i gusau journal of accounting and finance (gujaf) vol. 3 issue 2, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria 1 moderating influence of managerial ownership on debt financing and financial performance of manufacturing firms quoted on nigerian stock exchange abdullahi d. ibrahim, phd department of accountancy school of business studies federal polytechnic nasarawa. +2348033793282, adibrahimnas74@gmail.com ahmed hassan ahmed department of accountancy school of business studies federal polytechnic nasarawa. hassanrufai77.ah@gmail.com ramalan murtala muhammed department of accountancy school of business studies federal polytechnic nasarawa, +2348035866799 zainab abdulsalami department of accountancy school of business studies federal polytechnic nasarawa, +2348104002999, zainabj1970@gmail.com aliyu ahmed tanko department of accountancy school of business studies federal polytechnic nasarawa. +2348038452005 abstract the study considered the influence of managerial ownership and debt financing on financial performance of manufacturing firms listed on the nigerian stock exchange. the panel regression model utilized secondary data for a period of ten (10) years to 2020. the study sampled twelve (12) listed manufacturing firms in nigeria. findings revealed a negative effect of total debt on financial performance of selected quoted manufacturing firms in the period. the managerial ownership also negatively influences the financial performance of the sampled companies. the results clearly demonstrate that the interaction of debt financing and managerial ownership does not significantly influence the financial performance of listed manufacturing firms in nigeria implying very weak mailto:adibrahimnas74@gmail.com mailto:hassanrufai77.ah@gmail.com mailto:zainabj1970@gmail.com 2 moderating effect. the study recommends that listed manufacturing firms should consider their retained earnings to finance their operations instead of relying on debt finance, and directors should only own minority shareholding right in their companies as ownership of major shares cannot influence borrowing plans of the business. keywords: managerial ownership, financing, performance, equity and moderating influence 1. introduction finance decision as one of the financial management decisions cannot be ignored by corporate entities, policy makers, financial analysts and trade promoters. it focuses on available options of financing business and investment opportunities, settlement of day to day operating expenses and maintenance of cost of capital. more importantly, where a business raises its finance shall determine how much it will be ran profitably or not. therefore, attention should ensure effective management of borrowed funds. on the other hand, capital structure model has already built up funds structures for a going concern business, such as equity, preference share and debt. aziz (2019) observed that companies should be able to strategize their activities with a mix of equity and debt in order to increase their market value. though, excessive debt may overstretch the firm’s financial capacity, excessive equity weakens proprietorship premium and opens the company to outside control (owoloja, gbajumo, umoru, babatunde, & ilimezekhe, 2020). debt implies borrowing, that is, any fund that is subject to the payment of fixed return, such as long term loans, preference shares and debentures (alalade et al., 2015). however, debt capital with its associated risk and return, involves parting away funds from their owners. it is the interest rate companies, persons, or group of individuals pay on debt collected. it is supported by cost of debt capital, and from the borrowers’ point of view, onkware, joshua, and muya (2021) see it as the opportunity cost of making a specific investment. this cost has to exist in order to check financial managers’ excess and reckless spending on unprofitable and personal material things. sunday and onatuyeh (2019) were of the view that proper review of the different debt variants remains necessary. this would help to identify their individual effect on various performance returns. the short term debts, long term debts and total debts are usually used as the debt components. orji, nwadiator and agubata (2021), oghenero and samuel (2021), owoloja et al. (2020), sunday and onatuyeh (2019), usman, samaila and dalhat (2018), kalu and ken (2016) and oyesola (2009) used different measures of debt finance to locate their individual and aggregate influence 3 on various sets of performance indices. their findings have not been uniform due to a large number of factors ranging from study period, difference in settings and methodological approaches. however, none of these researches seem to acknowledge the possible influence of managerial ownership on the relation between debt financing and firms’ performance. therefore, against this background, the present study attempts to close the gap determine whether or not managerial ownership moderates the relationship between debt financing and financial performance of manufacturing firms on the nigerian stock exchange. this is desirable in view of the fact that managers have influencial responsibility to utilize both human and capital resources in their respective firms. the following null hypotheses are stated as below: ho1: debt financing does not significantly impact on the financial performance of manufacturing firms quoted on the nigerian stock exchange. ho2: managerial ownership and debt financing do not have significant moderating influence on the financial performance of manufacturing firms quoted on the nigerian stock exchange. 2. literature review and theoretical framework financial performance is the capacity to work profitably, proficiently and successfully and withstands ecological dangers while exhibiting the current chances and aptitude to develop (onkware et al, 2021). they also declared financial performance of a firm as that which can be analyzed in terms of profitability, dividend growth, sales turnover, asset base, capital employed among others. sunday and onatuyeh (2019) measured financial performance with such profitability indicators as earning per share, dividend per share, return on assets, return on equity among others. kalu and ken (2016) viewed financial performance as that which can be measured based on variables that involve productivity, returns, growth or even customers satisfaction. alalade and victor (2015) added that financial performance can be reflected in profit maximization, maximization of return on assets and maximization of shareholders’ return. debt finance has been the use of borrowed funds to run an operation of a business entity. it includes long term debt, short term debt and total debt. the long term debt represents the percentage of funds borrowed to finance assets of the firm and repayable after more than one year. these include debentures, bonds and long term loans issued by commercial banks (orji, nwadiator & agubata, 2021). they all carry different interest rates with some higher than the others. the long term facilities are required for expansion purposes as the expansion processes of firms 4 include acquisition of plant and machinery for the business, land and buildings, information and communication technology installations and upgrades. the total debts measure the total amounts of assets financed by creditors taking into consideration investors’ funds. these tell the proportion of corporate assets that are financed by long term and short term debt capital. the total debt capital ratio could enable creditors and loan issuers to examine the difference between financing with equity capital and total debts. in another words equally expressing the position of alalade and victor (2015), even though debt financing may be highly disadvantageous to firm, if not properly motivated it equally has the advantage of tax reduction on the firm which could make it important for consideration. the short term debts are borrowed monies with repayable period up to 12 months, and are used to fund current assets investment. they also showed that more debts could increase shareholders risk but when the conditions are right, it could increase their returns substantially, (orji et al. 2021). similarly, the long term debt is the percentage of assets financed with debt which is payable after more than one year. this includes debentures, bonds and long term loans issued by commercial banks (orji, nwadiator & agubata (2021). the managerial ownership is concerned with the percentage of equity shares owned by management (ida, made & mintarti, 2015). it includes the shareholders who run the affairs of the company. bodunde, clement and rosemary (2016) argued that the need to mitigate the agency problem has brought about the managerial ownership with a view to improving corporate performance. even then delegation of control to professional managers by owners is not compromised. consequently, jensen and meckling (1976) as cited by bodunde, et al. (2016), concluded that increasing managerial stake in the equity holdings of firms would serve as incentive to connect the interests of the managers with those of the shareholders. they also claimed that managers might possess superior information about potentials of a company over and above those possessed by the shareholders. against this backdrop, the extent to which managers will deplore their expertise in getting the company to maximize its potential and hence firm value will depend on their ownership stake in the firm. oghenero and samuel (2021) examined debt structure and performance of selected multinational companies in nigeria. from the results, total debt ratio had negative and significant impact on return on capital employed. also, other debt components of total debt and short term debt ratios had positive and statistically insignificant influence on return on equity. however, long term debt to asset ratio produced 5 negative and statistically insignificant impact on return on equity. the results of study by orji et al (2021) using ordinary least square regression technique reported significant and positive impact of debt financing on firms’ performance in nigeria. the study recommended debt finance to equity finance to improve performance. these studies ignored the role of managerial ownership in debt financing. mamaro and tsholofelo (2020)’s study found that long term debt to asset ratio negatively influenced financial performance of retail businesses. their findings are consistent with the trade off theory. therefore, it was concluded that the possible reason could be that most established retail firms prefer internal finance sources to debts. also, aziz (2019) revealed negative effect of debt finance on performance of the selected firms. therefore, his study recommended that the companies in pakistan should use less level of debt because it decreases the performance of companies in pakistan. though managerial ownership influence was considered, the finding remains limited to the sampled pakistan corporate firms. sunday and onatuyeh (2019) examined the effect of debt financing on the performance of listed consumer goods firms in nigeria. the results revealed debt ratios to have positively significant impact on performance of consumer goods firms quoted on the nigerian stock exchange. oyesola (2009) showed that debt finance significantly influenced the performance of nigerian listed firms. from the results it was obvious that firms in nigeria largely used short term debt finance. jensen and meckling (1976) showed that in an agency theory, debt is used where the ability to exploit profitable investment opportunities cannot be met from the resources of the shareholders. therefore, in order to implement business expansion programmes, debts are taken with agency costs. the debts should go a long way to mitigate agency cost and discipline managers who understand that they have to repay the loans with interests as at when due. jahanzeb, sai-ur-rehman, norkhairul, meisam and aiyoub (2014) declared that the trade-off theory’s original version came into being after the debate of modigliani-miller theorem (1958). that when the irrelevance theorem was added with the corporate income tax, this favored benefit for debt, that is it shields the earnings from taxes. firm’s managers evaluate and analyze the various costs and benefits of several alternatives of leverage plans. they posit that most of the time it is presumed that the interior solution should be obtained so that balance can be acquired between marginal costs and benefits. 6 3. methodology and data the study used secondary data from a population of forty-three (43) listed manufacturing firms for the period of 2011 to 2020. a sample size of twelve (12) companies was selected using judgmental sampling. according to tongco (2007) the judgmental sampling is the deliberate choice of research data for convenience reasons. as for this study, reason is not far from data easy accessibility and disclosure. the study also used ordinary least square regression to analyze the panel data collected for 10 years each of the twelve (12) sampled firms. this study adopted the econometric model as was used by aziz (2019) which portrays linear relationship between the managerial ownership, debt components and financial performance as follows: 𝑦 = 𝛼 + 𝛽1𝑥 + 𝜖………………………………………………………….1 𝑦 = the dependent variable; financial performance 𝛼 = the constant term 𝛽 = the coefficient/parameter of the independent variable; tda, mos 𝜖 = the error term total debt ratio (tda) = total debt to total assets ratio managerial ownership (mos) = percentage of directors’ share capital of the firm’s total share capital return on equity = profit after tax to equity ratio. total debt to asset ratio and managerial ownership (tda*mos) = the interaction of managerial ownership and total debt ratio roe = f(tda, mos, tda*mos)……………………………………........……..2 roeit = 𝛽0it + β1tdait +β2mosit + β3tda*mosit+ ∈…………………………3 4. results and discussions the table below provides the results of the data analysis as well as the discussions of findings of the study table 1: regression results variables coefficient t-value p-value vif tv tda -1.034 -1.51 0.000 3.457 0.289 mos -0.236 -2.66 0.009 2.995 0.334 tda*mos -0.0364 -0.07 0.943 1.25 0.799 constant 0.928 9.07 0.000 f-statistics 32.798 0.000 7 r2 0.533 source: stata 13 output the table 1 above shows an r2 value of 0.533 which suggests that the predicting variables explain variations in the return on equity at the rate of 53.3%. this proves also the statistical fitness of the model implying that the variables were properly selected and used in the study. it is supported by the f-statistics of 32.798 whose p-value of 0.000 is significant at 1%. from the table, the total debt with the parameter of -1.034 indicates that a unit change also decreases return on equity by 1.034. this result shows that debt finance as measured by total debt to asset ratio impacts negatively on financial performance of firms. the measurement of the effect of the independent variable on the dependent variable is at 5% significant level. the p–value of 0.000 confirms that total debts have significantly negative effect on financial performance. the finding is consistent with the work of sunday and onatuyeh (2019). similarly, the managerial ownership with a parameter of -.236 shows that a unit increase in managerial ownership while other predicting variables remain unchanged, the return on equity will decrease at the rate of 0.236. this is in support of the agency cost theory that suggested directors’ ownership of the minority firm’s equity. at the threshold of 5% significant level, the p – value of 0.000 implies that managerial ownership significantly influences financial performance of listed manufacturing firms in nigeria. further, the table shows a negative relationship between total debt to asset ratio\ managerial ownership and financial performance with a coefficient of -0.0364 and a t-value of -0.07. the correlation is statistically insignificant at a p-value of 0.943. this result demonstrates that financial performance decreases with the interaction between debt finance and managerial ownership. even though there is evidence of negative correlation between the interactive variables, the results indicate clearly that the moderating effect is statistically insignificant. 5. conclusions and recommendations based on the results, the study concludes that there exists a significant and negative influence of total debt finance on return on equity. this affirms that companies’ profitability growth mostly results from internal finance sourcing with less borrowing. the study also confirms the agency cost theory that sees the existence of relationship between the managerial ownership and firms’ performance. the 8 negative association places the directors to have minority shareholding in order to improve financial performance and avert some risk. the study also concludes that the interaction between debt finance and managerial ownership does not significantly influence financial performance of quoted manufacturing companies on the nigerian stock exchange. the study, therefore, recommends that firms should rely on their retained earnings because debt financing reduces financial performance. the firms should also consider allowing the directors to have limited minority shareholding for the purpose of improving their financial performance, and should diversify their funds into other profitable business opportunities in order to increase finances. reference aziz, s.u.a. (2019). effect of debt financing on firm performance: a study on nonfinancial sector of pakistan.open journal of economics and commerce, 2, 8-15. alalade, y.s.a., james, a.o., & victor, a.a. (2015). firm’s capital structure and profitability performance: a study of selected food product companies in nigeria. international journal of banking and finance research, 1, 64-83. bodunde, o.o., clement, o.o., & rosemary, o.s. (2016). managerial ownership and performance of listed non-financial firms in nigeria. international journal of business and emerging markets, 8, 446-461. ida, a.p.w., made, s.d., & mintarti, r. (2015). determinants of debt financing structure and debt maturity: empirical studies of manufacturing company in indonesian stock exchange. american journal of economics, 5, 321332. jensen, m.c., & meckling, w.h. (1976). theory of the firm: managerial behaviour, agency costs and ownership structure. journal of economics, 3. 305-360. jahanzeb, a., sai-ur-rehman, norkhairul, h.b., meisam, k., & aiyoub, a. (2014). trade-off theory, pecking order theory and market timing theory: a comprehensive review of capital structure theories. international journal of management and commerce innovations, 1,1118. kalu, a.o., & ken, n.c. (2016). capital structure composition and financial performance of firms in the brewery industry: evidence from nigeria. research journal of finance and accounting, 7, 7-15. mamaro, l., & tsholofelo, l. (2020). the impact of debt financing on financial performance: evidence from retail firms on the jse. journal of accounting and management,.10, 23-33. owkware, m., joshua, w., & james, m. (2021). moderating influence of firm size on cost of debt and financial performance of listed firms in nairobi securities exchange. international journal of academics and research, 3, 90-101. 9 orji, a., nwadialor, e. o. & agubata, n. (2021). effect of debt financing on firms performance in nigeria. journal of accounting and financial management, 7, 60-72 oghenero, o.g., & samuel, a.p. (2021). capital structure optimality and performance metrics of selected multinationals in nigeria. european journal of business innovation research,9, 68-80. oyesola, r.s. (2009). the effect of capital structure on profitability: an empirical analysis of listed firms in nigeria. the journal of business and finance research, 3. 121-129. owoloja, u.p.i., gbajumo-sherifm m.a., umaoru, b., babatunde, s.a., & ilimezekhe, d. (2020). capital structure and firm’s profitability: evidence from listed consumer goods sector in nigeria. journal of accounting, business and finance research, 9, 50-56. ruan, w., gary, t., & shiguang, ma (2011). managerial ownership, capital structure and firm value: evidence from china’s civilian-run firms. australian accounting business and finance journal, 5, 73-92. tongco, c. d. ma (2007). purposive sampling as a tool for informant selection. a journal of plants, people, and applied research. core.ac.uk sunday, a.j., & onatuyeh, a.e. (2019). effect of debt financing on the corporate performance: a study of listed consumer goods firms in nigeria. international journal of academic accounting, finance and management research, 3, 26-34. usman, h.a., samaila, i. n., & dalhat, b.s. (2018). capital structure and performance of deposit money banks in nigeria. ndic quarterly, 33, 49-76. i gusau journal of accounting and finance (gujaf) vol. 3 issue 2, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria 1 firms attributes and financial performance on listed deposit money banks in nigeria ismaila abubakar department of accounting kaduna state university, kaduna nigeria +2348036202601, abubakarismaila90@yahoo.com nuraddeen usman miko, phd department of accounting kaduna state university, kaduna nigeria +2348036691170, nuraumiko@gmail.com murtala abdullahi, phd department of accounting kaduna state university, kaduna nigeria +2348069179552, murtala.abdullahi@kasu.edu.ng abstract examining the effect of the financial performance of organizations has gained importance in the wholesale refinance literature; however, the study investigated determinants of financial performance of listed dmbs in nigeria for ten years from 2011-2020. the study adopts the correlation design so that to correlate the relationship between variables. the population of this study comprises the seventeen listed deposit money banks in nigeria as at 31 december, 2020. a total of thirteen which represent seventy-seven percent of the banks were duly used as sample for the study. the audited annual reports were obtained from nigerian stock exchange. the result provides evidence bank size, capital adequacy ratio and income diversification have insignificant impact return on assets of the banks. in the determining the effects of moderating impact on firm age is that capital adequacy ratio, bank size, income diversification has a statistically insignificant influence on the return on assets of listed deposit money banks in nigeria. based on the findings, the bank management should also continue to put policies and strategies in place to ensure effective management of bank size and efficiency for increased profitability, on the other part, shareholders should ensure management is properly diversified the banks’ income in a way that would yield more revenue and ensure short term cash should not be channeled to capital investment. keywords: bank age, bank size, capital adequacy ratio, deposit money banks, income diversification. 1. introduction financial performance plays a high level affair in economic resources distribution of any nations. financial performance has implication in terms of economic growth of any nations; great financial performance will attract more investors while poor financial performance will discourage investors, from investment which lead to mailto:abubakarismaila90@yahoo.com mailto:nuraumiko@gmail.com 2 financial failure and crisis, this can affect economic growth of a country (mark et al., 2019). according to oladipupo (2015) profitability has an aims of financial direction, as long as the aims of financial direction is to generate owners’ wealth, profit is one of the determinants financial performance. the aims of any business are to make profit; profitable businesses are capable to award its owners with a highly roi and also make sure that there rises sustainability of a business. according to oyinpreye (2016), the power of any bank depends on the capital adequacy. a bank’s capital is the detachment value of a bank to the current value of its future net income. capital adequacy measure the level of solvency for the bank, it indicates whether a bank has absolute capital to help the danger in its balance sheet. a larger bank are always has advantage over little banks for handling the measurement of economies in businesses and will tend to have more profit (haruna, 2015). the model linkage that live between bank size and profitability are very important and its can create a factors that can impact the profitability. bank size are defined as a barrel and diversity of services banks possesses and can make available concurrently to its customers (terraza, 2018). income diversification defined a bank to generate income other than the traditional interest income and it is calculated with total non-interest income all over total assets. banks needs change the traditional way of generating income toward opening more diversification services so that to have more competition in banking sector as well as non-banking sector and capital market. income diversification is an additional alternative of sources of income. it includes other earned charges for other bank services and service charges on deposit accounts (ibenta, 2018). bank age focused on company age means number of years that the banks have been in existing legally. morgan, et al (2004) defined bank age is a number of years’ banks has been active in operations. these is all about old generation banks and new generation, a bank that has age over other banks definitely most have exposure over the banks that have few years in existence and is measured as the number of years break up from the operation. in the year 2018, skye bank has changed identity to polaris bank because of financial crisis where all the staff will be retained under the new ownership structure (daily trust, punch, guardian and sun, 07 november, 2018). it is wellknown fact that bank failures don’t happen one day normally over a reasonable period; same of the reasons of banks failure includes poor management, nonperforming loan and insider abuses. polaris bank has acquired or taken over all the assets and liabilities of sky bank (sun, and guardian, 10 november, 2018). in the year 2019, access bank and diamond bank are merged where all the assets 3 acquired, it is clear that the compliance from both banks has showed the agreement as a friendly amalgamation. access bank has not clearly expressed their reasons for this merger. it means that access bank has to respect what diamond bank had achieved over the years, they reached agreement that the diamond bank mobile app would remain intact and prolific products of diamond bank will be retained the safety of the staff. this means the customers that have accounts with both banks they would not be merged by default, no shutting down branches and others agreement (guardian, sun and daily trust 17 march, 2019). in the year 2013 and 2017 unity bank plc made a total loss ofn-22,636,924 andn-14, 917,938 respectively as a result of poor management and non-performing loans from customers where earning per share drops to n-127.62 and n58.74 respectively (unity bank annual report, 2017 and 2013). the objectives on this study are to: i. investigate the impact of capital adequacy ratio on financial performance of dmbs in nigeria ii. examine the effect of bank size on financial performance of dmbs in nigeria iii. determine the impact of income diversification on financial performance of dmbs in nigeria iv. determine the moderating effect of bank age on the linkage between bank attributes (capital adequacy ratio, bank size and income diversification) and financial performance of dmbs in nigeria. base of the above objectives, hypotheses has been formulated in null form: h01: there is no significant linkage between capital adequacy ratio and financial performance of dmbs in nigeria. h02: there is no significant linkage between bank size and financial performance of dmbs in nigeria. h03: there is no significant linkage between income diversification and financial performance of dmbs in nigeria. h04: moderating ratio of bank age on the linkage between (capital adequacy ratios, bank size and income diversification) has no significant effect on financial performance of dmbs in nigeria. the previous literature, there few studies that conducted on banks attributes on financial performance of dmbs in nigeria by using income diversification and 4 bank age as an independent and moderating variable respectively. this investigation is going to balance the interval by using capital adequacy ratio, bank size and income diversification as independent variable and return on asset as dependent variable, this study also introduces bank age as moderating variable that can moderate linkage that exists between explanatory and dependent variable. the paper has the following other sections. section two reviews literature and theoretical in order to provide a basis for the research. section three contains the methodology adopt by this study. section four contains an argumentation of the results and findings of this study. section five includes conclusion and recommendations of the study. 2. literature review this concept provides a guide and details of the independent, dependent and moderating variables with the interrelationship between and among variables. a conceptual framework has been used in this research work to explain the possible courses of action or to show a thought or approach to an idea. 2.1 capital adequacy ratio and financial performance the impact of capital adequacy ratio on banks performance cannot be underrated back of capital adequate influences the amount of funds obtainable for loans, which constantly impact the level and degree of danger absorption mark et al (2019). it is clear that bank capital is act as safeguard cushions against losses drive-by certain kinds of dubiety. the perspective looks at capital as a reserve to avoid default and capital also acts as a bumper to protect depositors and other creditors upon misplacement at the operating and liquidation stage (osunsan et al.,2015) 2.2 bank size and financial performance bank size record the existence of economies or diseconomies of scale naceur& goaied (2008). the variable is calculated as the natural log of total assets (saona, 2011). economic theory indicates that market structure influence banks performance (ozili, 2019) and that if an company is subject to economies of scale, bigger institutions would be more efficient and could provide service at a small cost (rasiah, 2010). 2.3 income diversification and financial performance banks have to move away from their heritage activities, as far as sacrifice more diversified services as they face more competition within the banking industry as well from non-banking industries and capital markets. income diversification is an 5 option means of income other than earning from loans. it contains fees gained from sacrifice unit trust services, services charges on deposit accounts, and charges for other bank services (ibenta, 2018). 2.4 bank age and financial performance researchers have commenced to emolument more concentration in the role of age on performance of surviving banks (coad et at, 2013). studies have examined the age impact on new banks (stam &wennberg, 2009). performance and characters across banks of distant banks age and wage payment levels. hui, et al. (2013) nevertheless pointed out the studies on companies age and performance is scarce in less developed parts of the world. previous studies have shown that banks performance is a many-sided experience, as (delmar et al, 2016). theoretical framework the research framework is as follows figure 1 this study for bank attributes on financial performance of listed dmbs in nigeria are examined in range of portfolio theory and agency theory . the agency theory the agency theory lookout the firm as a linkage between the principal (shareholders) and agents (managers) in which decision-making power is delegated to the agent, purely it cannot be warranted that the decision of the agent be aligned with the interests of the principal (gurbaxani & whang, 1991). portfolio theory portfolio theory is the most consequential and plays a role in banking effort. according to abdulazeez et al. (2016) portfolio equilibrium classic of asset diversification, the easier way of holding of each asset in a capital owners’ capital adequacy ratio bank size income diversification bank age profitability 6 portfolio is a blast of policy decisions adjudicate by a number of proxy such as the vector of rates of return held in the portfolio, a vector of risks that linkage with the ownership of each financial assets and the size of the portfolio. base on this studies portfolio theory has been adapted. the portfolio theory describes that income diversification and wants portfolio to be masterpiece of conventional banks are output of making decisions by the management. 3. methodology this study uses correlation research design, because it is likely to demonstrate the statistical interrelation between two or more variables. this study will match of all the seventeen (17) nigerian dmbs where are listed on the nigerian stock exchange (nse) as at 31st december, 2020. this research will adopt a filtersampling technique, to arrive at thirteen (13) representing 77% of the population will be screened as a sample for this study, this investigation secondary sources of data collection where used, panel data will be generated from annual reports of the selected dmbs in nigeria. measurement of variables table 1: variables measurement variables ratio/symbol proxy/ definition sources profitability return on asset = roa earnings before interest and tax total assets yunusa, 2019) (oyinpreye, 2016) capital adequacy ratio total equity to risk weighted assets = car total equity total loans & advance (assfaw, 2018) (ani et al, 2012) bank size logarithm of total assets= bsize natural log of total assets (yunusa, 2019) (eyigege, 2018) income diversification non-interest income to total assets =ind non − interest income total assets (muhammed, 2015) (adina, 2013) bank age logarithm of age from date of listing=bage natural log of bank age (osunsan et al., 2015) source: compiled by the authors (2022) 7 model specification roait = α +β1carit + β2bsizeit β5indit +£it …………………….. (1) roait = α +β1carit β2bsizeit + β3indit + β4bageit + β5carit*ageit + β6bsizeit*ageit + β7indit*ageit + £it………… (2) where as: roa = return on assets, car= capital adequacy ratio, bsize = bank size, ind = income diversification, age = bank age, α = constant, β1-β7 = coefficient of the variables, £ = error term, i = bank, t = time 4. results and decisions table 2: descriptive statistics of the variables variable mean std. div minimum maximum roa 0.070 0.021 -0.02 0.18 car 0.542 0.248 0.06 0.89 bsize 23.273 7.761 18.520 56.10 ind 0.205 0.217 0.03 0.84 bage 1.208 0.375 0.23 1.89 source: stata 13 output the above table 2 acts that measure of financial performance which proxy by return on asset (roa) of the listed dmbs has a minimum value of -.02 and the maximum is .18. this implies that the banks that have lower percentage of 2 and higher percentage of 18. this indicated that, banks that have 2% roa documented lower financial performance, otherwise a higher financial performance. the mean is 0.007, which indicates 7% average financial performance in the sampled banks. the capital adequacy ratio (car) indicate that a fewer of .06 and largest of .89. the smallest ratio of capital adequacy is 6% and the largest ratio is 89%. this means that there is at least six percent of capital adequacy ratio and at most banks have eighty-nine percent capital adequacies of entire sampled listed nigerian dmbs. in addition, mean is .542, which shows most of the banks have averagely 54% of capital adequacy of listed nigeriandmbs. the standard deviations are.248, which suggested that, the data deviate from mean value by approximately 25%. the bank size (bsize) indicate that a smallest and largest of 18.52 and 56.10 respectively. this means that the smallest capital is 18.52billion of listed nigeria dmbs and the highest number is 56.10billion. this shows that some firms have violated the minimum requirement of twenty billion capitalization policy by central bank of nigeria (cbn). the mean is 23.273 which indicate that on the average it can be said there are banks that have approximately twenty-three billion capitals of nigeria dmbs. on average the banks have meet-up with the requirement 8 of the cbn. furthermore, income diversification (ind) has means of 0.205. this indicated the average 21% of the directors in the main board have accounting and financial knowledge. the smallest and largest level of the board financial expertise is 0.03 and 0.84 respectively. this indicated that some of the deposit money banks have three percent diversify their income, but some banks have diversified about eighty-four percent of their income to other activities. finally, the bank age (bage) indicates that a minimum of .23 and maximum of 1.89. this indicates little age of the sampled banks is 23 years, while there are some banks that are more than one hundred and eighty-nine years. the mean is 1.208 which indicates that on the average it can be said there are banks that have approximately one hundred and twenty years of listed deposit money bank in nigeria. table 3: correlation matrix variables roa car bsize ind age roa 1.0000 car -0.3348 1.0000 bsize 0.2758 0.0037 1.0000 ind 0.0308 0.1298 0.1658 1.0000 bage 0.0760 -0.0449 0.1778 -0.0632 1.0000 source: stata 13 output the table shows that car has negative association with roa of listed dmbs in nigeria. the indicates that an improvement in car lead to the decrease of roa of the listed dmbs in nigeria. while ind and bage have positive association with roa of the sampled firms. the correlation result in respect to the regressor themselves is that car has a positive association with bsize, and ind, but has negative relationship with bage only. similarly, bsize has a positive interrelation with ind and bage. finally, ind has a negative association with bage. table 4: random effect regression result variable coefficient t. value p. value tolerance/ vif constant .0720 8.69 0.000 car -.0251 -3.35 0.001 .981406/1.02 bsize .0007 3.39 0.001 .948882/1.05 ind .0089 1.01 0.314 .908216/1.10 r-square 0.1905 wald ch2 28.75 f-significant 0.0000 hettestprob> chi2 0.0665 9 source: stata 13 output 4.1 capital adequacy ratio and financial performance the regression result in table 6 shows that the coefficient of car is -0.251 and a tvalue of -3.35 with a p-value of 0.001 which is significant at 1% level of significance. this indicates that car is negatively and significantly affecting the financial performance of listed dmbs in nigeria. however, the output is unexpected as is not in line with the researchers’ prior expectation; adequate capital to run a business would lead to good financial result. the result is contrary with agency theory because management is expected to act on the shareholders’ interest. this is contrary with the findings of (mark et al., 2018). 4.2 bank size and financial performance this indicates that bank size has a coefficient of 0.007 and a t-value of 3.39 with a p-value of 0.001, which is significant at 1% level of significance. the result shows that, bank size is positively and significantly affecting the financial performance of the listed dmbs in nigeria. this suggests that the larger size of the bank, the effectiveness of the financial performance. the result is not unexpected as it`s in line with the researchers’ prior expectation, big banks are expected to provide all necessary facilities that could be used to improve financial commitments. the finding of this output is not with concept or line of findings from ani, et. al. (2012); aremu, et.al. (2013) and monday et al. (2019) that found bsize is insignificant influence on the financial performance. 4.3 income diversification and financial performance this shows that the coefficient and the t-value of income diversification (ind) .0089 and 1.01, respectively with the p-value of 0.314 where is insignificant at any level of significance. the result shows that ind is not significant impact on the financial performance of the listed dmbs in nigeria. the result is not in line with reality that diversification of income from the traditional system would increase inflow which as well improve the financial performance. the statistical result is contrary or inverse to the finding of chinye, et. al. (2013) and ibenta (2018) who arrived significant association. table 5: regression result for hypotheses variable coefficient p-value car -.0017 0.945 bsize .0008 0.249 ind -.0533 0.024 bage .04898 0.025 10 carage -.0121 0.498 bsizage -.0002 0.675 indage .0435 0.018 source: stata 13 output ho1: the hypothesis one stated that: car has no significant effect on the financial performance of the dmbs in nigeria. the result reveals that car with a coefficient of -0.0017 and a p-value of 0.945 has negative and insignificant impact on the financial performance of the listed dmbs in nigeria. therefore, the result provides basis of not to reject the null hypothesis one of the study. therefore, the hypothesis one is hereby fail to reject. ho2: bsize has no significant effect on the financial performance of listed dmbs in nigeria. this result reveals bsize which has a coefficient of 0.0008 and a p-value of 0.249 is positive and insignificant related to the financial performance of listed dmbs in nigeria at any level of significance. the result is not rejects the null hypothesis three of the study. thus, the hypothesis three is hereby fails to reject. ho3: the hypothesis one stated that: ind has no significant effect on the financial performance of the listed dmbs in nigeria. the result reveals that ind with a coefficient of -0.0533 and a p-value of 0.024 has negative and significant impact on the financial performance of the listed dmbs in nigeria at 5% level of significance. therefore, the result provides basis of rejecting the null hypothesis five of the study. therefore, the hypothesis five is hereby rejected. ho4: bage has no significant impact on the financial performance of the listed dmbs in nigeria. the result shows that bage has positive and significant influence on the financial performance of the listed dmbs in nigeria, given the coefficient of 0.04898 and a p-value of 0.025 which is statistically significant at 5% level of significance. the result provides an evidence of rejecting the null hypothesis six of the study. hence, the hypothesis six is hereby rejected. 