Audit committee characteristics and sustainability performance in Nigerian listed banks
Abstract
This study investigates the influence of audit committee characteristics on the sustainability disclosure among the Nigerian listed banks. Using the Fixed Effect regression estimator of panel data for ten (10) listed banks in Nigeria over the period of 2014–2016, the result shows that the influence of audit committee independence and gender diversity of audit committee are significantly positive on the sustainability disclosure. However, the audit committee magnitude has a negative and significant influence on the sustainability disclosure. This paper is unique as we consider the importance of the gender diversity of the committee given its relative contribution to sustainability reporting quality. This study tends to provide insights on sustainability reporting and assist stakeholders in emphasizing on the importance of sustainability disclosure through the audit committee oversight.
Keyword : audit committee characteristics, gender diversity, and sustainability reporting
How to Cite
Adegboye, A., Ojeka, S., Alabi, O., Alo, U., & Aina, A. (2020). Audit committee characteristics and sustainability performance in Nigerian listed banks. Business: Theory and Practice, 21(2), 469-476. https://doi.org/10.3846/btp.2020.10463
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Adegboye, A., Ojeka, S., Adegboye, K., Alabi, O., Afolabi, M., & Iyoha, F. (2019). Data on chief financial officer attributes and risk management strategies for Nigerian listed financial institution. Data in Brief, 27, 104609. https://doi.org/10.1016/j.dib.2019.104609
Ahmed, I., & Manab, N. A. (2016). Influence of enterprise risk management success factors on firm financial and non-financial performance: a proposed model. International Journal of Economics and Financial Issues, 6(3), 1–7.
Akhtaruddin, M., Hossain, M. A., Hossain, M., & Yao, L. (2009). Corporate governance and voluntary disclosure in corporate annual reports of Malaysian Listed Firms. Journal Application Management Accounting, 7(1), 1–20.
Anghel, I. (2014). Study regarding the impact of the audit committee characteristics on company performance. Study of Business and Economics, 9(2).
Al-Shaer, H., & Zaman, M. (2016). Board gender diversity and sustainability reporting quality. Journal of Contemporary Accounting & Economics, 12(3), 210–222. https://doi.org/10.1016/j.jcae.2016.09.001
Baxter, P., & Cotter, J. (2009). Audit committees and earnings quality. Accounting and Finance, 49(2), 267–290. https://doi.org/10.1111/j.1467-629X.2008.00290.x
Beasley, M., Carcello, J., Hermanson, D., & Lapides, P. (2000). Fraudulent financial reporting: consideration of industry traits and corporate governance mechanisms. Accounting Horizon, 14(4), 441–454. https://doi.org/10.2308/acch.2000.14.4.441
Bedard, J., & Gendron, Y. (2010). Strengthening the financial reporting system: can audit committees deliver? International Journal of Audit 14(2), 174–210. https://doi.org/10.1111/j.1099-1123.2009.00413.x
Buallay, A. M., & Aldhaen, E. S. (2018). The relationship between audit committee characteristics and the level of the relationship between audit committee characteristics and the level of sustainability report disclosure. Springer International Publishing. https://doi.org/10.1007/978-3-030-02131-3
Carcello, J. V., & Neal, T. L. (2003). Audit committee characteristics and auditor dismissals following new going-concern reports. The Accounting Review, 78(1), 95–118. https://doi.org/10.2308/accr.2003.78.1.95
Carter, D. A., Souza, F. D., Simkins, B. J., & Simpson, W. G. (2007). The diversity of corporate board committees and financial performance. Oklahoma State University, Working Paper. https://doi.org/10.2139/ssrn.1106698
Deloitte. (2013). The role and benefits of a corporate governance framework. The Wall Street Journal. https://deloitte.wsj.com/riskandcompliance/2013/05/24/the-role-and-benefits-of-a-corporate-governance-framework/
Field, A. (2009). Discovering statistics using SPSS for Windows (3rd ed.). London: SAGE Publication.
