Corporate Governance Characteristics and Audit Quality of Listed Insurance Firms in Nigeria
Keywords:
Audit fees, audit quality, board, corporate governance, managerial stock ownership
Abstract
Lack of comprehensive implementation of corporate governance codes in public corporate entities has been identified as part of the causes of many corporate failure. This study therefore investigated probable relationship amid corporate governance features, and audit-quality of listed insurance entities in Nigeria. Twenty-five (25) listed insurance firms were drawn from population of twenty-eight (28) companies based on certain selection criteria. Data were drawn from annual report of the firms sampled, and regression analysis was carried out using generalized least squares. Results display that board-size, and board-independence have positive relationship with audit-quality, which is statistically significant at 0.01 level, but antithetic and statistically significant bond exist amid managerial-ownership and audit-quality. The implication is that any rise in board size and independence will inform consequential rise in audit-quality, but managerial influence emanating from ownership can lead to decrease in crave for high quality-audit, and perhaps, engendering low audit-fee. It is concluded that corporate governance elements such as board-size and independence, and managerial stock-ownership are determinants of audit-quality of listed insurance firms in Nigeria. The recommendation is that Nigerian listed insurance entities should stem up adherence to corporate governance demands since its contribution brings best practices capable of boosting stakeholders’ confidence, and improved capital inflow to the industry, while shareholders should consider other audit quality enhancing managerial compensation pay package.
References
Abdu, M., & Jibir, A. (2017). Determinants of Firm’s Innovation in Nigeria. Kasetsart Journal of Social Sciences, 39(3), 448-456.
Abubakar, A., Sulaiman, I., & Haruna, U. (2018). Effect of firm characteristics on financial performance of listed insurance companies in Nigeria. African Journal of History and Archaeology, 3(1), 1-9.
Adebayo, P. A., & Adebiyi, W. K. (2016). Effect of Firm Characteristics on the Timeliness of Corporation Financial Reporting: Evidence from Nigeria deposit money banks. International journal of Economics, Commerce and Management, 4(3), 369-381.
Ahmed, N., (2012). Signaling theory transforms processing. Springer Science & Business Media. International Journal of Management & Business Studies, 2(25), 17-24.
Akhidime, A. (2015). Board structure, corporate characteristics and audit quality of Nigeria banks. International Journal of Economics, commerce and Management, 3(6), 832-846.
Akinbola, I.L.T., & Ejide, O. (2010). Ethical issues: A problem in Nigeria insurance companies. School of Management, Blekinge Institute of Technology, Sweden.
Aktas, R., & Kargin, M. (2011). Timeliness of reporting and the quality of financial information. International research journal of finance and economics, 63(1), 71-77.
Aladdin, D., Zeena, M., & Islam, A. (2018). Corporate governance and auditor quality choice: Evidence from Palestinian corporations. International Journal of Economics and Financial Issue, 2(8), 47-53
Alade, M.E. (2018). The effect of international financial reporting standards adoption on value relevance of accounting information in the Nigerian stock market. A doctoral degree thesis.
Anderson, J.E. (2003). Public policymaking: An introduction. Boston: Houghton Mifflin Company.
Awadallah, E. (2020). Measuring the effectiveness of selected corporate governance practices and their implications for audit quality: Evidence from Qatar. Afro-Asian Journal of Finance and Accounting, 10(1), 24-47.
Bakare, I. (2019). Board independence and audit quality in Nigeria. International Accounting and Taxation, 3(1), 1-11.
Bassey, D.N. (2018). Corporate governance implementation in the Nigerian banking industry. Walden Dissertations and Doctoral Studies.
Bhasin, M. L. (2013). Audit committee scenario & trends: Evidence from an Asian country. European Journal of Business and Social Sciences, 1(11), 1-23.
Carey, P., & Simnett, R. (2006). Audit tenure and audit quality. The accounting review, 81(3), 653-676.