5. conclusion and recommendations 11 the study concludes that, car, bsize have insignificant influence on the roa of listed dmbs in nigeria. indicating that a change of car, bsize does not leads to change of roa of listed dmbs in nigeria. ind has a significant negative impact on the roa of listed dmbs in nigeria. this shows that an increase of ind leads to the decrease of roa of listed dmbs in nigeria. in the determining the effects of moderating impact on bage. it conclusively indicated that bage is negative but no significant moderating the relationship between car, bsize and roa of listed dmbs in nigeria. this means that bage cannot moderate the relationship of car, bsize and roa. bage has statistically positive moderating effect on ind and roa. this reveals that bage has improved the relationship between ind and roa of listed dmbs in nigeria. from the findings and conclusions of the study, the study makes the following recommendations: the cbn should pay attention to the cost incurred by banks on deposits maintained with then as this may have significant on the banks’ capital and performance. the bank management should also continue to put policies and strategies in place to ensure effective management of bank size for increased profitability. on the other part, shareholders should ensure management is properly diversified the banks’ income in a way that would yield more revenue and ensure short term cash should not be channeled to capital investment. references abdulazeez d., suleiman o., & yahaya a. (2016). impact of merger and acquisitions on the financial performance of deposit money banks in nigeria. arabian journal of business and adamade u.& samuel s. (2015). the relationship between firm age and performance in nigeria. journal of sustainable development in africa, 17(3), 128–141. alshatti, & ali s. (2015). the effect of credit risk management on financial performance of the jordanian commercial banks. "investment management and financial innovations, 12(1), 338–345. ani w., ugwunta d., ezeudu j., & ugwuanyi g. (2012). an empirical assessment of the determinants of bank profitability in nigeria: bank characteristics panel. journal of accounting and taxation 4(3), 38–43. aremu m. a., ekpo i. c, & moustapha a. m. (2013). determinants of banks' profitaility in a developing economy: evidence from nigerian banking industry, interdisciplinary. journal of contemporary research in business , 4(9) 50-62. assfaw g.,& alim. (2018). determinants of the financial performance of private commercial banks in ethiopia: bank specific factors analysis. global journal of management and business research, 18(3) 14-25. athanasoglou p., &danniel m. d. (2006). determinants of bank profitability in the 12 south eastern european region. working paper . chinye o., osadume o., & rechard b.o. (2013). the determinants of financial performance of quoted banks in nigeria: a study of selected deposit money banks(dmbs). international journal of education and research, 1(10), 1– 18. coad, aj l., segarra a. & teruel m. (2013). like milk or wine: does firm performance improve with age? structural change and economic dynamics, journal of monetary economics, 5(1), 173-189. david c, &joy a. (2016). determinants of bank profitability in europe,north america and australia. journal of bank profitability in ukraine, 7(1-10). delmar f., davidsson p. & gartnerw. (2003). arriving at the high-growth firm. journal of business venturing, 18, 189–216. ejoh d, &nwonko o. (2014). the impact of capital adequacy on deposit money banks profitability in nigeria. research journal of finance and accounting, 5(12), 7–16. eyigege s, & anni i. (2018). influence of firm size on financial performance of deposit money banks quoted on the nigeria stock exchange 2 . conceptual frame work 3 . empirical review. international journal of economics and financial research, 4(9), 297–302. eyigege s. (2018). financial performance of deposit money banks quoted on the nigerian stock exchange. an empirical analysis. international journal of economics, business and management research, 2(4), 329–342. gul s., irshad f., & zaman k. (2011). factors affecting bank profitability in pakistan. romanian economic jornal , 14(39): 61-87. haruna muhammed . (2015). determinats of financial performance of listed mega banks in nigeria. an msc thesis, ahmadu bello university, zaria hui h., radzi c.w, jenatabadi h.s., abu kasimf., & radu s. (2013). the impact of firm age and size on the relationship among organizational innovation, learning, and performance: a moderation analysis in asian food. interdisciplinary journal of contemporary research in business, 5(3), 166-174. ibenta o. r. & samuel f. (2018). evaluation of the financial performance of deposit money banks in nigeria ( 2001 – 2014 ). iiard international journal of banking and finance research, 4(2), 23–50. lipuma j., newbert s., & doh j. (2013). the effect of institutional quality on firm export performance in emerging economies: a contigency model of firm age and size. small business economics, 4(2), 817-841. i̇slatince n. (2015). analysis of the factors that determine the profitability of the deposit banks in mark j. a, abbag. o, okwa e, soje b, & aikpitanyi l. n. (2019). determinants of capital adequacy ratio of deposit money banks in nigeria. journal of accounting & marketing, 7(2), morgan n., kaleka a. & katsikeas c. (2004). antecedents of export venture 13 performance: a theoretical model and empirical assessment. journal of marketing, 68, 90-108. naceur s. b., & goaied m. (2008). the determinants of commercial bank interest margin and profitability, evidence from tunisia. frontiers in finance and economics , 5(1): 106-130. naceur s. b, & goaied m. (2020). profitability of commercial bank on interest margin: evidence from tunisia. frontiers in finance and economics , 2(6): 10-18. okey n., precious o., &obi j. (2019). financial soundness of deposit money banks in nigeria : the camels model approach. international journal of family business and management 3(1), 1–8. olabamiji, o., & michael, o. (2018). credit management practices and bank performance : evidence from first bank. south asian journal of social studies and economics, 1(1),1–10. oladipupo f. (2015). determinants of deposit money banks profitability in nigeria. kuwait chapter of arabian journal of business and management review, 4(9), 10–18. olarewaju, o. m, & akande j. o. (2016). an empirical analysis of capital adequacy determinants in nigerian banking sector. international journal of economics and finance, 8(12), 132– 142. osadume r. (2018). evaluation of the financial performance of deposit money banks in nigeria (2001 – 2014 ). iiard international journal of banking and finance research, 4(2), 23– 50. osunsan o. k., nowak j, mabonga e, pule s, kibirige a. r, & baliruno j. b. (2019). firm age and performance in kampala , uganda : a selection of small business enterprises. international journal of academic research in business and social sciences, 5(4), 412–422. oyinpreye t. (2016). return on assets and capital adequacy of banks in nigeria . advances in social sciences research journal,3(12), 139–149. peterson k. (2019). determinants of banking stability in nigeria. munich personal repecarchive. journal of european research in business and economics, 5(4), 153–165. ramadan i, queen a, & theary. a. (2015). determinant of bank profitability: evidence from jordan. international journal of academic research, 3(4), 180– 191. richard b. o, and o. c. (2013). the determinants of financial performance of quoted banks in nigeria. international journal of education and research, 1(10), 1–18. robert o. (2017). analysis of factors influancing the profitability of listed commercial banks in kenya. a msc thesis, university of narobi, kenya. samuel f. (2015). evaluation of the financial performance of deposit money banks in nigeria (2001 – 2014 ). iiard international journal of banking and finance research, 4(2), 23–50. 14 sufian f., (2015). determinants of profitability in thailand banking sector: panel evidence from the post asian crisis period. international journal of economics and accounting , 1: 161 179. sugianto d. k. (2017). the moderating effect of age, income, gender, the influence of customers satisfaction towords customer loyalty in airline industry in china: asian academy of management journal of accounting and finance, 6(7), 205-213. tarawneh m. (2006). a comparison of financial performance in the banking sector: some evidence from oman commercial banks. international research journal of finance and economics, 3(1), 103-112. terraza v. (2018). the effect of bank size on risk ratios: implications of banks performance. centre for research in economics and management (crea) university of luxembourg, germany. 3(6) 1–12. udom i. s, & raymond o. (2018). effect of capital adequacy requirements on the profitability of commercial banks in nigeria. international research journal of finance and economics, 2(5) 165-172. ujuju e. and lorent u. (2018). risk management, risk concentration and the performamnce of nigerian deposit money banks. international journal of business and management review, 6(10), 56–68. umoru d, & osemwegie j. o. (2016). capital adequacy and financial performance of banks in nigeria : empirical evidence based on the fgls estimator. european scientific journal, 12(25), 295–305. wisdom a. o, and gebrel o. (2018). risk management and financial performance of deposit money banks in nigeria. european journal of business, economics and accountancy, 6(2), 30–42. yunusa a, musa b, and olamide m. (2019). determinants of survival of listed deposit money banks in nigeria. european journal of accounting, auditing and finance research, 7(3),20-40. 15 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 1 audit quality and earning management of listed insurance companies in nigeria abubakar abubakar department of accounting federal university of kashere, nigeria abubakarabubakar2020@gmail.com saifullahi abdullahi mazadu department of procurement and supply chain management kaduna state university, nigeria saifullahiabdullahi@kasu.edu.ng ahmed mogauri yusuf department of accounting gombe state polytechnic bajoga, nigeria ahmedmogauriyusuf@gmail.com abstract this study examines audit quality and earnings management of listed insurance companies in nigeria over the period of 5 years (2015-2019). the study used simple random sampling technique to arrive at sample size of ten (10) insurance companies listed the floor of nigerian stock exchange as at 2019. secondary data extracted from annual reports and accounts of the sampled firms was analyzed using multiple regression. the regression result shows that audit firm size has a positive and significant impact on earnings management of the sampled firms, while joint audit service has a negative and significant impact on earnings management. however, auditor independence has negative and insignificant impact on earnings management. therefore, the study recommends that regulators especially security and exchange commission should encourage or make it as part of law to listed insurance companies in nigeria to employs the service of both big 4 audit firm and the local audit firm for audit assignment in order to safeguard firm’s earnings from management manipulation. keywords: audit firm size, independence, joint audit, earnings management, insurance companies. 1. introduction earnings management is a widely researched area in the field of accounting for over two decades. earnings management is generally regarded as a negative factor that affects the quality of financial report. in accounting literature, there are different terms that are identical with earnings management such as creative accounting, mailto:abubakarabubakar2020@gmail.com mailto:saifullahiabdullahi@kasu.edu.ng mailto:ahmedmogauriyusuf@gmail.com gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 2 cooking the books, earnings manipulation, accounts manipulation, income smoothing to mention but a few. apart from using accounting measures to manipulate earnings, managers also resort to real transactions. while showing that managers maneuver sales, overproduce inventory and reduce optional expenses to avoid incurring losses or missing analyst forecasts (eriabie & dabor 2017). moreover, bens, hassan (2013), opined that firms also manipulate research and development costs to smooth reported earnings or avoid earnings per share dilution. audit quality is among the factors that have an effect on the reliability of accounting information. this can be inspiration for more research on audit quality and the other factors that may influence it. audit quality is defined as the possibility that an auditor would find out break in the owners accounting system and report the violated. the findings of misstatement measures quality in terms of the auditor’s knowledge and ability, while the reporting of a misstatement is dependent on the auditor’s incentives to disclose (ozkan, 2018). thus, the auditors should give a professional judgment concerning the creditability and reliability of accounting information enclosed in the annual reports and accounts for a particular period of time. however, the assessment carry out by auditors is vague ((iwiyisi & ifeanyi, 2018). therefore, the audit process is not mostly assessable and the appraisal of the quality of audit services must be indirect indication. (francis & yu, 2009) have paying attention on either factor that influences audit quality or consequences of audit quality. this study considers the factors that will improve audit quality: auditor-specific attributes such as audit firm size, joint audit and auditor’s independence. considerably several studies were conducted in different parts of the world to identify the impact of audit quality on earning management. audit quality proxies such as; audit firm size, auditor’s independence and joint audit service, however, many others were tested to measure earning management by using discretionary accruals. some of these studies include but not limited to (inaam, khmoussi & zehri 2012; iwiyisi & ifeanyi 2018; jayeola, taofeek & toluwalase 2017; ajekwe & ibiamke 2017; eriabie & dabor 2017; hassan & faruk 2014). none of the previous studies focused on the listed insurance companies in nigeria. this study therefore fills the identified gap in the previous studies. the financial industry in nigeria has remained one of the pivots of the economy because of its vast capital base and lending capacity. aside the federal government, the financial sector has the highest employer of labor and therefore needs gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 3 transparent, reliable and efficient audit to control earnings manipulation, this encouraged for this research as many studies have done on banking sector without considering the exposure risk covered by the insurance companies. therefore, aims at examine the impact of audit quality on earnings management of listed insurance firms in nigeria. 2. review of related studies in this section, related literatures on audit quality and earnings management are reviewed and the theoretical framework for the study is presented. audit firm size and earnings management there are inconclusive findings with respect to the relationships between audit quality and earnings management in the literature. for instance, with regard to audit firm size and experience big 4 has been the common and a subject of audit quality studies (ozkan (2018). lobo, paugam, zhang and casta (2016) documented that firms audited by big 4-non-big 4 auditor pair (bs) are more likely to book an impairment and book a larger impairment than firms audited by a big 4-big 4 auditor pair (bb) when low-performance indicators suggest a greater likelihood of impairment. moreover, firms audited by a bb pair reduce impairment disclosures when they book impairments, while firms audited by a bs pair do not, suggesting lower transparency for firms audited by a bb pair. almarayeh, aibar-guzmán, and abdullatif (2020) consolidated past studies in jordan by a renewed investigation into the association between two auditor characteristics, namely auditor size and audit fees as well as earnings management. with a final 251 firm’s/year observations, similar to past jordanian studies, over a 5-year period, the results depict no significant influence of these two proxies of audit quality and restriction on earnings manipulations in jordan. further, the results based upon a generalized least square regression (gls) show a positive and significant influence of all control variables (firm size, growth and roa), except leverage, though positive but insignificantly related to accrual earnings management. in addition, a relatively low value (18%) was reported as the adjusted r2 indicative that the totality of the explanatory variable explains only 18 percent differences in earnings management. similar study by alzoubi (2016) examined the effect of disclosure quality on the magnitude of earnings management among 86 industrial companies quoted on the amman stock exchange for four years between 2007 and 2010. using a gls regression in order to surmount the heteroskedasticity problems of ols, the findings from the study show disclosure gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 4 quality exerting a negative influence on incidence of earning management, accounting for 45 percent variations therein, thereby improve the quality of accounting information. of note are size of the audit firm (measured by big4 versus non-big4 dichotomy), client’s size (natural log of total assets) and clients’ profitability (proxied with roa). as expected, all displayed a negative and significant relationship with earnings management. ajekwe and ibiamke (2017) examined the association between audit quality and earnings management of listed firms in nigeria from 2009-2014. the study used ols in analyzing the data. the study measures audit quality by audit firm size and earnings management by the absolute abnormal discretionary accruals using the modified jones model. the study was carried out in two parts, the first part is the comparative study using independent sample t-test and the wilcoxon signed ranked test. the second part is the multivariate analysis where the association between audit quality and earnings management was examined. based on our analysis, we found that auditor size has restrained earnings management but the decrease is not statistically significant. this study adds to the literature on audit quality by showing that big-four auditors (proxy for audit quality) may not constrain earnings management of client firms in certain regulatory and institutional environments. auditor independence and earnings management martinez and moraes (2016) investigated effect of audit fees on earnings management in brazilian market using a sample of 300 firms listed on the bm&f bovespa for which it was possible to identify the amount paid to the auditors, using data gathered from the economatica database and the website of the brazilian securities commission. the study analyzed the data using multiple regressions and the findings revealed a negative and significant relationship between audit fee and earnings management meaning that audit firms that charge less for their service tend to be more relaxed regarding earnings management by their client companies. similarly, nawaish (2016) examined the prediction that external audit quality is positively associated with earnings management in jordanian banking firms listed in amman stock exchange (ase). findings revealed that audit tenure, audit fees, and auditor specialization have significant relations with earnings management. it means, future earnings management forecast is predictable based on audit quality leading indicators (audit tenure, audit fees, and auditor specialization). gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 5 aliyu, musa and zachariah (2015) examined the impact of audit quality on earning management of listed deposit money banks in nigeria for the period of 2006-2013. the study used the ordinary least squares (ols) regression technique of data analysis; the results show that audit quality has significant impact on the earnings management of listed deposit money banks in nigeria during the period under the study. the results also show that audit firm size and joint audit services have significant negative impact on the earnings management of listed deposit money banks in nigeria. while auditor financial dependence has a significant positive impact on earnings management of listed deposit money banks in nigeria. joint audit service and earnings management empirical studies on joint audit also reported mixed results. deangelo (1981) opined that recent literatures have encouraged joint auditors approach in ensuring objective financial reporting. that is the appointment of joint auditors to a firm will enhance its financial reports quality by minimizing earnings management. a study by francis et al. (2009) analyzed the consequences of france’s joint audit requirement on earnings quality and find that big 4 auditor-pairs are associated with lower levels of income-increasing abnormal accruals. they found that in france firms with one or two big 4 auditors are less likely to have income increasing abnormal accruals than other firms. firms audited by two big 4 auditors were even less likely to have income-increasing accruals. big 4 auditors paired with non-big 4 auditors are also associated with lower levels of income increasing abnormal accruals however to a lesser extent and concluded that a pecking order explains this with regards to earnings quality and auditor-pair choice. marmousez (2009) examined the impact of joint auditor pairs in france on financial reporting quality, measured by the degree of earnings conservatism. he provides evidence that big 4–big 4 auditor pairs are not associated with earnings conservatism whereas big 4–non-big 4 auditor pairs are associated with conservatism. jayeola et. al (2017) examined the relationship between audit quality and earning management in nigeria deposit money banks. the study adopted a longitudinal research design and secondary data covering a period of 2005-2014 were collected. panel data technique was employed, while fixed and random effects model were used for estimation. descriptive statistics, pearson correlation coefficient and simple pooled ols regression analysis were used for analysis to determine possible link between the variables identified. the results showed that joint audit has a significant positive relationship with earnings management, which gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 6 implies that a change to joint audit from single audit increases earnings management. moreover, results reveal that audit specialization has a significant negative relationship with earnings management, which implies that every unit increase in audit specialization decreases earnings management. mandour, file and kwak (2018) examined the effect of joint audit and dual audits on earning management practices during the period 2010-2014. the purpose of the paper is to determine the impact of the voluntary adoption of the joint external audit approach in reducing earnings management practices through accruals and real operations compared with the adoption of the dual external audit approach. the study used multiple regressions to analyze the data. the research follows a quantitative approach to collect and analyze data from companies listed on the egyptian stock exchange. the findings of the empirical studies show that there are consistent earnings management practices in the studied sample regardless of the type of audit (joint or dual audit). there is a negative association between joint audit and discretionary accruals compared to dual audit. this means that firms with joint audit are less engaged in accrual earnings management practices. in addition, large firms that adopt joint audit are less engaged in accrual earnings management. however, there is no effect of joint audit on real earnings management practices compared to dual audit. our result is consistent for firm size, profitability, and leverage. both firm profitability and leverage show positive association with earnings management practices while size did not have a significant effect on either type of practice. finally, the study recommends that, firms with high (low) profitability that adopts joint audits are less (more) likely to engage in real earnings management practices. 3. methodology and model specification this study adopted a quantitative research approach where data was gathered through secondary approach. the population is made up of entirely twenty-eight listed insurance companies whose shares are traded in the nigerian stock exchange (nse). simple random samples were used to arrive at samples of 10 insurance companies where sunu assurances nigeria plc, unic insurance, veritas kapital assurance plc, universal insurance company plc and regency alliance insurance plc were eliminated as a result of unavailable data during the period of the study. data were extracted from annual reports and account of 10 listed insurance companies in nigeria for the period of 5 years 2015 to 2019. statistical tools such as descriptive, correlation and regressions were employed to analyze the results of the study. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 7 table 1 variables and their measurement variables proxies variables measurement source dependent discretionary accruals cfo-pat/ta lisar, lisar and zadeh (2016) independent audit firm size dummy variable: 1= external auditor is 1 of the big4, 0 otherwise. basiruddin (2011), lisar, lisar and zadeh (2016) auditors independent non-audit fees divided by total audit fees lin and hwang (2010) joint audit dummy variable 1= if the firm make use of joint audit 0 otherwise. hassan (2011) control variables firm size natural log of total asset hassan and bello, (2013) hamid and abubakar (2019) firm age years of listing hamid and abubakar (2019) das (2014) sources: developed by the researcher, 2020 model specification the multiple regression model for this study is specified as follows: dait = β0 + β1afsit + β2aiit + β3jait + β4fsizeit + β5fage μ where: da = discretionary accruals afs = audit firm size ai = auditors independence ja = joint audit fsize = firm size fage = firm age β0 = fixed intercept/constant β1-5 = coefficient of the explanatory variables μ = error term i = insurance t = time gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 8 4. results and discussion descriptive statistics the descriptive statistics of variables under study were analyzed as contained in the table 2 below: table 2: descriptive statistics variable mean std. dev min max cfo 0.044 0.121 -0.218 0.646 afs 0.640 0.484 0.000 1.000 ai 0.452 0.104 0.160 0.500 ja 0.440 0.501 0.000 1.000 fsize 23.65 0.918 22.00 25.60 fage 19.40 8.957 6.000 29.00 source: stata output, 2020 table 2 shows that the measure of earnings management (cfo) of listed insurance firms in nigerian has a mean value of 0.044 with standard deviation of 0.121, and minimum and maximum values of -0.218and 0.646 respectively. this shows that the data move away from average value by 0.121. this suggests that the dispersion of the data from the mean is wide because the mean value is greater than the standard deviation. the table 2 also indicates audit firm size (afs) has an average value of 0.64 with standard deviation of 0.484, and the minimum and maximum values are 0.000 and 1.000 respectively. this shows that 48% of listed insurance companies in nigeria were audited by large audit firm (big 4) during the period of the study. the table 2 also shows that audit independence (ai) has a mean value of 0.452 with standard deviation of 0.104367, the minimum and maximum values of 0.16 and 0.5 respectively. moreover, table 2 shows that on average 44% of the samples firms utilized the services of joint audit (aj) during the period under the study, from the mean value of 0.440 with standard deviation of 0. 501. the minimum and maximum values of joint audit as measured by dichotomous variables are 0 and 1 respectively. finally, the results in table 2 indicated that firm size and age has a mean value of 23.658 and 19.4 with standard deviation of 0.918759, and 8.957952 and minimum and maximum values of 22, 6 and 25.6 and 20 respectively. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 9 correlation matrix the correlation matrix is used to find out the degree of association between the dependent variable and independent variables used in the study. table 3: correlation matrix variable cfo afs ai ja fsize fage cfo 1.000 afs 0.124 1.000 ai 0.075 0.509 1.000 ja -0.076 -0.510 -0.008 1.000 fsize -0.163 0.217 0.202 -0.539 1.000 fage -0.148 0.033 0.412 0.4412 -0.098 1.000 source: stata output, 2020 from the correlation results presented in table 3, the relationship between earnings management with the independent variables (i.e. audit firm size, auditor’s independence, joint audit firm size and age) indicated that audit firm size and audit independence are positively but weak associated with earnings management, while joint audit, firm size and firm age are negatively and also association with earnings management in the listed insurance companies in nigeria. from table 3 it can be observed that audit firm size (afs) has appositive strong association with other explanatory variable with exception of joint audit. however, auditor independence has a weak and positive relationship firm size and firm age. from table 3 joint audits shows a negative but strong relationship with firm age while firm sizes have a negative but strong relationships with joint audit. regression results this constitutes the summary of the multiple regression results obtained from the model using ordinary least square regression. the results show individual impact between the independent variables (audit firm size, audit independence and joint audit) and finally the overall impact between the dependent variable and the independent variables. this is presented in table 4 below. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 10 table 4 : summary of regression result variable coefficient t-value p-value constant 0.138 1.010 0.318 afs 0.049 2.250 0.029 ai -0.002 -1.100 0.279 ja -0.031 -2.130 0.039 fsize -0.002 -0.210 0.835 fage -0.035 -0.660 0.514 f-statistics 2.96 f-sig 0.022 r square 0.252 adjusted r square 0.167 source: stata output, 2020 from table 4 above, the results show an overall r square of (0.17), that is the coefficient of determination which represents the percentage of change in earnings management as explain by explanatory variables. this indicate that 17% changes in the earnings management is explain by explanatory variables used in the model; this signifies that the explanatory variables cumulatively bring about 17% changes in nigerian listed insurance and 83% is explained by other factors not accounted for by the model. this implies that the model is fit and the variables are appropriately selected. in evaluating the model based on the regression results audit firm size as indicate in table 4.3 has a positive and significant impact on earnings management of listed insurance companies in nigeria considering the coefficient value of0.049 and a p-value of 0.029 which significant at 5%. this suggests that as listed insurance companies continue use of big 4 audit firm lead to increase of earnings management by 5k. table 4 above also shows that joint audit services has a negative significant impact on earnings management of listed insurance companies in nigeria from the coefficient of -0.031which is significance at 5% level of significance (pvalue of 0.039). this suggests that as listed insurance companies continues to employs the joint audit services, the earning management decrease by 31k. similarly, the table shows that auditor independence has a negative and insignificant effect on earnings management of listed insurance companies in nigeria. this signifies that auditor’s independence does not have any impact of gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 11 earnings management of listed insurance companies during the period under review. 5. conclusion and recommendations this study has empirically provided evidence on the relationship between audit quality attributes proxies by audit firm size, auditor independence and joint audit on earnings management of listed insurance firms in nigeria. based on the findings, it is concluded that audit firm size and joint audit service has significant impact on earning management of listed insurance company in nigeria. however, study concludes that auditor’s independence has negative insignificant impact on earning management of listed insurance companies during the period under review. in line with findings and conclusions drawn from the study, therefore, the study recommends that the supervisory body especially security and exchange commission have to encourage or make it as part of law to listed insurance firms in nigeria to employs the service of both big 4 audit firm and the local audit firm for audit assignment in order to safeguard firm’s earnings from unwanted management manipulation. references abbasiazadeh, l., & zamanpour, a. (2016). investigation the effect of audit size on earnings management in tehran stock exchange. international journal of humanities and cultural studies (ijhcs) issn 2356-5926, 21882196. ajekwe, c. c., & ibiamke, a. (2017). the association between audit quality and earnings management by listed firms in nigeria. european journal of accounting, auditing and finance research, 5(4), 1-11. aliyu, m. d., musa, a. u., & zachariah, p. (2015). impact of audit quality on earnings management of listed deposit money banks in nigeria. journal of accounting and financial management, 1, 30-46. almarayeh, t. s., aibar-guzmán, b., & abdullatif, m. (2020). does audit quality influence earnings management in emerging markets? evidence from jordan. revista decontabilidad-spanish accounting review, 23(1), 64-74. alzoubi, e. s. s. (2016). audit quality and earnings management: evidence from jordan. journal of applied accounting research, 17, 170-189. ashbaugh, h., lafond, r., mayhew, b., (2002). do non-audit services compromise auditor independence? further evidence. the accounting review 78 (july), 611-639. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 12 balsam, s., krishnan, j., & yang, j. s. (2003). auditor industry specialization and earnings quality. auditing: a journal of practice & theory, 22(2), 71-97. basiruddin, r. (2011). the relationship between governance practices, audit quality and earnings management: uk evidence (doctoral thesis university of durham uk). becker, c. l., defond, m. l., jiambalvo, j., & subramanyam, k. r. (1998). the effect of audit quality onearnings management. contemporary accounting research, 15(1),1-24. deis jr, d. r., & giroux, g. a. (1992). determinants of audit quality in the public sector. accounting review, 462-479. eriabie, s., & dabor, e. l. (2017). audit quality and earnings management in quoted nigerian banks. francis, j. r., & yu, m. d. (2009). big 4 office size and audit quality. the accounting review, 84(5), 1521-1552. francis, j. r., maydew, e. l. & sparks, h. c. (1999). the role of big 6 auditors in the credible reporting of accruals. auditing: a journal of practice and theory. vol. 18, no. 2: 17-34. francis, j., reichelt, k. & wang, d., (2009). the pricing of national and cityspecific reputations for industry expertise in the u.s. audit market. the accounting review. 113-136. geiger, m., lennox, p. & north, k. (2008). auditor tenure and audit reporting failures. auditing: a journal of practice & theory 21 (march): 67:78. gul, f. a., fung, s. y. k., & jaggi, b. (2009). earnings quality: some evidence on the role of auditor tenure and auditors’ industry expertise. journal of accounting and economics, 47(3), 265-287. hassan, s. u., & farouk, m. a. (2014). firm attributes and earnings quality of listed oil and gas companies in nigeria. review of contemporary business research, 3(1), 99-114. healy, p. m., & wahlen, j. m. (1999). a review of the earnings management literature and its implications for standard setting. accounting horizons, 13(4), 365-383. inaam, z., khmoussi, h. i., & fatma, z. (2012). audit quality and earnings management in the tunisian context. international journal of accounting and financial reporting, 2(2), 17. jayeola, o., taofeek, o. a., & toluwalase, a. o. (2017). audit quality and earnings management among nigerian listed deposit money banks. international journal of accounting research, 5(2), 1-5. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 13 hamid, k. t., & abubakar a (2019). effect of firm characteristics on voluntary accounting information disclosure by listed consumer goods firms in nigeria. nigerian journal of management technology, 9(2), 53-74. kim, j. b., chung, r., & firth, m. (2003). auditor conservatism, asymmetric monitoring, and earnings management contemporary accounting research, 20(2), 323-359. krishnan, j., & schauer, p. c. (2000). the differentiation of quality among auditors: evidence from the not‐for‐profit sector. auditing: journal of practice & theory, 19(2), 9-25. krishnan, g. v. (2003). does big 6 auditor industry expertise constrain earnings management. accounting horizons, 17, 1-16. krishnan, g. & schauer, v. (2000), did houston clients of arthur andersen recognize publicly available bad news in a timely fashion? contemporary accounting research, vol. 22, no. 1, pp. 165-193. lennox, g. s. (1999). audit quality and auditor size: an evaluation of reputation and deep pockets hypotheses. journal of business finance and accounting vol. 26, no. 7/8: 779-805. lisar, a., lisar, t. & zadeh, p. i. (2016). evaluation of the effect of independent audit quality and ownership structure on earnings management in the listed companies of tehran stock exchange journal of economics and finance (iosr-jef)7(5) 53-56. lopes, p. a. (2018). audit quality and earnings management: evidence from portugal. athens journal of business & economics, 4(2), 179-192. mande, v., file, r. g., & kwak, w. (2000). income smoothing and discretionary r&d expenditures of japanese firms. contemporary accounting research, 17(2), 263-302. mandour, a. m., & mokhtar, e. s. (2018). examining the effect of joint and dual audits on earnings management practices. international journal of accounting and financial reporting, 8(1), 84-114. mangala, d. & isha. a. (2016). influence of corporate characteristics on extent of disclosure in published annual reports in india amity journal of finance 1(2), 22-34. martinez, a. l. & moraes, a. j. (2016). relationship between auditors’ fees and earnings management. international journal of accounting and finance, 3(1), 13-24. nawaiseh, m. e. (2016). impact of external audit quality on earnings management by banking firms: evidence from jordan. british journal of applied science and technology, 12(2) 1-14. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 14 okolie, a. o. (2014). audit quality and earnings response coefficients of quoted companies in nigeria. journal of applied finance and banking, 4(2), 139. ozkan, a. (2018). audit quality and earnings management: evidence from turkey journal of social sciences 68(23) 67-78 issn 1307-9832. palmrose, z. v. (1988). 1987 competitive manuscript co-winner: an analysis of auditor litigation and audit service quality. accounting review, 55-73. tate, s. (2001). differences in financial statement and compliance audit assessment between size and non-size auditors. working paper. teoh, s. h. &wong, t. j., (1993). perceived auditor quality and the earnings response coefficient. the accounting review. vol. 68, no. 2: 346-366. tyokoso, g. m., & tsegba, i. n. (2015). audit quality and earnings management of listed oil marketing companies in nigeria. european journal of business and management, 7(29), 34 -42. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 1 effect of macroeconomic factors on capital structure of firms in developing africa: a two-step gmm approach ahmed balarabe musa department of general studies school of liberal studies nuhu bamalli polytecnic, zaria cozing005@gmail.com +2348037837471 abstract the study examines the effects of macroeconomic factors and on capital structure of nonfinancial firms in africa. using a recent data for an advanced dynamic model (2step system generalized methods of moment (gmm)) technique for a panel data model of 406 non-financial firm of 8 developing african nations. the findings reveal that macroeconomic variables are determinant of capital structure of non-financial in africa. the findings show that financial managers can benefit from raising additional capital as macroeconomic conditions are favorable. moreover, shareholders should employ firm managers with good knowledge of macroeconomic conditions and also encourage them raise debt capital needed to fund positive investment. lastly, policymakers should enact policies that promote financial market development because such policies would complement the banks’ financing strategies and firms would have more access to debt capital. keywords: capital structure, macroeconomic factors, developing africa, generalized methods of moment (gmm) 1. introduction capital structure is the financial decisions regarding raising of capital from various sources of funds that comprises of retained earnings and debt and equity (shahar & manja, 2018). capital structure decisions impact a firm in two aspects. first, firms of equal risk category with high leverage will likely have high costs of capital. lastly, capital structure will affect firm's valuation, with high leveraged firms being more volatile and less valued than lower leveraged firms (baltaci, and ayaydin, 2014). however, capital structure is a vital choice that could lead to an optimum funding mix that could optimize firm's share price (lim, 2012). studies of corporate capital structures have a long history. ever since the article by modigliani and miller (1958) of irrelevance proposition, extensive theoretical studies have been done on determinants of firm’s capital structures. these efforts already resulted in the early 1980s in the establishment of the two major principles mailto:cozing005@gmail.com gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 2 of capital structure. in trade-off principle, firms trade off any potential tax savings bankruptcy from debt financing against deadweight costs. pecking order hypothesis, on the other hand, indicates firms prioritize inside to outside funding and also debt to equity due to adverse selection, if external financing is used. although neither theory is entirely satisfactory, they were instrumental in defining many of indicators that control the actual firms financing decisions. the most important issues in corporate financial domain, both theoretically and empirically, is question of optimal capital structure that can increase shareholder returns (kayo and kimura, 2011). since the modigliani and miller (1958) "capital structure irrelevance" proposals, we have experienced the emergence of many theoretical perspectives in this arena. consequent theoretical work takes into consideration financial market imperfections and showed that firms capital structure arises from firms-specific and macroeconomics influences. the predominance of the capital structure studies focuses primarily on the analysis of certain specific features of firms such as size, tangibility, profitability, growth and business risk as capital structure determinants, and overlooked the importance of the economic condition which the firm operates. certainly, the firms’ decisions on capital structure is affected by macroeconomic factors like inflation rate, gdp growth, interest rate and market capitalization to gdp. therefore, analyzing the role of these macroeconomic variables alongside the firm-specific features gives a clearer picture of the decision and choices that firms make on capital structure. the article aims at making contribution to knowledge the relevance capital structure decisions by examining capital structure determinants using a recent data for a large panel of firms in developing nations and concentrating on both firmspecific features and macroeconomic factors. the key contribution comes from evaluating the significance of macroeconomic variables roles in capital structure decisions and assessing potential impact of macroeconomic variables in determining firm's capital structure compared to the firm-specific features in developing african nations. additional contribution comes in through estimate of capital structure determinants using recent data and new macroeconomic variables (interest rate and market capitalization to gdp) which past researches on macroeconomic determinants of capital structure do not mostly incorporate. the article is arranged as follows: we provided an overview of theories relating to research of capital structure in section two. the macroeconomic determinants in gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 3 the third, data and estimation methodology are introduced in section fourth, fifth section presented the results, and the sixth concluded the study. 2. theories and determinants of capital structure in the study of firm-specific determinants of capital structure two main theoretical approaches are particularly important the trade-off and pecking order theories. these principles offer multiple projections concerning specific firm features and macroeconomic factors affecting firm’s decisions on capital structure. kraus and litzenberger (1973) offer a classic theory postulation that an ideal capital structure reflects a one-period trade-off between debt financing, tax advantages and deadweight prospects of bankruptcy cost. they, further argued that in the trade-off principle, choices in capital structure are defined by trade-off between the debt benefits and costs. typical considerations for this trade-off are based on cost of bankruptcy, tax advantages and asset replacement related agency costs (myers, 1977), and to overinvest (stulz, 1990). every firm has an optimal valuemaximizing debt and equity ratio that it seeks to achieve (gungoraydinoglu and öztekin, 2011). as a result, while higher debt mitigates equity costs for firm, it intensifies disputes between bondholders and shareholders (drobetz et al, 2013). the theory of pecking order founded by myers and majluf (1984) was built on information asymmetry basis and it asserts that adverse cost of selection for issuing risky securities, whether due to information asymmetry or management ambition, contribute to a preferential classification over means of funding by forming a bridge among internal and external funding costs and raising the uncertainty of issuing securities. firms initially raise retain earnings, debt, then equity to reduce adverse selection costs (gungoraydinoglu and öztekin, 2011). in pecking order principle, there's no condition of optimum capital structure for a firm, myers ' rationale for the pecking order theory is based on the assumption that firm stakeholders are more knowledgeable than those outside the firm (chakroborty, 2010). the pecking order principle lists sources of finance according to the level to which information asymmetry affects them. as a measure, firms are predominantly using internal financing. they prefer to give out debt over equity when they need outside funds (drobetz et al, 2014). the pecking order principle does not assume, as opposed to trade-off principle, that firms have well-defined goal for optimal debt-equity ratio (dang, 2013). among the few major studies that used firm-specific features to analyze capital structure determinants are rajan and zingales (1995) who used four specific firm gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 4 explanatory parameters, profitability, tangibility, size and growth. booth et al. (2001) added by including business risks. frank and goyal (2009) identified average leverage of industry, ratio of market to book assets, fixed assets, expected inflation, size and profits as capital structure determinants. dakua (2018) used profitability, size, risk, structure of assets, non-debt tax shield, growth opportunity and liquidity to measure capital structure. this study uses four firmspecific variables and they are non-debt tax shield, growth opportunity, profits and size. size of firm a significant connection between size of firm and debt is expected by trade-off principle. that's because large firms are highly diverse and have lesser default risk. on other hand, the pecking order principle is widely assumed as predicting an adverse connection, since big firms have lesser adverse selection problem and can give equity quickly than small firms. the vast majority of empirical research conducted find a significant connection among size of firm and debt. evidences show empirically that there is variations in results between size and debt. chakrabarti and chakrabarti (2019) and dakua, (2018) positively linked the connection between size of firm and debt. conversely, a negative connection was reported by hanousek and shamshur (2011) and chakraborty (2010). profitability in general, trade-off principle is defined as forecasting a positive link among firm profits and debt ratio. that is because risk of default is smaller, and interest-tax debt shields are of more value to firms with higher profits. on other hand, pecking order principle foresees an adverse connection among debt ratio and profitability as firms with higher profits can make use of retained earnings to finance business opportunities and thus have fewer desire for external debt. even though most empirical researches show that the connection is robustly adverse. yet some empirical studies show a positive result on the profit and debt ratio relation. chakrabarti and chakrabarti (2019) and dakua, (2018) found a negative connection between profit and debt. conversely, bukair (2018) and toumi, et al. (2012) found relation between profits and debt negative. market price to book (growth opportunity) growth firms need to use less debt from a trade-off theory viewpoint, because growth opportunities are intangible assets without value of collateral if firms face bankruptcy (myers, 1984). from pecking theory viewpoint, growing firms needing gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 5 funding should deliver security with fewer costs of information asymmetry. dakua, (2018) and acaravi, (2015) empirically found growth opportunity to be significantly connected to debt. conversely, gormley and matsa, (2013) and chakraborty (2010) report an adverse effect between growth opportunity and debt. non-debt tax shield in 1980, de angelo and masulis were obviously first to introduce into literature formally the concept of non-debt tax shields. the non-debt tax shield could be attributes such as depreciation deductions, allowances for depletion and tax credits for investment. such shields could be viewed as replacements for the debt funding corporate tax benefits. consequently, firms with greater volumes of non-debt tax shields will opt for lower debt rates. the trade-off principle thus predicts an adverse connection between the debt ratio and non-debt tax shields. empirical research more often than not show findings which support this prediction; yet some show a positive relation. among the few empirical studies that show an adverse link between debt and non-debt tax shield are oztekin and flannery, (2012), iwarere and akinleye, (2010). conversely, chakrabarti and chakrabarti (2019) and bukair (2018) posits a positive link between debt and non-debt tax shield. macroeconomic determinants several research, like de jong et al. (2008) and baltaci and ayaydin, (2014) reveal that the safety and stability of the economic conditions has a tremendous effect on firm’s capital structures. to analyze impact of economic conditions on firms’ capital structure, the study used macroeconomic indicators such as gdp growth, interest rate, market capitalization to gdp, and inflation rate to measures the general economic climate. inflation inflation is one of a country's key indices of stability. any rise in inflation leads to economic instability. this uncertainty causes firms' inability to repay their debts. higher inflation decreases the benefits of debt because of higher bankruptcy costs of debt imposed on firms (gungoraydinoglu and öztekin, 2011). in this situation, borrowers demand a higher return because of the risk that they are taking. higher interest rates raise the firm's projected debt burden, firms lower the debt ratios. additionally, firms are increasingly using weak dollars in times of high inflation to pay off debt and reduce their debt ratios (drobetz et al, 2013). inflation thus has an adverse impact on debt. joeveer (2013) argues that anticipated inflation is forecasted to be related positively to debt due to increased real value of deductions gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 6 on debt tax. an adverse relationship is found among debt and inflation in the studies of öztekin and flannery (2012), drobetz et al (2013) and joeveer (2013). conversely, there have been a positive link among inflation and the firm’s debt financing in works of sinha and ghosh, (2010); and ali, (2011). interest rate interest rate is the expense of acquiring loans on short-term or long-term grounds. interest rate cannot be ignored because, of its impact on firm's debt. companies prefer getting debt from financial institution and capital market in particular to fund investment when the expense is very low. despite financial liberalization of their financial markets, interest rate in most developing economies is however very high. interest rates are generally double digits, and financing are mostly obtained on a short-term basis. one of the reasons contributing for this is the saving behavior of bank depositors who save on a short-term basis and expect higher saving rates. gdp growth rate growth in real gross domestic product (gdp) can be seen as an indicator of growth opportunities open to firms in an economy. in a sound economic environment, lack of tangible assets of firms compared to the available business opportunities means a higher value loss when businesses are in distress. the trade-off theory therefore predicts that there is a negative relationship between leverage and gdp growth. the pecking order hypothesis, by comparison, predicts a positive relationship between debt and gdp growth, because a high ratio of growth opportunities to internal funds will suggest a stronger need for external funding. empirical research commonly find an adverse connection between debt and gdp growth (demirgückunt and maksimovic 1996). conversely, lim, (2012) and drobetz et al. (2013) find positive gdp growth debt relationship. according to usual practice, we measure gdp growth as annual growth in real gdp per annum, denoted by gdpg. market capitalization to gdp according to dincergok & yalciner report (2011), the development of the stock market has significant connection to capital structure. in fact, market capitalization as proxy for the growth of the stock market has positive impact on capital structure (gajurel, 2006). about the same period bokpin (2009) claims that these variables have no connection. conversely, sett & sarkhel (2010) considers an adverse connection between the growth of the stock markets and capital srtucture. moreover, researchers noted that the impact of stock market growth on debt rates of capital structure in certain developing nations with economies in transition is not gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 7 clear and distinct from developed ones. the study in developing nations found that growth of the stock market has same dimensional connection with debt. this is described as the company risks are varied, and asymmetric information decreases, making firms prefer more debt because the debt cost is lower than of equity. 3. methodology and specification of models this research sourced data for firm specific and macroeconomic factor from the data stream and world development indicators (wdi). our sample cover a period between 2010 and 2016 for 4,642 financial firm across 22 developing nations. the study employed suitable and advanced dynamic panel estimator, blundell and bond's (1998) generalized methods of moment estimation technique (2step system gmm). model specification model 1 𝑇𝐷𝑇𝐴𝑖𝑡 = 𝜆𝑇𝐷𝑇𝐴𝑖𝑡−1 + 𝛽0 + 𝛽1𝑆𝑙𝑜𝑔𝑖𝑡 + 𝛽2𝑃𝑅𝐹𝑇𝑆𝑖𝑡 + 𝛽3𝑀𝑇𝐵 + 𝛽4𝑁𝐷𝑇𝑆𝑖𝑡 + 𝛽5𝐼𝑁𝐹𝑖𝑡 + 𝛽6𝐼𝑁𝑇𝑖𝑡 + 𝛽7𝐺𝐷𝑃𝐺𝑖𝑡 + 𝜙𝑖 + 𝛼𝑡 + 𝜇𝑖𝑡 model 2 𝑇𝐷𝑇𝐴𝑖𝑡 = 𝜆𝑇𝐷𝑇𝐴𝑖𝑡−1 + 𝛽0 + 𝛽1𝑆𝑙𝑜𝑔𝑖𝑡 + 𝛽2𝑃𝑅𝐹𝑇𝑆𝑖𝑡 + 𝛽3𝑀𝑇𝐵𝑖𝑡 + 𝛽4𝑁𝐷𝑇𝑆𝑖𝑡 + 𝛽5𝐼𝑁𝐹𝑖𝑡 + 𝛽6𝐼𝑁𝑇𝑖𝑡 + 𝛽7𝐺𝐷𝑃𝐺𝑖𝑡 + 𝛽8𝑀𝐶𝐺𝐷𝑃𝑖𝑡 + 𝜙𝑖 + 𝛼𝑡 + 𝜇𝑖𝑡 where tdta = total debt to total assets slog = log of size mtb = market to book value ndts = non debt tax shield prfts = profits inf = inflation rate int = interest rate gdpg = gross domestic product growth mcgdp = market capitalization to gross domestic product øi = industry effects αt =year fixed effects λ = adjustment parameter µ = error term 4. results and discussion critical examination of descriptive statistics in table 5a for dependent variables and independent variables reveal some vital information. as can be seen from the gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 8 entire firm level variables, the mean is greater than the median, except for gdpg variable. thus, the data is mostly characterized by positive skewness. based on the mean values of tdta (3.18), it can be deduced that firms in developing countries prefer debt in their capital structure. moreover, standard deviation of tdta is fairly high. this implies that on average, firms in developing countries do not reflect large differences in their total debt holdings when the debt measures are scaled by total assets. inflation rates and interest rates means is 6.22 and 10.45 respectively. the disparity in inflation rate and interest rate ranges from -0.90 and 3.42 (minimum value) for some firms and 17.45 and 52.1 (maximum value) for other firms. thus, the disparity between inflation rates and interest rate implies that some developing countries, firms are faced with higher inflation and interest rates than others in developing nations. however, firms faced with higher inflation and interest rate may make less effective capital structure decision than other firms with lesser rates of inflation and interest. table 1 summary of descriptive statistics source: authors computation using stata 14, 2020 with respect to gdpg and mcgdp, the results indicate that the mean is 5.79 and 76.35 respectively. the difference between gdpg and mcgdp ranges from -3.54 and 7.46 (minimum value) for some firms and 14.04 and 270.19 (maximum value) for other firms. hence, the difference between gdpg and mcgdp implies that index tdt sllog prft mtb ndts inf int gdp g mcgd mean 3.18 1 14.84 9 0.062 2.006 0.076 6.223 10.45 8 5.792 76.357 median 2.96 0 14.68 6 0.070 1.100 0.055 6.217 10.00 8 6.066 67.464 max 8.99 0 26.03 0 19.61 9 233.0 9 857.5 17.45 4 52.1 14.04 7 270.19 7 min 0.00 0 0.000 -5.621 -69.7 0.000 -0.900 3.422 -3.549 7.462 std. dev. 2.10 4 2.966 0.196 5.347 4.756 3.284 6.677 2.432 46.763 skewnes s 0.48 3 0.396 43.53 1 13.15 8 179.28 9 0.215 3.558 -0.655 1.662 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 9 some developing countries firms are having better economic conditions in their countries than other firms’ developing countries. however, firms with better economic conditions could make effective capital structure decision than firms with lesser economic conditions. correlation results for model 1 and 2 table 5b present the correlation coefficient among total debts to total assets (tdta) and inflation and interest rates are statistically significant and positive (0.09 and 0.07). similarly, the correlation coefficient between the total debts to total assets and gdp growth and market capitalization to gross domestic product are statistically significant and positive (0.05 and 0.01) respectively. this suggests that as the economy increases with better condition, debt increases. moreover, the correlation coefficient between tdta and firm size is statistically positive and significant (0.07). likewise, the correlation coefficient between tdta and profits is statistically significant and positive (0.05). this suggest that as firm size and profits increases, debt increases. table 2. correlation results for objective one (equation 1 and 2) source: output of stata 14, 2020 notes: a and b indicate correlation coefficient is significant at 1 and 5 percent levels, respectively. furthermore, correlation coefficient among total debt to total assets and mtb (growth opportunity) is positive and significant statistically. this suggests that as tdta sllog prfts mtb ndts inf int gdpg mcgdp tdta 1.00 sllog 0.078 1.00 prfts 0.005 0.006 1.00 mtb 0.065b 0.061 0.019 1.00 ndts 0.004b -0.006 -0.099 0.019 1.00 inf 0.097b 0.047 0.007 0.007 -0.007 1.00 int 0.070b 0.064 0.004 0.010 -0.005 0.293 1.00 gdpg 0.059b -0.011 0.003 0.005 -0.003 0.260 -0.257 1.00 mcgdp 0.010b -0.204 -0.005 0.029 0.005 -0.290 -0.371 -0.115 1.00 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 10 growth opportunity increases, debt increases. conversely, tdta is adversely related ndts and statistically significant. generalized method of moments results the study estimates a dynamic panel model built on trade-off theory. total debt to debt assets ratios is used as dependent variable for results of models 1 to 2. system gmm is the main estimation. the coefficients estimated in the models are significant and have the expected sign. inflation rate coefficients for model 1 and 2 are (0.051** and 0.059** with t-statistics of 3.87 and 2.96 respectively) significant statistically both at 5 percent level and positively linked tdta. this positive connection implies that favorable inflation rate increases debt. also, interest rate coefficients for model 1 and 2 are (0.042** and 0.045** with t-statistics of 2.46 and 2.79 respectively) significant statistically both at 5 percent level and positively related to tdta ratio. this positive relation signifies that favorable interest rate increases debt. likewise, the coefficient of gross domestic product growth (0.001*** and 0.001*** t-statistics of 3.24 and 3.54) in model 1 and 2 respectively are significant statistically both at 1 percent level and positively linked to tdta ratio. this positive link implies that higher growth in gross domestic product increases debt. furthermore, market capitalization to gross domestic product coefficients in model 2 is 0.002** with t-statistics of 3.84 and statistically significant at 1 percent and positively related to tdta ratio. this significant connection implies that high market value reduces firms’ risk which in turn increases debt. however, firm size coefficients for model 1 and 2 are 0.104* and 0.056** with t-statistics of 1.94 and 2.99 respectively are statistically significant both at 10 and 5 percent level and positively linked to tdta ratio. this positive relation signifies that increase in firm size increases debt. likewise, the coefficient of market to book (firms’ growth opportunity) is 0.031** and 0.043** t-statistics 2.75 and 3.02 in model 1 and 2 respectively are significant statistically both at 5 percent and positively linked to tdta ratio. this positive link implies that increase in growth opportunities increases debt. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 11 table 3. panel system gmm result for model 1 and 2 source: output of stata 14. notes: soa is speed of adjustment to target debt level. asterisks indicate significance at 10% (*), 5% (**) and 1% (***). t-statistics of gmm system model are based on windmeijer-corrected standard errors. 2nd order serial correlation in first difference is distributed as n (0, 1) under the null of no serial correlation in the residuals. 4.1 findings, implications and discussion the positive relation between capital structure (debt) and macroeconomics variables support the insights drawn from the theory of trade-off that firms make efficient decisions on capital structure, like deciding on optimal mix of capital system gmm system gmm 1 2 soa 0.040 0.042 tdtait-1 0.960* (25.22) 0.958* (24.24) inf 0.051** (3.87) 0.059** (2.96) int 0.042** (2.46) 0.045** (2.79) gdpg 0.001*** (3.24) 0.001*** (3.54) mcgdp 0.002*** (3.84) sllog 0.104* (1.95) 0.056** (2.99) prfts -0.900 (-1.38) -0.589 (-0.91) mtb 0.031** (2.75) 0.043** (3.02) ndts -36.62 (-1.38) -23.97 (-0.91) industry effects yes yes firm fixed effect yes yes year fixed effect yes yes ar(1) 0.000 0.000 ar(2) 0.491 0.490 difference sargan test instruments 54 64 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 12 structure that maximize benefits of debt interest tax shield which may bring high returns to shareholders. the positive relationship macroeconomics variables and capital structure, point to the need for shareholders to employ firm managers with sufficient knowledge of macroeconomic conditions that will enhance choices of capital structure. firms with strategies and targets on macroeconomic situations make higher quality decisions because their knowledge on the workings of the economy allows them to have practical insights on better debt financing decisions (cole and sokolyk, 2017), such as capital structure decisions and maximization of shareholders’ returns. policymakers should be more specific about how to improve the economic conditions in an economy which will aid firms to make valuable decisions on debt management. policymakers should also create an environment that supports managerial training and should also continue to formulate policies that encourage firm managers to take advantage of training opportunities to enrich their skill and knowledge on debt financing considering macroeconomic conditions in an economy. 5. conclusion an important issue in the literature is that unobservable macro-specific variables explain most of the variation in firm’s capital structure in developing nations. this study argues and confirms that macroeconomic variables are the potentially factors which explain some of the variation in firms’ capital structure. as firms operate with better economic conditions, they proffer effective decisions of capital structure like optimal capital structure; firms can increase shareholders’ returns. the results reveal that macroeconomic variables are capital structure determinants in developing african nations and results are robust to model alternative specification and used different macroeconomic variables. the macroeconomic variables are significant statistically and related positively to debt. references acaravci, s.k, (2015): the determinants of capital structure: evidence from the turkish anufacturing sector. international journal of economics and financial issues, 5 (2015) no. 1, 158-171.. ali, i. (2011). determinants of capital structure: empirical evidence from pakistan. available at ssrn 1977024. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 13 baltaci, n., ayaydin, h. (2014), firm, country and macroeconomic determinants of capital structure: evidence from turkish banking sector. emerging market journal, 3(3), 4-58. bokpin, g.a. (2009), macroeconomic development and capital structure decisions of firms – evidence from emerging market economies. studies in economics and finance, 26, 129-142. booth, l., varouj, a., demirguc-kunt, a., and maksimovic, v., (2001). capital structure in developing countries. journal of finance, 56 (1), 87-130. blundell, r., and bond, s. (1998). initial condition and moment restriction in dynamic panel data models. journal of econometrics, 87, 115-143. bukhair, a.a.a., (2018). factors influencing islamic bank’s capital structure in development countries. journal of islamic accounting and business research vol. 10, issue 1, pages 2-20. chakraborty, i. (2010). capital structure in an emerging stock market: the case of india. research in international business and finance, 24, 295-314. chakrabarti, a and chakrabarti, a. (2019): the capital structure puzzle: evidence from india energy sector. international journal of energy sector management vol. 13 no. 1, 2019 pp. 2-23. dakua, s. (2018): effect of determinants on financial leverage in indian steel industry: a study on capital structure. international journal of finance and economics. dang, v.a. (2013): testing capital structure theories using error correction models: evidence from the uk, france and germany. applied economics 45, 171– 190. de angelo, h., & masulis, r. w. (1980): optimal capital structure under corporate and personal taxation. journal of financial economics, 8(1), 3–29. de jong, a., kabir, r., & nguyen, t. t. (2008). capital structure around the world: the roles of firm and country specific determinants. journal of banking & finance, 32(9), 1954– 1969. demirguc-kunt, a. and maksimovic, v., (1996): stock market development and firm financing choices. world bank economic review, 10(2), 341-369. dincergok, b., & yalciner, k. (2011). capital structure decisions of manufacturing firms’ in developing countries. middle eastern finance and economics, 12, april, 2011, 86–100 drobetz, w., gounopoulos, d., merikas, a., schröder, h. (2013): capital structure decisions of globally-listed shipping companies. transportation research part e: logistics and transportation review 52, 49–76. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 14 drobetz, w. and wanzenried, g. (2006). what determines the speed of adjustment to the target capital structure?.applied financial economics, 16(13), 941958. frank, m. and goyal, v., (2009). capital structure decisions: which factors are reliably important? financial management 38, 1-37. gajurel, d. p. (2006). macroeconomic influences on corporate capital structure. available at ssrn: http://ssrn.com/abstract=899049 or http://dx.doi.org/10.2139/ssrn.899049 gormley, t.a., and matsa, d.a. (2013): common errors: how to (and not to) control for unobserved heterogeneity. review of financial studies, 27(2), 617-661. gungoraydinoglui, a., oztekin, o. (2011): firmand country level determinants of corporate leverage: some new i̇nternational evidence”. journal of corporate finance 17, 1457–1474. hanousek, j. and shamshur, a. (2011). a stubborn persistent: is the stability of leverage ratios determined by the stability of the economy. journal of corporate finance, 17(5), 1360-1376. iwarere, h.t. and akinleye, g.t. (2010): capital structure determinants in the nigerian banking industry: financial managers’ perspective. pakistan journal of social sciences, vol. 7, no. 3, pp. 205-213 kayo, e. k., and kimura, h. (2011): hierarchical determinants of capital structure. journal of banking and finance 35, 358–371. khemiri, w. and noubbigh, h., (2018): determinants capital structure: evidence from sub-saharan africa firms. quarterly review of economics and finance, 2018. kraus, a., & litzenberger, r. h. (1973). a state-preference model of optimal financial leverage. journal of finance, 33, 911–922. lim, t.c. (2012). determinants of capital structure: empirical evidence from financial services listed firms in china. international journal of economics and finance 4(3), 191-203. lintner, j., (1956). distribution of i̇ncomes of corporations among dividends, retained earnings and taxes”. american economic review 46 (2), 97–143. modigliani, f., miller, m. h. (1958). the cost of capital, corporate finance and the theory of investment, american economic review 49, 261–97. myers, s.c., and majluf, n.s., (1984). corporate financing and investment decisions when firms have information and investors do not have. journal of financial economics, 13(2), 187-221. http://dx.doi.org/10.2139/ssrn.899049 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 15 myers, s.c., (1984). the capital structure puzzle. journal of finance, 39(3), 575592. myers, s.c., (1977). determinants of corporate borrowing. journal of financial economics 5, 147–175. oztekin, o., and flannery, m.j. (2012). institutional determinants of capital structure adjustments speeds. journal of financial economics 103, 88–112. rajan, r.g., and zingales, l., (1995). what do we know about capital structure? some evidence from international data. journal of finance, 50(5), 14211460. sett, k. & sarkhel, j. (2010). macroeconomic variables, financial sector development and capital structure of indian private corporate sector during the period 1981–2007. the iup journal of applied finance, 16(1), 40–56. shahar, w.s.s. and manja, s.i. (2018). determinants of capital structure. reports on economics and finance, vol. 4, 2018, no. 3, 139 – 149 hikari ltd. sinha, p. c. and ghosh, s. k. (2010): macroeconomic variables and firms’ adjustment-speed in capital structure choice: indian evidence. the iup journal of applied finance, 16(4), 29-50. stulz, r. (1990): managerial discretion and optimal financing policies, journal of financial economics, 26(5), 145-158. toumi, k., viviani, j.l. and belkasem, l. (2012): from ethical principles to financial decision theoretical foundations and empirical comparison with conventional banks of islamic banks capital structure. available at: http://ssrn.com/abstract, 2080081 (accessed 23 nov. 2019). http://ssrn.com/abstract i gusau journal of accounting and finance (gujaf) vol. 3 issue 1, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria ii © department of accounting and finance vol. 3 issue 1 april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng editorial board editor-in-chief: prof. shehu usman hassan mailto:abupress2013@gmail.com iii department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. iv prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. dr. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. v dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. vi call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7 th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ vii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ viii contents mediating effect of audit committee on board dynamic and creative accounting in nigerian firms abbas usman phd, shehu usman hassan phd 1 financial performance of banks in selected african countries: does institutional quality matter? toluwa celestine oladele phd, peters ade sanni 22 firm-specific characteristcs and financial performance of listed agricultural companies in nigeria abdulrazaq t. jimoh, john a. attah 33 effect of financial leverage on stock returns of listed companies in nigeria capital market abdulrahman abubakar, prof. ahmad bello, prof. s. a. abdullahi, dr. m. d. tahir 45 efficiency of deposit money banks in nigeria: data envelopment analysis approach mayowa gabriel ajao, phd, lucky charity omoregie, phd 57 credit appraisal, collection policy and loan performance of microfinance banks in kwara state, nigeria lukman a. o. abdulrauf 69 environmental sustainability disclosure and market value of listed oil and gas firms in nigeria munir aliyu saleh, sirajo bappah, prof. gbegi daniel orsaa, ibrahim adamu saleh phd 81 audit quality, tenure and real earnings management of listed nonfinancial firms in nigeria ahmed mohammed, ademu yahaya, musa zakariya 95 effect of ceo pay and ceo power on risk-taking of listed deposit money banks in nigeria ismaila yusuf, dr. salisu abubakar, dr. idris ahmed aliyu, dr. (mrs) aneitie charles dikki 104 nexus between taxation and foreign direct investment in nigeria daniel ayegbeni ulokoaga, esther ikavbo evbayiro-osagie (mrs), ph. d 115 working capital management and profitability of listed consumer and industrial goods companies in nigeria kwasau ntyak leah, samuel eniola agbi phd, lateef olumide mustapha phd 125 value relevance of earnings and book value: a comparative analysis between big4 and non-big4 audited listed firms in nigeria abdu abubakar, ishaya luka chechet phd, muazu saidu badara phd, yunusa nasiru phd 136 ix value relevance of international financial reporting standard 4 (ifrs 4) of listed nigerian insurance firms mariya mohammed hafiz, muhammad mustapha bagudo phd, salisu abubakar phd 145 determinants of audit fees of listed insurance companies in nigeria sagir lawal, phd, mohammed ibrahim, phd 158 taxation and social services: evidence from nigeria adegbite, tajudeen adejare, phd, abdussamad, olarinde 171 ownership structure and financial performance of quoted mortgage banks in nigeria awotundun, d. a., phd, jinadu, m. y. b., fakunmoju, s. k., phd. 183 capital structure and profitability of listed deposit money banks in nigeria rahji ohize ibrahim, kamaldeen ibraheem nageri, phd, abdullai agbaje salami, phd 194 1 value relevance of earnings and book value: a comparative analysis between big4 and non-big4 audited listed firms in nigeria abdu abubakar department of accounting abu business school ahmadu bello university, zaria. abubakarabdu26@gmail.com ishaya luka chechet phd professor of accounting and finance department of accounting abu business school ahmadu bello university, zaria. muazu saidu badara phd department of accounting abu business school ahmadu bello university, zaria. yunusa nasiru phd department of accounting abu business school ahmadu bello university, zaria. abstract this study empirically examined the comparative value relevance of earnings and book value between big4 and non-big4 audited listed firms in nigeria. the study covered 161 listed firms for the period 2014 -2019. however, an adjusted population of 154 firms was used with aid of a filter. the study employed quantitative data extracted from the annual reports of the sampled firms and the study aligns itself to positivist paradigm. data were analyzed based on multiple regression technique with the aid of stata, and the study revealed that both eps and bvp are value relevant in both models. however, eps and bvp in the first model are more value relevant. on the whole, the study found that accounting information of firms audited by non-big4 audit firms is more value relevant than that audited by big4 audit firm. thus, the study recommends inter-alia that regulatory authorities such as cbn and sec should ensure that firms engage the service of audit firms not necessarily the big4 audit firms as this helps improve the credibility of the report. keywords: accounting information, earnings per share, book value per share, big4 audit firms, non-big4 audit firms. 1. introduction the essence of accounting report is to provide stakeholders with information as to the economic reality of the firm to which they own a stake. this information must have the ingredients necessary to be of relevance for use in the investment decision of the investors thus influencing the value of the firm. hence, the concept of value relevance, rooted on the pillars of relevance and reliability. it has to do with the ability of accounting figures to mailto:abubakarabdu26@gmail.com 2 summarize the fundamentals that support stock values. levitt (1998) viewed value relevance as the nexus that exists between accounting information and share price. financial statements form part of the key mechanisms through which listed firms transmit financial information to investors and the general public (kaushalya and kehelwalatenna, 2020). accounting information is considered value relevant when it influences the investors' decision with regards investment (uwuigbe, uwuigbe, jafaru, igbinoba, & oladipo, 2016; chaudhry & sam, 2014). plethora of studies was conducted in the field of value relevance in advanced and developing economies. these studies looked at value relevance from different viewpoints such as pre and post ifrs introduction (prihatni, subroto, saraswati & purnomosidi, 2018), sector analysis (aruwa & naburgi, 2015), cross country analysis (elbakry, 2016), and traditional ohlson’s analysis. however, this study seeks to examine comparatively, the value relevance of earnings and book value between big4 and nonbig4 audited listed firms in nigeria. a priori expectation of the study is that the investors and the general public would be able to determine the accounting information that is more value relevant between the firms audited by big4 audit firms and those audited by non-big4 audit firms. it ensures that a company's credibility with investors and shareholders is preserved. the findings of the previous studies on the value relevance of accounting numbers were diverse and inconsistent. also, the previous studies failed to look at value relevance from the view point of comparison between the firms that were audited by big4 and those that were audited by nonbig4 audit firms in nigeria or in any part of the world. to fill this vacuum, therefore, this study aims to carry out a comparative analysis of value relevance of earnings and equity book value between big4 and non big4 audited listed firms in nigeria. based on the foregoing objective, the study hypothesizes in null form as follows: h01: there is no significant difference in the value relevance of earning per share between big4 and non-big4 audited listed firms in nigeria. h02: there is no significant difference in the value relevance of book value per share between big4 and non-big4 audited listed firms in nigeria. the study covers all the listed companies in nigeria for the period 2014 -2019. the findings will add to existing empirical evidences in the area of value relevance of accounting information, it will be utilized by the policy makers, existing and prospective investors, managers, practitioners and academicians. this section entails introduction, the subsequent sections encompasses literature review and theoretical framework, section three comprises research methodology, section four entails results presentation and discussion and finally, section five covers conclusion and recommendations. 2. literature review and theoretical framework there exist a number of previously documented empirical evidence in the field of value relevance of accounting information; though with varying perspective and approach. some of which found a positive impact of eps and book value per share on share price (mamman, 2013; trabelsi & trabelsi, 2014; ijeoma, 2015; bengi, ahmet, & irene, 2020), while others found negative influence of earnings per share and book value on share price (busari, 2019; trabelsi & trabelsi, 2014). other studies, such as prihatni, subroto, saraswati and purnomosidi (2018), olugbenga (2016), umoren and enang (2015), and suadiye (2012), look at it from the standpoint of value relevance of accounting information before and after 3 ifrs implementation. there are contradictions in previously documented empirical investigations, where some studies claim to have found a strong impact of accounting information on share price others, such as balakrishnan (2016), argue that accounting figures have no effect on share price. in addition, some empirical evidences documented inter-sector comparison (aruwa and naburgi, 2015; and bagudo, 2015) and some form of cross country analysis (elbakry, 2016). conversely, the studies were not able to look at value relevance of accounting information based on comparison between big4 and non-big4 audited listed firms in nigeria, also the studies did not cover the entire listed firms in nigeria, again, their findings may not be capable of being replicated when conducted on the entire listed firms in nigeria considering, the sample size, the passage of time and environmental disparities. hence, the need for a more encompassing and robust study to bridge the observed gap. research framework: this simply presents diagrammatically, the association between accounting information and share price. thus: independent variables dependent variable dependent signaling theory is deemed seemly in this circumstance as it facilitates characterization of behavior when two parties (individuals or firms) have differing knowledge. the prevalent instance is that, the sender is at discretion to choose whether and how to transmit (or signal) that information, while the receiver, is at liberty to interpret the signal. the signaling theory is based on the proposition that financial report items convey message to an entity's stakeholders. furthermore, this knowledge has the likelihood of affecting stakeholders’ decision with regards a particular firm. as a result, it is reasonable to conclude that the share price in a company's financial statement is a critical variable that provides information to securities market investors. this information conveyed by financial report is deemed value relevant if it aids investors’ decision as to investment or divestment in any given firm or economy. 