The role of gender diversity on corporate boards and audit committees in shaping tax avoidance behaviour

Purpose – The study aims to examine how the presence of female directors influences corporate tax avoidance behaviour and investigates whether female representation on the audit committee moderates this relationship. 
Design/methodology/approach – Drawing on social role and social identity theory, this study argues that perceived communal traits (e.g., ethical awareness, risk aversion) of female directors and their shared group identity collectively enhance corporate accountability and ethical compliance by constraining tax avoidance practices. Based on data from listed financial firms in Bangladesh, an emerging economy, over the period 2016–2024, the study employs linear regression analysis to test these hypotheses. 
Findings – The empirical findings indicate that a higher proportion of female directors is associated with lower levels of corporate tax avoidance. Moreover, the negative association between board gender diversity and tax avoidance is strengthened by female representation on the audit committee. Additional analysis confirms that these findings are contingent on the presence of at least two female directors on the board, which aligns with the notion of critical mass theory. To ensure robustness, alternative measures of tax avoidance and board gender diversity are employed, and endogeneity concerns are addressed using lagged regression, the Heckman two-step method and entropy balancing. Further evidence suggests that earnings management may serve as a potential channel linking board gender diversity to lower levels of tax avoidance. 
Practical implications – The study highlights the significance of promoting female participation on boards and audit committees to curb tax avoidance tendencies. It enhances understanding of how female directors’ perceived communal traits and shared group identity contribute to stronger ethical oversight and corporate governance. The study also suggests that regulators may consider mandating at least two women on corporate boards to strengthen governance effectiveness. Originality/value – This study contributes to the literature on gender diversity and tax avoidance in the context of an emerging economy. Notably, it fills a research gap by investigating the moderating role of female representation on the audit committee in curbing tax avoidance in the financial sector.