The effect of female presence on increasing the effectiveness of the audit committee: Evidence from agency costs and bankruptcy risk in the Tehran Stock Exchange

In recent years, the participation of women in corporate governance, especially on boards of directors and audit committees, has considerably increased. Examining the effect of female audit committee members on agency costs and bankruptcy risk, this study aims to answer the question of whether women on the audit committee are associated with the improvement of its effectiveness. In this respect, 662 firm-year observations of listed companies on the Tehran Stock Exchange for the period 2012-2017 were analyzed, employing the method of panel data and Generalized Least Squares (GLS). The research findings revealed that female presence on audit committees has a significant negative association with agency costs and bankruptcy risk. In other words, female presence on audit committees leads to the reduction in agency costs and bankruptcy risk. In sum, the results support the viewpoint that women make better monitors, and they are more risk-averse and less tolerant towards managers’ opportunistic behaviors and thus, lead to the enhancement of audit committee effectiveness.