3. methods and techniques this study is based purely on correlational research designs as it entails evaluating the association between accounting information and share price. the study covers all the 161 publicly traded companies in nigeria for the period 2014-2019. however, the study used adjusted population with the aid of a filter reducing the firms to 154 listed firms. only quantitative data were extracted from the audited financial reports of the selected companies, and analysis was made based on multiple regression technique with the aid of stata package, and the study is in line with positivist paradigm. in a bid to empirically evaluate the comparative value relevance of earnings and book value between big4 and non-big4 audited listed firms in nigeria, multiple linear regression models will be adopted. the first model is to capture the value relevance of earnings per share and book value per share, for the non-big4 audited listed firms in nigeria. however, the second model is to incorporate the value relevance of earnings per share and book value per share, for the big4 audited listed firms in nigeria. the models are as follows: earnings per share share price book value per share 4 sp it = αit + β1epsit + β2bvpsit +εit --------------------------------------------------------------(i) spit = αit+β1epsit + β2bvpsit + εit ---------------------------------------------------------------(ii) note: α: constant β1– β2 are the coefficients of the parameter estimates. it: panel data ε: the error term table 1: variables measurement variable acronym variable name variable measurement source (s) sp market value per share share price as at the end of march of each accounting year (zulu, de klerk, & oberholster, 2017). bvps book value per share equity divided by no. of equity shares outstanding (uwuigbe et al., 2016)) eps earnings per share earnings after tax divided by no. of shares outstanding (sullubawa, 2015) source: computed by author based on literature , 2022 robustness tests with a view to ensuring the reliability and validity of the statistical inferences to be drawn for the study, the study conducted various levels of robustness test. the test involves multicollinearity and serial correlation test, heteroscedasticity, fixed and random effects tests, hausman specification test, langrangian test, and any other test deemed necessary in order to substantiate and corroborate the validity and reliability of result of the study. 4. presentation and discussion of result this section presents and discusses the descriptive statistics table, correlation matrix, robustness tests, and summary of regression result. table 2: descriptive statistics (model one: non-big4 audited firms) variables min max mean std. dev n sp 0 315 8.9278 29.4569 445 eps -5.1643 496.48 1.7517 25.8348 371 bvp 0.19 3747.5 25.4819 197.0455 371 source: stata output from the table 2 above, share price has minimum value of 0.000, maximum value of n313 and value of 12.251 and standard deviation value of 38.890. the minimum value of 0.000 may mean that for some years we could not access the share price of the studied firms. the maximum value represents the highest price the share of the studied firms was selling for the period of the study. the standard deviation of share price from mean of n 33.89 suggests a high degree of dispersion since it is higher than the mean. 5 earnings per share, eps has an average value of n 1.75, minimum value of n -5.16, maximum value of n 496.47 and standard deviation value of n 25.83. the minimum value of n-5.16 means that firms were experiencing loss and the maximum value of n496.47 kobo means the maximum profit per share made by the firms is not more than the said amount. also, the standard deviation value of 25.8348 means that there is high degree of variation since it is far higher than the average value of n1.75 kobo. book value per share, bvp has a minimum value of n 0.19 kobo, maximum value of n 3,747.5 kobo, mean value of n25.4820 and standard deviation n196.912. the minimum book value of n 19 kobo means some firms have book value per share that is less than the minimum market price. the average value implies that listed firm in nigeria has a book value of equity per share of n 25.83 kobo which measures the safety level of each share after all accumulated debts are settled. the standard deviation also indicates some degree of dispersion from the mean by about n 196.912 signifying a wide range of dispersion from the average value since the standard deviation is higher than average value. this large variation might be owing to the differences in the size of the studied firms, age of sampled firms, associates, level of activities to mention a few. table 3: descriptive statistics (model two: big4 audited firms) variables min max mean std. dev n sp 0.2100 1500 39.7849 139.5934 453 eps -0.0620 1352 15.2470 92.3781 460 bvp -0.01978 2.3551 0.1517 0.3194 460 source: stata output, 2022 from the table 4.2 for the model two (big4 audited firms), share price has minimum value of 0.21, maximum value of n1500 and mean value of 39.7849 and standard deviation value of 139.5934. the minimum value of 0.21 means that for the period under investigation, it was the least price per share amongst the listed firms. the maximum value represents the highest price the share of the studied firms was selling for the period of the study. the standard deviation of share price from mean of n 139.5934 suggests a high degree of dispersion since it is higher than the mean. earnings per share, eps has an average value of n 15.2470, minimum value of n -0.0620, maximum value of n 1352 and standard deviation value of n 92.3781. the minimum value of n-0.0620 implies that firms were experiencing losses, and the maximum value of 1352 means the maximum profit per share made by the firms is not more than the said amount. also, the standard deviation value of n 92.3781 means that there is high degree of variation since it is far higher than the average value of 15.2470. book value per share, bvp has a minimum value of n -0.01978kobo, maximum value of n 2.3551kobo, mean value of n0.1517 kobo and standard deviation n0.3194kobo. the minimum book value of n-19 kobo means some firms have book value per share that is less than the minimum market price. the average value implies that listed firm in nigeria has a book value of equity per share of 15kobo which measures the safety level of each share after all accumulated debts are settled. the standard deviation also indicates some degree of dispersion from the mean by about n 32 kobo signifying a relatively higher level of 6 dispersion from the average value since the standard deviation is higher than average value. this large variation could be as a result of the differences in the size of the studied firms, age of sampled firms, associates, level of activities to mention a few. correlation matrix correlation matrix was conducted for both models, and the result of the test indicated the presence of multicollinearity amongst the explanatory variables as some of the independent variables are significantly correlated amongst themselves. however, in order to ascertain as to the presence of harmful multicollinearity, an advanced test, vif and tolerance value tests were conducted and the result suggested the absence of harmful multicollinearity (see appendix). robustness test with a view to ascertaining the validity and reliability of the result generated in both models, robustness tests were carried out. first, vif and tolerance value tests were conducted and the results in both models indicate the absence of harmful multicollinearity amongst the independent variables of the study as the vif and tolerance values appeared consistently less than 10 and 1 respectively. heteroscedasticity test was carried out and the probability value was significant implying the presence of heteroscedasticity, the study went further to conduct further test, based upon which study reported robust ols regression model in order to take care of heteroscedasticity found in the earlier tests on both models. hence, the results were finally interpreted based on robust ols regression models. table 4.3: summary of regression results model 1 model 2 coeff. z prob coeff. t-stat prob constant 2.7201 2.83 0.005 35.3769 4.74 0.000 eps 6.4423 3.92 0.000 0.7887 3.83 0.000 bvp 0.2275 2.54 0.012 -51.1804 -2.11 0.036 r-sq f-sig prob. hettest 0.45 15.15 0.000 666.5*** 0.21 8.07 0.000 4441*** source: stata output, 2022 from the robust ols model presented in table 4.3 for model one, it can be seen that f-sig has a value of 15.15 and a p-value of 0.000 which is significant 1% percent, signifying that the model is well fitted. the r-squared overall of 45% means that accounting information (eps, bvp) are responsible for changes in share price to the tune of 45% while other factors not captured in the model explain 55% of changes in share price. also, for model two, the robust ols regression result indicates adjusted r-squared value of 21 percent, signifying that the combined effect of accounting information explains the changes in share price to the extent of 21 percent. the f-sig of 8.07 which is significant at one percent from the probability value of 0.000 indicates that the model two of the study is also fitted and adequate. 7 eps in model one has a beta value of 6.4423, and a p-value of 0.000 which is significant at 1% indicates that eps is positively and significantly associated with share price at one percent level. this implies that for every one percent increase in earnings per share, share price will increase by n6.44k. also, eps for the second model, has a beta value of 0.788 and p-value of 0.000. this indicates that there is significant positive relationship between eps and share price. this further implies that for every one percent increase in eps share price will increase by 788 kobo. this is not surprising as it is in line with a priori expectation and signaling theory that accounting information sends useful information that aids investors’ decision making with regards their investment. also, the coefficient values in the two models appear to be different in volume and this was supported by the chow test conducted (see appendix). thus, hypothesis one is rejected. bvp has a coefficient value of 0.2275 with a p-value of 0.012. this indicates the presence of positive and significant association between book value per share and share. this further signifies that bvp positively and significantly influence share price at five percent. this implies that for every five percent increase in book value share price will increase by 22 kobo. the result is in line with our expectation and proposition of signaling theory that as accounting information sends a positive signal to investors this has the influence of pushing the share price upwards and vice versa. also, book value per share, bvp in the second model has a coefficient value of -51.180 and probability value of 0.036. this indicates that there exists an inverse relationship between accounting information (bvp) and share price which is significant at five percent level. this further signifies that bvp negatively and significantly influences share price at five percent. this further implies that for every five percent increase in equity book value, share price will reduce by n51.18k. the finding is in line with busari, 2019) and contradicts those of ijeoma, 2015; aruwa & naburgi, 2015). this therefore negates the early stated hypothesis that there is no significant difference in value relevance of book value per share between big4 and non-big4 audited listed firms in nigeria. thus, hypothesis two is rejected. 5. conclusion and recommendations based on the findings, the study concludes that earning per share has positive and significant influence on share price. while book value per share exerts a significant negative influence on the share price of listed firms in nigeria. also, the study concludes that there is significant difference in the value relevance of earnings and book value per share between big4 and non-big4 audited listed firms in nigeria. the study therefore, recommends inter-alia that regulatory authorities such as cbn and sec should ensure that firms engage the service of audit firms not necessarily the big4 audit firms. references beaver, w. h. (1968). the information content of annual earnings announcements. journal of accounting research 6(3), 67-92. bengi, c. ahmet, c. and irene, g. w. (2020), accounting comparability and the value relevance of earnings and book value, the journal of corporate accounting and finance, 31(4), 8298. busari, k. (2019). value relevance of accounting information in listed financial service firms in nigeria: a comparative study of consolidated and separate financial statement. being an m.sc thesis submitted to department of accounting, ahmadu bello university, zaria. chaudhry, m. i., & sam, a. g. (2014). the information content of accounting earnings , book values , losses and firm size vis-a empirical evidence from an emerging stock 8 market. applied financial economics, 24(23), 1515–1527. https://doi.org/10.1080/09603107.2014.925074 https://moeny.cnn.com (2018). global stock market turmoil. https://www.express.co.uk/finance/city/914997/ftse-100-down-today-live-update-stock marketcrash. https://www.vanguardngr.com/2017/06/stock-market-fundamentalsare-nigerian-equities-still undervalued/ https://www.vanguardngr.com/2018/01/analysts-stockbrokers-project-strong-equity performance-2018/ ijeoma, n.b. (2015). value relevance of accounting information share prices of listed firm, social an d basic science review (sbsrr), 3(10), 328-344. kaushalya, p. and kehelwalatenna, k. (2020). the impact of ifrs adoption on the value relevance of accounting information. international review of business research papers, 16 (2), 6686. levitt, a. (1998). the numbers game: speech delivered at the new york university center for law and business, new york; http://wwwrutgers.edu/accounting; http://www.sec.gbov/news mamman, s. (2013). value relevance of earnings on market value of quoted building materials firms in nigeria, (adsu) (adamawa state university), journal of of accounting research (ajar), 1(2), 1-6. nse. (2012). nigerian stock exchange factbook 2011/12 ohlson, j. (1995). earnings, book values and dividends in quality valuations, contemporary accounting research, 11,661–688. olugbenga, j. (2016). the adoption of ifrs and value relevance of accounting information in nigeria, international journal of innovative research and advanced studies (ijiras), 3 (4) prihatni r., subroto, b., saraswati, e. & purnomosidi b. (2018). comparative value relevance of accounting information in the ifrs period between manufacturing company and financial services go public in indonesia stock exchange, academy of accounting and financial studies journal 22, (3), 1-9 suadiye, g. (2014). value relevance of book value and earnings under the local gaap and ifrs: evidence from turkey, ege academic review, 12(3), 301-310 sullubawa, n. k. (2015). the impact of international financial reporting standard (ifrs) on value relevance of accounting information: evidence from nigeria, global business and management research: an international journal, 9(4), 1-16. trabelsi, n.s & trabelsi, m. (2014). the value relevance of ifrs in the uae banking industry: empirical evidence from dubai financial market, international journal of academic research in accounting, finance and management sciences, 4 (4), 60–71 http://dx.doi.org/10.6007/ijarafms/v4-i4/1241 umoren, a.o. & enang, e.r. (2015). ifrs adoption and value relevance of financial statement of nigerian listed banks, international journal of finance and accounting, 4(1), 1-7. doi:105923/ji.ijfa20150401.01 uwuigbe, o. r., uwuigbe, u., jafaru, j., igbinoba, e. e., oladipo, o. a. (2016). “ value relevance of financial statements and share price : a study of listed banks in nigeria ” 11(4), 135– 143. https://doi.org/10.21511/bbs.11(4-1).2016.04 xu, w., & qi, m. (2017). presentation pattern and the value relevance of comprehensive income: evidence from china, 9(6), 31–37. https://doi.org/10.5539/ijef.v9n6p31 zulu, m., de klerk, m. & oberholster, j.g.i. (2017). a comparison of the value relevance of interim and annual financial statements, south african journal of economic and management sciences, 20(1)1–11, a1498. https://doi.org/10.4102/sajems.v20i1.1498. http://www.sec.gbov/news http://dx.doi.org/10.6007/ijarafms/v4-i4/1241 https://doi.org/10.4102/sajems.v20i1.1498 9 10 i gusau journal of accounting and finance (gujaf) vol. 3 issue 2, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria 1 liquidity management and financial performance of listed deposit money banks in nigeria bashiru iliyasu danmulki national board for technical education, kaduna, nigeria +2348035578963, dimulk@yahoo.com eniola samuel agbi department of accounting nigeria defense academy, kaduna, nigeria +2348163426272, samagbi@yahoo.com lateef o. mustapha department of accounting nigeria defense academy, kaduna, nigeria +2348036049138, lomustapha@nda.edu.ng abstract the study investigates the effect of liquidity management on financial performance of listed deposit money banks in nigeria. liquidity management was measured and proxy with capital adequacy ratio, liquidity ratio and loan to deposit ratio, however financial performance was proxy with tobin’s q. secondary data source was utilized and it was extracted via the audited published annual reports and accounts of the banks selected covering the period from 2010-2019. panel multiple regression technique was adopted as the technique of data analysis, while stata 13 was used as the tool for analysis of data. robustness tests which include heteroscedasticity, multicollinearity and normality test of standard error were conducted. findings revealed that capital adequacy ratio have positive and significant effect on financial performance of listed deposit money banks in nigeria. liquidity ratio has significant but negative effect on financial performance of banks in nigeria which connotes that high level of liquidity ratio will lead to low level of performance strategically for banks. loan to deposit ratio has positive but insignificant effect on financial performance. it is therefore recommended that management of board should pursue increased capital with the central bank of nigeria and the cbn should also make sure that banks met and continually meet the requirements in respect of capital adequacy before giving the license to operate. the management of the banks should ensure that most idle cash are investment into short term portfolios to attract higher returns which will eventually increase the value of the banks. keywords: financial performance, liquidity, shiftability theory, capital adequacy 1. introduction the world nowadays has changed due to the growing aim of companies to maximize profit to improve the value of their firm, preserving high liquidity level to attain the highest level of net worth for the shareholders of the organization, together with the achievement of other aims and objectives. therefore, the liquidity mailto:dimulk@yahoo.com mailto:samagbi@yahoo.com 2 management in an organization is very important due to the role it plays in their success. liquidity management is very critical to the survival and growth of any financial system. numerous studies have been conducted on this concept in some organizations over the years, therefore its importance cannot be overemphasized in terms of the baking sector particularly the deposit money banks in nigeria. the significance of having effective liquidity management cannot be overemphasized when it comes to financial systems like deposit money banks. the importance of liquidity management came about during the global financial crisis of 2007 through 2008, when the banking industry was affected by serious liquidity strain. the global financial crisis revealed the fact that liquidity can disappear in a thin air like a mirage; so also, it can stay for a longer time (terseer, henry, & mkuma, 2010). liquidity management in all organizations is their ability to effectively convert current business assets to cash. cash is usually considered very important in any intuition because it ensures that business components are sustained (patjoshi, 2016). on the other hand, liquidity in banking is the ability of a bank to make funds that can be used to pay for obligation as it progressively becomes due (onyekwelu, chukwuani, & onyeka, 2018). if working capital is managed properly in any organization, it makes it easy to maintain liquidity which guarantees daily operation and meeting of business obligations without any hindrance (ibe, 2013). one of the major challenges affecting the continuous survival of many businesses or financial organizations is credit risk. the likelihood that the credit clients of a bank whether in organization or person will not meet up with payment of loan as it gets due is referred to as credit risk. credit risk can also be referred to as “the risk of default” (gambo, bambale, ibrahim, & sulaiman, 2019). banks can fall into loan default when they give out credit and don’t monitor it, to ensure that is paid back. banks mainly make use of money deposits to create loans for borrowers. if these loans go to default, the banks are exposed to default risk which can lead to financial crisis (nwude & okeke, 2018). proper management of credit risk through its careful assessment and weighing can reduce the negative it might have on the performance of an organization. so also, effective credit management serves as source of income for banks and when it managed properly it leads to their survival and robust growth. though, credit risk plays a vital role on the growth of commercial banks because it accounts for a large portion of its profits through the interest rates being charged form the loans granted. however, the interest can be linked directly to credit risk; this means that when interest rate is higher it can lead to nonpayment of loan . 3 again, the main aim of listed deposit money banks of maximizing profit is to is to enable them accept cash from customers such as deposit to give it out as credit. when there is increase in the amount of credits borrowed out to customers who in turn refuse to pay, it might affect the cash balance of the bank by resulting in a decrease which can weaken liquidity level. therefore, attaining balance between liquidity and credit risk is of major importance. when banking sector is performing well financially in any economy, it promotes growth and development in that economy. any financial institution that is strong financially can be able to withstand all forms of crisis that can emerge, and its financial strength can also strengthen other sectors or institutions by providing financial aid. according to rajkumar and hanitha (2015), the assessment of financial performance of any organization that can generate resources from daily operations at given time is done through cash from operations and net income. therefore, liquidity management is understood as important variable to the financial performance of banks. the inclusion of suitable strategy to effectively manage both variables will help banks in the long term to better serve its customers and ensure growth. furthermore, despite the significance of liquidity management on financial performance of nigerian banks, there is very little existing literature in accounting and finance that can be use adequately to investigate the effect of liquidity management on the financial performance of listed banks in nigeria. it is against this backdrop the current study is designed. the main objective of this study is to determine the effect of liquidity management on the financial performance of listed deposit money banks in nigeria. the specific objectives are: i. determine the impact of capital adequacy ratio on financial performance of listed deposit money banks in nigeria. ii. examine the impact of liquidity ratio on financial performance of listed deposit money banks in nigeria. iii. determine the impact of loan to deposit ratio on financial performance of listed deposit money banks in nigeria. 2. literature review this section includes the conceptual framework which link between concepts used within this research and also include empirical review the gives proper understanding of the links between financial performance and management . liquidity management financial performance 4 source: authors’ conceptual model (2022) 2.1 empirical review of previous study the research in the impact of liquidity management on financial performance of commercial banks in botswana by sathyamoorthi, mapharing and dzimiri (2020), examined the nine (9) commercial banks in the country which comprised the studies population in the period that covered between 2011 to 2011; a secondary data was sources from bank of botswana’s financial statistics database; descriptive statistics, correlation and regression analyses were also applied to analyze the data. results from regression analysis showed there are significant relationships for loan to total assets ratio and liquid assets to total assets ratio with return on assets and return on equity; loans to deposits ratio and liquid assets to deposits ratio had statistically significant negative relationships with return on assets and return on equity; cash and cash equivalents to total assets ratio had statistically insignificant positive relationship with return on assets and return on equity while cash to deposits ratio had statistically insignificant negative relationship with return on assets and return on equity”. adhikari (2020) studied the impact of liquidity on profitability in nepalese commercial banks. 27 out of 28 commercial banks in nepal were used for the analysis. a cross-sectional secondary data of the banks was employed. for data analysis, causal comparative and descriptive approaches for research were used. furthermore, to determine the relationship between the variable’s multiple general linear regression and correlation analysis were used. findings from the study showed that statically the association between the driver’s liquidity and profitability of nepal commercial banks is insignificant. this study carried out in regard to the commercial banks in nepal, however the current study is centered on commercial banks in nigeria to serve as a guide or aid in their decision making and policy implementation. terseer et al., (2020) examined the effect of liquidity management on financial performance of banks in nigeria from 2010-2018. secondary source of data was employed for 5 banks that were listed on the nigerian stock exchange. estimation capital adequacy ratio liquidity ratio loan to deposit ratio financial performance 5 of model and hausman test is done using panel regression analysis whilst determining to choose between the random and fixed effect model. it revealed that the effect of liquidity ratio on drivers of profitability of deposit money banks is significant and positive. this study was limited or used little number of banks for its study. therefore, it can’t generalize its finding to all the deposit money banks in nigeria. dadepo and afolabi (2020) assessed the impact of the liquidity management on the performance of ten manufacturing companies from 2012 to 2016 which covered the period of 5 years. fidings of the study showed that the effect of current ratio on profitability measured by return on assets is negative and significant while, the relationship between cash and quick ratio on return on assets of the selected companies is negligible but positive. also, emmanuel and stephen (2020) conducted a study on liquidity management and performance of deposit money banks in nigeria with six (6) banks that are part of an international association. secondary data were obtained from the bank’s annual books from 2013 to 2019. the findings showed that there is positive relationship between capital adequacy and return on equity likewise; liquidity and current ratio showed very low negative relationship with return on equity and bank size had a strong positive relationship with return on equity. hence the need for broader study on the field. chinweoda et al., (2020) studied the effect of liquidity management on the performance of banks in nigeria. the population sample for the study was eighteen (18) banks that are listed on nigeria’s stock exchange between 2011 to 2017. the study revealed that liquidity management has a positive and serious impact on profitability of those banks being studied. also, the study showed that capital adequacy has a significant effect on return on assets, return of equity, and return on capital being employed. similarly, asset quality was found to have a positive and high effect on the drivers of performance. the main shortcoming of chiwendo’s work was the scope which involved banks in nigeria and limited its findings on deposit money banks while ignoring development banks like bank of industry, bank of agriculture and mortgage banks therefore his findings cannot be generalized due its broad scope and limited sample size. anandasayanan and subramaniam (2020) assessed the effect of liquidity management on banks profitability in sri lanka. the research work used 26 commercial banks in sri lanka from 1998 to 2017, making it a period of 20 years. the findings of the research showed that there is positive association between return on asset and capitalization ratio, whilst a negative relationship was found 6 between capital adequacy ratio and return on asset and the results from the regression analysis also identified that liquidity has a very high impact on profitability. a study carried out by ali (2020) about the impact of liquidity on financial performance of ten commercial banks whose shares are listed in kuwaiti stock exchange from 2010 to 2018, shows that “statistically, there is very high and direct relationship among return on asset and ratio of loans to total assets, the ratio of loans and deposit and ratio of the financing deficit to total assets”. the analysis also shows an inverse relationship the is significant existed between return on asset of liquid assets and the total assets and the ratio of liquid assets and deposits. therefore, return on equity had a very high response only on liquid assets, deposits, and deficit of funding the asset. a study on the impact of liquidity on profitability in textile sector in pakistan by sattar (2020) whose result from the simple regression using stata 12 showed that current ratio has a significant and positive impact on return on equity and return on capital deployed in 2014. so also in 2015, current ratio has reasonable but positive effect on return on capital employed and return on equity. mwambui and koori (2019) assessed the effect of liquidity management and financial performance of microfinance banks in nairobi city county for the period 2011 to 2017. thirteen microfinance banks made up the population of the study. for the secondary and primary data, a descriptive survey research design was employed for them. data analysis for the study was carried out with the use of spss version 22.0. the it was discovered in the study that there is no reasonable but weak and positive relationship between capital sufficiency and financial performance, whereas the relationship between loan repayments and cash management is significant and positive with microfinance banks financial performance. kitere, namusonge and makokha (2019) analyzed the effect of liquidity management on performance of commercial banks in kenya where a mixed research design was adopted for the study. the population of the study was made up by the 6913 employees in management and supervisory cadres in commercial banks in kenya. the sampling approach used was stratified and unstructured and structured questionnaires were the tool for data collection and the source of data were both secondary and primary. the spss version 21 was used for analyzing of the data. the significant levels of the variables were tested using regression analysis and hypotheses were tested by anova to test the significant levels of one variable 7 to the other in the study. the results showed that the effect of liquidity management on the performance of commercial banks in kenya is positive and significant. there was an attempt by satyakama and bhusan (2019) to analyze the impact the liquidity management on the profitability of private sector banks in india where they use ten (10) banks privately owned by individuals from 2013 to 2017. it was showed in the study that there exists a significant negative effect of cash to deposit ratio and investment to deposit ratio on return on assets, while the relationship between liquidity and profitability of the variables under study was significant in the case of return on equity. otekunrin et al (2019) studied the performance of selected deposit banks in nigeria and liquidity management where he used secondary data source obtained from the annual reports of fifteen deposit money banks from the total of 17 deposit money banks in nigeria that are listed in nigerian stock exchange from 2012 to 2017. according to the study, it was discovered that liquidity management measured with capital ratio, and current ratio and cash ratio has a positive relationship performance measure with return on assets. therefore, the study revealed that liquidity management is vital to profitability of any business. the study conducted by sanyaolu, aloa and ojunrongbe (2019) examined the effect of liquidity management on profitability of ten (10) nigerian deposit banks from 2008 to 2017. the study’s random effects generalized least square estimate showed that a positive and statistically significant relationship exists between the two indicators liquidity management proxies (current ratio and liquidity ratio) and return on asset, however the study did not find empirical evidence in support of loan to deposit ratio (t = 1.0650, p = 0.2896) and deposit to asset ratio (t = -6507, p = 0.5168) as having influence on profitability of the selected banks, as results produced insignificant relationship with profitability. waswa, mukras and oima (2018) examined the effects of liquidity management on the performance of firm, sampling five (5) sugar companies from 2005 – 2016 in kenya. the estimation from the random effect regression showed there is negative association between liquidity management and financial performance of the firms being studied. the research also suggests that when liquidity is funded carefully, will lead to a good financial performance. the study carried out by dadepo and afolabi (2020) focused on liquidity management of ten (10) manufacturing companies in nigeria which differs with 8 this research that focused on effect of liquidity management on the financial performance of deposit money banks in nigeria. so also, some of the previous research works dealt with the impact of liquidity management on financial performance of commercial banks in botswana, nepal, sri lanka, kuwait, pakistan, kenya, india; whose findings are not applicable to nigeria but can only be used as a guide for this work. from the review above, the following hypothesis have been deduced in null form to be tested. h01: capital adequacy ratio has no significant impact on financial performance of listed deposit money banks in nigeria. h02: liquidity ratio has no impact on financial performance of listed deposit money banks in nigeria. h03: loan to deposit ratio has no impact on financial performance of listed deposit money banks in nigeria. the study chose shiftability and anticipated income theory to explain the variables link. shiftability theory states that liquidity crisis in banks not mainly caused by loans or credit default but however their ability to possess assets that can be sold to other banks or institution at a pleasing price (udoka, 2012). this theory explains that facts that by the banks start going through liquidity or financial crisis, they should not be bordered by the level or assets they have which can easily be sold off to boost their liquidity position. according to oloruntoba, zaid and oluwafolakemi (2018) shiftability theory asserts profitable transactions that last for a period and matures at an appropriate time. this helps banks in a situation that will enables them to meet the needs of their customers. the aim of any commercial bank is profit maximization and survival in the long run, it is therefore a known fact that the shiftability theory is good approach in helping them stay liquid because helps the sale or shift of assets to other banks that have higher level of liquidity. so also, it makes it possible for the financial systems to operate efficiently, also preventing liquidity shortage because of their ability to sell the assets of the bank at prices that are relatively good. anticipated income theory states the source of liquidity in the bank should be dependent on the credit or advance portfolio (udoka, 2012). the theory shows that closing of “a term loan is planned based on the anticipated income of the debtor irrespective of the conditions of his business”. therefore, payment of the loan obtained from the bank by debtor is done in a form of installment which could be on monthly or quarterly basis depending on the agreed time and dates by both parties instead of paying a huge or all the amount obtained on the day of maturity. 9 alshatti (2014) states that anticipated income theory is the ability of the bank liquidity to be handled appropriately based on credit that is being given out. ibe (2013) also argues that liquidity should be planned to use the anticipated income of the borrower. therefore, this study is challenged towards the anticipated income theory because it takes care of the major objectives of any banks which are liquidity, safety and profitability. banks can be sure of their liquidity because the debtor is paying in installment not a lump sum amount at a particular time. 3. methods of the study this study has adopted the ex-post facto research design. the ex-post facto research design was chosen for this study because it helps in ascertaining the effect of independent variable on the dependent variable to be able to make predictions. secondary source of data was used, and the data were obtained via the annual reports of the banks. it covered period between 2010-2019. there were nineteen (19) commercial banks in nigeria on the central bank with national and international authorization, but only 14 of the commercial banks are listed on the nigerian stock exchange from 2010 to 2019. in addition, out of the 14 commercial banks listed in the nigeria stock exchange only 12 have remained listed on the nigerian stock exchange within the study period. therefore 12 banks were used based on the availability of their annual reports and other account required for data to be extracted. panel multiple regression technique was adopted, and stata 13 was used for the analysis of data. also, a post estimation test such as multicolinearity, normality of standard error, heteroscedasticity, hausman specification and longrange multiplier tests were conducted to validate the results. the model to be used for the regression analysis was formulated from the variables of the study and to be tested based on hypotheses formulated in section one of the paper: epsit = βo + β1carit + β2ldrit + β3ldt + bsit +  where eps = earnings per share, car = capital adequacy ratio, ldr = liquidity ratio, ltd = loan to deposit ratio, bs = bank size, βo = model constant, = error time, it = banks and time table 1: variable measurement variable proxy (ies) measurement liquidity management capital adequacy ratio total equity divided by total assets liquidity ratio cash to total assets 10 loan to deposit ratio loans divided by deposits (alali, 2020) financial performance earnings per share (eps) profit after tax divided by outstanding ordinary shares in issue (pandy, 2009) control variable leverage total debt to total assets. (emmanuel & stephen, 2020). source: compiled by authors (2022) 4. results and discussion this includes presentation, interpretation, analyses and discussion of the descriptive statistics, correlation result and the summary of the regression results. table 2: descriptive statistics variables min max mean std. dev. sktest tobin’s q 0.63 2.55 0.870 0.247 0.0000 car 2.97 95.2 14.89 8.474 0.0000 ldr 1.57 34.3 14.15 7.178 0.3818 ltd 3.55 99.1 62.94 18.66 0.1535 dta 71.7 254.7 89.29 21.62 0.0000 source: descriptive statistic results using stata 13 table 2 shows the minimum value of tobin’s q to be 0.63; this implies that some of the banks were not having high value as they have market value less than one. however, when compared to the highest level of tobin’s q of banks 2.55 shows that there were banks whose financial performance in the marketplace was more than the nominal value of their shares. on the overall, most of the banks have a very low value within the study period which implies that their financial performance was low. the capital adequacy ratio had a minimum value of 2.97 and a maximum value of 95.2. this implies that the banks even with low capital adequacy had 2 times what is required in terms of capitalization. meanwhile, the highest was 95 times the required capital. on average, majority of the banks had 14 times what is required by law to be saved with central bank of nigeria. in other words, this means that all the banks had reserved at most 14.89% ratio of total qualifying capital to total risk weighted assets. liquidity ratio recorded a minimum value of 1.57 and maximum value of 34.3. this shows that the lowest liquidity ratio for the banks during the study period was 1.57 percent, while the highest percentage of liquidity ratio was 34.32%. also, on average the liquidity ratio for all the banks was about 14.15. loan to deposit ratio shows a minimum value of 3.55 and maximum value of 99.1. this implies that 11 some banks had total loans that were more than the deposits received. the highest value indicates their banks that had 99% of total loans more than their total deposits. the mean value was 62.94 means that on average, total loans from the banks outgrew its total deposits by 62.94%. table 3: correlation analysis tobin’s q car ldr ltd dta tobin’s q 1 car 0.3832* 1 ldr -0.4735* -0.2045* 1 ltd -0.1422* 0.1620 -0.0836 1 dta 0.8421* 0.2996* -0.1937* -0.2692* 1 source: correlation matrix results using stata 13 *. correlation significance is at 0.01 or 0.05 level table 3 shows that financial performance is positively and significantly correlated with capital adequacy ratio to the level of 38%. this implies that financial performance of the banks is directly correlated with capital adequacy ratio. liquidity ratio is found to have a negative and significant relationship with financial performance to the tune of about 47% level implying that there is an inverse correlation between the two variables. financial performance recorded a negative but significant relationship with loan to deposit ratio at a magnitude of 14%. this shows that there is correlation between the two variables moves in different direction. for the association between the independent variables, multicolinearity test was used to determine whether the level of association was grievous. however, a mean vif value of 1.18 is an indication that presence of multicolinearity is not a problem. 