Female tainted directors,financial reporting quality and audit fees |
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| Institution: | 1. School of Accountancy, Massey University, New Zealand;2. Department of Accounting, Auckland University of Technology, New Zealand;3. School of Accounting, Curtin University, Australia;1. Department of Accounting, College of Business, University of Texas at Arlington, TX, USA;2. Department of Accounting and Finance, School of Business Administration, Oakland University, MI, USA;1. International Business School Suzhou, Xi’an Jiaotong-Liverpool University, Suzhou, Jiangsu Province 215123, China;2. W. P. Carey School of Business, Arizona State University, Tempe, AZ 85287, USA;3. Department of Accounting, Monash Business School, Monash University, Caulfield East, Victoria 3145, Australia;4. Department of Accounting, Deakin Business School, Deakin University, Burwood Highway, Burwood, Victoria 3125, Australia;1. Department of Finance, Tunghai University, Taiwan;2. Department of Quantitative Finance, National Tsing Hua University, Center for Research in Econometric Theory and Applications, National Taiwan University, Taiwan |
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| Abstract: | This paper examines the association between the presence of female tainted directors on corporate boards and audit committees and (1) financial reporting quality and (2) audit fees. Female tainted directors are defined as female directors who have been directors of the firms that have previously been involved in financial failures and integrity indiscretions. Using real earnings management and audit fees as proxies for effective governance and board reputation, we find that firms with female tainted directors have higher real earnings management and higher audit fees. However, since prior literature has demonstrated that audit fees are higher for firms with female directors because female directors demand better auditing, we corroborate a supply-side effect of auditors charging higher audit fees when female tainted directors exist. We demonstrate this by showing that while there is an association between audit fee and real earnings management, this association is higher for firms with female tainted directors. Arguably, the governance and reputational benefits of female directors on boards are negated if such directors have tarnished professional reputations. |
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| Keywords: | Female tainted director Real earnings management Audit fees Financial reporting quality G39 M41 M42 |
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