Abstract
The United Kingdom (UK) has been constantly ranked as one of the world’s top three charitable countries in terms of donating money. While the charity sector has contributed significantly to the UK’s socio-economic landscape, it has suffered from a number of controversies, resulting in a heightened focus on accountability, transparency, and governance. Despite the socio-economic significance and accountability concerns linked to the UK charity sector, only a few studies have examined UK charities’ financial reporting, auditing, and governance practices. Given these limitations, this thesis addresses the following research questions using a unique and comprehensive dataset of UK charities:
• Chapter 2: What are the determinants of financial reporting timeliness?
• Chapter 3: Does audit partner gender affect audit pricing and audit quality?
• Chapter 4: Is there a relationship between trustee board gender diversity and charity performance?
Chapter 2 examines the determinants of financial reporting timeliness as a qualitative characteristic of financial statements within UK charities. Utilizing 67,014 charitable company-year observations from 2007 to 2018, the findings show that charities that rely more on donation income take a shorter time to file accounts to the charity regulator. There is also evidence that charities operating in competitive donation markets are more inclined to provide timely financial disclosures. Like for-profit organizations, charities tend to delay their regulatory financial statements filings when they face deficit, negative equity, low liquidity, and high leverage. In addition, the findings show that charities with higher accruals quality, unqualified audit opinions, and subject to audit by industry-specialized audit firms publish their annual accounts earlier. Given a regulatory filing deadline change from ten months to nine months after the fiscal year-end in 2008, this study also finds that the shortened regulatory filing deadline change increases the timeliness of charities’ financial reporting. This is more pronounced for charitable companies that used to file their annual accounts more than nine months after the fiscal year-end under the old filing deadline regime. An additional analysis shows a significant decrease in financial reporting timeliness following the new accounting standards regime in 2015.
Chapter 3 focuses on the effect of audit partner gender on audit pricing and audit quality in UK charities. The analysis employs 63,317 charity-year observations from 2009 to 2019. The findings show that women audit partners charge higher audit fees than men audit partners. Furthermore, charities are more likely to receive a qualified opinion when women audit partners are engaged. The results also reveal that charities with women audit partners are less likely to report zero fundraising expense when they report non-zero voluntary income indicating higher audit quality.
Chapter 4 investigates the impact of trustee board gender diversity on charity performance. The analysis utilizes 86,334 charity-year observations from 2007 to 2019. The findings show that improved charity performance, measured by charitable program efficiency ratios, is associated with a greater proportion of women trustees on board. Moreover, enhanced charity performance is tied to a critical mass of more than 20% women board representation. Further, channel analyses show that less busy women trustees and those with longer board tenure significantly improve contribution to better charity performance.
The findings of the thesis are robust to alternative measures and subsample analyses. To control for self-selection bias and potential endogeneity, a series of econometric analyses is adopted. The models are estimated using: (i) ordinary least squares (OLS) regression; (ii) logistic regression; (iii) ordered logistic regression; (iv) propensity score matching (PSM) estimation; (v) difference-in-differences (DiD) estimation; (vi) fixed-effect regression; (vii) Heckman two-stage selection model; and (viii) instrumental variable approach.
This thesis contributes to the scarce existent literature on UK charities and extends understanding of financial reporting, auditing, and governance practices within the sector. The findings imply the significant role of donors, regulators, auditors, and trustees in enhancing accountability and transparency within charities. In addition, the results provide practical implications on regulatory changes applied to UK charities around the study period.