Daoud, K. A. A., Ismail, K., Izah, K. N., & Lode, N. A. (2014). The Timeliness of Financial Reporting Among Jordanian Companies: Do company and board characteristics, and audit opinion matter? .Asian Social Science, 10(13), 191-201.
Datta, N. (2018). Impact of corporate governance on financial performance: A study on DSE listed insurance companies in Bangladesh. Global Journal of Management and Business Research, 18(2), 32-39.
Dean, D.S., Bulent J.R., & Christopher M.A. (2000). Determinants of auditor choice in emerging markets: Evidence from Saudi Arabia. The Business & Management Review, 9(3), 65-72.
Dezoort, K.A.A., Ismail, K., Izah, K.N., & Lode, N.A (2002). The Timeliness of Financial Reporting Among Jordanian Companies: Do company and board characteristics, and audit opinion matter? Asian Social Science, 10(13), 191-201.
Ejeagbasi, I., Gloria, E., Nweze, A.U., Ezeh, E.C., & Nze, D.O. (2015). Corporate governance and audit quality in Nigeria: evidence from the banking industry. European Journal of Accounting, Auditing and Finance Research, 5(1), 18-39.
Elamer, A.A., Alhares, A., Ntim, C.G., & Benyazid, I. (2018). The corporate governance-risk-taking nexus: Evidence from insurance companies. International Journal of Ethics and Systems, 34(4), 493-509.
Eluyela, D.F., Asaleye, A.J., Popoola, O., Lawal, A.I., & Inegbedion, H. (2020). Grey directors, corporate governance and firms’ performance nexus: Evidence from Nigeria. Cogent Economics & Finance, 8(1).
Enofe, A.O., Mgbame, C., Aderin, A., & Ehi-Oshio, O.U. (2013). Determinants of Audit Quality in the Nigerian Business Environment. Research journal of finance and Accounting, 4(4), 36-43.
Eshiet, U. (2012, October 15). Firms fail to meet accounts’ submission deadline. The Nation Newspaper. Retrieved from https://thenationonlineng.net/firms-fail-to-meet-accounts-submission-deadline/
Fadaly, D.S. (2018). Determinants of auditor choice in emerging markets: Evidence from Saudi Arabia. The Business & Management Review, 9(3), 65-72.
Fama, E.F., & Jensen, M.C. (1983). Separation of ownership and control. The journal of law and Economics, 26(2), 301-325.
Firth, M., Rui, O.M., & Wu, X. (2012). How do various forms of auditor rotation affect audit quality? Evidence from China. The International Journal of Accounting, 47(1), 109-138
Francis, J. R. (2011). A Framework for understanding and researching audit quality. Auditing: A journal of practice & theory, 30(2), 125-152.
Gajevszky, A. (2015). Audit quality and corporate governance: evidence from the Bucharest Stock Exchange. Journal of Economics and Social Development, 1(2), 1-11.
Ghasemi, A., & Zahediasi, S. (2012). Normality tests for statistical analysis: A guide for non-statisticians. International Journal of Endocrinology and Metabolism, 10(2), 486.
Jensen, M.C., & Mecklin, W.H. (1976). Theory of the firm managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
Knechel, W.R., Krishnan, G.V., Pevzner, M., Shefchik, L.B., & Velury, U.K. (2013). Audit quality: Insights from the academic literature. Auditing: A Journal of Practice & Theory, 32(sp1), 385-421.
Koji, K., Adhikary, B.K., & Tram, L. (2020). Corporate governance and firm performance: A comparative analysis between listed family and non-family firms in Japan. Journal of Risk and Financial Management, 13(9), 215-235.
Levitt, M.S. (2000). Effective working relationship between audit committees and internal audit the cornerstone of corporate governance in local authorities, A Welsh perspective. Journal Management & Governance, 13(1-2), 41-73.
Malik, M. S. (2011). Strategic management accounting; A Messiah for Management Accounting. Australian Journal of Business and Management Research, 1(4), 1-7.
