Board characteristics and audit committee diversities: Evidence from Hong Kong

Abstract

This study is the first study to examine the relationship between board characteristics and the diversity of audit committee members in Hong Kong after the Asian financial crisis in 2008. Using five dimensions of diversities (education level, ethnicities, experience, gender, and age), we find — for a sample of Hong Kong Hang Seng Composite Index 1,700 firm-year observations between 2010 and 2015 — that board independence, board size, board directorships, and board tenure are important determinants of diversities in audit committee members. In addition, our control variables show that board state ownership, board of directors’ political connection, and family members on the board are also important determinants of diversities in audit committee members. The findings suggest that effective board characteristics encourage diverse education levels, age, and gender of the audit committees while discouraging diverse experiences and ethnicities. Overall, consistent with prior studies, our findings suggest that effective board characteristics are important determinants of its oversight quality. Our findings are of potential interest to policymakers, professionals, boards of directors, and academics.