AUDIT COMMITTEE CHARACTERISTICS AND THE PROFITABILITY OF LISTED INDUSTRIAL GOODS FIRMS IN NIGERIA
Keywords:
Audit Committee Characteristics, Audit Committee Diligence, Audit Committee Gender Diversity, Audit Committee Independence, Audit Committee Size, ProfitabilityAbstract
The study examined the effect of audit committee characteristics on the profitability of listed industrial goods firms in Nigeria. Specifically, the study determined the effect of audit committee size, audit committee gender diversity, audit committee independence and audit committee diligence on the return on capital employed of listed industrial goods firms in Nigeria. Ex-post facto research design was employed. Thirteen (13) listed industrial goods companies on the Nigerian Exchange Group made up the population of the study. Purposive sampling was used in selecting a sample size of nine (9) firms. Secondary data for the study were collected from the firms’ annual reports over a ten year period which spanned from 2014 to 2023. Descriptive tools such as mean and measures of dispersion were used to summarise the data. Panel Least Square regressions with white cross-section standard errors was used to test the hypotheses. The findings revealed the following: Audit Committee Size has a positive and significant effect the return on capital employed of listed industrial goods firms in Nigeria (β = 0.053675; p-value = 0.0001); Audit Committee Gender Diversity (ACGD) has a positive but non-significant effect on the return on capital employed of listed industrial goods firms in Nigeria (β = 0.139434; p-value = 0.1739); Audit Committee Independence (ACI) has a positive but non-significant effect on the return on capital employed of listed industrial goods firms in Nigeria (β = 0.706078; p-value = 0.2731); Audit Committee Diligence (ACD) has a positive and significant effect on the return on capital employed of listed industrial goods firms in Nigeria (β = 0.196620; p-value = 0.0112). In conclusion, larger, more gender-diverse, independent, and diligent audit committees are associated with better profitability outcomes. The study recommends that the board should consider expanding the audit committee by adding at least one or two members with specialized financial expertise or industry knowledge in order to enhance the committee’s ability to provide more thorough oversight of financial reporting, improve risk management, and, ultimately, contribute to better financial performance.
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