Gender diversity in South African audit committees and financial reporting quality: A critical mass analysis
Douglas Zvinowanda ORCID ↗ · Elza Odendaal ORCID ↗
International Journal of Business Ecosystem & Strategy · 2026 · Vol. 8 / Issue 4 · 434-448
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Observed 21 Oct 2026, 00:14 UTC
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Abstract
This study explores the relationship between gender diversity in South African audit committees and financial reporting quality (FRQ) of non-financial companies listed on the Johannesburg Stock Exchange from 2020 to 2024. A quantitative approach was employed to investigate these relationships, utilising an ex post facto design to collect data from the Osiris database and integrated annual reports. Gender diversity within audit committees was assessed using several measures: dummy variables indicating whether an audit committee had one female director (ACFD1) or two or more female directors (ACFD2), as well as the proportion of females on the committee (ACGD) and its square (ACGD²). FRQ was assessed using earnings management (EM), evaluated through accrual earnings management (AEM) and real earnings management (REM). The study applied both linear and curvilinear models, using fixed-effects models and Two-Stage Least Squares to test the hypotheses. The regression results revealed that ACFD1 had an insignificant negative impact on AEM and an insignificant positive impact on REM. In contrast, ACFD2 showed a significant negative impact on both AEM and REM. Additionally, ACGD had a significant positive impact on AEM, while ACGD² exhibited a significant negative impact. For REM, ACGD also had a significant positive effect, whereas ACGD² demonstrated a significant negative impact. These results indicate that audit committee gender diversity has an inverted U-shaped effect on both AEM and REM. The study's inverted U-shaped results align with critical mass theory, which suggests that a balanced representation of female directors (between 40% and 60%) can reduce earnings manipulation and enhance FRQ. Furthermore, these results provide a strong business case for increasing female representation to critical-mass levels, thereby minimising EM. Theoretically, this research underscores the importance of critical mass and collective action when examining the economic benefits of gender diversity in audit committees. Regulators are encouraged to consider audit committee gender diversity beyond mere numbers.
Keywords: {'name': 'Gender Diversity'}, {'name': 'Audit Committees'}, {'name': 'Finanacial Reporting Quality'}, {'name': 'Critical Mass Theory'}, {'name': 'Curvilinear Quadratic Models'}
Authors & affiliations
Douglas Zvinowanda
University of South Africa
Elza Odendaal
University of South Africa
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