IIARD International Institute of Academic Research and Development

Journal of Accounting and Financial Management (JAFM )

E-ISSN 2504-8856
P-ISSN 2695-2211
VOL. 9 NO. 3 2023
DOI: https://doi.org/10.56201/ijssmr.v8.no1.2022.pg32.40

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Audit Diversity and Financial Performance of Nigerian Firms: Evidence from Services Sector

Onyenaju Oghenero Cosmas, Orjinta, Hope Ifeoma (Ph.D)

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Abstract

This study investigated whether a well-diversified audit committee members of selected services firms in Nigeria can improve financial performance. Return on equity was used as dependent variable to measure financial performance while audit committee independence, audit committee diligence, audit committee member’s busyness and audit committee financial expertise were used as independent variables. A sample of 14 quoted services firms from Nigeria were used for the period of ten years spanning 2012 to 2021. The study employed ex-post facto and longitudinal research design. The secondary sources of data were collected from annual reports of the selected services firms quoted in their respective exchange group and four (4) specific objectives and hypotheses were subjected to some preliminary data tests like descriptive statistics, Pearson correlation analysis and Variance Inflation factor (VIF). Hypotheses were tested using panel least squares regression through fixed effect and random effect determined by Hausman test, random effect was accepted, with the aid of E-views 12 econometric statistical software. Using a sample of 140 firm-year observations, the result revealed that audit committee independence and audit committee financial expertise documented a positive and statistically significant effect on financial performance of services firms in Nigeria which was statistically significant at 5% level of significance respectively while a negative and insignificant effect was documented for audit committee member’s busyness in Nigeria services firms. On the basis of our findings, the study recommends among others, that there is need for the audit committee members to be constituted with independent members to give a seasoned advice without bias on ways to improve financial performance and that audit committees should be that of diversified nature to accommodate people with indebt knowledge on finance and accounting related matters and those with p

keywords:

Audit committee busyness, independence, diligence, expertise and performance

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References:

Abdulla Al-Jalahma (2022). Impact of audit committee characteristics on firm performance:
Evidence from Bahrain. Problems and Perspectives in Management, 20(1), 247-261.
doi:10.21511

Abdullah, R., Zubaidah, I., & Malcolm, S. (2018). Audit committees’ involvement and the
effects of quality in the internal audit function on corporate governance. International
Journal of Auditing, 22: 385–403

Adams, R. B., & Ferreira, D. (2007). A theory of friendly boards. Journal of Finance, 62(1),
217-250. https://doi.org/10.1111/j.1540-6261.2007.01206.x

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