.389*** 6.446*** 6.463***
(0.338) (0.337) (0.338) (0.371) (0.370)
Firm-Fixed Effects Y Y Y Y Y
Year-Fixed Effects Y Y Y Y Y
R-squared 0.17 0.17 0.169 0.153 0.153
N 26965 26965 26965 23913 23856
* p<0.10, ** p<0.05, *** p<0.01. The dependent variable for all models is the natural logarithm of
Audit fees. Specifications (1) to (4) report the regression results from the audit fee model (equation 1).
All variables are defined in the Appendix. Standard errors are reported in parentheses.

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 Table 5. Regression results: The Role of Quotas and Institutions

DV: Ln(Audit Fees) (6) (7) (8) (9)

Sample No Quotas Quotas Full Sample Full Sample
Board Gender Diversity 0.107*** 0.036 -0.139** -0.317***
(0.040) (0.080) (0.061) (0.109)
Control of Corruption -0.060**
(0.025)
Control of Corruption*Board Gender Diversity 0.189***
(0.043)
Women in Parliament -0.365**
(0.162)
Women in Parliament *Board Gender Diversity 1.404***
(0.355)
Ln(Total Assets) 0.346*** 0.304*** 0.340*** 0.340***
(0.016) (0.047) (0.015) (0.015)
Leverage 0.06 0.274** 0.085** 0.086**
(0.041) (0.119) (0.040) (0.040)
ROA -0.344*** -0.02 -0.306*** -0.305***
(0.042) (0.113) (0.039) (0.039)
Sales Growth 0.049*** -0.001 0.043*** 0.044***
(0.008) (0.020) (0.007) (0.007)
Loss in past year -0.002 0.009 0.000 -0.001
(0.008) (0.018) (0.007) (0.007)
Current to Total Assets -0.098** -0.217* -0.121*** -0.118***
(0.044) (0.118) (0.043) (0.043)
ESG score 0.000 0.001 0.000 0.000
(0.000) (0.001) (0.000) (0.000)
Board Independence 0.039 0.004 0.027 0.033
(0.036) (0.050) (0.029) (0.029)
CEO duality -0.018* 0.008 -0.015 -0.014
(0.011) (0.030) (0.010) (0.010)
Auditor Change -0.017* -0.025 -0.020** -0.018**
(0.009) (0.019) (0.008) (0.008)
Auditor Tenure -0.002* -0.001 -0.002* -0.002
(0.001) (0.003) (0.001) (0.001)
Constant 6.364*** 6.767*** 6.499*** 6.508***
(0.338) (1.014) (0.336) (0.337)
Firm-Fixed Effects Y Y Y Y
Year-Fixed Effects Y Y Y Y
R-squared 0.18 0.134 0.171 0.171
N 22265 4938 26965 26965
* p<0.10, ** p<0.05, *** p<0.01. The dependent variable for all models is the natural logarithm of Audit fees.
Specifications (6) and (7) report the regression results from the audit fee model (1), when we split our sample
between firms that are subject to mandatory board gender quotas, and those that are not. We obtain data on board
gender quotas from the latest report by Deloitte (2024) which summarizes the gender quota initiatives for each
country and year. Specification (8) reports the regression results from the audit fee model (equation 1), when adding
the interaction between board gender diversity and control of corruption, while specification (9) reports the
regression results from the audit fee model (1), when adding the interaction between board gender diversity and
Women in Parliament. All variables are defined in the Appendix. Standard errors are reported in parentheses.

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Appendix. Variable Definitions

Variable Definition Source

The natural log of the fees paid to auditor for
Ln(Audit Fees) Refinitiv Eikon
the financial statement audit work
The percentage of female board members over
Board Gender Diversity Refinitiv Eikon
the total number of board members
The percentage of female TMT members over
TMT Gender Diversity Refinitiv Eikon
the total number of TMT members
An indicator variable equal to one when the
SDG Goal 5 - Gender equality firm has committed itself to the UN’s SDG Refinitiv Eikon
Goal 5 on Gender Equality
The natural log of the total assets’ value of the
Ln(Total Assets) Refinitiv Eikon
firm
The ratio of the sum of the long-term and short-
Leverage Refinitiv Eikon
term debt to total assets
Return on assets defined as net income divided
ROA Refinitiv Eikon
by total assets
The percentage of sales growth defined as:
Sales Growth Refinitiv Eikon
(salest – salest-1) / salest-1
A dummy that takes the value of one if the firm
Loss in past year reports a loss during the current year, and zero Refinitiv Eikon
otherwise
Current to Total Assets The ratio of current assets to total assets Refinitiv Eikon
ESG score Refinitiv Eikon benchmarked ESG score Refinitiv Eikon
ratio of independent board members to the total
Board Independence Refinitiv Eikon
number of board members
An indicator variable equal to one when the
CEO duality CEO also holds the Chair position and zero Refinitiv Eikon
otherwise
A dummy that takes the value of one when the
Auditor Change client contracts a new auditor and zero Refinitiv Eikon
otherwise
The number of years an auditor has been in the
Auditor Tenure Refinitiv Eikon
firm
An indicator that reflects perceptions of the
Control of Corruption extent to which public power is exercised for WorldBank
private gain
The proportion of parliamentary seats held by
Women in Parliament WorldBank
women in a country's national legislature

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