4.2 post estimation tests this section includes hetroscedascity, multicollinearity and normality test of error term will be discussed. heteroscedasticity test result showed that the chi-square value of 0.36 which is considered small and the probability value of 0.2649 was greater than 5%. this implies that the absence of hetroscedascity. therefore, the use of ordinary least square (ols) is advisable due to the non-violation of the classical assumptions of ols. multicollinearity test results for vif and tolerance values were found to be consistently less than ten and one respectively (see appendix). normality of error term revealed that most residual of the error term was mild and tolerable. hence, the low level of abnormality of error term was achieved. 12 4.3 presentation and interpretation of result in this section, the relationship between the dependent and independent variables using the coefficient, the t-statistics and probability to describe the pattern and the strength of association that exist among the variables. table 4: summary of regression result (ordinary least square) variables coefficient t-statistics prob. value cumulative results constant 0.1831 2.57 0.011 car 0.0025 2.03 0.045 ldr -0.0105 -7.40 0.000 ldt 0.0003 0.54 0.592 dta 0.0087 16.9 0.000 r2 0.8176 adjusted r2 0.8113 fisher exact statistics 128.87 f-significance 0.0000 hetroscedasticity (chi2) 1.24 hettest probability (chi2) 0.2649 mean vif 1.18 source: result output from stata 13 the cumulative r2 of 0.8113 signifies that 81.13% of total variation in financial performance of listed deposit money banks in nigeria is driven by its capital adequacy ratio, liquidity ratio and loan to deposit ratio and leverage used in this study. the fisher exact statistics value of 128.87 with a significant value of 1% shows that the model of the study is appropriate and well fitted. it further implies that there is 99.9% probability that the association between the variables was not due to mere chance and as such the inferences drawn from the research could be relied upon. capital adequacy ratio had a coefficient value of 0.0025, t-value of 2.03 that is significant at 5% level. this means that capital adequacy ratio has significant and positive effect on the financial performance of banks in nigeria which further implies that an increase in capital adequacy ratio will significantly increase the financial performance of banks. this may be as a result of the fact that when most banks are faced with any financial risk and having enough capital with the central bank will enable them to absorb the shocks due to adequate funds or capital. liquidity ratio had a t-value of -7.40 and coefficient value of -0.0105 at a significance level of 1%. this connotes that liquidity ratio has a negative and 13 significant effect on the financial performance of listed bank in nigeria. therefore, an increase in the level of banks liquidity ratio, will lead to decrease in their financial performance due to holding down of capital, under investing and overcapitalization. keeping idle cash without investing them will lead to less or no returns. the loan to deposit ratio recorded a t-value of 0.54, a coefficient value of 0.0003 with a value that is not significant at 5%. this implies that loan to deposit ratio has a positive but weak effect on the financial performance of listed banks in nigeria. this means that for every increase in loan to deposit ratio, there will be little or no increase in the level of financial performance for listed banks in nigeria. this could be resulting from the fact that when more loans are given out from the bank’s deposits and there is high rate of default from borrowers, it then connects that the loan is non-performing, and the banks cash is being held without receiving the principal nor the interest due and thus this will affect the banks financial performance. 5. conclusion and recommendations the study concludes that liquidity management is a major driver to achieving high financial performance in the banking sector. banks that want their presence to be appreciated require proper management of their liquidity. it also concludes that based on the variables in the study, capital adequacy ratio and liquidity ratio are the main drivers of high value in the banking sector. this study therefore recommends that management of board should pursue increased capital with the central bank of nigeria and cbn should as well make sure that banks continually meet the requirements with respect to capital adequacy before giving them license to operate. the management of the banks should guarantee that most inactive cash are invested into short term portfolios to attract higher returns because it will eventually increase the value of the banks. the ratio of loan to deposit should be significantly reduced to 50% or even less to avoid putting the liquidity and survival of the banks in the hands of the borrowers. when a balance is achieved or maintained, that will put the banks in a better position to address their liquidity need and attract interest from the loan advances given. regulators should formulate policies where interest on loans is bearable and at minimal level. if the interest rate is made lower it will reduce the rate of defaulters and increase the profitability of banks. references 14 adebayo, o., david, o. a., & samuel, o. o. (2011). liquidity management and commercial banks’ profitability in nigeria. research journal of finance and accounting , 24-38. al-eitan, n. g., & bani-khalid, o. t. (2019). credit risk and financial performance of the jordanian commercial banks: a panel data analysis. academy of accounting and financial studies journal, 1-13. ali, s., & iman, m. (2011). capital structures and firms performance: evidence from iranian companies. international research journal of finance and economics. alshatti1, s. a. (2014). the effect of the liquidity management on profitability in the jordanian commercial banks. international journal of business and management, 62-72. corporate finance institute . (2021). credit risk. retrieved from cfi education inc.: https://corporatefinanceinstitute.com/resources/knowledge/finance/credit-risk/ corporate finance institute . (2021). financial performance. retrieved from cfi education inc.: https://corporatefinanceinstitute.com/resources/knowledge/finance/financialperformance/ corporate finance institute . (2021). return on assets & roa formula. retrieved from cfi education inc.: https://corporatefinanceinstitute.com/resources/knowledge/finance/return-onassets-roa-formula/ corporate finance institute . (2021). what is return on investment (roi)? retrieved from cfi education inc.: https://corporatefinanceinstitute.com/resources/knowledge/finance/return-oninvestment-roi-formula/ corporate finance institute. (2021). non-performing loan (npl). retrieved from cfi education inc.: https://corporatefinanceinstitute.com/resources/knowledge/finance/nonperforming-loan-npl/ corporate finance institute. (2021). return on equity (roe). retrieved from cfi education inc.: https://corporatefinanceinstitute.com/resources/knowledge/finance/what-isreturn-on-equity-roe/ edem, b. d. (2017). liquidity management and performance of deposit money banks in nigeria. international journal of economics, finance and management sciences, 147-161. funso, t. k., kolade, r. a., & ojo, m. o. (2012). credit risk and commercial banks’ performance in nigeria: a panel 15 model approach. australian journal of business and management research, 31-38. gambo, h., bambale, j. a., ibrahim, a. m., & sulaiman, a. s. (2019). credit risk management and financial performance of quoted deposit money banks in nigeria. journal of finance, accounting and management, 26-42. hahu zone. (2017). loans and advances. retrieved from hahu zone. : https://hahuzone.com/loans-and-advances ibe, o. s. (2013). the impact of liquidity management on the profitability of banks in nigeria . journal of finance and bank management , 37-48. jn, t., eg, u., bu, a., k, a., l, o., & m.e, a. (2015). credit risk management: implications on bank performance and lending growth. saudi journal of business and management studies, 584-590. kaaya, i., & pastory, d. (2013). credit risk and commercial banks performance in tanzania: a panel data analysis. research journal of finance and accounting, 55-62. mushtaq, m., ismail, a., & rahila, h. (2015). credit risk, capital adequacy and bank’s performance: an empirical evidence from pakistan. international journal of financial management, 27-32. mutava, m. p., & ali, i. a. (2016). effects of credit risk management on financial performance of commercial banks in mombasa county . research journal of finance and accounting, 15-22. nwude, c. e., & okeke, c. (2018). impact of credit risk management on the performance of selected nigerian banks. international journal of economics and financial issues, 287-297. nzenwata, a. (n.d.). theories of financial distress. retrieved from midas research : http://researchmidas.blogspot.com/2017/08/theories-offinancial-distress.html oloruntoba, o., zaid, a. a., & oluwafolakemi, o. f. (2018). credit risk management and its influence on the financial performance of banks: a study of selected banks in nigeria. south asian journal of social studies and economics, 2-11. oluwafemi, s. a., & oluwabunmi, d. (2017). impact of credit risk management on deposit money banks performance in nigeria . journal of association of professional bankers in education (japbe), 163-178. omare, h. (2016). effect of credit reference bureau services on non-performing loan portfolios in kenya: a case study of deposit taking microfinance institution. onyekwelu, u. l., chukwuani, v. n., & onyeka, v. n. (2018). effect of liquidity on financial performance of deposit money banks in nigeria. journal of economics and sustainable development, 19-28. 16 patjoshi, k. p. (2016). a study on liquidity management and financial performance of selected steel companies in india. international journal of advanced information science and technology, 108-117. raza, a., farhan, m., & akram, m. (2011). a comparison of financial performance in investment banking sector in pakistan. international journal of business and social science, 73-81. s, m. (n.d.). top 4 theories of liquidity management. retrieved from micro economics: https://www.microeconomicsnotes.com/banking/commercialbanks/top-4-theories-of-liquidity-management/1234 startcredits. (2020, july 9). https://startcredits.com/the-2019-non-performing-loansin-nigeria/. retrieved from startcredits.com: https://startcredits.com/the-2019non-performing-loans-in-nigeria/ sunday, c. o., & ndukaife, c. n. (2016). effect of liquidity management on performance of deposit money banks in nigeria (20002015). journal of policy and development studies (jpds), 156-169. terseer, w., henry, y., & mkuma, p. y. (2020). effect of liquidity management on the financial performance of banks in nigeria. european journal of business and innovation research, 30-44. the economic times . (2021, april 04). definition of 'earnings per share (eps)' . retrieved from economic times : https://economictimes.indiatimes.com/definition/earnings-per-share-eps the economic times. (2021, march 31). definition of 'liquidity'. retrieved from the economic times: https://economictimes.indiatimes.com/definition/liquidity the economic times. (n.d.). definition of 'capital adequacy ratio'. retrieved from the economic times: https://economictimes.indiatimes.com/definition/capital-adequacy-ratio udoka, o. c. (2012). an analytical and theoretical investigation of the determinants of deposit money bank’s investment in treasury bills in nigeria. european journal of business and management, 42-48. 17 i gusau journal of accounting and finance (gujaf) vol. 3 issue 1, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria ii © department of accounting and finance vol. 3 issue 1 april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. iv prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. dr. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. v dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. vi call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7 th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ vii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ viii contents mediating effect of audit committee on board dynamic and creative accounting in nigerian firms abbas usman phd, shehu usman hassan phd 1 financial performance of banks in selected african countries: does institutional quality matter? toluwa celestine oladele phd, peters ade sanni 22 firm-specific characteristcs and financial performance of listed agricultural companies in nigeria abdulrazaq t. jimoh, john a. attah 33 effect of financial leverage on stock returns of listed companies in nigeria capital market abdulrahman abubakar, prof. ahmad bello, prof. s. a. abdullahi, dr. m. d. tahir 45 efficiency of deposit money banks in nigeria: data envelopment analysis approach mayowa gabriel ajao, phd, lucky charity omoregie, phd 57 credit appraisal, collection policy and loan performance of microfinance banks in kwara state, nigeria lukman a. o. abdulrauf 69 environmental sustainability disclosure and market value of listed oil and gas firms in nigeria munir aliyu saleh, sirajo bappah, prof. gbegi daniel orsaa, ibrahim adamu saleh phd 81 audit quality, tenure and real earnings management of listed nonfinancial firms in nigeria ahmed mohammed, ademu yahaya, musa zakariya 95 effect of ceo pay and ceo power on risk-taking of listed deposit money banks in nigeria ismaila yusuf, dr. salisu abubakar, dr. idris ahmed aliyu, dr. (mrs) aneitie charles dikki 104 nexus between taxation and foreign direct investment in nigeria daniel ayegbeni ulokoaga, esther ikavbo evbayiro-osagie (mrs), ph. d 115 working capital management and profitability of listed consumer and industrial goods companies in nigeria kwasau ntyak leah, samuel eniola agbi phd, lateef olumide mustapha phd 125 value relevance of earnings and book value: a comparative analysis between big4 and non-big4 audited listed firms in nigeria abdu abubakar, ishaya luka chechet phd, muazu saidu badara phd, yunusa nasiru phd 136 ix value relevance of international financial reporting standard 4 (ifrs 4) of listed nigerian insurance firms mariya mohammed hafiz, muhammad mustapha bagudo phd, salisu abubakar phd 145 determinants of audit fees of listed insurance companies in nigeria sagir lawal, phd, mohammed ibrahim, phd 158 taxation and social services: evidence from nigeria adegbite, tajudeen adejare, phd, abdussamad, olarinde 171 ownership structure and financial performance of quoted mortgage banks in nigeria awotundun, d. a., phd, jinadu, m. y. b., fakunmoju, s. k., phd. 183 capital structure and profitability of listed deposit money banks in nigeria rahji ohize ibrahim, kamaldeen ibraheem nageri, phd, abdullai agbaje salami, phd 194 1 audit quality, tenure and real earnings management of listed nonfinancial firms in nigeria ahmed mohammed department of accountancy school of financial studies the federal polytechnic bida niger state. adangaha76@gmail.com ademu yahaya department of business management facaulty of management sciences federal university dutsin-ma, katsina state ayahaya2@fudutsinma.edu.ng musa zakariya department of accountancy school of business and financial studies, kaduna polythechnic, kaduna. zachee90@gmail.com abstract earnings management is volatile due to its asymmetric nature by managers of non-financial firms. yet, very few studies have examined the issues that cause this manipulation, especially in non-financial firms. this study, therefore, examines the relationship between audit big4 and audit tenure on rem of 76 listed non-financial firms in nigeria using a 10-year data set (2010-2019). the machammeratios database is used for data extraction. the results indicate that audit big4 shows significant positive effects on real earnings management. however, audit tenure shows in significant adverse effects on real earnings management. the paper, therefore, concludes that audit big4 is very important in mitigating real earnings management in the non-financial companies in nigeria. the empirical findings are essential for non-financial firms' policy enhancement and further research and contributions to the body of knowledge. managers should improve audit tenure while enhancing audit big4 independent to reduce incidence earnings management. keywords: audit big4, audit tenure, real earnings management. 1. introduction earnings management is a pervasive problem, spreading across organizations and industries; it distorts earnings quality and utility for investment decisions, diminishing investor confidence in financial reporting. the level of information asymmetry between shareholders, management, and knowledgeable and uninformed investors is the cause. therefore, the demand for external audits is fueled by agency issues related to ownership and control separation—shareholders' investments in public companies to their contracting agent and management. stakeholders want the agent to supply relevant and trustworthy data for various corporate operations, such as investments, financing, liquidity, dividends, mergers, and acquisitions, to name a few (adamu et al., 2017; hassan & ibrahim, 2014). due to extensive accounting and financial manipulation at the hands of its contractual agent, the public faith in businesses has badly broken in recent years (brown, 2013; hassan & bello, 2013). firms must act as good stewards to their owners, displaying their actual situation and performance and demonstrating the quality of their earnings (admati, 2017; ibrahim et al., 2020). mailto:adangaha76@gmail.com mailto:ayahaya2@fudutsinma.edu.ng 2 experienced accountants will be able to arrange transactions that satisfy their earnings aim where businesses diverge (rem) or manipulate their performance metrics to provide the appearance of success without actually creating value. the output may be favorable in the short term but not in the long run (adamu et al., 2017; ibrahim, 2020). enron, tyco, and other financial reporting crises have highlighted the need for audit quality and governance systems, which are critical for influential non-financial firms in nigeria. furthermore, external examination, like an internal audit, is essential to improve the reliability, objectivity, and soundness of financial reporting, promote accountability, reduce any intelligent board behavior, and improve the proficiency and effectiveness of internal controls (wolnizer, 1995). according to anderson et al. (2001), a director with a more considerable profit incentive, the auditor perceives such a director as more aggressive, as someone who wants their financial accounts to seem reasonable and expects the auditors to agree with their reports. as a result, when auditors become aware that ceos are manipulating earnings, they will report income smoothing. similarly, the financial scandals have cast doubt on the audit function truthfulness, reliability, utility, or value relevance. in the last decade, badawi (2008) compiled a list of corporations involved in accounting scandals involving poor external audit quality and earnings manipulations in the united states. corporate scandals in nigeria, such as those involving cadbury nigeria plc and lever brothers nigeria plc, have been widely publicized and have resulted in false financial reporting (adeyemi & fagbemi, 2010; yusuf, 2020). the nigerian context provides a rich contextual foundation for examining the impact of audit quality on earnings management. apart from a few instances of accounting fraud, the dearth of scientific research in this sector adds to the case. previous studies focus on financial institutions, while few in the oil and gas industry see alao and gbolagade (2019); tyokoso and tsegba (2015). the big4 audit companies continued dominance in the nigerian audit sector, the country's flawed corporate governance system, and little or no lawsuit risk against auditors are all considered in this study. this study investigated the relationship between audit big4 and audit tenure on rem among nigerian quoted non-financial firms. as a result, the findings of this study will be helpful to the appropriate authorities. following the introduction, the work proceeds as follows: the second portion covers past related empirical investigations in addition to the theoretical review. meanwhile, the various sections explain the methodology, practical results, conclusion, and recommendation. 2. literature review and hypothesis development according to agency theory, monitoring systems are supposed to align the interests of managers and shareholders, removing the inherent conflict of interest in the corporate form of organization and the managers' opportunistic behavior (alzoubi 2016). an auditing function is a monitoring tool that aligns managers' and shareholders' interests, limits managers' opportunistic behavior in earnings management, etc. it reduces the asymmetry of knowledge between management and shareholders (alvin et al., 2012). big 4 auditors have proxied audit quality (ibrahim et al., 2020, wu et al., 2016). according to research on audit quality and earnings management, firms audited by the big 4 have lower earnings management levels than firms examined by non-big4 auditors (alzoubi 2016; ibrahim et al. 2020). 3 audit big4 and earnings management studies that demonstrated big4 auditors perform higher-quality audits than non-big4 auditors have primarily examined in the united states and other countries where auditors face a substantial risk of shareholder litigation if they provide lower-quality auditing. recent data reveals that client factors, particularly size, play a role in audit quality disparities between big 4 and non-big4 auditors (lawrence et al. 2011). according to ajona et al. (2008), big 4 auditors behave differently in different nations regarding profit management, which varies systematically with differences in the economic environment and particular institutional contexts. alzoubi (2015) discovered that the level of earnings management is significantly less among companies hiring a big4 audit firm. the big4 auditors will enforce higher earnings quality and greater conservatism on clients' financial statements (eilifsen & knivsfla, 2016; agyei-mensah, 2019; ibrahim et al., 2020; le & moore, 2021). according to research conducted in belgium, france, greece, korea, malaysia, and turkey, there is no substantial difference in the levels of earnings management of big 4 and non-big4 audited enterprises, according to research conducted in countries such as developed and emerging economies (yasar 2013; ching et al. 2015; abid et al. 2018). therefore, it is pertinent to investigate audit big4 against rem. thus, we hypothesize that; h1. there is a significant relationship between audit big4 and rem. audit tenure and earnings management the audit committee has the responsibility and role of overseeing the financial reporting process on behalf of the commissioners who represent the owner to ensure that no manager's actions affect the owner. over a more extended period, the committee can better understand management's features when running a business (prasetyo 2014). audit committees who have been in office for a long time may have knowledge and expertise in financial statement auditing. the tenure has no bearing on rem. the length of service positively impacted accrual quality (dhaliwal et al., 2010). the size of one's employment has a good impact on rem. meanwhile, bedard et al. (2004) discovered a link between aggressive earnings management and audit committee terms. according to auditing literature, the shorter the tenure of an audit company, the better the firm's performance and audit quality (guindy & basuony, 2018). on the other hand, some believe that the longer an audit company works with a client, the greater the risk of compromising audit quality and eroding long-term firm performance (chi et al., 2011, sun et al., 2014; ibrahim et al., 2020; soyemi et al. 2020; susanto & pradipta, 2020). the hypothesis is: h2: audit committee tenure does not have significant effects on rem. 3. methodology this study adopted panel data from financial statements from 2010 to 2019 to analyze the nexus between the audit big4 and audit tenure on rem in listed non-financial firms of nigeria. the data accesses from the machameratios database and financial statement. there are 112 listed non-financial firms in nigeria as of 31st december 2019, and this study deleted 37 firms on technical suspension by the nigerian stock exchange. as a result, the study utilized the remaining 75 firms. therefore, the study uses correlational research analysis since it addresses cause and effect linkages. similarly, skewness and kurtosis, correlation analysis, variance inflation factor, and tolerance level for multicollinearity are carried out to make the estimation free of bias. test for heteroskedasticity, breusch/pagan lagrangian multiplier test for panel effect/ordinary least squares, and hausman specification test for random effect model/fixed-effect model used to diagnose the data, and together with descriptive and 4 inferential analyses, and the test results interpreted at 5 percent level of significance. the empirical models for the study are as follows: variable measurement previous studies on earnings management used the dechow et al. (1995) model, advanced by roychowdhury (2006), and later studies used modified roychowdhury (2006) models to quantify rem. on the subject of corporate finance and associated literature, authors such as roychowdhury (2006) emphasize the idea of earnings management. this research used the cohen et al. (2008); kouaib and jarboui (2017); almashaqbeh et al. (2019) model, which includes three proxies for rem:1) unusual discretionary spending, 2) unusual manufacturing costs, and 3) unique cash flow of funds disxt/tat-1 = a0+(1/tat-1)+a1(sales t-1/tat-1)+et …….…………………………………………… (1) prodt/tat-1= a0+(1/tat-1)+ a1(salest/tat-1)+a2 (∆salest/tat-1)+a3(∆salest-1/tat-)+et……… (2) cfo t/tat-1 = a0+(1/ tat-1)+ a1(salest/tat-1)+a3 (∆salest/tat-1) + et………………………….... (3) therefore, these equations are to calculate normal disexp, prod, and cfo and derived residual. where; disexp, and prod: discretionary expenses. st: the sales in year t. ∆sales t: (sales t sales t-1) change in current sales from t-1 to t. sales t-1: sales in year t-1. ∆sales t-1: change in sales, tat-1: is the total asset by the end of the year as expressed through t-1, and prodt: the cost of production cfot: current cash flow from operation. outside the average level of expenditures in the business (remdixept) and abnormal levels of production cost (rem prodt) as measured as the residuals of equation (2) while, operating cash flows for the business (remcfot) calculated under the title of equations (3) and 2 multiplied by −1. remt is the sum of remdixept ; remprodt, and rem cfot. the residual is: rem= cfo*(-1) + disexp*(-1) + prod. the regression model used to examine the association among the independent variables (i.e., audit big4, audit tenure) and rem is as follows: remit = β0+ β1audb4it + β2audteit +β3fsizeit + β4fageit + eit. whereas: rem = real earnings management, audb4 = audit big4 (non-jordanian). audte = audit tenure, fsize = firm size, fage = firm age, e = error term abnormal levels of production cost (rem prodt) as measured as the residuals of equation (2), while the outside the normal level of expenses in the business (remdixept) and operating cash flows for the business (remcfot) are measures under the title of equations (1) and (3) multiplied by −1. remt is the sum of remprodt , remdixept and rem cfot. rem= cfo*(-1) + disexp*(-1) + prod (4). the measurement of independent and control predictors depicts in the table 1: table 1: operationalization of the variables variables measurement audq audit quality is proxy with big4 which is equal to 1 if the company is audited by a big 4 audit firm and 0 otherwise (alzoubi, 2015;). audte audit tenure is the number of years audit big4 client relationship (ibrahim et al., 2020; lee & moore, 2021) 5 fsize firm size is the natural logarithm of total assets (alzoubi, 2016). fage firm age is the natural logarithm of fit age of incorporation to date (wu et al., 2020). source: authors compilation, 2021. 4. result and analysis this section is devoted to the results of the series of analyses carried out, the contrast and comparison with empirical results from previous related studies, and the results of the descriptive analysis depicted in table 2 as follows: table 2: results of descriptive analysis variables no. of obs. mean standard deviation min max skewness kurtosis rem 760 .041 .028 .000 .3062 3.188 22.058 audqu 760 .572 .495 0.000 1 -.2923 1.086 audte 760 .766 .424 0.000 1 -1.255 2.576 fsize 760 7.081 .816 5.093 9.241 .206 2.587 fage 760 26.183 13.379 1 55 -.258 1.743 source: stata 13 outputs, 2022 table 2 presents a summary of the descriptive indicators of the variables of interest in the paper. the number of observations is 760, derived from the 76 listed non-financial firms and the study's ten (10) years. in terms of the audit big4 of the firms, the average audit big4 over the ten years is 0.572. however, the minimum audb4 is 0.000, and the maximum audb4 is 1. concerning audit tenure, the average audte is .766. these results clearly show that the audit tenure is extended even as big4, which implies that the uses of audit big4 in nonfinancial firms in nigeria are underutilized. in terms of control variables, the average value of fsize is 7.081, while the minimum is 5.093 and the maximum is 9.241. also, the average fage is 26.183 with minimum and maximum values of 1 and 55, respectively. table 3: results of correlation test variables rem audb4 audte fsize fage rem 1.0000 audb4 0.1501 1.0000 audte -0.0035 0.0495 1.0000 fsize 0.0497 0.3311 0.0079 1.0000 fage 0.0076 0.0655 -0.0443 0.1533 1.0000 source: stata 13 outputs, 2022 table 3 reports a bivariate association between variables. results indicate that audb4 has significant positive associations with rem. however, audte failed to show any meaningful relationship with rem price. the associations among the predictors offer a maximum coefficient of 15.01 percent (between audb4 and rem), which falls short of the 80 percent required to prove the presence of multicollinearity among the independent variables. table 4: multicollinearity test results variables vif 1/vif audqu 1.15 0.872670 audte 1.13 0.887383 fsize 1.03 0.974313 fage 1.01 0.994914 6 source: stata 13 outputs, 2022 table 4 presents the results of the vif and tolerance value of the series to consider the likelihood of multicollinearity. the variables have vifs of less than 2 and a tolerance of higher than 0.5 across the panels. therefore, it suggests an absence of multicollinearity because values are below the benchmark of 10 for vif above 0.10 for tolerance (wooldridge, 2010; field, 2013). table 5: results of breusch/pagan lagrangian multiplier test chibar2 (01) 11.28 prob > chibar2 0.001 source: stata 13 outputs, 2022 table 5 presents the outcome of the breusch/pagan lagrangian multiplier test assists in deciding between a random-effects model and a simple ordinary least square (ols). as clearly indicated in table 6, the prob > chibar2 is not significant (p-value = 0.001), which implies that there are no panel effects in the model, and therefore, ols is the most appropriate for the study. table 6: ols regression results rem coef. robust std. err. t p>t audb4 .0085648 .002169 3.95 0.000 audte -.0007341 .0023929 -0.31 0.759 fsize 5.18e-06 .0013269 0.00 0.997 fage -5.82e-06 .0000766 -0.08 0.939 _cons .0367642 .0092751 3.96 0.000 number of obs. = 760 f(4, 755) = 4.38 r-squared = 0.0227 adj r-squared = 0.0175 hettest: chi2(1) = 11.28. prob>chi2= 0.0008 source: stata 13 outputs, 2022 as indicated in table 6, for every unit of increase in audit big4, there is a 1per cent increase in rem. also, the t-value (3.95) and p-value (.000) indicate that the effect of audit big4 on rem is significant. these results align with the results of alzoubi, 2015; ibrahim et al. 2020, who found significant effects. thus, hypothesis one, which states that audit has no significant impact on the rem of listed non-financial firms in nigeria, is rejected. however, table 5 indicates that for every one-year tenure of an auditor (audte), rem reduces by 0.02. the tvalue (-0.31) and p-value (0.759) indicate that the effect audt has on rem is insignificant. these results align with soyemi et al. (2020); susanto & pradipta (2020) found no significant impact. thus, hypothesis two is accepted, that depicted audte has no considerable effect on rem. finally, from table 5, the results of control variables also reveal a positive association between fsize and rem. at the same time, it is not statistically significant with fage and rem. 5. conclusion and recommendation the paper examines the relationship between audit big4 and tenure on real earnings management in nigerian non-financial firms. to achieve this goal, we developed a measure of rem based on the theory of rowchebberry, 1976, which derived from the cash flows and expenses of the firms. we analyzed if big4 auditors and audit turnover influence rem within 7 the nigerian economy's non-financial firms. the study used an ols regression model similarly used by alzoubi; (2016). we used the 76 listed non-financial firms on the nigerian stock exchange over ten years (2010-2019) and found that audit big4 has significant positive effects on rem. however, we failed to find any substantial impact from audit tenure on rem. based on the results of this study, the contributions of this paper to empirical literature are many. first, we established that engagement of audit big4 in the non-financial firm has a significant bearing on rem. we, however, also failed to establish that audit tenure mitigates rem. these results have policy and performance implications, future empirical studies, and the present body of knowledge (conceptual and theoretical). finally, the paper offers directions for future empirical studies. the sample should cover the entire financial sector (banks, insurance, mortgage banks, possibly microfinance banks). these would have to provide an opportunity for comparison among different financial institutions. in addition, future research should examine the effect of other measures on earnings management, for example, discretionary accruals. ols application is another cause of worry, as broader coverage could have provided a data set that indicates the presence of panel effects. references abid, a., shaique, m., & anwar ul haq, m. (2018). do big four auditors always provide higher audit quality? evidence from pakistan. international journal of financial studies, 6(2), 58. adamu, a.i., ishak, r.b., & chandren, s.a (2017). the effect of board attributes on real earnings management in nigerian financial institutions, international journal of accounting, business, finance. res., 1(1), 76–83. adeyemi, s.b., & fagbemi, t.o. (2010). audit quality, corporate governance and firm characteristics in nigeria. international journal of business and management, 5 (5), 169 – 179. admati, a.r., (2017). a skeptical view of financialized corporate governance, international journal, econonomics perspect, 31(3),131–150. agyei-mensah, b.k. (2019). the effect of audit committee effectiveness and audit quality on corporate voluntary disclosure quality. african journal of economic and management studies. ajona, l. a., dallo, f. l., & alegria, s. s. (2008). discretionary accruals and auditor behaviour in code-law contexts: an application to failing spanish firms. european accounting review, 17(4), 641-666. alao, b. b., & gbolagade, o. l. (2019). the influence of audit quality on earnings management among listed oil and gas companies in nigeria. international journal of academic and applied research, issn, 2643-9603. alhadab, m., clacher, i., & keasey, k. (2015). real and accrual earnings management and ipo failure risk, account. bus. res., 45(1), 55–92. almashaqbeh, a., shaari, h., & abdul-jabbar, h. (2019). the effect of board diversity on real earnings management: empirical evidence from jordan. international journal of financial research, 11(5), 495-508. alzoubi, e. s. s. (2016). audit quality and earnings management: evidence from jordan. journal of applied accounting research, 17(2), 170-189. doi 10.1108/jaar-09-2014-0089. anderson, u., kadous, k., & koonce, l. (2001). the role of reporting incentives and quantification in auditors' evaluations of earnings fluctuations. available at ssrn 276570. alvin a. arens, randal j. elder, mark beasley (2012). auditing and assurance services..an integrated approach, 14th edition-boston _ prentice hall 8 badawi, i. m. (2008). motives and consequences of fraudulent financial reporting, paper presented at the 17th annual convention of the global awareness society international, 110-123. be’dard, j., chtourou, s.m., & courteau, l. (2004). the effect of audit committee expertise, independence, and activity on aggressive earnings management. auditing: journal of practice and theory, 23, 13-35. brown, a. (2013). understanding pharmaceutical research manipulation in the context of accounting manipulation, j. law, med. ethics, 41(3), 611–619. chi, w., lisic, l.l., & pevzner, m (2011). is enhanced audit quality associated with greater real earnings management? account horizons, 25(2), 315–335. ching, c. p., teh, b. h., san, o. t., & hoe, h. y. (2015). the relationship among audit quality, earnings management, and financial performance of malaysian public listed companies. international journal of economics & management, 9(1). cohen, d. a., & zarowin, p. (2008). economic consequences of real and accrual-based earnings management activities. the accounting review, 83(1), 758-787. deangelo, l.e. (1981). ―auditor size and audit quality‖, journal of accounting and economics, 3(3), 183-199. dechow, p. m., sloan, r. g., & sweeney, a. p. (1995). detecting earnings management. accounting review, 193 225. dhaliwal, d., naiker, v. & navissi, f. (2010). the association between accruals quality and the characteristics of accounting experts and mix of expertise on audit committees, contemporary accounting research, 27(3), 787-827. eilifsen, a., & knivsflå, k. (2016). the role of audit firm size, non‐audit services, and knowledge spillovers in mitigating earnings management during large equity issues. international journal of auditing, 20(3), 239-254. field, a. (2013), discovering statistics using ibm spss statistics, 3rd ed., sage, london. guindy, m., & basuony, m. (2018). audit firm tenure and earnings management: the impact of changing accounting standards in uk firms, 52(4), 167–181. hassan, s.u., & bello, a. (2013). firm characteristics and financial reporting quality of listed, 1(6), 47–63. hassan, s.u., & ibrahim, g. (2014). governance attributes and real activities manipulation of listed manufacturing firms in nigeria, international journal of account. tax., 2(1), 37– 62. ibrahim, g., mansor, n., & ahmad, a. u. (2020). the mediating effect of the internal audit committee on the relationship between firms’ financial audits and real earnings management. international journal of scientific & technology research, 9(04), 816822. kouaib, a., & jarboui, a (2017). the mediating effect of rem on the relationship between ceo overconfidence and subsequent firm performance moderated by ias/ifrs: moderatedmediation analysis, ‖ res. int. bus. finance. lawrence, a., minutti-meza, m., & zhang, p. (2011). can big 4 versus non-big 4 differences in audit-quality proxies be attributed to client characteristics? the accounting review, 86(1), 259-286. le, b., & moore, p. h. (2021). the impact of audit quality on earnings management and cost of equity capital: evidence from a developing market. journal of financial reporting and accounting. 1985-2517. doi 10.1108/jfra-09-2021-0284. prasetyo, a.b. (2014). pengaruh karakteristik komite audit dan perusahaan terhadap kecurangan pelaporan keuangan. jurnal akuntansi & auditing, 11(1),1-24. roychowdhury, r. (2006). earnings management through real activities manipulation, international journal of account econ., 42(3), 335–370. 