Bank governance, human capital efficiency, and audit quality: evidence from commercial banks in Ghana

This study examines the relationship between bank governance mechanisms and audit quality, taking the efficiency of human capital as a moderator variable. The data set is made up of twenty commercial banks in Ghana from 2014 to 2023 (200 firm-year observations). For estimating both the direct and indirect impact of the variables, the fixed effects estimator, along with robust standard errors, was used as a baseline estimator, together with a two-stage system GMM estimator for checking robustness. The direct relationship demonstrated a significant positive link between board size, independence, and audit quality (Fees and Tenure) except for board gender. The findings from the indirect relationship reveal significant positive effects between board governance and audit quality (Fees and Tenure). Human capital efficiency strengthens board gender diversity to exhibit a positive relationship with audit quality. This finding highlights the critical role of human capital in advancing the quality of the workforce. As far as the effect of board gender is concerned, an increase in the level of board gender by one unit implies a reduction in the audit fee ratio by − 0.817 units in a direct relationship (Fixed effects; p <0.01), while the coefficient of interaction between board gender and human capital efficiency evinces 0.058 ( p <0.05). These findings are consistent with expectations based on the agency theory and provide useful contributions to intellectual capital research through extending its findings to audit quality in the emerging economy banking sector. The empirical evidence underscores the importance of human capital efficiency in shaping board governance decisions to increase audit quality, which prior researchers have predominantly neglected. Hence, provide a nuanced understanding of this novel idea by contributing practically and theoretically to CG, human capital efficiency, and audit quality disclosure literature.