IIARD International Institute of Academic Research and Development

Journal of Accounting and Financial Management (JAFM )

E-ISSN 2504-8856
P-ISSN 2695-2211
VOL. 10 NO. 4 2024
DOI: https://doi.org/10.56201/jafm.v10.no4.2024.pg31.47

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Capital Structure and Financial Performance of Listed Deposit Money Banks in Nigeria: The Moderating Role of Audit Committee Independence

Onunaka, Uzoamaka Faith, Okezie, Stella O. and Godspower, Jennifer Odinakachi.

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Abstract

The study examined moderating effect of audit committee independence on the relationship between capital structureand financial performance of listed deposit money banks in Nigeria. The study employed ex-post facto research design and extracted secondary data from annual reports of five (5) selected listed deposit money banks in Nigeria fromthe Nigerian Exchange Group Floor listingfor the period 2013 to 2022. Data were analyzed using the Multiple Regression Analysis. The results of the finding revealed that Capital Structure has a significant effect on Return on Assets of listed Deposit Money Banks in Nigeria. Also, the result of the moderation revealed that after introducing the moderating variable (audit committee independence) on the relationship between capital structure and financial performance, Audit committee independence has a significant moderating effect on the relationship between capital structure (Debt to Equity and Long term debt) and Return on Assets of listed deposit money banks in Nigeria. Therefore the study recommends that in order to improve performance, corporate managers are advised to reduce financial leverage. This offers substantial evidence that using debt capital as opposed to equity capital has a detrimental impact on the performance of listed deposit money banks in Nigeria. The study also recommends that Board of Directors of listed deposit money banks in Nigeria should include financially literate non-executive members in the audit committee who have specific industrial experience and financial knowledge to make optimal capital structure decisions that will improve the firm’s financial performance. The study also suggests that Regulatory authorities such as Financial Reporting Council of Nigeria (FRCN), Corporate Affairs Commission (CAC) and Security and Exchange Commission (SEC) should ensure strict adherence to code of corporate governance by listed deposi

keywords:

capital structure, Audit committee independence, Return on Asset, Corporate Governance

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References:

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Al-Hamadsheh, I.M., Bardai, B.B. & Al-Jounaidi, A.R.M. (2020). The mediating effect of
voluntary disclosure on the relationship between corporate governance and financial
performance: A pilot study. International Journal of Research and Innovation in Social
Sciences, IV(111), 325 – 331

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