9 sun, j., lan, g. & liu, g. (2014). independent audit committee characteristics and real earnings management. managerial auditing journal, 29(2), 153-172. soyemi, k.a., olufemi, o.a., & adeyemi, s.b. (2020). external audit(or) quality and accrual earnings management: further evidence from nigeria, malaysian management journal, 24, 31-56. susanto, y.k., & pradipta, a. (2020). can audit committee reduce real earnings management? jurnal bisnis dan akuntansi, 22(1), 139-146. tyokoso, g. m., & tsegba, i. n. (2015). audit quality and earnings management of listed oil marketing companies in nigeria. european journal of business and management, 7(29), 34 -42. wolnizer, p.w. (1995). are audit committees red herrings abacus 31 (1) 45-66. wooldridge, j.m. (2010), econometric analysis of cross section and panel data, mit press wu, m., coleman, m., & bawuah, j. (2020). the predictive power of k-nearest neighbour (knn): the effect of corporate governance mechanisms on earnings management. sage. open, 10(3), https://doi.org/10.1177/215824402094953. yasar, a. (2013). big four auditors' audit quality and earnings management: evidence from turkish stock market. international journal of business and social science, 4(17). yusuf. m.a (2020). effect of audit quality on earnings management of listed consumers goods companies in nigeria, journal of management sciences, 3(1), 01-13. https://doi.org/10.1177/215824402094953 i gusau journal of accounting and finance (gujaf) vol. 3 issue 1, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria ii © department of accounting and finance vol. 3 issue 1 april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. iv prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. dr. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa v department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. vi call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7 th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ vii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ viii contents mediating effect of audit committee on board dynamic and creative accounting in nigerian firms abbas usman phd, shehu usman hassan phd 1 financial performance of banks in selected african countries: does institutional quality matter? toluwa celestine oladele phd, peters ade sanni 22 firm-specific characteristcs and financial performance of listed agricultural companies in nigeria abdulrazaq t. jimoh, john a. attah 33 effect of financial leverage on stock returns of listed companies in nigeria capital market abdulrahman abubakar, prof. ahmad bello, prof. s. a. abdullahi, dr. m. d. tahir 45 efficiency of deposit money banks in nigeria: data envelopment analysis approach mayowa gabriel ajao, phd, lucky charity omoregie, phd 57 credit appraisal, collection policy and loan performance of microfinance banks in kwara state, nigeria lukman a. o. abdulrauf 69 environmental sustainability disclosure and market value of listed oil and gas firms in nigeria munir aliyu saleh, sirajo bappah, prof. gbegi daniel orsaa, ibrahim adamu saleh phd 81 audit quality, tenure and real earnings management of listed nonfinancial firms in nigeria ahmed mohammed, ademu yahaya, musa zakariya 95 effect of ceo pay and ceo power on risk-taking of listed deposit money banks in nigeria ismaila yusuf, dr. salisu abubakar, dr. idris ahmed aliyu, dr. (mrs) aneitie charles dikki 104 nexus between taxation and foreign direct investment in nigeria daniel ayegbeni ulokoaga, esther ikavbo evbayiro-osagie (mrs), ph. d 115 working capital management and profitability of listed consumer and industrial goods companies in nigeria kwasau ntyak leah, samuel eniola agbi phd, lateef olumide mustapha phd 125 value relevance of earnings and book value: a comparative analysis between big4 and nonbig4 audited listed firms in nigeria abdu abubakar, ishaya luka chechet phd, muazu saidu badara phd, yunusa nasiru phd 136 ix value relevance of international financial reporting standard 4 (ifrs 4) of listed nigerian insurance firms mariya mohammed hafiz, muhammad mustapha bagudo phd, salisu abubakar phd 145 determinants of audit fees of listed insurance companies in nigeria sagir lawal, phd, mohammed ibrahim, phd 158 taxation and social services: evidence from nigeria adegbite, tajudeen adejare, phd, abdussamad, olarinde 171 ownership structure and financial performance of quoted mortgage banks in nigeria awotundun, d. a., phd, jinadu, m. y. b., fakunmoju, s. k., phd. 183 capital structure and profitability of listed deposit money banks in nigeria rahji ohize ibrahim, kamaldeen ibraheem nageri, phd, abdullai agbaje salami, phd 194 1 capital structure and profitability of listed deposit money banks in nigeria rahji ohize ibrahim kamaldeen ibraheem nageri, phd department of banking and finance faculty of management sciences al-hikmah university, ilorin, nigeria abdullai agbaje salami, phd department of accounting, faculty of management sciences al-hikmah university, ilorin, nigeria abstract bank management and providers of funds are of the view that capital structure is of supreme importance, the use of a wrong mix of capital structure could seriously affect the performance and subsistence of such a bank. consequently, this research examines the impact of capital structure on the net interest margin of deposit money banks in nigeria. panel data analysis was employed, analysing the fixed effect and random effect models. the population of the study is 14 listed banks at the nse. the sample is the six systemically important banks in nigeria and covered the period of 2012 to 2020. findings shows that long term debt to total asset and total debt to total asset are statistically significant determinants of the net interest margin in nigerian deposit money banks while total equity to total asset, total asset, risk and income tax expenses to earnings before taxes are not statistically significant determinant deposit money banks’ net interest margin in nigeria. therefore, it is concluded that the net interest margin of deposit money banks in nigeria is statistically significantly determined by long term debt and equity. as such, the study recommended that deposit money banks in nigeria should take into cognizance, the leverage level incurred in the capital structure as it significantly determines bank’s net interest margin. keywords: capital structure, net interest margin, profitability, deposit money bank introduction investors has higher interest in the banking sector simply because banks are interested in profitability and liquidity, while banks’ liability are more of short-term. deposits are payable on demand, with scarce fixed costs and little operating leverage compare to other participants in other sectors of the economy. therefore, bank management and providers of funds is of the view that capital structure is of supreme importance because the use of a wrong mix of capital structure could seriously affect the performance and subsistence of such a bank. banking sector channel the tide of funds for productive drives and are also expected to reimburse the excess sector from the profits of the banks (mutairi & naser, 2015). decision around the mixture of the several sources of funds that corporations can use to fund its operations and investments involves what is known as capital structure. capital structure is 2 concerned about financing sources available to corporations to fund their operations. these include retained earnings, equity (share) sales, bonds, bank loans, accounts payable (creditors), line of credit, among others (rossi, schwaiger & winkler, 2009) and perhaps additional interestbearing debts. raising funds on nigerian capital market has continuously remained an issue because the capital market is tilted towards equity sources of finance with its attendant higher cost of capital and serious financing constraint on corporations (kolawole, ijaiya, sanni & aina, 2019). it is detected that investors tend to pull out their share investment which led to declining stock prices in particular bank stocks (abubakar, jagongo, almadi & muktar, 2014). asset management corporation of nigeria (amcon) in year 2011 also injected n679 billion to recapitalise nigerian banks yet some banks are operating on negative shareholder’s funds. the upward trend of non-performing loans compounded the heightened unemployment in nigeria which, together resulted in depreciated currency and tight financial conditions. following the special examination, eight nigerian commercial banks wrote off n279.6 billion loans in 2017 equivalent to 66% of their total capital. as result of the forgoing discussions, the research question that begs for answer is, what is the impact of capital structure on the net interest margin of deposit money banks in nigeria. therefore. the objective of this study is to investigate the impact of capital structure on net interest margin of nigerian deposit money banks. several studies such as kumar (2015); muraleetharan (2013) and onoja and ovayioza (2015) examined the effect of capital structure on the performance of banks concentrated on long term sources of financing while ignoring the short-term sources of financing. this study intends to improve on the discourse by looking to improve on previous studies by considering the net interest margin variable, because interest form the major source of revenue for deposit money banks. the identified neglected area by the previous studies is very important and hence constitute the research gaps which this current study duly considered. the result of this study is important to policy makers for policy guide, financial managers in banks would be able to know the way out of their dilemma in which investments policy to pursue. this study focusses on the six systemically important banks in nigeria, the study covered the period from 2012 to 2020. the choice of 2012 beset the n679 billion which was expended by the asset management corporation of nigeria (amcon) to recapitalise nigerian banks in august, 2011 while as at the time the study was carried out, the 2021 annual report of the selected banks is yet to be released. data on salient variables selected for this study are activities such as total debt to total assets (tdta), long term debt to total assets (ltda), total equity to total asset (teta) and net interest margin proxy by risk and income tax expenses to earnings before tax (ite). the study employed panel data regression technique. panel data technique is appropriate for the study because panel data estimation yields more robust results than time-series estimation. 3 the remainder of the study include section two which deals with review of literature while the methodology is captured in section three. the fourth section explains the results and findings and fifth section provides the summary, conclusion and recommendations. literature review the mixture of internal and external fund sources employed by corporations in financing business operations is capital structure (amara, 2014). corporations’ capital structure is derived from diverse sources and typically stated in the financial position statement (modugu, 2013). vu thi and huang (2003) stated corporation has three diverse ways, namely; internal (equity/retained earnings), external (debt capital, borrowing money via debt instruments) as the sources of capital to finance their business operations. sources of funding makes up capital structure of corporation and as well displays the ownership of corporation. net interest margin is well-thought-out as a useful tool for trailing profitability of bank investment and lending over a specific period of time. it indicates the spread of interest rate between loans and deposits and in addition, the transaction costs and taxes that are borne directly by borrowers and savers respectively. according to hijazeen (2017) ratio of net interest income to average earning assets of banks is known as net interest margin. theoretically, trade-off theory hypothesizes what makes a company to borrow up to a certain margin tax-deductibility of interest payment. where interest tax shield present value is made up for by the value loss as a result of agency cost arising from risky debt issued and the cost of likely liquidation or reorganization. based on miller (1977) hypothesis, the proposition of optimal capital structure of corporation, is a function of the tradeoff among current tax shield advantage from debt and higher cost of bankruptcy as a result of the higher degree of indebtedness. this is based on the assumption that corporations will balance the financial distress costs against the interest tax shields marginal present values. in same vein, the trade-off model indicates that ideal capital structure exists by creating certain level of debt and progressively stirring towards the target level. corporation’s optimal capital structure comprises tradeoff between the effect of personal tax and corporate tax, agency cost and bankruptcy cost. tax and agency-based theories are part of the trade-off theory (cheng & tzeng, 2010; harris & raviv, 1991 jensen & meckling, 1976). it is worthy to note that advantage of taxation is vital for regulated, big and dividend paying corporations, that corporations with perhaps, higher corporate tax rate with large tax incentive using debt (desai & hines jr, 1999; graham & harvey, 2001). myers (1984) opined that corporation reveals matching the cost of interest tax shield against various bankruptcy cost to avoid financial awkwardness. though, there exists divergence opinions on how appreciated the tax shield are, if any, the cost of financial awkwardness remains substantial. therefore, corporations are likely to substitute debt for equity or equity for debt pending the maximization of the value of the firm. empirically, from the international perspective, ramli, latan, solovida (2019) examined capital structure determinant and financial performance of firm in malaysia and indonesia, using plssem. the variables used in the study are asset structure, growth opportunity, liquidity, non-debt tax shield, firm leverage and rate of interest. finding provides evidence of capital structure 4 negatively affecting performance of firm. le and phan (2017) evaluated capital structure and firm performance from the perspective of developing country. the listed variables used in the study are book leverage, market leverage, firm characteristics: growth, investment, liquidity, risk, dividend, roa, roe, tobin q and cash flow. using, panel data analysis, the study shows the existence of negative impact of capital structure on firm performance. tifow and sayilir (2015) examined capital structure and firm performance during the periods of 2008 and 2013, comprising of 130 manufacturing firms listed on borsa istanbul using panel data analysis. the study revealed a negative significant relationship between leverage and performance of the firms. basnet (2015) study capital structure determinants (profitability, assets tangibility, size, collateral, business risk dividends, gdp growth) and inflation of commercial banks in nepal. using multiple regressions, findings indicate internal factors were significant determinant of capital structure. dao and ta (2020) conducted meta-analysis of capital structure and firm performance using 340 studies chosen from 2004 to 2019 with data range from 1998 to 2017. the descriptive and quantitative analysis conducted shows that corporate performance is negatively related to capital decisions. studies on sub-saharan africa includes ebaid (2009) which indicted that capital structure mix has little or no impact on firm performance in egypt, while omollo, muturi and wanjare (2018) examined the effects of debt structures on firm financial performance of listed companies at the nairobi securities exchange and found negative and statistically significant of debt structure on returns on assets. an investigation of the firm level determinants of capital structure of 62 egyptian publicly traded non-financial firms over the time period from 2003 to 2016 shows that trade-off and pecking order theories best describe the choice of capital structure (sakr & bedeir, 2019). studies done on nigerian firms includes yakubu and olowe (2019) studied impact of capital structure on selected quoted firms’ financial performance in nigeria. return on equity, short term debt, long term debt and debt/equity were the variables adopted, in the study while analyses were done using the ordinary least square (ols). findings discloses the existence of positive and significant impact of shortand long-term debt and ratio of debt/equity on financial performance. oladeji, ikpefan and olokoyo (2015) carried out an empirical study on petroleum industry’s capital structure and firms’ performance in nigeria. the variables adopted in the study are firm size, tax, past period return on asset, and ratio of total debt to total asset, while the study was conducted using panel data analysis. the study found the existence of negative relationship between leverage and firm performance, positive relationship between the explanatory variables (firm size, tax and lagged return on asset) and firm performance. the tests of the long run and short run dynamic of debt on firm‘s performance, using the panel cointegration model, fully modified ordinary least square and error correction model indicates the existence of long run relationship between debt and firm performance (ibrahim & nageri, 2020). most studies mainly conduct regression analysis or generalized method of moments (gmm) and similar analysis using panel data, this study contribution to the body of literature is by the use of 5 net interest margin as a measure of profitability which only applies to banking financial institution. 3. methodology and model specification this section consists of model specification, sources of data, method of data analysis, data description and apriori-expectation. the panel data analysis was employed using the fixed and random effect models. the selection between the fixed effect and random effect models depends on the objective of the analysis, and problems concerning the exogeneity of the explanatory variables. the model used to achieve the objective was adapted from the study of ajibola, wisdom and qudus (2018) which was modified and specified as: 3.1 thus, the model is written in linear form as: 3.2 econometrically, it can be written thus: 3.3 where: nim= net interest margin ltda= long-term debt / total assets tdta= total debt / total assets, ta= natural log of total assets, and rsk= risk teta = total equity/total assets ta= natural logarithm to total assets, ite = income tax expense/earnings before taxes a-priori expectation mathematically, it can be written as: β1, β2 and β3 > 0 it is expected that there will be a positive impact of capital structure on net interest margin of deposit money banks in nigeria. the data for this study is secondary in nature implying that the secondary data was obtained from central bank statistical bulletin and financial statement of the selected deposit money banks. method of data analysis the panel data analysis was employed using the fixed and random effect models. the selection between the fixed effect and random effect models depends on the objective of the analysis, and problems concerning the exogeneity of the explanatory variables. the population of the study is the 14 listed banks at nse. the study was based on the six systemically important banks in nigeria and covered the period of 2012 to 2020. results and discussion this section presents the analysis and results and the interpretation. 6 table 1: correlation matrix for multicollinearity test variables ltda tdta teta ta rsk ite ltda 1 tdta -0.05 1 teta 0.29 -0.14 1 ta 0.02 -0.16 0.10 1 rsk 0.02 -0.10 0.04 0.46 1 ite 0.04 -0.31 -0.11 0.51 0.44 1 source: author’s computation 2021 using stata 14.2 multicolinearity is a foremost problem in multiple regression models because it leads to bias estimates of parameters and thus renders the regression estimates spurious. pair-wise correlation test was conducted to examine the existence of multicolinearity. table 1 shows that none of the correlation is shown to be strong and constitute serious problem of multicolinearity. the independent variables’ correlation coefficients are less than 5%, indicating none existence of multicolinearity. table 2: results of fixed and random effect regressions for net interest margin (1) (2) variables fixed effect model for nim random effect model for nim long term debt to total asset (ltda) -0.00069*** -0.00064*** (0.000026) (0.000030) total debt to total asset (tdta) 0.069* 0.081*** (0.037) (0.017) risk (rsk) 0.023 0.051* (0.030) (0.029) total equity to total asset (teta) -0.0026 0.0028 (0.19) (0.19) total asset (ta) -0.0011 -0.016 (0.047) (0.055) income tax expense (ite) 0.18 0.19 (0.17) (0.19) constant -0.57* -0.72 (0.29) (0.47) observations 70 70 r-squared 0.196 number of cid 14 14 7 robust standard errors in parentheses ***, ** and * denote 1%, 5% and 10% level of significance respectively source: author’s computation 2020 using stata 14.2 table 2 presents the regression estimates for fixed effect and random effect models. the dependent variable is net interest margin while the independent variables are long-term debt / total assets, total debt / total assets, risk, total equity/total assets, natural logarithm to total assets, income tax expense/earnings before taxes. column 1 and 2 contains the fixed effect model and the random effect model respectively. however, the result in table 4.2 shows that long term debt to total asset (ltda) and total debt to total asset (tdta) are the only statistically significant determinants of the net interest margin in nigerian deposit money banks as shown by the p-value of less than 5%. thus, the variables have significant impact on net income margin of commercial banks in nigeria. the estimates of the coefficients show that one-unit increase in lda will lead to about 0.00069 units increase in net income margin. on the other hand, a unit increase in total debt to total asset will bring about 0.069 units decrease in net income margin respectively. since the independent variables are representing capital structure, the result thus indicates that capital structure significantly affects net income margin of deposit money banks in nigeria. table 3: result of hausman test for all the models hausman test chi-statistics p-value 3.61 0.7295 test summary source: author’s computation 2020 using stata 14.2 the chi-square statistics of the hausman tests for the model is 3.61 while the p-values is 0.7295. since the p-values are greater than 5% level of significance, the null hypotheses are not rejected and the results of the random effect models are preferable for the model. in short, this implies that the policy inferences of the study should be based on the result of the random effect models. conclusion and recommendations this study examined the impact of capital structure on net interest margin of deposit money banks in nigeria, employed panel regression of fixed and random effect to establish the extent of capital structure variation on net interest margin of deposit money banks in nigeria. the study revealed that long run relationship existed between capital structure and net interest margin of deposit money banks in nigeria. it was also revealed that, long term-total assets (ltda), total assets and equity were relevant to profit after tax and net interest margin of deposit money banks in nigeria. in conclusion, based on the empirical findings of the study, the study concluded that capital structure has impacts on net interest margin of deposit money banks in nigeria. in other words, net interest margin of deposit money banks in nigeria was statistically significantly determined by long term debt and equity. 8 therefore, from the findings of this study, it was recommended that deposit money banks in nigeria should take into cognizance the amount of leverage incurred because it is a significant determinant of their net interest margin. furthermore, financial managers of banks in nigeria should try to finance from retained earnings rather than relying heavily on debt capital in their capital structure and use debt as a last option as supported by the pecking order theory. references abubakar, a. y., jagongo, a., almadi, o. j., & muktar, b. s. (2014). effects of 2008 global liquidity crisis on the performance of banks shares traded in nigeria stock exchange market. african journal of business management, 8(23), 1094-1100. abubakar, y. & olowe, g. j. (2019). capital structure and financial performance of selected quoted firms in nigeria. international journal of research and scientific innovation, vi(ii), 75-81. ajibola, a., wisdom, o. & qudus, o. l. (2018). capital structure and financial performance of listed manufacturing firms in nigeria. journal of research in international business and management, 5(1), 81-89. amara, b. a. (2014). impact of capital structure on firm performance: analysis of food sector listed on karachi stock exchange. international journal of multidisciplinary consortium, 1(1), 24-31. basnet, a. (2015). capital structure choice of financial firms: evidence from nepalese commercial banks. a master’s thesis submitted to hanken school of economics. cheng, c., & tzeng, c. (2010). the effect of leverage on firm value and how the firm financial quality influences on this effect. national chung cheng university, taiwan. dao, b.t.t. & ta, t.d.n. (2020). a meta-analysis: capital structure and firm performance. journal of economics and development, 22(1) 111-129. https://doi.org/10.1108/jed-12 2019-0072 desai, m. a. & hines jr, j. r. (1999). ‘‘basket cases’’: tax incentives and international joint venture participation by american multinational firms. journal of public economics, 71, 379–402 ebaid, e. i. (2009). the impact of capital-structure choice on firm performance: empirical evidence from egypt. the journal of risk finance, 10(5), 477-487. graham, j. r. & harvey, c. r. (2001). the theory and practice of corporate finance: evidence from the field. journal of financial economics, 60, 187-243. http://dx.doi.org/10.1016/s0304-405x(01)00044-7 harris, m., & raviv, a. (1991). the theory of capital structure. journal of finance, 46, 297-355. hijazeen, i. (2017). the determinants of net interest margins in the jordanian commercial banks. international journal of business and social science, 8(8), 27-37. ibrahim, r. o. & nageri k. i. (2020). debt financing and firm performance: evidence from cointegration analysis. journal of management, economics, and industrial organization, 4(3), 75-88. jensen, m. & meckling, w. (1976). theory of the firm: managerial behaviour, agency costs and capital structure. journal of financial economics, 3, 1125. kolawole, k. d., ijaiya, m. a., sanni, m. & aina, t. j. (2019). impact of financial deepening on economic growth in nigeria. fountain university osogbo journal of management, 4(2), 57 – 73. 9 kumar, n. s. (2015). capital structure and its impact on profitability. international journal of science, technology & management, 4 (2), 24-30. le, t. p. v. & phan, t. b. n. (2017). capital structure and firm performance: empirical evidence from a small transition country. research in international business and finance, 42(c), 710-726. miller, m. h. (1977). debt and taxes. journal of finance 32, 261–275. modugu, k. p. (2013), capital structure decision: an overview. journal of finance and bank management, 1(1), 14-27. muraleetharan, p. (2013). impact of capital structure on profitability: a case study of beverage food and tobacco firms in colombo stock exchange (cse) in sri-lanka. international journal of commerce, business and management, 5 (5), 93-99. mutairi, a. & naser, k. (2015). determinants of capital structure of banking sector in gcc: an empirical investigation. asian economic and financial review, 5(7), 959-972. doi:10.18488/journal.aefr/2015.5.7/102.7.959.972. oladeji, t., ikpefan, a. o. & olokoyo, f. o. (2015). an empirical analysis of capital structure on performance of firms in the petroleum industry in nigeria. journal of accounting and auditing: research & practice, 2015, 1-9. omollo, b. a., muturi, w. m. & wanjare, j. (2018). effect of debt financing options on financial performance of firms listed at the nairobi securities exchange, kenya. research journal of finance and accounting, 9(10), 150-164. onoja e. e., & ovayioza, s. p. (2015). effects of debt usage on the performance of small-scale manufacturing firms in kogi state of nigeria. international journal of public administration and management research, 2 (5), 74-84. ramli, n. a., latan, h. & solovida, g. t. (2019). determinants of capital structure and firm financial performance—apls-sem approach: evidence from malaysia and indonesia. the quarterly review of economics and finance, 71(c), 148-160. rossi, s. p. s., schwaiger, m. s. & winkler, g. (2009). how loan portfolio diversification affects risk, efficiency and capitalization: a managerial behavior model for austrian banks. journal of banking & finance, 33(12), 2218-2226. doi: 10.1016/j.jbankfin.2009.05.022 sakr, a. & bedeir, a. (2019). firm level determinants of capital structure: evidence from egypt. international journal of financial research, 10(1), 68-85. tifow, a. a. & sayilir, o. (2015). capital structure and firm performance: an analysis of manufacturing firms in turkey. eurasian journal of business and management, 3(4), 13 22. vu thi, t. & huang, h. (2003). the determinants of capital structure in shipping companies: case studies of broström and concordia ab. unpublished master's thesis, university of gothenburg, gothenburg. i gusau journal of accounting and finance (gujaf) vol. 3 issue 2, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria 1 board structure and financial performance of listed pharmaceutical firms in nigeria hauwa aliyu ndayako distance learning centre ahmadu bello university zaria, nigerian ndayakohauwa@gmail.com, 07037160770 nurudeen jimoh phd department of business administration kaduna state university, kaduna – nigeria. nur.jimoh@gmail.com; 07039876754 halima shuaibu distance learning centre ahmadu bello university, zarianigeria saasalimsuleiman@gmail.com, 08069807220 abstract this research attempts to investigate how corporate board structure affects the financial performance of nigerian pharmaceutical companies that are publicly traded. the study discovered that female directors, institutional directors, and non-executive directors have a strong significant impact on the profitability of the sampled pharmaceutical firms in nigeria during the period covered by the study using multiple regression technique. the study used a correlational research design and a panel regression technique of data analysis on a sample of seven pharmaceutical firms for a period of ten years (2012-2020). the research found that, the size of the board of directors had no discernible effect on the selected firms' profitability. according to the research, institutional directors have a positive effect on the profitability of nigeria's publicly traded pharmaceutical businesses, whereas female directors and non-executive directors have a negative impact on the profitability of their organizations. according to the research, a big board does not always increase a company's profitability. therefore, management and the board of directors of pharmaceutical companies in nigeria are advised to reduce the size of their boards to a maximum of six members. additionally, it was advised that the number of institutional directors on the boards of nigerian pharmaceutical companies that are publicly traded be expanded since their presence contributes to rising profits. the report's conclusion urges policymakers and other interested parties to start a process to limit the number of women who may serve as directors on the boards of publicly traded pharmaceutical companies in nigeria since their participation does not increase profitability. key words: board structure, financial performance and firms 1. introduction mailto:ndayakohauwa@gmail.com mailto:saasalimsuleiman@gmail.com 2 the changing nature of the economic environment in nigeria as well as the rising expectations of stakeholders for excellent financial performance have led to a recent assessment of the structure of the boards of directors of publicly listed firms in nigeria. these elements came together to cause the review. it was a difficult task to develop a board structure formula that would guarantee the company's long-term success in terms of financial performance. this study tries to determine whether or not the impact of board structure on an enterprise's profitability can be documented in a way that is consistent with industry best practices. in this particular research, this question will be specifically examined. without a question, a well-run and successful board will need to place a strong focus on matters such as duties, positions, structures, and procedures, as well as on the qualifications and talents of the directors (muller et al., 2014). brennan (2012) contends that in order to address the issue of agent and principal conflict, the corporate board of directors should have a significant role in monitoring, supervising management, and coordinating the goals of these agents with the interests of shareholders. the foundation of brennan's argument is the fact that the board of directors is in charge of the general management of the business. additionally, it is in charge of approving the management's efforts once they have been thoroughly reviewed (jonsson, 2005). the cadbury report, passed in the uk in 1992, the higgs report, passed in the us in 2003, and the smith report, passed in the uk in 2003 were all attempts to ease the tension between agency theory and other theories of corporate governance. the sarbanes-oxley act, passed in the us in 2002, the cadbury report, passed in the uk in 1992, the higgs report, passed in the us in 2003, and the smith report, passed in the uk in 2003. the failures that followed the corporate scandals like enron, worldcom, and hih have raised the issue of whether the board structure is the most effective for monitoring how effectively managers are doing their duties (mizruchi, 2004). enron, worldcom, and hih's boards of directors were all careless in their supervision of questionable accounting procedures used by the management of their respective firms (lawrence, 2004; solomon, 2007). many countries throughout the globe, including nigeria, have lately changed their corporate governance structures as a direct result of this. in order to address the issues listed below, the nigerian securities and exchange commission (sec) implemented a corporate governance framework in 2012. it is commonly believed that the failure of various financial institutions in nigeria was caused by a lack of corporate governance codes of conduct, corruption, and a lack of transparency in their operations (sanda, et al., 2005). a significant absence of corporate governance measures across the nation has caused shareholders' 3 confidence in publicly traded corporations to completely erode. the code of best practice in nigeria was created by the nigerian securities and exchange commission (sec) in an effort to regain investors' faith in the nation's capital markets. in accordance with this code of best practice, shareholders have received instructions on the corporate governance principles that are intended to serve their best interests at all times. it assists in preserving control over the board's performance throughout business operations. fama and jensen (1983) assert that the board of directors' primary responsibility is to safeguard the interests of the firm's shareholders by closely monitoring the management operations of the company. if one wants to exert effective control over the management of the firm, considering the board of directors' makeup is a crucial consideration. the idea that institutional and non-executive directors are better at protecting the interests of shareholders than their executive counterparts is one that is often held. according to akpan and amran (2014), the involvement of outside directors in the position of professional referees raises the likelihood that the board will carry out its oversight function and lowers the danger that top management may conspire with other board members to harm shareholders' interests. the likelihood that the board will carry out its control function is further increased by the involvement of independent directors who serve as professional referees. therefore, it would be wise to do study into how the makeup of boards of directors affects the profitability of pharmaceutical companies in nigeria that are listed on stock exchanges. this research will provide empirical proof to resolve the doubts about directors of publicly listed pharmaceutical firms in nigeria being able to safeguard stakeholders' interests by enhancing and raising their profitability (female directors, institutional directors, non-executive directors, and board size). the goal of this research is to find any connections that could exist between the board of directors' makeup and the financial success of pharmaceutical businesses in nigeria, with an emphasis on that country's pharmaceutical market. the major emphasis of the study will be the nigerian pharmaceutical business. the pharmaceutical firm was chosen due to its distinctive features, such as the manufacture of a broad range of health and food supplement items, as well as the fact that there aren't many studies in this field of the economy. these elements had a role in the decision to choose the corporation as the study's topic. along with the requirements established by the securities and exchange commission, several corporations have proclaimed the profile qualities that are essential for their company's directors (2012). it is vital to establish if the 4 organizational structure of the board of directors has an influence on the amount of profit generated by the firm. according to studies, a variety of criteria, such as board size, board gender, ceo duality, board education, board experience, outside directors, salary, and block holders on the board of directors (bod), may be used to evaluate corporate governance success (vo & phan, 2013). several studies that examined the link between board structure, board size, and board independence and company performance found that each of these criteria had a negative impact. many studies in nigeria, including ehikioya (2009), kajola et al., (2010), have led researchers to the conclusion that (2011). this research employed a robust gls to do this, as compared to previous studies, which evaluated data using ols. the purpose of this research is to look at the elements that influence the success of publicly traded pharmaceutical companies in nigeria, with an emphasis on board structure. the most important of them is that a board of directors is critical for supervising and monitoring corporate management as they operate their organization for the benefit of its owners, hence board member selection is critical for a number of reasons (fama& jensen, 1983). the primary issue raised by the research's results is how much the profitability of nigeria's publicly traded pharmaceutical companies is impacted by all of the proxy factors that affect board composition. the researchers that took part in this study posed the research question, "does the board structure of pharmaceutical enterprises in nigeria have an impact on the financial success of such businesses?" in light of the data supplied in the previous paragraphs. the bulk of empirical research on these variables related to board composition and financial results of pharmaceutical companies in nigeria has been small and of narrow scope. this is due to the way in which the study has been done. the motivation for the present study, which seeks to fill it, came from this gap. hence, the following null hypotheses were formulated in concurrence with the above set out specific objectives of the study to test board structure and financial performance of listed pharmaceutical firms in nigerian. h01 female director (fd) has no significant impact on profitability of listed pharmaceutical firms in nigeria h02 institutional director (insd) has no significant effect on profitability of listed pharmaceutical firms in nigeria h03 non-executive directors (nexd) has no significant effect on profitability of listed pharmaceutical firms in nigeria h04 board size (bsz) has no significant effect on profitability of listed pharmaceutical firms in nigeria 5 it adds to the corpus of knowledge by making accessible previously unavailable real data on the correlation between corporate performance and board structure of publicly listed pharmaceutical enterprises in nigeria. the pharmaceutical enterprises in nigeria. firms are regulated by additional bodies such as the national agency for food and drug administration and control and the nigerian drug law enforcement agency, which make the sector distinct from the other firms in the manufacturing sector. this makes the finding of studies from other sectors hardly applicable to the pharmaceutical enterprises in nigeria because of the difference in regulation and business environment such as risk and uncertainties. second, it enhances the framework by include institutional directors and female directors as indicators of the composition of the board of directors. the securities and exchange commission (sec), the nigerian stock exchange (nse), and other players in the pharmaceutical business will all find use for the findings of this study in formulating policy. for students who want to do more study on the subject or a related industry, the book is a useful source of reference information. over a decade was spent on the research (2005-2020). there are four sections: a discussion of the literature review and theoretical framework; a description of the research technique and model; results and discussions; and a conclusion and recommendations section. 