Michael, J., Gombola, M.J., Ho, A.Y., & Huang, C. (2016). The effect of leverage and liquidity on earnings and capital management: Evidence from U.S. commercial banks. International Review of Economics and Finance, 43, 35-58.
Miller, T., & Triana, M. (2009). Demographic diversity in the boardroom: mediator of the board diversity – firm performance relationship. Journal of Management Studies, 46.
Mustapha, U.A., Rashid, N.N.M., Lateef, S.A., & Bala, A. (2019). The effect of corporate governance attributes on audit quality in Nigeria. International Journal of Recent Technology and Engineering, 8(4), 4882-4886.
Nelson, M., & Tan, H. T. (2005). Judgment and decision making research in auditing: A task, person, and interpersonal interaction perspective. Auditing: A Journal of Practice & Theory, 24(s-1), 41-71.
Ntim, C.G., & Osei, K.A. (2011). The impact of corporate board meetings on corporate performance in South Africa. African Review of Economics and Finance, 2(2), 83-103.
Ogwu, S.M. (2021, October 18). 40 listed insurance, companies fined N1bn over infractions. Daily Trust Newspaper. Retrieved from https://dailytrust.com/40-listed-insurance-companies-fined-N1bn-over-infractions
Olabisi, J., Kajola, S.O., Abioro, M.A., & Oworu, O.O. (2020). Determinants of audit quality: Evidence from Nigerian listed insurance companies. Journal of Volgograd State University, Economics, 22(2), 182-192.
Olowookere, J. K., & Inneh, G. E. (2016). Determinants of external auditors choice in Nigerian quoted manufacturing companies. Kuwait Chapter of Arabian Journal of Business and Management Review, 33(2651), 1-13.
Orimisan, B. (2021, June 30). Poor governance structure responsible for insurance failure, says NAICOM. The Guardian Newspaper. Retrieved from https://editor.guardian.ng/business-services/poor-governance-structure-responsible-for-insurance-failure-says-naicom/
Page, M.E. (2010). Signaling in the labour market. International Encyclopaedia of Education, 321-324.
Pavić Kramaric, T., Aleksić, A., & Pejic-Bach, M. (2018). Measuring the impact of board characteristics on the performance of Croatian Insurance companies. International Journal of Engineering Business Management, 10, 1-13.
Piot, E., & Vahamaa, S. (2012). Did good corporate governance improve bank performance during the financial crisis? Journal of Financial Service Research. 41, 19-35.
Popoola, N. (2018, December 26). Failed policies, declining confidence slow insurance industry growth. The Punch Newspaper. Retrieved from https://punchng.com/failed-policies-declining-confidence-slow-insurance-industry-growth/
Reiter, J.K., & Rosenberg, J.R. (2003). Does size matter? The influence of large clients on office-level auditor reporting decisions. Journal of Accounting and Economics, 30, 375 – 400.
Seyedeh, Z.I, Elham. O. Abrandabadi, A.N., & Panahandeh, N. (2016). The Impact of Audit Quality on the Share Prices of Quoted Companies in Jordan. Research Journal of Finance and Accounting, 5(8), 150-166.
Sharinah, S., Mohd, M. F. M., & Azlina A. (2014). Audit committee and timeliness of financial reporting: Malaysian public listed companies. Middle-East Journal of Scientific Research, 22(2), 162-175.
Spence, A.M. (1973). Job market signaling. Quarterly Journal of Economic Theory, 87, 355-374.
Stainer, D. (2016). The pricing of audit services: Theory and evidence. Journal of Accounting Research (Spring), 161 – 190.
Sumaira, S., & Amjad, P. (2013). Professional audit competencies and audit quality, Reputation, and Success. Review of Business Research, 9(3), 66-85.
