Corporate Governance Mechanisms and Accounting Conservatism: An Empirical Study of Listed Information and Communication Technology (ICT) Companies in Nigeria
Abstract
This study investigates the effect of corporate governance mechanisms on accounting conservatism in listed Information and Communication Technology companies in Nigeria. The analysis focused on four governance variables: board independence, board size, audit committee effectiveness, and ownership structure, using secondary data from annual reports of listed ICT firms. An econometric approach was employed to test the research hypotheses and evaluate the relationship between governance mechanisms and conservatism in financial reporting. The findings reveal that board size has a significant negative effect on accounting conservatism, indicating that larger boards are associated with less prudent reporting practices. In contrast, board independence, audit committee effectiveness, and ownership structure do not exhibit statistically significant effects on conservatism. These results suggest that in Nigeria’s ICT sector, where innovation and agility are crucial, oversized boards may weaken accountability and dilute the enforcement of conservative accounting policies. The insignificance of other governance variables underscores the contextual limitations of formal governance mechanisms when regulatory enforcement is weak. The study concludes that board structure, particularly board size, is the most effective lever for influencing accounting conservatism in Nigerian ICT firms. It contributes to knowledge by providing sector-specific evidence from an underexplored industry, demonstrating the context- dependent nature of governance effectiveness, and reinforcing the agency theory argument for smaller, more cohesive boards. The study recommends optimizing board size, strengthening audit committee capacity, and enhancing the quality and independence of board appointments.
References
Abdullah, A., & Tursoy, T. (2023). The impact of corporate governance on the financial performance of firms in Germany. Journal of Business Research, 29(4), 450–466. Abuaja, P. (2023). Board gender diversity and diligence as determinants of accounting conservatism in listed manufacturing firms in Nigeria. International Journal of Corporate Governance, 16(2), 134–145. Adegboyegun, A., Akinola, O., & Aladejana, D. O. (2022). The role of corporate governance in enhancing the performance of Nigerian deposit money banks. International Journal of Business Management and Economics, 9(3), 153–168. Al-Fasfus, M., Muhammad, H., & Hashem, M. (2022a). Accounting conservatism and its impact on the quality of financial reports: Evidence from emerging markets. Journal of Financial Reporting and Accounting, 20(3), 478–495. Al-Fasfus, M. N., Rahi, M. A., & Ghanem, M. (2022b). The impact of accounting conservatism on the quality of financial reporting: Evidence from emerging markets. Journal of Accounting and Taxation, 14(2), 43–56. Al-Fasfus, M., Alzoubi, E. S. S., & Alshira’h, A. F. (2022c). Accounting conservatism and earnings quality: The role of accounting information relevance and reliability. Accounting, 8(1), 43–52. Alsadeq, R. (2024). Board size and corporate performance: Exploring the trade-offs. Journal of Corporate Governance and Financial Regulation, 17(1), 22–35. Altin, M., Koseoglu, M. A., & Giritli, H. (2024). The impact of audit committee independence on corporate financial transparency. Journal of Financial Regulation, 8(1), 62–74. Altin, A., Bahar, H., & Ali, K. (2024). Audit committee characteristics and financial reporting quality in Nigerian listed companies. Journal of Accounting Research, 12(2), 45–65. Arogundade, A. M., & Ajibade, A. O. (2023). Corporate governance and accounting conservatism in Nigeria: An empirical examination. Nigerian Business and Economics Review, 31(2), 233–248. Basu, S. (1997). The conservatism principle and the asymmetric timeliness of earnings. Journal of Accounting and Economics, 24(1), 3–37. Bello, B. M. (2022). Corporate governance and accounting conservatism in Nigerian quoted manufacturing companies. Kashere Journal of Humanities, Management and Social Sciences, 3(2), 21-33. Benvolio, L., & Ironkwe, I. (2022). Board composition and bank performance in Nigeria: The role of corporate governance. International Journal of Financial Studies, 34(5), 199– 213. Boloumbele, S., Kone, A., & Toure, M. (2023). Audit committee effectiveness and financial reporting quality in emerging markets. African Journal of Accounting and Finance, 12(3), 45–58. Chiedu, C. O., Anichebe, S. A., & Emeka-Nwokeji, N. A. (2022). Board structure and accounting conservatism in listed non-financial firms in Nigeria. European Journal of Accounting, Auditing and Finance Research, 10(3), 42–58. Cui, L., Kent, P., Kim, S., & Li, S. (2021). Accounting conservatism and firm performance during the COVID-19 pandemic. Accounting & Finance, 61(4), 5543–5579. Dimitropoulos, P. (2023). The role of board independence in enhancing corporate governance mechanisms. International Journal of Business and Management Studies, 10(2), 110– 126. Efenana, A., Aliyu, S., & Uzoechi, P. (2023). State ownership and corporate governance: Challenges and prospects in developing economies. International Journal of Public Sector Governance, 11(2), 118–130. Egbadju, N. (2023). Investors’ decision-making and the reliability of financial statements in Nigeria. African Journal of Business