2. review of empirical studies insiders and outsiders’ directors' duties are modelled in raheja (2005)'s theoretical model of board structure. while insiders may be a valuable source of information for the board, they may be influenced by personal benefits and lack of independence from the ceo. independent of the company, outsiders provide greater monitoring than insiders, although they are less aware of the company's restrictions and prospects. connell and cramer (2010), kyereboah and coleman (2007), mashayekhi and bazaz (2008), sanda, et al., (2007) and uadiale (2007) all came to the conclusion that there is a connection between the performance of an organization and its board of directors. bhagat and black provided an explanation for the unfavorable link that exists between non-executive directors (ned) and the success of the company (1999). whilst research conducted by ponnu (2008); rashid et al., (2010) revealed no evidence of a substantial connection between nonexecutive directors (ned) and corporate performance. 6 using a pattern of american listed firms yermack (1996) here came to the realization that having small boards of directors improves the overall performance of the organization, positively affects the behaviour of investors, and has upward consequences in the value of the enterprise. jensen (1993) made a similar point, arguing that large board size can be less successful than small board size. the premise at the back of this is that when forums get too large, the board's organization problems run upward, and the board itself will symbolically become much larger and less of a part of the control process. bozeman and daniel (2005) and hanifa and hodeib (2012) determined that there is an inverse relationship between board dimensions and organizational achievement. on the other hand, studies conducted by means of adams and mahran (2008) as well as studies conducted by means of richner and dalton (1991) have identified an effective affiliation between the dimensions of the board of directors and corporate realization. the organization's speculation served as the inspiration for this investigation. it involves an agreement where the principal (owners) engage the agent(s) to adopt specific offerings on their behalf, and the principals are responsible for the depreciation of those offerings (jensen and meckling, 1976). in the current corporate world, the shareholders, who are the true owners of the company, act chiefly, even when the control of the organization operates within the function of the agents. brennan (1995) states that the problem of the organization may also stand further if the agent fails to work with the manager's great hobby, which may also have an effect on the overall performance of the organisation. they take a place close to the agencies while control over the pursuit of their own endeavors is motivated over shareholder price (agrawal & knoeber, 1996) and can act in an opportunistic manner for the purpose of maximizing their rewards. (agrawal and knopper, 1996). 3. methodology this study used a correlational research design to investigate the effect of board structure on the financial performance of a nigerian pharmaceutical company that is publicly traded. the design is beneficial for studying the cause-and-effect connection between variables. ten years' length of secondary data from the financial accounts of the selected pharmaceuticals were analyzed for this investigation (2005-2020). this study's population consists of all seven pharmaceutical companies listed on the floor of the nigerian stock exchange 7 (nse) as of december 31, 2020.in order to address the spurious regression issue that may result in statistical bias, the study used the panel multiple regression technique of data analysis. tests including the heteroscedasticity test, the multicolinearity test, the hausman specification test, and the fixed ordinary least square dummy variable test are conducted (granger & newbold 1974). this is also supported by the conventional assumptions of traditional regression models, which include the requirements that the explanatory variables are not fully linked and that the variance of the error term must be constant and the same for all observations (homoscedastic). failure to address this spurious regression issue might result in biased and inconsistent standard error terms for the estimated parameters (adren, 2007). therefore, robustness tests contribute to the creation of blue estimators (best linear unbiased estimators). utilizing statistical/data analysis software, the analysis is carried out. to measure the determinants of board structure and financial performance of listed pharmaceutical firm in nigeria, the following model is estimated: roait = β0 + β1fdit + β2insdit + β3nexdit + β4bszit +μit………….…………..i where; roait = return on asset of firm i in year t fdit = female directors of firm i in year t insdit = institutional directors of firm i in year t nexdit = non-executive directors of firm i in year t bszit = board size of firm i in year t β0 = the intercept/constant; β1 – β4 = are the parameters; μit = the residual/error term of firm i in year t variables measurement the definitions and measurements of the variables used in this study are presented in table 1 below; table 1: variables measurements variables definition/measurements dependent variable return on asset(roa) measured by ratio of profit after tax divide by total assets of current year independent variables female directors (fd) ratio of number of female directors to total number of directors in the firm 8 institutional directors (insd) ratio of number of directors representing indirect shareholding to total number of directors in the firm non-executive directors(nexd) ratio of number of non-executive directors to total number of directors in the firm board size (bsz) natural logarithm of total number of directors on the board of the firm source: authors’ compilation (2022). 4. results and discussions the findings that were obtained from the tests that were performed on the data that was gathered for the research are shown in this part, and a discussion of those results follows. in the first part of this section, the data that were gathered for the research are described, and then the section moves on to the inferential statistics. 9 descriptive statistics the descriptive statistics of the data collected for the study is presented in table 2; table 2: descriptive statistics variable mean std. dev minimum maximum skewness kurtosis roa 0.08007 0.07783 0.00214 0.32507 1.5494 4.7242 fd 0.1133 0.0946 0.0000 0.3750 0.9093 4.1955 insd 0.2467 0.0998 0.1111 0.5000 0.9542 3.6169 exd 0.4036 0.1383 0.1818 0.6363 0.0432 1.6633 bsz 2.1895 0.1784 1.7917 2.4849 -0.1407 1.9861 source: stata output (2022). table 2 provides a summary of how the composition of boards of directors influences the financial performance of publicly traded pharmaceutical businesses in nigeria. according to the data, the range of values for our profitability measures (roa) is from 0.00214 to 0.32507, with 0.00214 being the minimum and 0.32507 being the highest. the values of the data range from 0.07783 to 0.08007, with 0.08007 serving as the mean roa value and 0.07783 serving as the standard deviation of the roa value. because the standard deviation is so near to the value of the mean, the data for the return on asset variable are not very spread out among the sample firms. this is due to the fact that. according to the score of 1.5494, the data exhibits a favorable degree of bias. the data also did not adhere to the assumption of a symmetrical distribution, and the kurtosis value of 4.7242 demonstrates that the majority of the values are higher than the mean. this demonstrates that the data did not adhere to the condition for a normal distribution, which is necessary for the data to be considered valid. the data also indicates that the lowest and greatest values for female directors (fd) are 0.0000 and 0.3750, respectively, with a mean value of 0.1133 and a standard deviation of 0.0946. the mean value for female directors is 0.1133. the results show a deviation of 0.0946 standard deviations from the mean, which indicates that at least 11.33 percent of the board members of the chosen pharmaceutical enterprises were female directors. the mean value suggests that at least 11.33 percent of the board members of the pharmaceutical enterprises were female directors. the fact that the kurtosis value for these data is 4.1955 indicates that they are normally distributed, while the skewness value of 0.9093 indicates that they are symmetrically biased to the right. the institutional director (insd) of the evaluated pharmaceutical companies in nigeria is 0.2467 on average, with a standard deviation of 0.0988 from the mean value. this information is summarized in the table. this means that the standard deviation for the analyzed firms is 0.0988, which denotes a modest dispersion. a minimum value of 0.1111 and a maximum value of 0.5000 are assigned to the 10 institutional director (insd). the data's peak is shown by the kurtosis value of 3.6169, which also shows that the majority of the values are higher than the mean and that the data did not conform to the assumption of a normal distribution. the data does not fit the symmetrical distribution assumption since the coefficient of skewness of 0.9542 shows that the data is positively skewed (the bulk of the data is on the right side of the normal curve). the average non-executive director (nexd) is 0.4036, with a standard deviation of 0.1383, and the lowest and highest values are 0.1818 and 0.6363, respectively, according to the data. this indicates that the average non-ex for publicly traded pharmaceutical companies is 0.4036, while the actual data deviated by 0.1383 from the mean. the fact that the standard deviation is so close to the mean value shows how far the data deviates from the mean. the data meet the requirements for a normal distribution according to the kurtosis value of 1.6633 and the skewness value of 0.0432, which shows that the data is symmetric and skewed to the right within the zero zone of the distribution. table 2 further demonstrates that the board size (bsz) measure's minimum and maximum values are 1.7917 and 2.4849, respectively, with a mean value of 2.1895 and a standard deviation of 0.1784. this indicates that the sample pharmaceutical companies' average board size over the study period was 2.1895, with a standard deviation of 0.1784. the data's peak is shown by the kurtosis value of 1.9861, which also shows that the bulk of the values are below the mean and that the data did not conform to the assumption of a normal distribution. the data does not fit the symmetrical distribution assumption because of the data's negative skewness, which is shown by the skewness coefficient of -0.1407 (majority of the data are on the left side of the normal curve). the information is extensively dispersed, suggesting that it isn't always generally distributed, as evidenced with the aid of using the better trendy deviation values of the bulk of the variables, in keeping with an evaluation of the descriptive data of the information obtained for the study. the shapiro–wilk test is more appropriate method for small sample sizes (<50 samples) although it can also be handling on larger sample size. hence, normality of residual was conducted. table 3: normal data test variables w v z p-values n resid 0.8652 0.422 1.531 0.09531 70 source: stata output, 2022. 11 the study makes use of the shapiro-wilk (w) test for normal data. this test examines a variable taken from a population that follows a normal distribution by using the idea of the null hypothesis. the assumption that the data follow a normal distribution will serve as the test's null hypothesis (gujarati, 2004). according to table 3, normality of residual was conducted and the fact that the p-value for test statistics is statistically insignificant at the 5% level of significance. consequently, the residual of the model is normally distributed. the results of the correlation between the variables will be discussed in the next section once the analyses of descriptive statistics and the normality of the data for the study variables have been completed. correlation results the pearson correlation's executive summary table 4 shows the study's variable coefficients in the following ways: table 4: correlation matrix var roa fd insd nexd bsz roa 1.0000 fd -0.2575* (0.0314) 1.0000 insd 0.0366 (0.7635) -0.0143 (0.9064) 1.0000 nexd -0.1573 (0.1934) 0.1377 (0.2558) 0.0472 (0.6978) 1.0000 bsz 0.0626 (0.6065) -0.3139* (0.0081) -0.2007 (0.0958) 0.1215 (0.3164) 1.0000 p-values in parentheses source: stata output, 2022. the results of a research on the relationships between a company's return on assets and board structure of pharmaceutical companies that are listed publicly in nigeria are shown in table 4. the nigerian stock exchange lists these businesses. the female director (fd) and return on asset (roa) of the sample pharmaceutical enterprises in nigeria are significantly correlated, with a correlation coefficient of -0.2575, which is statistically significant at the 1% level of significance. at the 1% level of significance, this connection is statistically significant (p-value of 0.03). this shows that adding one more female director causes the return on assets to fall by a percentage equal to 25% of its original value. a insignificant positive association between institutional directors and return on asset (roa) of the sample 12 pharmaceutical firms in nigeria is also suggested by the correlation coefficient of 0.0366, which is not statistically significant at any level of significance. the correlation coefficient does not fulfill the requirements for statistical significance at any level of significance, which serves as the foundation for this conclusion. this is because, regardless of the level of significance taken into account, the correlation coefficient fails to demonstrate any statistical significance (p-value of 0.7635). due to this connection, it is probable that any change in the number of institutional directors in listed pharmaceutical firms in nigeria—whether the number is increased or decreased—would not have an impact on the return on assets. as demonstrated by the correlation coefficient of -0.1573, which is not statistically significant at any level of significance, table 4 also demonstrates a negative link between non-executive directors (nexd) and return on asset (roa) of the sample pharmaceutical firms in nigeria. this is evidenced by the fact that the correlation coefficient is negative (p-value of 0.1934). (p-value of 0.1934). the conclusion that may be derived from this is that the return on assets will drop as the number of institutional directors grows; yet, the finding cannot be relied upon as it did not achieve the level of statistical significance necessary to be regarded trustworthy. in conclusion, the table illustrates that board size (bsz) is positively connected to the return on asset (roa) of listed pharmaceutical firms in nigeria. this result is based on a correlation coefficient of 0.0626, which is not statistically significant at any level of significance; nevertheless, the table does reveal that this link is positive (pvalue of 0.6065). (p-value of 0.6065). this link appears to show that an increase in return on assets is connected with an increase in board size; yet, the conclusion is not statistically significant at any level of significance. regression results and hypotheses testing in this section, the hypotheses formulated for the study are tested; the section begins with the discussion of the regression model as presented in table 5; table 5: robust fixed effect regression model summary variables statistics prob. mean vif 1.12 hettest: chi2 2.61 0.1064 hausman: chi2 128.05 0.0000 13 source: stata output, 2022. according to the coefficient of determination, the variables that were considered to be the study's explanatory factors (female director, institutional director, nonexecutive director, and board size) explained 38.01 percent of all variations in return on asset of the listed pharmaceutical firms in nigeria. [citation needed] (r square of 0.3801). the f-statistic of 3.62 and the probability value of 0.0009 that are included in the table demonstrate that the model used in the research is likewise suitable for use at a significance level of 1 percent. according to the results of the breuch pagan/cook-weisberg test for heteroskedasticity/hettest, there is not an issue with heterogeneity. the chi2 value was 2.61, and the p-value was 0.1064. (that is, a constant variance exists in the panel). in addition, the findings of the breuch-pagan and cook-weisberg tests indicate that there is no serial relationship, providing more evidence in favor of the model's reliability. due to the fact that the mean variance inflation factor (vif) is 1.12, the data also demonstrate that there is incomplete multicollinearity among the variables that are considered independent. this is a significant amount lower than the cutoff of 10, which indicates complete multicollinearity. according to the results of the hausman specification test, which discovered statistically significant variances in the panel, the ols regression model is the one that provides the best fit for the research (chi2 of 128.05 with a p-value of 0.0000). on the other hand, the result variable may be influenced by certain entity-specific characteristics. in order to take into consideration, the influence of unobserved heterogeneity in the fixed effect regression, the least square dummy (lsd) was included into the model. this was done in order to make the model more accurate. the next part will thus examine and assess the study's hypotheses. hypotheses testing the hypotheses are examined in this part to determine the influence of board structure on the financial performance of listed pharmaceutical companies in nigeria. the regression coefficient for the analysis is shown in table 6. table: 6 regression result for model of study statistics variables beta coefficients t. value sig 14 fd insd nexd bsz constant 0.7890 0.4150 -0.3958 0.0034 0.0963 -5.05 3.25 -.2.91 0.03 0.35 0.000 0.002 0.005 0.977 0.730 r2 0.3801 adjr2 0.2750 f.statistical 3.62 sign 0.0009 source: stata output, 2022. according to table 6, the value of female directors of pharmaceutical companies (fd) in nigeria is -5.05 and a coefficient of -0.7890. at the 1% threshold of statistical significance, both stats are significant (0.00 p-value). this indicates that female directors have a detrimental effect on the return on assets (roa) of publicly traded pharmaceutical companies in nigeria. with a 78 percent drop in roa when more fd is present, this means that fd and roa are negatively correlated. thus, there is a clear relationship between the ratio of female principals and the return on assets. the results refute the first null hypothesis (h01), which claims that having female directors has little or no financial impact on publicly listed nigerian pharmaceutical companies. the study found that the presence of female directors significantly affects the return on assets of listed pharmaceutical companies in nigeria, albeit in a negative way. the table also shows, with coefficients of 0.4150 and a t-value of 3.25, both of which are statistically significant at the 1% level, that the institutional director (insd) of the pharmaceutical companies included in the sample in nigeria has a statistically significant positive effect on yield. on the assets of pharmaceutical companies. the inclusion of these two values in the table illustrates this. this is evidenced by the fact that the table meets the criteria for classification as an evidence table (p-value 0.002). this means that the institutional directors (insd) have a substantial and positive impact on the return on assets of publicly listed nigerian pharmaceutical companies. this is a reasonable conclusion based on the evidence presented. in addition, it was determined that there was a significant link between insd and roa, with a 41 percent increase in return on assets for each additional institutional manager, indicating that the increase in roa was proportional to the presence of institutional managers. in addition, the data indicated a strong link between roa and insd. this guide accurately explains why there is a positive correlation between institutional managers' participation and 15 return on assets. there is no evidence to support the second null hypothesis (h02), which asserts that institutional director management has no effect on the return on assets of listed nigerian pharmaceutical companies. the inclusion of institutional directors on the boards of publicly traded pharmaceutical companies in nigeria throughout the study period resulted in a greater return on assets for those companies, according to the study findings. in a similar vein, the table demonstrates that non-executive directors (nexd) in the sample of nigerian listed pharmaceutical firms have a significant negative impact on the return on assets of the pharmaceutical firms, with coefficients of 0.3958 and a t-value of -2.91, both of which are statistically significant at the 1 percent level of significance. in other words, the table provides evidence that nonexecutive directors in the sample of nigerian listed pharmaceutical firms have a significant negative (p-value of 0.005). it would appear that the profitability of nigeria's publicly traded pharmaceutical companies would drop by 39.5% for every additional rise in the number of institutional directors serving on the boards of those companies. this would be the case for each additional rise in the number of institutional directors. as a consequence of this finding, the third iteration of the null hypothesis, which is designated by the letter h03 and asserts that institutional directors do not have a significant impact on the profitability of publicly listed pharmaceutical businesses in nigeria, is not supported by the research. this finding indicates that the null hypothesis is not correct. the results of the study led the investigators to the conclusion that institutional directors have had a significant impact, both positively and negatively, on the profitability of publicly traded pharmaceutical businesses in nigeria over the course of the research period. this conclusion was reached as a direct result of the findings of the study. last but not least, the findings suggest that the size of a company's board of directors has a sizeable and positively significant influence on the profitability of nigerian listed pharmaceutical businesses. with a coefficient of 0.0034 and a tvalue of 0.03 that is not statistically significant at any of the levels of significance considered, the findings suggest that the size of a company's board of directors has a sizeable and positively significant influence on the profitability of nigerian listed pharmaceutical businesses (p-value of 0.977). this would seem to suggest that the size of a company's board of directors does not have any influence on the profitability of publicly listed pharmaceutical businesses in nigeria. however, this does not appear to be the case. in light of the fact that it was hypothesized that a more numerous board would result in a rise in profitability, the outcome came as a complete surprise. this is due to the fact that it is expected that bigger boards would put more time and effort into the duty of monitoring management, in contrast to 16 smaller boards, which are expected to invest less time and effort in the task. in a similar line, larger boards are connected to board monitoring due to their potential to divide the labor weight over a greater number of observers. this is one of the reasons why larger boards are preferred for board monitoring (klein, 2002). 5. conclusion and recommendations this study was conducted to determine the degree to which the board structures of publicly listed pharmaceutical firms in nigeria affect the financial performance of these businesses. based on the analysis of the data and the testing of the hypothesis, the research found that female directors, institutional directors, and non-executive directors all significantly and substantially influenced the profitability of listed pharmaceutical enterprises in nigeria over the course of the study. this conclusion may be made from the finding that the size of the board had no impact on the company's profitability. based on the findings and conclusions of the research, the report suggests that the board of directors of listed pharmaceutical enterprises in nigeria be limited to a maximum of six members. it's critical to note that they must be placed together in such a way that they provide experience diversity while maintaining integrity, accessibility, and independence. this recommendation is part of a bigger study that advises restricting the size of the board of directors of nigerian listed pharmaceutical corporations to no more than reasonable number of individuals. this exact proposal was created utilizing the study data and results. the number of institutional directors on the boards of pharmaceutical companies with shares trading on nigerian markets should be raised. this is because it has been demonstrated positive influence of performance references adams, r. b. & mehran, h. (2008). corporate performance, board structure and its determinants in the banking industry. federal reserve bank of new york staff reports, no.330. a review and integrative model, journal of management, 15 (2), 291-334. agrawal, a., &knoeber, c. r. (1996). firm performance and mechanisms to control agency problems between managers and shareholders. journal of financial and quantitative analysis, 31(03), 377-397. akpan, e. o. and amran, n. a. (2014). board characteristics and company performance: evidence from nigeria, jounal of accounting and finance 2(3), 81-89 fama, e. & jensen, m. (1983). separation of ownership and control, journal of lawand economics, 26(2), 301-25 grace, m., ireland, a., & dunstan, k., 1995. board structure, nonexecutive directors’ characteristics and corporate financial performance, asia pacific journal of accounting, 2, 121-137. 17 granger, c. and p. newbold (1974). spurious regressions in econometrics. journal of econometrics, 111-120. guest, p. m., (2008). the determinants of board size and composition: evidence from the uk, journal of corporate finance, 14, 51-72. gujarati, d. n. (2004). basic econometrics, fourth edition gujarati, d., (2003). basic econometrics, 4th ed, new york, mcgraw-hill. hermalin, b. e., &weisbach, m. s., (1991). the effects of board structure and direct hermalin, b. e., &weisbach, m. s., (2003). board of directors as an endogenously incentives on firm performance, financial management, 20 (4), 101-12. jensen, m.c. & meckling, w.h. (1976). theory of the firm: managerial behavior, agency costs and ownership structure. journal of financial economics, 4, 305360. journal of american academy of business, 4 (1-2), 263-270. klein, a. (2002). audit committee, board of director characteristics, and earnings management. journal accounting and economics, 33, 375-450. kyereboah-coleman, a. & biekpe, n. (2012). the relationship between board size, board composition, ceo duality and firm performance: experience from ghana. corporate ownership and control journal, 4(2), 114-112. muller, v, ienciu, i., bonaci, c.g., & filip, c. i., (2014). board characteristics best practices and financial performance. evidence from the european capital market, babes-bolyai university, cluj-napoca, romania. vol. xvi • no. 36 rashidah a.r. & fairuzana, h.m. (2012). board, audit committee and earnings management: malaysian evidence, managerial auditing journal, 21(7), 783 – 804. sanda, a. mikailu, a.s. & garba, t. (2005), corporate governance mechanism and firm financial performance in nigeria. a paper presented at africa economic research consortium, nairobi kenya, and march 2005. 1-37 sanda, a. u., garba, t. & mikailu, a.s., (2008). board independence and firm financial performance: evidence from nigeria. a paper submitted to the centre for the study of african economies (csae) for presentation at the csae conference 2008 titled economic development in africa at st catherine’s college, university of oxford, oxford, 16-18 march 2008. shehu, u. h., (2011), corporate governance and financial reporting quality: a study of nigerian money deposit bank, international journal of research in computer application and management (u.s.a), 1(6): 12-19 issn: 2231-1009 smith, a. (2020). the quality of reported earnings and the monitoring role of the board: evidence from small and medium companies. south african business review, 19(2) uadiale, o. m. (2010). the impact of board structure on corporate financial performance in nigeria. international journal of business and management, 5(10), 155-166 18 yammeesri, j., & lodh, s. c., (2004). is family ownership a pain or gain to firm performance? yermack, d. (1996). higher market valuation of companies with a small board of directors. journal of financial economics 40, 185-211. zahra, s. a., & stanton, w. w., (1988). the implications of board of directors’ composition on financial performance. journal of sagepub.com zahra, s. a., &. pearce ii, j. a., (1989). board of directors and corporate financial performance. journal of sagepub.com 19 i gusau journal of accounting and finance (gujaf) vol. 3 issue 1, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria ii © department of accounting and finance vol. 3 issue 1 april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. iv prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. dr. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. v dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. vi call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7 th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ vii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ viii contents mediating effect of audit committee on board dynamic and creative accounting in nigerian firms abbas usman phd, shehu usman hassan phd 1 financial performance of banks in selected african countries: does institutional quality matter? toluwa celestine oladele phd, peters ade sanni 22 firm-specific characteristcs and financial performance of listed agricultural companies in nigeria abdulrazaq t. jimoh, john a. attah 33 effect of financial leverage on stock returns of listed companies in nigeria capital market abdulrahman abubakar, prof. ahmad bello, prof. s. a. abdullahi, dr. m. d. tahir 45 efficiency of deposit money banks in nigeria: data envelopment analysis approach mayowa gabriel ajao, phd, lucky charity omoregie, phd 57 credit appraisal, collection policy and loan performance of microfinance banks in kwara state, nigeria lukman a. o. abdulrauf 69 environmental sustainability disclosure and market value of listed oil and gas firms in nigeria munir aliyu saleh, sirajo bappah, prof. gbegi daniel orsaa, ibrahim adamu saleh phd 81 audit quality, tenure and real earnings management of listed nonfinancial firms in nigeria ahmed mohammed, ademu yahaya, musa zakariya 95 effect of ceo pay and ceo power on risk-taking of listed deposit money banks in nigeria ismaila yusuf, dr. salisu abubakar, dr. idris ahmed aliyu, dr. (mrs) aneitie charles dikki 104 nexus between taxation and foreign direct investment in nigeria daniel ayegbeni ulokoaga, esther ikavbo evbayiro-osagie (mrs), ph. d 115 working capital management and profitability of listed consumer and industrial goods companies in nigeria kwasau ntyak leah, samuel eniola agbi phd, lateef olumide mustapha phd 125 value relevance of earnings and book value: a comparative analysis between big4 and non-big4 audited listed firms in nigeria abdu abubakar, ishaya luka chechet phd, muazu saidu badara phd, yunusa nasiru phd 136 ix value relevance of international financial reporting standard 4 (ifrs 4) of listed nigerian insurance firms mariya mohammed hafiz, muhammad mustapha bagudo phd, salisu abubakar phd 145 determinants of audit fees of listed insurance companies in nigeria sagir lawal, phd, mohammed ibrahim, phd 158 taxation and social services: evidence from nigeria adegbite, tajudeen adejare, phd, abdussamad, olarinde 171 ownership structure and financial performance of quoted mortgage banks in nigeria awotundun, d. a., phd, jinadu, m. y. b., fakunmoju, s. k., phd. 183 capital structure and profitability of listed deposit money banks in nigeria rahji ohize ibrahim, kamaldeen ibraheem nageri, phd, abdullai agbaje salami, phd 194 1 ownership structure and financial performance of quoted mortgage banks in nigeria awotundun, d. a., phd. department of banking and finance lagos state university, ojo lagos state, nigeria jinadu, m. y. b. department of banking and finance lagos state university, ojo lagos state, nigeria mybjinadu@gmail.com fakunmoju, s. k., phd. department of banking and finance lagos state university, ojo lagos state, nigeria abstract the financial performance of mortgage banks worldwide has been a significant source of worry among researchers, professionals, and other stakeholders because of the substantial role mortgage banks play in people’s well-being and economic activity. despite mortgage bank reforms, the mortgage banking systems in nigeria are still developing. they remain at a low level of financial performance, poor financing management, and decline in economic performance indicators due to poor ownership structure among mortgage banks in nigeria. this study examines the effects of ownership structure (significant shareholding, government holding, and minority holding) on financial performance indicators (earnings per share, net profit margin and bank size via total assets) of nigerian mortgage banks. ex-post facto research design was employed as well as the panel regression method of analysis, and data was sourced from selected mortgage banks in nigeria from 2011 to 2020. the study found that ownership structure components (significant shareholding, government holding, and minority holding) have positive and significant effect on financial performance indicators of selected mortgage banks in nigeria at less than a p<0.05 level of significance. the study concluded that ownership structure components affect financial performance indicators of selected mortgage banks in nigeria. therefore, the study recommended that there is a need for mortgage banks in nigeria to increase their ownership structure in terms of significant shareholding, government holding, and minority holding), as it was found that ownership structure absolutely affects the financial performance indicators of mortgage banks quoted in nigeria. keywords: financial performance, government holding, significant shareholding, and minority holding 1. introduction the financial performance of mortgage banks across the globe has been a significant concern among scholars, professionals, and other stakeholders due to the substantial contribution mortgage banks play in the well-being of citizens and economic activities. mortgage banks offer loans to clients to them purchase real estate properties. however, the dearth of housing stock, both in number and quality/ functionality, abound virtually in every country, mainly in developing countries vary from one country to another hence creating challenges in achieving mailto:mybjinadu@gmail.com 2 sound and targeted financial performance among mortgage banks (kim, laufer, pence, stanton, & wallace, 2018). globally, among developed, developing, and emerging economies, goodman, parrott, ryan, and zandi (2020) stated that most accounts of the late2000s housing and mortgage market meltdown blame it on falling house prices, lax underwriting, and other factors that resulted in credit losses in the mortgage system thus created uncontrollable challenges on financial performance indicators in the mortgage banking industry. financial crisis inquiry commission (2021) asserted that the collapse of mortgage banks was fueled by continuous decline in economic performance indicators, lowinterest rates, accessible and abundant credit, inadequate regulation, and toxic mortgages, creating a full-fledged crisis in the mortgage banking industry. developed countries like the united states of america, the united kingdom, belgium, france, among others, mortgage banks financial performance indicators were characterized with challenges of unstable and fast decline on total assets, net profit, and return on equity due to the availability of long-term funds that align with the period required for the mortgage loans, low earning income when compared to the price of houses leading to a high level of affordability (mortgage metrics report, 2021). likewise, in developing countries such as ghana, nigeria, cameroon, south africa, among others, mortgage banks were faced with similar challenges such as low saving culture, poor saving mobilization mechanism, meager long-term funds to fit with mortgage loan duration, low incomes, inadequate access to construction financing, lopsided ownership structure (african development bank report, 2021). these challenges have resulted in unstable financial performance indicators among mortgage banks in developing countries. dakhlallhi, rashi, amalina, abdullah, and dakhlallh (2021) argued that ownership structure is a governance tool that assists stakeholders in aligning their priorities with company goals (blair & stout, 2017). the ownership structure is the property claims made by managers and investors who have no direct link with the company's management. furthermore, previous studies found ownership structure to be vital aspect of corporate governance frameworks and fundamental corporate governance processes (loay, jamal, & mah'd, 2018). the incompatibility of interests between management and shareholders, particularly between majority and minority shareholders, is one of the issues that existing companies face (mang'unyi, 2011). this inconsistency comes at a price known as the cost of agency (aguilera, judge, & terjesen, 2018). however, ownership structure does not only focus on the business owners, but also takes into consideration liability, control, tax and profit sharing. this implies that the issue of ownership regardless of the ownership style (private, government or public) is important in mortgage banking firms. enyia and udungeri (2018) pointed out that mortgage banks, whether owned by private or government, are characterized with partial ownership in nigeria, which created challenges in achieving targeted financial performance indicators. despite the regulatory reform in nigeria's mortgage banking industry, there are still several issues such as bias ownership concentration, weak corporate governance, and maladministration; thus, wine down targeted financial performance indicators in the mortgage banking industry (oluba, 2020). in the light of the above discussion, ownership structure has been a source of concern to both the nigerian government and private stakeholders of nigerian mortgage banks. despite existing regulations enacted by government on credit management and considerable banking reforms in the mortgage industry in nigeria, there exist biased ownership structure mechanism and poor credit management of mortgage banks leading to the reduced financial performance and low return on assets in the past couple of years (usunobun & omoghosa, 2019). 3 though several studies such as dakhlallh et al. (2020), jarbou, abu-serdaneh, and latif mahd (2018), kao, hodgkinson, and jaafar (2019), koehn and santomero (2019), muthoni and nasieku (2018), and ng’ang’a (2017) have examined how ownership structure has impacted on the performance of banking firms. these past studies employed ownership concentration, domestic ownership, and foreign ownership as proxied for ownership structures. still, they failed to consider how significant shareholding, government holding, and minority holding as proxied for ownership structure affect financial performance indicators (earnings per share, net profit margin and bank size via total assets) of mortgage banks in nigeria. thus, there exist gap in the literature especially within nigeria context that this study intended to fill. the main objective of the study is to examined the effect of ownership structure on financial performance of selected mortgage banks quoted in nigeria while the specific objectives are to; i. examine the effect of ownership structure components (significant shareholding, government shareholding, and minority shareholding) on earning per share of mortgage banks quoted in nigeria; ii. determine the effect of ownership structure components (significant shareholding, government shareholding, and minority shareholding) on net profit margin of mortgage banks quoted in nigeria; and iii. investigate the effect of ownership structure components (significant shareholding, government shareholding, and minority shareholding) on bank size (total assets) of mortgage banks quoted in nigeria considering the gap aforementioned, the study hypothesized that; h01: there is no significant effect of ownership structure components (significant shareholding, government shareholding, and minority shareholding) on earning per share of mortgage banks quoted in nigeria h02: there is no significant effect of ownership structure components on the net profit margin of mortgage banks quoted in nigeria h03: there is no significant effect of ownership structure components on the bank size (total assets) of mortgage banks quoted in nigeria 2. literature review discussed within this section is the conceptual review, theoretical framework, and empirical review of literature related to the present study. ownership structure, according to gichohi (2018), is a structure that defines the shareholders and their various categories. ng’ang’a (2017) defined ownership structure in relation to the decision-making capability of an organization as well as equity distribution in terms of votes and capital. it is the argument of tanui, yegon, and bonuke (2019) that ownership structure is vital in shaping an organizations’ corporate governance system. thus, the study conceptualized ownership structure as significant shareholding, government holding, and minority holding. financial performance can be conceptualized as an organization’s to be efficient in its operations survive and grow in the aspect of operating income, retained earnings, shareholders’ funds, return on assets, and profit before tax. the present study measures mortgage bank financial performance using earnings per share, net profit margin and total assets (bank size). 