García-Sánchez, I.-M., Suárez-Fernández, O., & Martínez-Ferrero, J. (2019). Female directors and impression management in sustainability reporting. International Business Review, 28(2), 359–374. https://doi.org/10.1016/j.ibusrev.2018.10.007
Gallego-Álvarez, I., García-Sánchez, I., & Rodríguez-Dominguez, L. (2010). The Influence of gender diversity on corporate performance. Revista de Contabilidad, 13(1), 53–88. https://doi.org/10.1016/S1138-4891(10)70012-1
Grace, M. F., Leverty, J. T., Phillips, R. D., & Shimpi, P. (2014). The value of investing in enterprise risk management. The Journal of Risk Management, 82(2), 289–316. https://doi.org/10.1111/jori.12022
Green, C. P., & Homroy, S. (2018). Female directors, board committees and firm performance. European Economic Review, 102, 19–38. https://doi.org/10.1016/j.euroecorev.2017.12.003
Hackman, J. R. (1990). Groups that work. Jossey-Bass.
Hashim, F., & Mohd Saleh, N. (2007). Voluntary annual report disclosures by Malaysian multinational corporations. Malaysian Accounting Review, 6(1), 129–156.
Hayek, C., & Hayek, M. (2012). Audit Committee characteristics and moral awareness of financial fraudulent reporting: The moderating role of dispositional integrity. Forum presentation at the Ethics Symposium, American Accounting Association Annual Conference. Washington, DC.
Hossain, M. B. P. M. H., & Rahman, A. R. (1995). Voluntary disclosure in the annual reports of New Zealand companies. Journal of International Financial Management and Accounting, 6(1), 69–87. https://doi.org/10.1111/j.1467-646X.1995.tb00050.x
Kantudu, A., & Samaila, I. (2015). Board characteristics, independent audit committee and financial reporting quality of oil marketing firms: evidence from Nigeria. Journal of Finance, Account and Management, 6(2), 34.
KPMG. (2013). The KPMG survey of corporate responsibility reporting. https://home.kpmg/xx/en/home/insights/2017/10/the-kpmg-survey-of-corporate-responsibility-reporting-2017.html
Krivačić, D. (2017). Sustainability reporting quality: the analysis of companies in Croatia. Journal of Accounting and Management, 7(1), 1–14.
Laskar, N. (2016). Impact of corporate sustainability reporting on firm performance: an empirical examination in Asia. Journal of Asia Business Studies, 11. https://doi.org/10.1108/JABS-11-2016-0157
Lisic, L., Neal, T., & Zhang, Y. (2011). Audit Committee financial expertise and restatements: the moderating effect of CEO power. Research Gate.
Madi, H., Ishak, Z., & Manaf, N. A. (2014). The impact of audit committee characteristics on corporate voluntary disclosure. Procedia – Social and Behavioral Sciences, 164, 486–492. https://doi.org/10.1016/j.sbspro.2014.11.106
Marnburg, E. (2000). The behavioral effects of corporate ethical codes: Empirical finding and discussion. Business Ethics: A European Review, 9(3), 200–210. https://doi.org/10.1111/1467-8608.00191
Munshia, D., & Duttab, S. (2016). Sustainability reporting quality of Indian and American manufacturing firms. Serbian Journal of Management, 11(2), 245–260. https://doi.org/10.5937/sjm11-9593
Ojeka, S. A., Adegboye, A., Adegboye, K., Alabi, O., Afolabi, M., & Iyoha, F. (2019). Chief financial officer roles and enterprise risk management: An empirical based study. Heliyon, 5(6), e01934. https://doi.org/10.1016/j.heliyon.2019.e01934
Ojeka, S., Adegboye, A., Adegboye, K., Umukoro, O., Dahunsi, O., & Ozordi, E. (2019). Corruption perception, institutional quality and performance of listed companies in Nigeria. Heliyon, 5(10), e02569. https://doi.org/10.1016/j.heliyon.2019.e02569
Ojeka, S., Adegboye, A., Titilayo Adetula, D., Adegboye, K., & Udoh, I. (2019). IFRS adoption and CEO compensation: evidence from listed banks in Nigeria. Banks and Bank Systems, 14(3), 1–8. https://doi.org/10.21511/bbs.14(3).2019.01
Ojeka, S. A., Fakile, S. A., Anijesu, A., & Owolabi, I. (2017). Examining the quality of financial reporting in the banking sector in Nigeria: does audit committee accounting expertise matter? Journal of Internet Banking and Commerce, 21(3), 1–18.