Management, 17(4), 112–121. Egbadju, N., & Odey, J. E. (2023). Financial reporting and stakeholders’ decision-making: A study of selected Nigerian firms. Journal of Accounting and Taxation, 15(2), 27–38. Egbadju, E. I. (2023a). Financial reporting quality and investment decision-making: Evidence from Nigeria. Nigerian Journal of Accounting and Finance, 15(1), 75–88. Egbadju, E. I., & Odey, F. (2023a). The role of financial statements in enhancing investment decisions among Nigerian firms. International Journal of Financial Studies, 11(2), 112–130. Egbadju, O. E. (2023b). Financial reporting quality and investment decisions among Nigerian investors. Journal of Accounting and Business Research, 9(1), 13–25. Egbadju, O. E., & Odey, F. (2023b). Corporate accountability and stakeholders’ decision- making: The role of financial statements. African Journal of Accounting and Finance, 5(2), 44–56. Egbadju, O. (2024). Corporate governance attributes and accounting conservatism in Nigeria: Evidence from non-financial firms. Corporate Governance Review, 19(1), 112–127. Farooq, R., Mahmood, F., & Yusuf, A. (2023). Corporate governance mechanisms and firm sustainability: A stakeholder approach. Journal of Business Ethics and Governance, 15(4), 210–229. Honarbakhsh, S. (2022). The relationship between corporate governance factors and accounting conservatism (based on Basu’s model evaluation). Journal of Money and Economy, 17(1), 43-66. Iqbal, N., Ahmad, N., & Riaz, Z. (2019a). The role of financial reporting quality in investment decisions: Evidence from developing countries. Asian Journal of Accounting Research, 4(2), 232–245. Iqbal, N., Ahmad, N., & Hussain, Z. (2019b). Financial reporting and investment decisions: The role of transparency and disclosure. International Journal of Economics and Financial Issues, 9(3), 148–156. Iqbal, N., Ahmad, N., & Fareed, Z. (2019c). Impact of financial reporting on investor decision making. Journal of Finance and Economics Research, 4(1), 38–50. Jenter, D., Matveyev, E., & Roth, L. (2023). Board structure and corporate outcomes: A meta- analytical review. Journal of Financial Economics, 148(1), 98–115. Khan, M. A., Bashir, M. A., & Ahmad, M. (2022). Corporate governance and accounting conservatism in Pakistan. Journal of Accounting and Financial Management, 28(1), 91–105. Kudo, M., Tanaka, Y., & Tsukada, H. (2024). Audit committee expertise and its effect on financial reporting quality. Journal of Corporate Finance and Accounting, 13(3), 200– 216. Kudo, Y., Oi, M., & Kimura, S. (2024). Expertise in audit committees: Implications for financial reporting. Journal of Financial Regulation, 28(1), 23–40. Mollah, S., Zaman, M., & Bhuiyan, M. B. U. (2023). Independent directors and corporate transparency: Empirical evidence from Nigeria. Journal of Contemporary Accounting and Governance, 19(2), 33–49. Mrad, M. (2022). Corporate governance and accounting conservatism in France. International Journal of Business Studies, 28(2), 44–59. Munjal, S., Sharma, S., & Banerjee, P. (2021a). Determinants of earnings quality in emerging economies: A panel data approach. International Journal of Emerging Markets, 16(7), 1349–1371. Munjal, S., Banerjee, R., & Sharma, V. (2021b). Earnings management and financial reporting: Exploring the effects on firm performance. Asian Journal of Accounting Research, 6(2), 201–219. Munjal, D., Singh, K., & Khurana, S. (2021c). Determinants of financial reporting quality: A comprehensive review. Accounting and Finance Review, 6(1), 78–95. Musa, O., & Temitope, A. (2023). Corporate governance and accounting conservatism of quoted firms in Nigeria. African Journal of Accounting and Finance, 12(3), 102–119. Musa, M. A., & Temitope, M. T. (2023). Accounting conservatism and corporate governance: A study of Nigerian ICT companies. International Journal of Accounting Studies, 12(2), 45–59. Naburgi, M. M., Ojo, L. O., & Ogbu, J. O. (2024). Effect of board characteristics on conditional accounting conservatism of listed industrial companies in Nigeria. FULafia International Journal of Business and Allied Studies, 2(1), 192–208. Nguyen, T. N., Tran, T. T., & Pham, T. N. (2023). Ownership concentration and accounting conservatism in Vietnam. Journal of Accounting and Business Research, 45(2), 112– 125. Nguyen, T. H., Le, P. T., & Phan, T. Q. (2023). The effect of board independence on corporate governance practices: Evidence from listed companies in Vietnam. Journal of C
More Articles from WORLD JOURNAL OF FINANCE AND INVESTMENT RESEARCH
Advances in Quantitative Evaluation Models for Measuring Corporate Diversity and Inclusion Investments
Author: Ngonadi Uchechi, Michael Ominyi, Cyril Chimelie Anichukwueze, Ngozi Samuel, Uzougbo.
Effect of Naira Re-Design Policy on the Performance of Small and Medium Scale Enterprises in Sokoto State, Nigeria
Author: Sadat Ibn Adam and Adamu Idris
Entrepreneurship Development Access to Credit and Business Performance Among Youth-Owned Enterprises (A Study of Phone Accessories Business in Umuahia Metropolis, Abia State Nigeria)
Author: Aliba Ijeoma Vivian, Ikwuagwu Henry Chinedu, PhD, Maduagwuna Veronica Ifeyinwa, PhD
Stock Market Performance of Firms in the Nigerian Petroleum Sector Using the ARIMA Model Approach
Author: Dr. John Okey Onoh AND Gbalam Peter Eze (Ph.D)
Financialization and Swapization: A Chinese Lifeboat for Economic Development of Nigeria
Author: Department of Accountancy Imo State Polytechnic, Umuagwo Nigeria