Suryanto, T., Thalassinos, J.E., & Thalassinos, E.I. (2017). Board characteristics, audit committee and audit quality: The case of Indonesia. International Journal of Economics and Business Administration, 5(3), 44-57.
Wallace, D. (1980). Toward a theory of self-directed learning: A study of experts without formal training. Journal of Humanistic Psychology, 20(2), 41-56.
Yadirichukwu, E., & Ebimobewei, A. (2013). Audit committee and timeliness of financial reports: Empirical evidence from Nigeria. Journal of Economics and Sustainable Development, 2(1), 25-36
Zábojníková, G. (2016). The Audit Committee Characteristics and Firm Performance: Evidence from the UK.
Abubakar, A., Sulaiman, I., & Haruna, U. (2018). Effect of firm characteristics on financial performance of listed insurance companies in Nigeria. African Journal of History and Archaeology, 3(1), 1-9.
Adebayo, P. A., & Adebiyi, W. K. (2016). Effect of Firm Characteristics on the Timeliness of Corporation Financial Reporting: Evidence from Nigeria deposit money banks. International journal of Economics, Commerce and Management, 4(3), 369-381.
Ahmed, N., (2012). Signaling theory transforms processing. Springer Science & Business Media. International Journal of Management & Business Studies, 2(25), 17-24.
Akhidime, A. (2015). Board structure, corporate characteristics and audit quality of Nigeria banks. International Journal of Economics, commerce and Management, 3(6), 832-846.
Akinbola, I.L.T., & Ejide, O. (2010). Ethical issues: A problem in Nigeria insurance companies. School of Management, Blekinge Institute of Technology, Sweden.
Aktas, R., & Kargin, M. (2011). Timeliness of reporting and the quality of financial information. International research journal of finance and economics, 63(1), 71-77.
Aladdin, D., Zeena, M., & Islam, A. (2018). Corporate governance and auditor quality choice: Evidence from Palestinian corporations. International Journal of Economics and Financial Issue, 2(8), 47-53
Alade, M.E. (2018). The effect of international financial reporting standards adoption on value relevance of accounting information in the Nigerian stock market. A doctoral degree thesis.
Anderson, J.E. (2003). Public policymaking: An introduction. Boston: Houghton Mifflin Company.
Awadallah, E. (2020). Measuring the effectiveness of selected corporate governance practices and their implications for audit quality: Evidence from Qatar. Afro-Asian Journal of Finance and Accounting, 10(1), 24-47.
Bakare, I. (2019). Board independence and audit quality in Nigeria. International Accounting and Taxation, 3(1), 1-11.
Bassey, D.N. (2018). Corporate governance implementation in the Nigerian banking industry. Walden Dissertations and Doctoral Studies.
Bhasin, M. L. (2013). Audit committee scenario & trends: Evidence from an Asian country. European Journal of Business and Social Sciences, 1(11), 1-23.
Carey, P., & Simnett, R. (2006). Audit tenure and audit quality. The accounting review, 81(3), 653-676.
Daoud, K. A. A., Ismail, K., Izah, K. N., & Lode, N. A. (2014). The Timeliness of Financial Reporting Among Jordanian Companies: Do company and board characteristics, and audit opinion matter? .Asian Social Science, 10(13), 191-201.
Datta, N. (2018). Impact of corporate governance on financial performance: A study on DSE listed insurance companies in Bangladesh. Global Journal of Management and Business Research, 18(2), 32-39.
Dean, D.S., Bulent J.R., & Christopher M.A. (2000). Determinants of auditor choice in emerging markets: Evidence from Saudi Arabia. The Business & Management Review, 9(3), 65-72.
Dezoort, K.A.A., Ismail, K., Izah, K.N., & Lode, N.A (2002). The Timeliness of Financial Reporting Among Jordanian Companies: Do company and board characteristics, and audit opinion matter? Asian Social Science, 10(13), 191-201.