Orazalin, N., & Mahmood, M. (2018). Economic, environmental, and social performance indicators of sustainability reporting: Evidence from the Russian oil and gas industry. Energy Policy, 121, 70–79. https://doi.org/10.1016/j.enpol.2018.06.015
Othman, R., Farhana, I., Maznah, S., Arif, M., & Abdul, N. (2014). Influence of audit committee characteristics on voluntary ethics disclosure. Procedia – Social and Behavioral Sciences, 145, 330–342. https://doi.org/10.1016/j.sbspro.2014.06.042
Pathan, S., & Faff, R. (2013). Does board structure in banks really affect their performance? Journal of Banking & Finance, 37, 1573–1589. https://doi.org/10.1016/j.jbankfin.2012.12.016
Persons, O. S. (2005). Relation between the new corporate governance rules and the likelihood of financial statement fraud. Review of Accounting and Finance, 4(2), 125–148. https://doi.org/10.1108/eb043426
Persons, O. S. (2009). Audit committee characteristics and earlier voluntary ethics disclosure among fraud and no-fraud firms. International Journal of Disclosure and Governance, 6(4), 284–297. https://doi.org/10.1057/jdg.2008.29
Persons, O. S. (2011). Characteristics and financial performance of no ethics-code firms. Journal of Academic and Business Ethics, 1–14.
Preuss, L. (2009). Ethical sourcing codes of large UK-based corporations: prevalence, content, limitations. Journal of Business Ethics, 88, 735–747. https://doi.org/10.1007/s10551-008-9978-7
Raghunandan, K., & Rama, D. (2007). Determinants of audit committee diligence. Accounting Horizon, 21(3), 265–279. https://doi.org/10.2308/acch.2007.21.3.265
Raghunandan, K., Read, W. J., & Rama, D. V. (2001). Audit committee composition, gray directors and interaction with internal auditing. Accounting Horizons, 15(2), 105–118. https://doi.org/10.2308/acch.2001.15.2.105
Schwartz, M. (2001). The nature of the relationship between corporate codes of ethics and behaviour. Journal of Business Ethics, 32, 247–262. https://doi.org/10.1023/A:1010787607771
Ahmed, I., & Manab, N. A. (2016). Influence of enterprise risk management success factors on firm financial and non-financial performance: a proposed model. International Journal of Economics and Financial Issues, 6(3), 1–7.
Akhtaruddin, M., Hossain, M. A., Hossain, M., & Yao, L. (2009). Corporate governance and voluntary disclosure in corporate annual reports of Malaysian Listed Firms. Journal Application Management Accounting, 7(1), 1–20.
Anghel, I. (2014). Study regarding the impact of the audit committee characteristics on company performance. Study of Business and Economics, 9(2).
