Examining the Relationship between Audit Committee Attributes and Financial Performance of Listed Manufacturing Firms in Nigeria

Abstract

This study investigated the relationship between the characteristics of audit committees and financial performance of Nigerian manufacturing firms. Data was gathered from the annual financial statements of the chosen manufacturing enterprises and statistics from the Nigerian Exchange Group's (NGX) fact book covering the ten-year period from 2014 to 2023; the study population consisted of all production-based companies listed on the Nigerian Exchange Group as of December 31, 2023. The research used both descriptive and inferential analytical methods, with Pearson's correlation analysis and a panel estimation technique acting as the inferential analysis method. A Hausman test was conducted to identify the most appropriate panel estimation technique for the study. According to the regression analysis, the relationship between audit committee independence and the financial performance of Nigerian firms is weak and statistically insignificant. The regression coefficient for audit committee independence within the fixed effect analysis was -0.0928, with a t-statistic of -0.4180 and a p-value of 0.6769 (p>0.05). Similar findings were made by the same analysis, which showed a negative and statistically insignificant association between audit committee meetings and return on equity (regression coefficient = -0.3218, t-statistic = -0.6311, p-value = 0.5296, p > 0.05). A negative and insignificant link with return on equity was further demonstrated by the fixed effect analysis's regression coefficient for audit committee size, which was -0.8195, t-statistic of -1.0200, and p-value of 0.3105 (p>0.05). The study concludes that the companies' return on equity is not significantly impacted by the attributes of their audit committees. The study recommends, among others, that manufacturing companies keep their audit committees independent. This is because accurate and reliable financial statements are necessary to attracts investors, keep stakeholders' trust, and facilitate well-informed decision-making.