Professional and Commercial Incentives in Audit Firms: Evidence on Partner Compensation

Prior research finds that women receive lower salaries than men. Similarly, we show that female audit partners in Belgium receive significantly lower compensation than male partners. However, there are alternative explanations for the pay gap other than gender discrimination. For example, the gap in compensation could reflect that men are paid more because they have higher levels of productivity. We provide new predictions and tests of gender discrimination by comparing the fees generated by audit partners (a measure of partner productivity) and the types of clients assigned to partners. Consistent with our prediction of female partners having to meet higher performance thresholds than male partners, we show that female partners generate larger fee premiums, but they are less likely to be assigned to prestigious clients. To test whether these patterns are attributable to gender discrimination, we examine whether the results are stronger in male‐dominated offices, because this is where we would expect to find the most discrimination against women. We find the fee premiums generated by female partners are larger in male‐dominated offices, while the negative association between prestigious clients and female partners is stronger in male‐dominated offices. Collectively, our combined predictions and tests are consistent with female partners facing gender discrimination in audit offices that are dominated by male partners.

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Section: Resultsmentioning

confidence: 99%

Gender Discrimination? Evidence from the Belgian Public Accounting Profession*

Hardies

Lennox

2021

Contemporary Accting Res

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“…These management companies are required to file annual financial statements with the National Bank of Belgium, which means we are able to obtain information on individual partner incomes. Following Vandenhaute et al (2020), we use the incomes of audit partners' individual management companies as a proxy for their compensation. We obtain the compensation data for 1,343 of the 3,468 partner-year observations 15 In an untabulated test, we drop the offices with zero females and we continue to find that aggregate abnormal audit fees are significantly larger for female partners in the male-dominated offices (i.e., where (0.750 ≤ OMALE% < 1.000).…”

Section: The Annual Compensation Of Male and Female Partnersmentioning

confidence: 99%

Gender Discrimination? Evidence from the Belgian Public Accounting Profession

Hardies

Lennox

2018

SSRN Journal

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“…Furthermore, while U.S. data are not available, all Big 4 firms in the U.K. and Australia report large gender pay gaps, primarily driven by differentials within the upper ranks (Deloitte, 2018;EY, 2019;PWC, 2018). Several studies have also provided archival evidence of gender pay gaps in Europe (Knechel et al, 2013;Vandenhaute et al, 2020).…”

Section: Dilemmas Of Diversitymentioning

confidence: 99%