Ejeagbasi, I., Gloria, E., Nweze, A.U., Ezeh, E.C., & Nze, D.O. (2015). Corporate governance and audit quality in Nigeria: evidence from the banking industry. European Journal of Accounting, Auditing and Finance Research, 5(1), 18-39.
Elamer, A.A., Alhares, A., Ntim, C.G., & Benyazid, I. (2018). The corporate governance-risk-taking nexus: Evidence from insurance companies. International Journal of Ethics and Systems, 34(4), 493-509.
Eluyela, D.F., Asaleye, A.J., Popoola, O., Lawal, A.I., & Inegbedion, H. (2020). Grey directors, corporate governance and firms’ performance nexus: Evidence from Nigeria. Cogent Economics & Finance, 8(1).
Enofe, A.O., Mgbame, C., Aderin, A., & Ehi-Oshio, O.U. (2013). Determinants of Audit Quality in the Nigerian Business Environment. Research journal of finance and Accounting, 4(4), 36-43.
Eshiet, U. (2012, October 15). Firms fail to meet accounts’ submission deadline. The Nation Newspaper. Retrieved from https://thenationonlineng.net/firms-fail-to-meet-accounts-submission-deadline/
Fadaly, D.S. (2018). Determinants of auditor choice in emerging markets: Evidence from Saudi Arabia. The Business & Management Review, 9(3), 65-72.
Fama, E.F., & Jensen, M.C. (1983). Separation of ownership and control. The journal of law and Economics, 26(2), 301-325.
Firth, M., Rui, O.M., & Wu, X. (2012). How do various forms of auditor rotation affect audit quality? Evidence from China. The International Journal of Accounting, 47(1), 109-138
Francis, J. R. (2011). A Framework for understanding and researching audit quality. Auditing: A journal of practice & theory, 30(2), 125-152.
Gajevszky, A. (2015). Audit quality and corporate governance: evidence from the Bucharest Stock Exchange. Journal of Economics and Social Development, 1(2), 1-11.
Ghasemi, A., & Zahediasi, S. (2012). Normality tests for statistical analysis: A guide for non-statisticians. International Journal of Endocrinology and Metabolism, 10(2), 486.
Jensen, M.C., & Mecklin, W.H. (1976). Theory of the firm managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
Knechel, W.R., Krishnan, G.V., Pevzner, M., Shefchik, L.B., & Velury, U.K. (2013). Audit quality: Insights from the academic literature. Auditing: A Journal of Practice & Theory, 32(sp1), 385-421.
Koji, K., Adhikary, B.K., & Tram, L. (2020). Corporate governance and firm performance: A comparative analysis between listed family and non-family firms in Japan. Journal of Risk and Financial Management, 13(9), 215-235.
Levitt, M.S. (2000). Effective working relationship between audit committees and internal audit the cornerstone of corporate governance in local authorities, A Welsh perspective. Journal Management & Governance, 13(1-2), 41-73.
Malik, M. S. (2011). Strategic management accounting; A Messiah for Management Accounting. Australian Journal of Business and Management Research, 1(4), 1-7.
Michael, J., Gombola, M.J., Ho, A.Y., & Huang, C. (2016). The effect of leverage and liquidity on earnings and capital management: Evidence from U.S. commercial banks. International Review of Economics and Finance, 43, 35-58.
Miller, T., & Triana, M. (2009). Demographic diversity in the boardroom: mediator of the board diversity – firm performance relationship. Journal of Management Studies, 46.
Mustapha, U.A., Rashid, N.N.M., Lateef, S.A., & Bala, A. (2019). The effect of corporate governance attributes on audit quality in Nigeria. International Journal of Recent Technology and Engineering, 8(4), 4882-4886.
Nelson, M., & Tan, H. T. (2005). Judgment and decision making research in auditing: A task, person, and interpersonal interaction perspective. Auditing: A Journal of Practice & Theory, 24(s-1), 41-71.
