Do Gender Diversity Recommendations in Corporate Governance Codes Matter? Evidence from Audit Committees

What is it about?

Motivated by a global debate on boardroom gender diversity, we examine whether gender diversity guidelines result in the appointment of women better able to perform oversight functions. We consider two opposing views; the limited supply view which suggests that, as a result of an increased demand without a commensurate supply of women, such gender diversity guidelines are not able to increase audit quality; and the discrimination view in which firms abandon their suboptimal hiring practices and hire better qualified women resulting in higher levels of audit quality. We find that gender diversity guidelines in Australia increased the demand for qualified women directors, but did not lead to a corresponding increase in supply leading to a decline in audit quality. Our results suggests that developing guidelines alone are insufficient rather a series of more considered measures need to be developed including a focus on better preparing women for such oversight roles.

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