Al-Shaer, H., & Zaman, M. (2016). Board gender diversity and sustainability reporting quality. Journal of Contemporary Accounting & Economics, 12(3), 210–222. https://doi.org/10.1016/j.jcae.2016.09.001
Baxter, P., & Cotter, J. (2009). Audit committees and earnings quality. Accounting and Finance, 49(2), 267–290. https://doi.org/10.1111/j.1467-629X.2008.00290.x
Beasley, M., Carcello, J., Hermanson, D., & Lapides, P. (2000). Fraudulent financial reporting: consideration of industry traits and corporate governance mechanisms. Accounting Horizon, 14(4), 441–454. https://doi.org/10.2308/acch.2000.14.4.441
Bedard, J., & Gendron, Y. (2010). Strengthening the financial reporting system: can audit committees deliver? International Journal of Audit 14(2), 174–210. https://doi.org/10.1111/j.1099-1123.2009.00413.x
Buallay, A. M., & Aldhaen, E. S. (2018). The relationship between audit committee characteristics and the level of the relationship between audit committee characteristics and the level of sustainability report disclosure. Springer International Publishing. https://doi.org/10.1007/978-3-030-02131-3
Carcello, J. V., & Neal, T. L. (2003). Audit committee characteristics and auditor dismissals following new going-concern reports. The Accounting Review, 78(1), 95–118. https://doi.org/10.2308/accr.2003.78.1.95
Carter, D. A., Souza, F. D., Simkins, B. J., & Simpson, W. G. (2007). The diversity of corporate board committees and financial performance. Oklahoma State University, Working Paper. https://doi.org/10.2139/ssrn.1106698
Deloitte. (2013). The role and benefits of a corporate governance framework. The Wall Street Journal. https://deloitte.wsj.com/riskandcompliance/2013/05/24/the-role-and-benefits-of-a-corporate-governance-framework/
Field, A. (2009). Discovering statistics using SPSS for Windows (3rd ed.). London: SAGE Publication.
García-Sánchez, I.-M., Suárez-Fernández, O., & Martínez-Ferrero, J. (2019). Female directors and impression management in sustainability reporting. International Business Review, 28(2), 359–374. https://doi.org/10.1016/j.ibusrev.2018.10.007
Gallego-Álvarez, I., García-Sánchez, I., & Rodríguez-Dominguez, L. (2010). The Influence of gender diversity on corporate performance. Revista de Contabilidad, 13(1), 53–88. https://doi.org/10.1016/S1138-4891(10)70012-1
Grace, M. F., Leverty, J. T., Phillips, R. D., & Shimpi, P. (2014). The value of investing in enterprise risk management. The Journal of Risk Management, 82(2), 289–316. https://doi.org/10.1111/jori.12022
Green, C. P., & Homroy, S. (2018). Female directors, board committees and firm performance. European Economic Review, 102, 19–38. https://doi.org/10.1016/j.euroecorev.2017.12.003
Hackman, J. R. (1990). Groups that work. Jossey-Bass.
Hashim, F., & Mohd Saleh, N. (2007). Voluntary annual report disclosures by Malaysian multinational corporations. Malaysian Accounting Review, 6(1), 129–156.
Hayek, C., & Hayek, M. (2012). Audit Committee characteristics and moral awareness of financial fraudulent reporting: The moderating role of dispositional integrity. Forum presentation at the Ethics Symposium, American Accounting Association Annual Conference. Washington, DC.
Hossain, M. B. P. M. H., & Rahman, A. R. (1995). Voluntary disclosure in the annual reports of New Zealand companies. Journal of International Financial Management and Accounting, 6(1), 69–87. https://doi.org/10.1111/j.1467-646X.1995.tb00050.x
Kantudu, A., & Samaila, I. (2015). Board characteristics, independent audit committee and financial reporting quality of oil marketing firms: evidence from Nigeria. Journal of Finance, Account and Management, 6(2), 34.
KPMG. (2013). The KPMG survey of corporate responsibility reporting. https://home.kpmg/xx/en/home/insights/2017/10/the-kpmg-survey-of-corporate-responsibility-reporting-2017.html
Krivačić, D. (2017). Sustainability reporting quality: the analysis of companies in Croatia. Journal of Accounting and Management, 7(1), 1–14.
Laskar, N. (2016). Impact of corporate sustainability reporting on firm performance: an empirical examination in Asia. Journal of Asia Business Studies, 11. https://doi.org/10.1108/JABS-11-2016-0157
Lisic, L., Neal, T., & Zhang, Y. (2011). Audit Committee financial expertise and restatements: the moderating effect of CEO power. Research Gate.