Ntim, C.G., & Osei, K.A. (2011). The impact of corporate board meetings on corporate performance in South Africa. African Review of Economics and Finance, 2(2), 83-103.
Ogwu, S.M. (2021, October 18). 40 listed insurance, companies fined N1bn over infractions. Daily Trust Newspaper. Retrieved from https://dailytrust.com/40-listed-insurance-companies-fined-N1bn-over-infractions
Olabisi, J., Kajola, S.O., Abioro, M.A., & Oworu, O.O. (2020). Determinants of audit quality: Evidence from Nigerian listed insurance companies. Journal of Volgograd State University, Economics, 22(2), 182-192.
Olowookere, J. K., & Inneh, G. E. (2016). Determinants of external auditors choice in Nigerian quoted manufacturing companies. Kuwait Chapter of Arabian Journal of Business and Management Review, 33(2651), 1-13.
Orimisan, B. (2021, June 30). Poor governance structure responsible for insurance failure, says NAICOM. The Guardian Newspaper. Retrieved from https://editor.guardian.ng/business-services/poor-governance-structure-responsible-for-insurance-failure-says-naicom/
Page, M.E. (2010). Signaling in the labour market. International Encyclopaedia of Education, 321-324.
Pavić Kramaric, T., Aleksić, A., & Pejic-Bach, M. (2018). Measuring the impact of board characteristics on the performance of Croatian Insurance companies. International Journal of Engineering Business Management, 10, 1-13.
Piot, E., & Vahamaa, S. (2012). Did good corporate governance improve bank performance during the financial crisis? Journal of Financial Service Research. 41, 19-35.
Popoola, N. (2018, December 26). Failed policies, declining confidence slow insurance industry growth. The Punch Newspaper. Retrieved from https://punchng.com/failed-policies-declining-confidence-slow-insurance-industry-growth/
Reiter, J.K., & Rosenberg, J.R. (2003). Does size matter? The influence of large clients on office-level auditor reporting decisions. Journal of Accounting and Economics, 30, 375 – 400.
Seyedeh, Z.I, Elham. O. Abrandabadi, A.N., & Panahandeh, N. (2016). The Impact of Audit Quality on the Share Prices of Quoted Companies in Jordan. Research Journal of Finance and Accounting, 5(8), 150-166.
Sharinah, S., Mohd, M. F. M., & Azlina A. (2014). Audit committee and timeliness of financial reporting: Malaysian public listed companies. Middle-East Journal of Scientific Research, 22(2), 162-175.
Spence, A.M. (1973). Job market signaling. Quarterly Journal of Economic Theory, 87, 355-374.
Stainer, D. (2016). The pricing of audit services: Theory and evidence. Journal of Accounting Research (Spring), 161 – 190.
Sumaira, S., & Amjad, P. (2013). Professional audit competencies and audit quality, Reputation, and Success. Review of Business Research, 9(3), 66-85.
Suryanto, T., Thalassinos, J.E., & Thalassinos, E.I. (2017). Board characteristics, audit committee and audit quality: The case of Indonesia. International Journal of Economics and Business Administration, 5(3), 44-57.
Wallace, D. (1980). Toward a theory of self-directed learning: A study of experts without formal training. Journal of Humanistic Psychology, 20(2), 41-56.
Yadirichukwu, E., & Ebimobewei, A. (2013). Audit committee and timeliness of financial reports: Empirical evidence from Nigeria. Journal of Economics and Sustainable Development, 2(1), 25-36
Zábojníková, G. (2016). The Audit Committee Characteristics and Firm Performance: Evidence from the UK.
Published
2022-06-29
How to Cite
ALADE, M. E., AINA, O. B., & ODUGBEMI, O. M. (2022). Corporate Governance Characteristics and Audit Quality of Listed Insurance Firms in Nigeria. Global Journal of Accounting, 8(1), 1-12. Retrieved from http://gja.unilag.edu.ng/article/view/1547
Section
Articles
