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Impact of board diversity and audit on firm performance

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  • Aqil Waqar Khan
  • Qazi Abdul Subhan

Abstract

The study investigates impact of board diversity and quality audit on financial performance by analyzing listed firms in Pakistan. Board diversity is investigated in terms of nationality diversity and gender diversity. Audit is studied in domain of quality audit and audit cost. Although various organizations want to have diverse board structure but still the implication of board diversity in firm performance is uncertain. Here in this study results illustrated an interesting depiction of board diversity and firm financial performance. Higher audit cost leads to more efficient audit services as compare to companies having less audit cost. The study sample comprises of listed companies in Pakistan Stock Exchange (PSE) 100 Index. PSE-100 index is selected on the basis of sector representation and highest market capitalization. Panel data set is collected with time span from 2008 to 2017. In methodology, the study utilized quantitative techniques from econometrics on panel data to fill the research gap in the existing governance literature. Findings suggest that presence of female board members contributed to enhance firm performance while number of female board members in board of director is not related to firm financial performance. Nationality diversity is negatively associated with firm financial performance mostly due to difference in cross-cultural perceptions and communication barriers. High audit cost indicates a good quality audit, due to the fact that extended audit hours and expert audit staff conduct more comprehensive investigation, which cost higher audit fees.

Suggested Citation

  • Aqil Waqar Khan & Qazi Abdul Subhan, 2019. "Impact of board diversity and audit on firm performance," Cogent Business & Management, Taylor & Francis Journals, vol. 6(1), pages 1611719-161, January.
    • Handle: RePEc:taf:oabmxx:v:6:y:2019:i:1:p:1611719
    DOI: 10.1080/23311975.2019.1611719
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    Cited by:

    1. Bambang Tjahjadi & Noorlailie Soewarno & Khairul Anuar Kamarudin & Sazkiya Aldina & Tsanya El Karima & Annisa Ayu Putri Sutarsa, 2023. "Effect of Top Management Team Characteristics and Green Innovation on Firm Performance in Indonesia: Role of Carbon Emission Disclosure," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 44-53, September.
    2. Wang PeiZhi & Muhammad Ramzan, 2020. "Do corporate governance structure and capital structure matter for the performance of the firms? An empirical testing with the contemplation of outliers," PLOS ONE, Public Library of Science, vol. 15(2), pages 1-25, February.
    3. Ria Ria, 2023. "Determinant Factors of Corporate Governance on Company Performance: Mediating Role of Capital Structure," Sustainability, MDPI, vol. 15(3), pages 1-14, January.
    4. Mujeeb Saif Mohsen Al-Absy & Nada Hameed AlMahari, 2023. "The Interaction Effect of Nomination Committee’s Effectiveness on Board of Directors’ Characteristics and Firm Performance," Administrative Sciences, MDPI, vol. 13(5), pages 1-17, May.
    5. Abubakar Biu Aliyu & Onipe Adabenege Yahaya & Nma Ahmed Mohammed, 2021. "Board features and financial performance of Nigerian banks," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 10(1), pages 11-19, January.
    6. Iman Harymawan & Aditya Aji Prabhawa & Mohammad Nasih & Fajar Kristanto Gautama Putra, 2021. "Risk Management Committee, Auditor Choice and Audit Fees," Risks, MDPI, vol. 9(9), pages 1-16, August.
    7. Aditya Aji Prabhawa & Iman Harymawan, 2022. "Readability of Financial Footnotes, Audit Fees, and Risk Management Committee," Risks, MDPI, vol. 10(9), pages 1-21, August.
    8. Krzysztof Kompa & Dorota Witkowska & Lia (Magda) Hewitt, 2023. "Women’s Representation on Boards and the Financial Performance of Polish Public Companies in the pre-COVID-19 Decade," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 34-47.

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