Madi, H., Ishak, Z., & Manaf, N. A. (2014). The impact of audit committee characteristics on corporate voluntary disclosure. Procedia – Social and Behavioral Sciences, 164, 486–492. https://doi.org/10.1016/j.sbspro.2014.11.106
Marnburg, E. (2000). The behavioral effects of corporate ethical codes: Empirical finding and discussion. Business Ethics: A European Review, 9(3), 200–210. https://doi.org/10.1111/1467-8608.00191
Munshia, D., & Duttab, S. (2016). Sustainability reporting quality of Indian and American manufacturing firms. Serbian Journal of Management, 11(2), 245–260. https://doi.org/10.5937/sjm11-9593
Ojeka, S. A., Adegboye, A., Adegboye, K., Alabi, O., Afolabi, M., & Iyoha, F. (2019). Chief financial officer roles and enterprise risk management: An empirical based study. Heliyon, 5(6), e01934. https://doi.org/10.1016/j.heliyon.2019.e01934
Ojeka, S., Adegboye, A., Adegboye, K., Umukoro, O., Dahunsi, O., & Ozordi, E. (2019). Corruption perception, institutional quality and performance of listed companies in Nigeria. Heliyon, 5(10), e02569. https://doi.org/10.1016/j.heliyon.2019.e02569
Ojeka, S., Adegboye, A., Titilayo Adetula, D., Adegboye, K., & Udoh, I. (2019). IFRS adoption and CEO compensation: evidence from listed banks in Nigeria. Banks and Bank Systems, 14(3), 1–8. https://doi.org/10.21511/bbs.14(3).2019.01
Ojeka, S. A., Fakile, S. A., Anijesu, A., & Owolabi, I. (2017). Examining the quality of financial reporting in the banking sector in Nigeria: does audit committee accounting expertise matter? Journal of Internet Banking and Commerce, 21(3), 1–18.
Orazalin, N., & Mahmood, M. (2018). Economic, environmental, and social performance indicators of sustainability reporting: Evidence from the Russian oil and gas industry. Energy Policy, 121, 70–79. https://doi.org/10.1016/j.enpol.2018.06.015
Othman, R., Farhana, I., Maznah, S., Arif, M., & Abdul, N. (2014). Influence of audit committee characteristics on voluntary ethics disclosure. Procedia – Social and Behavioral Sciences, 145, 330–342. https://doi.org/10.1016/j.sbspro.2014.06.042
Pathan, S., & Faff, R. (2013). Does board structure in banks really affect their performance? Journal of Banking & Finance, 37, 1573–1589. https://doi.org/10.1016/j.jbankfin.2012.12.016
Persons, O. S. (2005). Relation between the new corporate governance rules and the likelihood of financial statement fraud. Review of Accounting and Finance, 4(2), 125–148. https://doi.org/10.1108/eb043426
Persons, O. S. (2009). Audit committee characteristics and earlier voluntary ethics disclosure among fraud and no-fraud firms. International Journal of Disclosure and Governance, 6(4), 284–297. https://doi.org/10.1057/jdg.2008.29
Persons, O. S. (2011). Characteristics and financial performance of no ethics-code firms. Journal of Academic and Business Ethics, 1–14.
Preuss, L. (2009). Ethical sourcing codes of large UK-based corporations: prevalence, content, limitations. Journal of Business Ethics, 88, 735–747. https://doi.org/10.1007/s10551-008-9978-7
Raghunandan, K., & Rama, D. (2007). Determinants of audit committee diligence. Accounting Horizon, 21(3), 265–279. https://doi.org/10.2308/acch.2007.21.3.265
Raghunandan, K., Read, W. J., & Rama, D. V. (2001). Audit committee composition, gray directors and interaction with internal auditing. Accounting Horizons, 15(2), 105–118. https://doi.org/10.2308/acch.2001.15.2.105
Schwartz, M. (2001). The nature of the relationship between corporate codes of ethics and behaviour. Journal of Business Ethics, 32, 247–262. https://doi.org/10.1023/A:1010787607771