Abstract
This study examines the effect of supplier geographic proximity on the gender assignment of audit partners. Geographic proximity allows suppliers to closely monitor a firm’s business and financial environment, motivating transparent reporting to sustain cooperation. In contrast, firms may manipulate accounting information to meet proximate suppliers’ expectations and avoid business disruptions. As gender-diverse audit partners can provide superior monitoring and improve client firms’ financial reporting, supplier geographic proximity may influence decision-making in selecting audit partners. Using data on Chinese listed firms from 2009 to 2023, this study finds that geographic proximity is positively associated with the selection of gender-diverse audit partners. Further analyses show that this positive relationship is stronger in state-owned enterprises (SOEs), particularly local SOEs. Furthermore, this effect is less pronounced when hometown ties exist between the top executives of the firm and those of its suppliers. Policymakers may factor in supplier–customer proximity when designing corporate governance frameworks, given its influence on firms’ auditor selection decisions.