The Impact of Demographic Characteristics of CEOS and Directors on Audit Fees and Audit Delay

Maretno Agus Harjoto, Indrarini Laksmana, Robert Lee, (2015) "The impact of demographic characteristics of CEOs and directors on audit fees and audit delay", Managerial Auditing Journal, Vol. 30, Issue 8/9, page 963-997.

Posted: 8 Sep 2015 Last revised: 30 Sep 2015

See all articles by Maretno A. Harjoto

Maretno A. Harjoto

Pepperdine University - Pepperdine Graziadio Business School (PGBS)

Indrarini Laksmana

Kent State University - Department of Accounting

Robert Lee

Graziadio School of Business - Pepperdine University

Date Written: September 7, 2015

Abstract

This study examines the impact of gender and ethnicity of CEO and audit committee directors on audit fees and audit delay in the U.S. firms. Audit related corporate governance literature has extensively examined the determinants of audit fees and audit delay by focusing on board characteristics, specifically board independence, diligence, and expertise. We provide empirical evidence that gender and ethnicity diversity in corporate leadership and boardrooms influence a firm’s audit fees and audit delay. This study finds that firms with female and ethnic minority CEOs pay significantly higher audit fees than those with male Caucasian CEOs. We also find that firms with a higher percentage of ethnic minority directors on their audit committee pay significantly higher audit fees. Further, we find that firms with female CEOs have shorter audit delay than firms with male CEOs and firms with a higher percentage of female and ethnic minority directors on their audit committee are associated with shorter audit delay. Our results indicate that female CEOs and both female and ethnic minority directors are sensitive to the market pressure to avoid audit delay. Our results suggest that gender and ethnic diversity could improve audit quality and the firms’ overall financial reporting quality. This study provides insights to regulators and policy makers interested in increasing diversity within a firm’s board and top executives. Recently, the U.S. Securities and Exchange Commission (SEC) and the European Commission have been pressing publicly traded companies to improve diversity amongst their directors. This study provides evidence and perspective on how diversity can enhance financial reporting quality measured by audit fees and audit delay.

Keywords: Gender, Ethnicity, Race, CEO, Audit Committee, Audit Fee, Audit Delay

JEL Classification: J16, J15, M42, G30

Suggested Citation

Harjoto, Maretno Agus and Laksmana, Indrarini and Lee, Robert, The Impact of Demographic Characteristics of CEOS and Directors on Audit Fees and Audit Delay (September 7, 2015). Maretno Agus Harjoto, Indrarini Laksmana, Robert Lee, (2015) "The impact of demographic characteristics of CEOs and directors on audit fees and audit delay", Managerial Auditing Journal, Vol. 30, Issue 8/9, page 963-997.. Available at SSRN: https://ssrn.com/abstract=2657204

Maretno Agus Harjoto (Contact Author)

Pepperdine University - Pepperdine Graziadio Business School (PGBS) ( email )

Drescher Campus Suite 344
24255 Pacific Coast Highway
Malibu, CA 90263
United States
(310) 506-8542 (Phone)
(310) 506-4126 (Fax)

HOME PAGE: http://scholar.google.com/citations?hl=en&user=9-PfQi0AAAAJ

Indrarini Laksmana

Kent State University - Department of Accounting ( email )

P.O. Box 5190
Kent, OH 44242-0001
United States

Robert Lee

Graziadio School of Business - Pepperdine University ( email )

Malibu, CA
United States
310-506-8541 (Phone)
310-506-4126 (Fax)

HOME PAGE: http://bschool.pepperdine.edu/faculty/default.php?faculty=robert_lee

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