4 theoretical framework the study anchored on stakeholder theory; as the perspective of stakeholder approach was first introduced into the management theory as an answer to dissatisfaction with the unilateral financial criteria of effectiveness in corporate governance and firm performance. it is rooted in the work of richard freeman in 1984. a stakeholder is defined as ‘any group or individual who can affect or is affected by the achievement of the organization’s objectives’ (freeman, 1984). the main assumption of the stakeholder theory is that an organization’s effectiveness is measured by its ability to satisfy not only the shareholders, but also those agents who have a stake in the organization and so as to achieve firm financial performance (freeman, 1984). for the stakeholder theory, the primary criticism is that it fails to deal with the problem of balancing the potential conflicting interests of all different constituencies. even so, there is no way for the stakeholders to claim for any failure on the part of the directors. shareholders are no doubt, an important constituent and profits are a critical feature of this activity, but concern for profits is the result rather than the driver in the process of value creation (rahid, 2020). empirical review and gap in the literature the link between ownership structure and organizational performance have been examined in various contexts. among past related studies, asri (2017) examined the impact of ownership structure comprising of institutional ownership and administrative ownership, on wage quality and firm value while san martin-reyna (2018) and rashid (2020) examined the impact of ownership composition on profit management. both studies found that institutional ownership and management ownership positively affect firm value. maswadeh (2018) investigated the impact of ownership structure consisting of concentration ownership, institutional ownership, and foreign ownership in terms of credit rating and company size as controlling variables on earning management in jordanian industrial companies. a significant impact of concentration ownership was found in minimizing earnings management processes. similarly, no significant impact was found of institutional ownership on foreign ownership in earnings management practices in jordanian industrial companies. saona, muro, and alvarado (2020) in their study assessed how ownership structure and the characteristics of the board of directors affect earnings management. it was found that ownership structure and board of directors had a significant impact on earnings management. hanan, xiaoyan, and muhammad (2016) show that board size negatively affected firm performance. it was further revealed that board independence significantly impacted on performance as measured by return on equity, invested capital, and tobin's q). abdolreza (2016) and oyerinde (2014) conducted a study which showed sales growth to be positively correlated with all indicators of value creation. however, revenue growth was positively associated with the return on assets. positive relationship was found between economic value added and ceo duality. no correlation was found between the market value-added and jensen's alpha and all indicators of corporate governance. a negative and significant relationship was further found between return on assets and the auditor's time, while the return on equity was negatively correlated with the auditor's time and the change of ceo. mwanzia and ochanda (2017) assessed the relationship between the economy, the market, and cash value added as value-based performance indicators and corporate governance. the results revealed that ownership concentration was found to have a significant relationship with economic and cash value-added, while internal ownership was revealed not to be a significant factor in growth performance. furthermore, external ownership was found to increase economic value-added and declined market value-added. 5 despite various empirical studies reviewed, no study to the best of researcher’s knowledge employed significant shareholding, government shareholding, and minority shareholding as measures or components or proxied for ownership structure and their aggregate effect such as (significant shareholding, government shareholding, and minority shareholding ) on each financial performance indicators like earning per share, net profit margin and bank growth (total assets) of quoted mortgage banks in nigeria. thus, there exists an empirical gap to fill. 3. methodology the study employed ex-post facto research design within the study variables from 2011 to 2020. the study population comprised of 33 mortgage banks, and 12 mortgage banks were selected due to availability of data and they listed in nigeria stock market. the study employed panel regression method of analysis and used hausman test for the selection of either fixed, random or pooled panel regression models. the measures adopted for the variables and their respective apriori expectations are presented on the table 1 below: table 1: measurement of variable variables proxied measurement apriori expectation ownership structure significant shareholding (ssh) between 1-5 holders +/ ownership structure government holding (gh) private-zero holding govt – between -50%80% +/ ownership structure minority holding (mh) less than 20% +/ financial performance earnings per share (eps) (net income preferred dividends) ÷ average outstanding common shares financial performance net profit margin (npm) divide net income by total revenue and multiplied by 100 financial performance bank size (bs) total assets source: authors’ computation (2022) model specification two variables were identified in this study, independent and dependent variables. based on the variables the following models were proposed: y = dependent variable (i.e. financial performance (fp) measured by (y1, y2, y3) x = independent variable (i.e. ownership structure (os) measured by (x1, x2, x3) where; y1= earnings per share (eps) y2= net profit margin (npm) y3 = bank size (bs) x1 = significant shareholding (ssh) x2 = government shareholding (gh) x3= minority shareholding (mh) β0 = constant 6 β1β3 = coefficient εit = panel regression model the apriori expectations will be β1>0, β2>0, β3>0 hypothesis one eps = f(sshit, ghit, mhit) epsit = β0 + β1sshit+ β2ghit + β3mhit +µi + εit ------------------------equation 1 hypothesis two npm = f(sshit, ghit, mhit) npmit = β0 + β1sshit+ β2ghit + β3mhit +µi + εit -----------------------equation 2 hypothesis three bs = f(sshit, ghit, mhit) bsit = β0+ β1sshit+ β2ghit + β4mhit +µi + εit-----------------------equation 3 4. analysis and interpretation table 2: descriptive statistics ssh gh mh eps npm bs mean 15.2298 1.97209 32.13897 7.02465 15.09138 27.2417 median 6.875488 6.527562 27.865672 2.445641 7.908765 13.85945 maximum 3104.0 5.134 153.9 70.45 38.38376 28.07476 minimum 697.6 0.760 7.63 7.26 8.701209 16.54382 std. dev. 752.3 1.452 44.21 16.5 6.083109 4.073292 skewness 2.865590 4.245760 4.234575 0.821340 2.876541 1.943249 kurtosis 11.81121 19.03515 18.97404 3.302873 6.9451209 3.732919 jarque-bera 5.87987 10.29516 35.89709 123.61205 95.85289 5.352289 probability 0.090987 0.061980 0.298763 0.295029 0.010094 0.00326 obs 120 120 120 120 120 120 source: authors’ computation (2022) the probability of the jarque-bera shows that the data for the study variables such as significant shareholding (ssh), government holding (gh), earnings per share (eps), and minority holding (mh) are normally distributed except for net profit margin (npf) and bank size (bs) since the probability value for jarque-bera is less than 5% unlike ssh, gh, eps, and mh. table 3: correlation coefficients for multicollinearity test variables ssh gh mh variance inflation factor (vif) ssh 1 1.76 gh 0.155 1 1.82 mh -0.350 0.341 1 1.13 source: authors’ computation (2022) 7 table 3 indicates that the correlation coefficients of the relationship among the explanatory variables are quite below the rule of thumb threshold of 0.8. this implies that including these explanatory variables in the same model will not cause a problem of severe multicollinearity. table 4: panel result table for hypothesis one variables fixed effect (fe) random effect (re) pooled regression (pr) ssh 1.717 (0.326) [2.546] {0.032}** 0.011 (0.126) [0.032] {0.933} 3.024 (1.094) [3.216] {0.010}** gh -0.610 (0.317) [-4.521] {0.060}*** 0.019 (0.089) [0.021] {0.826} 0.032 (1.046) [0.103] {0.482} ms -0.741 (0.361) [-2.189] {0.045}** -0.096 (0.223) [-0.021] {0.664} -0.149 (2.158) [-0.298] {0.349} constant 75.677 (36.942) [3.532] {0.046}** -3.471 (13.66) [-0.032] {0.799} -1.440 (2.846) [-0.243] {0.884} breusch-pagan (lagrange multiplier) (lm) test χ 2 (1) = 37.72 (0.0010) χ 2 (1) = 5.46 (0.0097) 2 (1) = 114.53 (0.0021) hausman test χ2(3) = 29.18 (0.0152) χ2(3) = 27.30 (0.0365) χ2(3) = 113.60 (0.0063) f-test f(3,116) = 23.14 wald chi2(3) = 5.54 f(3,116) = 9.62 pesaran cross-sectional dependence (cd) 1.368 (p>5% = 0.735) n 120 120 120 ajd-r 2 0.42 0.18 0.21 dependent variable: earning per share (eps) notes: fe, re and pr represent fixed effect panel regression, random effect panel regression and pooled regression; standard errors ( ), t-statistic [ ] and p-value { } are reported in parentheses. *, ** and *** show the 10%, 5% and 1% significance level respectively.” where; significant shareholding (ssh), government holding (gh), and minority holding (mh) table 4 shows the results for model 1 for hypothesis one. the study adopted fixed effect (fe) panel regression, as government shareholding (gh) and minority shareholding (mh) have negative and significantly affect earning per share (eps) while significant shareholding (ssh) has positive but insignificantly affect eps of selected mortgage banks in nigeria. thus, this study rejected null hypothesis one. table 5: panel result table for hypothesis two variables fixed effect (fe) random effect (re) pooled regression (pr) shh 1.217 0.616 0.838 (0.499) (0.198) (0.111) [4.321] [3.278] [2.934] 8 {0.018}** {0.002}*** {0.050}** gh -1.338 0.323 -0.177 (0.478) (0.147) (0.073) [-3.221] [2.983] [-3.215] {0.087}* {0.028)** {0.069}* ms -1.678 1.405 -1.250 (0.534) (0.325) (0.207) [-5.732] [4.032] [-4.110] {0.093}* {0.000}*** {0.048}** constant 176.26 96.47 102.886 (54.42) (19.40) (9.190) [2.156] [0.021] [1.821] {0.002)*** {0.910} {0.036}** breusch-pagan (lm) test χ 2 (1) = 12.63 χ 2 (1) = 14.78 χ 2 (1) = 22.94 (0.0331) (0.0017) {0.0002) hausman test χ2(3) = 1.75 χ2(3) = 4.98 χ2(3) = 2.94 (0.6732) (0.3671) (0.1063) f-test f(3,116) = 36.89 wald chi2(3) = 22.58 f(3,116) = 18.73 pesaran cd 0.358 (p<5% = 0.231) n 120 120 120 ajd-r 2 0.314 0.518 0.652 dependent variable: net profit margin (npm) notes: fe, re and pr represent fixed effect panel regression, random effect panel regression and pooled regression; standard errors ( ), t-statistic [ ] and p-value { } are reported in parentheses. *, ** and *** show the 10%, 5% and 1% significance level respectively.” where; significant shareholding (ssh), government holding (gh), and minority holding (mh) table 5 shows that the random effect model is suitable for this analysis representing model two for hypothesis two. in this study, government shareholding (gh) and minority shareholding (mh) have negative and significantly affect net profit margin (npm). in contrast, significant shareholding (ssh) has a positive but insignificantly affected npm of selected mortgage banks in nigeria. thus null hypothesis two rejected. table 6: panel result table for hypothesis three variables fixed effect (fe) random effect (re) pooled regression (pr) ssh 5.450 6.721 3.732 9 (1.030) (1.155) (1.057) [6.342] [3.753] [4.964] {0.007}*** {0.001}** {0.002}*** gh 3.060 -1.13 -1.136 (1.040) (4.546) (9.967) [7.352] [-0.021] [-0.229] {0.030}** {0.910} {0.910} 5.570 7.44 7.447 (1.570) (3.46) (3.469) [3.452] [2.012] [3.211] {0.013}** {0.031}** {0.036}** constant 2.021 -6.253 -6.252 (9.751) (2.159) (2.159) [0.032] [-2.971] [-4.921] {0.837} {0.004} {0.005} breusch-pagan(lm) test χ 2 (1) = 17.63 χ 2 (1) = 12.74 χ 2 (1) = 14.894 (0.064) (0.073) (0.0221) hausman test χ2(3) = 65.02 χ2(3) = 45.89 χ2(3) = 97.36 (0.0002) (0.0015) (0.0201) f-test f(3,116) =89.61 wald chi2(3) = 22.87 f(3,116) = 15.72 pesaran cd 0.828 (p>5% = 0.391) n 120 120 120 adj-r 2 0.523 0.509 0.255 dependent variable: bank size (bs) notes: fe, re and pr represent fixed effect panel regression, random effect panel regression and pooled regression; standard errors ( ), t-statistic [ ] and p-value { } are reported in parentheses. *, ** and *** show the 10%, 5% and 1% significance level respectively.” .” where; significant shareholding (ssh), government holding (gh), and minority holding (mh) table 6 shows that this study adopted fixed effect (fe) panel regression, as significant shareholding (ssh), government holding (gh), and minority holding (mh) have positive and significant impact bank size measure with total assets (ta). thus null hypothesis three rejected. 5. conclusion and recommendation this study focused on ownership structure proxies (significant shareholding, government holding, and minority holding) on mortgage bank financial performance indicators such as 10 (earnings per share, net profit margin and bank size via total assets). the study concluded that ownership structure components (significant shareholding, government holding, and minority holding) affect financial performance indicators in nigeria. this indicated that ownership structure dimensions such as significant shareholding, government holding, and minority holding play major and vital role in improving financial performance measure like earnings per share, net profit margin and bank size via total assets n among quoted mortgage banks in nigeria. from the finding, this study recommends that; (i) it is essential for mortgage banks in nigeria to increase their ownership structure in terms of (significant shareholding, government holding, and minority holding) in order to enhanced earning per share, as it was found that ownership structure certainly significantly improve affects earning per share of quoted mortgage banks in nigeria; (ii) regulators of mortgage banks in nigeria should enforce management of both private and government institutions mortgage to embrace significant shareholding, government holding, and minority holding in their ownership structure so as to boost and achieve targeted net profit margin in the nigerian mortgage banking industry; and (iii) government should inculcate the habit of private and government shareholding in the drive of ownership structure of mortgage in nigeria which in turn increase mortgage bank size in nigeria. references abdolreza, g. (2016). an investigation on the relationship between corporate governance and growth strategy with value creation in tehran stock exchange (tse). international journal of accounting and taxation, 4(2), 79-97 african development bank report (2021). african development bank report (2021) on mortgage banks https://www.afdb.org/en/documents-publications/annual-report aguilera, r. v., judge, w. q., & terjesen, s. a. (2018). corporate governance deviance. academy of management review, 43(1), 87–109. asri, m. (2017). the effect of ownership structure on earning quality (empirical study of manufacturing companies listed on indonesia stock exchange) (june 27, 2017). available at ssrn: https://ssrn.com/abstract=2993110 or http://dx.doi.org/10.2139/ssrn.2993110 dakhlallh, m. m., rashid, n. m. n. m., abdullah, w. a. w., & dakhlallh, a. m. (2019). the effect of ownership structure on firm performance among jordanian public shareholders companies: board independence as a moderating variable. international journal of academic research in progressive education and development, 8(3), 13–31 enyia, j. o., & udungeri, k. (2018). the use of land as collateral security for credit in nigeria: problems & challenges. international journal of managerial studies and research (ijmsr), 6(7), 44-56 freeman, r.e. (1984). strategic management: a stakeholder approach. boston: pitman publishing inc goodman, l., parrott, j., ryan, b., & zandi, m. (2020). the mortgage market has caught the virus. https://www.urban.org/sites/default/files/publication/102225/the-mortgagemarket-has-caught-the-virus_0.pdf hanan, m., xiaoyan, a. m., & muhammad, z. a. (2016). the impact of corporate governance on chinese firms performance: aboard structure perspective. international journal of managerial studies and research, 4(6), 1-8 https://www.afdb.org/en/documents-publications/annual-report https://ssrn.com/abstract=2993110 https://dx.doi.org/10.2139/ssrn.2993110 https://www.urban.org/sites/default/files/publication/102225/the-mortgage-market-has-caught-the-virus_0.pdf https://www.urban.org/sites/default/files/publication/102225/the-mortgage-market-has-caught-the-virus_0.pdf 11 jarbou, l. s., abu-serdaneh, j., & latif mahd, o. a. (2018). ownership structure impact on jordanian banks’ financial performance. asian journal of accounting & governance, 9(2), 1–10. kao, m., hodgkinson, l., & jaafar, a. (2019). ownership structure, board of directors and firm performance: evidence from taiwan. corporate governance, 19(1), 189–216. kim, y. s., laufer, s. m., pence, k., stanton, r., & wallace, n. (2018). liquidity crises in the mortgage market. brookings papers on economic activity, spring, 347-428 koehn, m., & santomero, a. m. (2018). regulation of bank capital and portfolio risk. the journal of finance, 35(5), 1235-1244 loay, s. j., jamal, a. s., & mah’d, o. (2018). ownership structure impact on jordanian banks' financial performance. https://www.semanticscholar.org/paper/ownershipstructure-impact-on-jordanian-banks'-loayjamal/77c578fec2e5f6bc7a760d6ca4c291f9db29579b#citing-papers mang’unyi, e. e. (2011). ownership structure and corporate governance and its effects on performance: a case of selected banks in kenya. international journal of business administration, 2(3), 2–18. maswadeh, s. (2018). the effect of the ownership structure on earnings management practices. investment management and financial innovations, 15(4), 48-60 mortgage metrics report (2021). global mortgage report across countries. annual publication on mortgage industry. muthoni, g. g., & nasieku, t. m. (2018). ownership identity and capital structure: a panel analysis for quoted firms in kenya. advances in social sciences research journal, 5(10) 302-309. ng’ang’a, p. n. (2017). effect of ownership structure on the financial performance of companies listed at the nairobi securities exchange in kenya. ph.d. thesis published in jomo kenyatta university of technology and agriculture. oluba, b. c. (2020). mortgage services in nigeria and the challenges with collateralization. file:///c:/users/user/downloads/mortgageservicesinnigeriaandthech allengeswithcollateralization.pdf oyerinde, a. a. (2014). corporate governance and bank performance in nigeria: further evidence from nigeria. international journal of business and management, 9(8), 133-139 rashid, m. m. (2020). ownership structure and firm performance: the mediating role of board characteristics. corporate governance, 20(4), 719–737 san martin reyna, j. m. (2018). the effect of ownership composition on earnings management: evidence for the mexican stock exchange. journal of economics, finance and administrative science, 23(46), 289-305 saona, p., muro, l., san martín, p., & carlos c. (2020) ibero-american corporate ownership and boards of directors: implementation and impact on firm value in chile and spain. economic research-ekonomska istraživanja, 33(1), 2138-2170 usunobun, h. o., & omoghosa, j. a. (2019). mortgage finance institution and the impact on the nigerianeconomy.users/user/downloads/mortgagefinanceinstitutionan dtheimpactonthenigerianeconomy%20(2).pdf file:///c:/users/user/downloads/mortgageservicesinnigeriaandthechallengeswithcollateralization.pdf file:///c:/users/user/downloads/mortgageservicesinnigeriaandthechallengeswithcollateralization.pdf https://www.emerald.com/insight/search?q=juan%20manuel%20san%20martin%20reyna https://www.emerald.com/insight/publication/issn/2218-0648 https://www.emerald.com/insight/publication/issn/2218-0648 12 i gusau journal of accounting and finance (gujaf) vol. 3 issue 2, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria 1 corporate governance mechanism and stock price performance: insights from nigeria frankline c.s.a. okeke phd department of accountancy alex ekwueme federal university ndufu-alike, ikwo ebonyi state nigeria. frankcsa31@gmail.com obiora peters emeka ph. d chukwuemeka odumegwu ojukwu university, anambra state, nigeria obiorapeters919@gmail.com chinonye b. ezeilo department of accountancy akanu ibiam federal polytechnic unwana, ebonyi state. nigeria. bchiezeilo@gmail.com azuka tina nwobodo ph. d department of accountancy institute of management and technology (imt), enugu. nigeria. azukatina2015@gmail.com ifeoma gloria duruzor ph. d department of accountancy alex ekwueme federal university ndufu-alike, ikwo ebonyi state nigeria. omaduruzor@gmail.com abstract over the years, firms from financial, real estate and construction sectors in nigeria have been challenged heavily by corporate governance lapses. this seems to have affected major spheres of performance and specifically market stock price of the firms, thereby necessitating investigation into its level of influence. this study assessed how corporate governance practices affected listed businesses in nigeria's firm performance. the study's goal is to assess the impact of board diversity, independence, size, and ownership on the stock price performance of a sample of nigerian public companies. in order to achieve this, the study used secondary data, which was based on an ex post facto research strategy and used a pooled data set gathered from sixteen (16) quoted businesses during the period between the 2006 and 2019 financial period. descriptive statistics, correlation matrices, and robust least squares regression analysis techniques were used to analyze the data that had been gathered. the agency theory and entrenchment hypothesis served as the study's pillars. the results support the entrenchment hypothesis, which contends that large board ownership percentages have a negative impact on stock price performance. in particular, we discover that the stock price performance of listed companies in nigeria throughout the study period was negatively mailto:frankcsa31@gmail.com mailto:obiorapeters919@gmail.com mailto:bchiezeilo@gmail.com mailto:azukatina2015@gmail.com mailto:omaduruzor@gmail.com 2 impacted by the corporate governance variables of board size and board ownership, both of which are statistically significant at1%, 5%, and 10%. the entrenchment effect, which is already at work among our sample companies, leads us to urge, among other things, that consideration be given to the review of board ownership and size in light of the study's findings. keywords: performance, stock price, and corporate governance 1. introduction one hundred large worldwide economic entities exist, of which forty-four (44) are corporations and fifty-six (56) are owned by states. the corporation is like a state in that it has its own laws, as well as executive and supervisory authorities that must govern the business in accordance with established norms and culture to ensure value-based management (brigham and erhard 2004). in order to maximize the wealth of shareholders and other interested parties, good corporate governance is established and offers a significant reduction in the agency problem. these results imply that effective corporate governance secures long-term confidence between shareholders and the company's management. in their 2013 study, kumar and singh came to the conclusion that while excellent governance has real, positive effects on the economy and markets, these advantages are more apparent when the economy is in a slump. by implementing sound corporate governance, the company might mitigate the considerable decline in share price that it experienced during the most recent global financial crisis (monem, 2013). furthermore, in terms of return on assets or the firm's development potential, good corporate governance has been found to be more important than financial performance. excellent corporate governance is valued omore highly than a company's financial performance by 15% of european institutional investors (eii), according to the mckinsey global investor opinion survey (mckinsey, 2002). in terms of accountability and financial performance, in particular, this has undoubtedly reawakened modern corporations' understanding of the subject. the subject matter of corporate governance and ethical behavior, however, burst with the corporate scandals including enron, parmalat, and worldcom in the 1990s, and it was hotly debated once more in regard to financial companies during the global liquidity crunch. furthermore, these scandals and the purportedly subpar performance of the corporate sector in africa (particularly nigeria), according to a 2004 oecd assessment, have driven the adoption of corporate board processes in a number of african nations. in fact, the core of many significant corporate board improvements and reforms is a shared stake in the board of directors' success in accomplishing organizational goals. 3 the importance of corporate governance is stressed as a determining element in business performance and the accuracy of financial reporting. the analysis of accounting data and firm market value can thus be done using it. most earlier writers concentrated on the non-financial sector and used accounting performance ratios such roce, roa, roe, and roi as performance metrics. in light of this, by using the variable of share price as a proxy for company performance, which has rarely been employed by scholars in the nigerian context, this study contributes to other similar studies on corporate governance literature. according to our best knowledge, nigeria's banking, real estate, and construction industries are yet untapped sources for research studies. the author specifically selected sample companies from these sectors banking, real estate and construction. investigating the impact of corporate governance and the stock prices performance of listed banks and construction/real estate companies in nigeria is the main objective of this research. however, the specific goals are to: i. determine how board size affects the stock price performance of a few nigerian listed firms. ii. examine the impact of board independence on the performance of the stock prices of a few nigerian listed firms. iii. examine the impact of board diversity cum gender has on the performance of the stock prices of a few nigerian companies that are publicly traded. iv. analyze the impact of board ownership on the performance of the stock prices of a few nigerian traded companies. the purpose of this research was to determine how corporate governance mechanisms affected the stock price performance of companies trading on the nigerian exchange group. only quoted companies from nigeria's construction, real estate, and banking industries were captured for the study. in addition, the study's scope included four construction and real estate companies, 12 commercial banks, and it was conducted from 2006 to 2020. as of december 31st, 2006, the companies are listed on the nigerian stock exchange (nse). based on two criteria, a sample size of four businesses was chosen. this allowed for the elimination of any businesses deemed unsuitable for the study. 2. review of empirical studies numerous hypotheses serve as the foundation for this study because they directly affect it. agency theory, signaling theory, and entrenchment hypothesis are the theories that guide the investigation. they are best suited for this study and explained it relatedness to the study. 4 uwuigbe (2013) looked at the connection between share price and corporate governance practices. the audit committee and ownership structure of the company serve as examples of corporate governance. a sample of thirty entities that are listed on the nigerian exchange group served as the basis for the study. in this study, regression and correlation analysis approaches were applied. the results show that ownership structure and business share prices tend to be negatively correlated. however, the analysis does seem to suggest that the audit committee has a positive effect on stock prices. according to the paper, bad corporate governance can have a detrimental effect on economies in both developed and developing nations. using data from selected listed businesses on the oslo stock exchange from 2010 to 2016, frydenberg and neegaard (2018) conducted a study on ceo ownership and stock market performance using the fama and french models. their data show that ventures with a higher ceo ownership percent experienced considerably lower abnormal returns than the market. additionally, the data demonstrates that businesses without a ceo outperform the market. according to the findings, businesses that have a ceo who owns less than 0.05% of the venture's outstanding shares do better than businesses without a ceo and businesses where the ceo owns more than 0.05% of the company's outstanding shares. the results demonstrate that ceo ownership had an early positive impact on stock market performance, indicating enhanced incentives, but that a later negative impact showed lower incentives and suggested management entrenchment. the corporate governance index and stock performance in emerging countries have a significant relationship, according to klapper and love (2002). additionally, they made use of the asian credit lyonnaise securities (clsa) index, which comprised a sample of 374 countries. their findings suggest a positive correlation between corporate governance and value company valuation. malik (2012) looked into the relationship between the kse30 index businesses' stock prices and corporate governance ratings. the kse 30 index firms from 2009 to 2010 are the subject of the study. the firm's share price is employed as a dependent variable in this study, while the corporate governance score is used as an independent variable. the results show that well-run businesses have higher stock prices. this happens because well-structured businesses are gauged to perform better, which will lead stock values to increase. 5 cheng, lui, and shum (2013) examined the effect of board independence and share ownership structures on the market interactions of 976 hong kong-listed businesses between the years 2008 -2009. the outcome demonstrates that during the financial crisis era, companies without an independent outside director manning as head of the board and companies with a lower percentage of outside independent directors had quality stock interaction as measured by market-adjusted cumulative stock return. market-adjusted cumulative stock performance is negatively correlated with the percentage of large shareholdings held by the ceo and directors. additionally, there is a positive correlation between market-adjusted cumulative stock return and the percentage of shares owned by independent directors. dincer and dincer (2013) analyzed the corporate governance practices of quoted banks on the istanbul stock exchange and look at the association between corporate governance and company value in a developing economy (ise). according to the regression, banks with lesser control structure ratings generate bigger share value because they are riskier, whereas banks with higher governance ratings generate lower share value because they are less risky. the primary variables in the regression were performance indicators like roa and share price as well as corporate governance indicators including ownership, board composition, and transparency policies. according to the findings, stock prices appropriately reflect the higher risk of poorly managed companies and the lower risk of a strategic structure firm. the study of oyerinde (2014) examined the extent to which corporate governance contributed to the financial crisis in the nigerian banking industry between the periods 2000 and 2010. panel data on a post consolidated banks in nigeria for the pre and post-2004 consolidation reforms were used. two measures of bank performance (return on equity and net interest income) were used as dependent variables on a model that included both numbers of board members and related insider loans as measures of corporate governance. it was found that while the size of the board was significant positive insider loan is negatively related to bank performance. the paper concludes that insider loan was the most detrimental consequence of the lack of corporate governance in the nigerian banking industry. the issue raised in some studies about the size of the board members, this paper found a relatively higher number of board members to be more performanceenhancing and aid effective coordination of banks operating within the peculiarity of the nigerian financial system. 6 salah and elewa (2016) investigated whether corporate governance is associated with stock prices and trade volume for 62 publicly traded firms on the egyptian stock exchange during 2007-2014. the authors hypothesize that firms with strong corporate governance have a significant impact on stock prices and trade volume. to examine the associations, a multiple regression analysis is used. consistent with the first hypothesis, this study finds firms with strong corporate governance have a significant impact on stock prices while having no significant impact on trade volume. findings indicate that the quality of corporate governance can affect firms' stock price while trading volume is not affected by the strength of corporate governance. the results suggest that egyptian firms should improve their corporate governance as it has a significant effect on firms’ value. also, providing diverse sources of financial information other than the financial statements and ensuring the presence of high-quality financial reporting and strong investor protection. this study is carried out on non-financial firms only. this research is important to regulators and standard setters as it shows the information that affects investors’ decisions and the importance of its disclosure. it pays attention of standard setters for setting a corporate governance framework for improving the level of disclosures of publicly traded firms in egypt. acheampong, agalega, and shibu (2013) examined the effect of financial leverage and market size of selected stocks on stock returns. ordinary least square (ols) regression methods were used to model the relationship between the dependent variable and the independent variables. the leverage of the selected firms were estimated from the annual financial reports covering a period of five years (i.e.2006-2010) of selected five corporations operating in the manufacturing sector. furthermore, average monthly stock prices of the selected stocks between 20062010 for unilever, pioneer kitchenware, pz cussions, aluworks and camelot making up the five selected companies were used. the study established a negative and significant relationship between leverage and stock return when the overall industrial data is used. however, at the individual firm level the relationship was not stable. four out of the five selected companies (i.e. pz, unilever, aluworks and camelot) all had associated leverage coefficients to be negative. pioneer kitchenware however, had positive leverage coefficient. the study also found the relationship between size and stock returns to be positive and significant. the size effect within the manufacturing sector was however very limited. brown and caylor (2004) took another approach in evaluating corporate governance and firm performance. they created a broad measure of composite governance; gov-score comprising of 51 factors in eight corporate governance 7 categories based on a data set provided by institutional shareholder services. they then relate gov-score to operating performance (roe, profit margin and sales growth), valuation (tobins q) and shareholders payout (dividend yield and share repurchases) for 2,327 us firms and found that better governed firms are relatively more profitable, more valuable and pay out more cash to their shareholders. they also showed that good governance as measured using executive and director compensation is associated with good operating performance. to determine whether there is a correlation between stock returns and leverage, muradoglu and sivaprasad (2012) empirically investigated the effect of a firm's leverage on stock returns. we undertake our tests based on the explicit valuation model of modigliani and miller (1958) tested in the utilities, oil, and gas industries. we test the relationship between leverage and stock returns in all risk classes. for utilities, returns increase in leverage. this is consistent with the findings of modigliani and miller (1958). for other risk classes the relationship is negative consistent with the recent work of korteweg (2004), dimitrov and jain (2005), and penman (2007) in the cross-section of all firms. results are robust to other risk factors. theory of agency the agency theory, propounded by berles and means (1936), contends that high levels of corporate governance make businesses less risky, more efficient, and not quite expensive to audit and monitor. it posits that higher expectations of cash flow and a lower cost of capital result in quality firm value and better output. the theory contends that improved transparency, better oversight, and transparency among the principal and agent are outcomes of a good corporate governance framework. the agency philosophy states that since agency costs are reduced when managers are well supervised, increased corporate control will lead to higher and better stock prices in the long term. this hypothesis that stronger corporate governance should result in higher stock prices or better long-term performance because when managers are properly overseen, agency costs are decreased and profit is maximized is the theory that serves as the basis for this study. demsetz (1983) and fama and jensen (1983) introduced the managerial entrenchment theory, which suggested balancing the costs of strong management ownership. this idea holds that a corporation will be of lesser value if managers with high stakes have adequate voting power to maintain their cadre within the organization. a manager with large ownership can protect himself from market fumbles like the potential for a takeover or the managerial labor market. 8 management with fewer shares can be influenced by market actions to optimize firm value. when managers lack sufficient investments in the form of equity and shareholders are too dispersed to take action against unattractive investments, insiders may use corporate operations to obtain personal fringes like shirking and perk expenditures (farinha, 2003). giving a company's management ownership might give them more sway in voting decisions, which would make their workplace safer. they are thereby safeguarded from takeover bids and the current management market. as a result, managers frequently run the danger of being sacked by making themselves so irrelevant that losing them would jeopardize the business. a manager receives motivation when he invests the entity's resources in assets whose value is higher under him than under the best alternative manager, even if such investments do not maximize value (shleifer, 1989) agency costs arise when a company's ownership and control are divided. we employ this concept in the research because we anticipate managers who own a sizable portion of the company's stock to profit personally from opportunities. as a result, stock prices are subject to ups and downs. 3. methodology and model requirements the ex-post facto research strategy was chosen for this study in accordance with gujarati's (2003) assertion that it is one of the best research methods for finding the cause-and-effect relationship between the independent and dependent variables in order to demonstrate a causal link among them. the study involves four (4) construction and real estate companies and twelve (12) commercial banks listed on the nigerian stock exchange between 2006 and 2019. in this work, the effect of heteroskedasticity that can be attributed to temporal and cross-sectional effects in the data set was addressed using the robust least square panel regression. numerous robustness tests are run on the data, including tests for multicollinearity, heteroskedasticity, residual normality, and correlation matrix normality. the estimation results were assessed using respective significance tests (t-tests) and overall statistical significance tests (f-tests), and the coefficient of determination was used to gauge how well the model fit the data (r-squared). the analysis was carried out using the stata 14 software suite. in order to create a model for this study, we adopted and modified the model from akinkoye adedeji adelabu and akinadewo (2015). here is what is said. tobin’s q it = α + β1 gciit+ β2bodit + β3excompit+ β4sharit+β5ownit +β6dis it+ β7 levit+ β8sizeit+β9ageit+β10roait+μii…………………………….......(i) 9 mrkval = α + β1 gciit+ β2bodit + β3excompit+ β4sharit+β5ownit +β6dis it+ β7 levit+ β8sizeit+9ageit+β10roait+μii……………………………………….....(ii) the effect of corporate governance mechanisms on the stock price performance of listed banks and construction/real estate companies in nigeria is examined using the model below. simply put, we demonstrate that the corporate board mechanism is a function of stock price performance as given in the equation below: sp= f (board size, board independence, board gender diversity, board ownership and leverage) ……………………………. (1) this can be re-written in explicit form as: sp= π0 + π1b_size + π2b_ind + π3b_gen_div + π4b_owner + π5leverage……… (2) and can be written econometrically as: sp= π0 + π1b_size + π2b_ind + π3b_gen_div + π4b_owner + π5leverage+ εt……… (3) since we employ panel datasets, we capture both time and cross section effect with the equation below spit= π0+π1b_sizeit+π2b_indit+π3b_gen_divit+π4b_ownerit+π5leverageit+εit ……....(4) also econometrically expressed as: sp equals 0 plus 1 each of the following: b size, b ind, b gen div, b owner, b leverage, and b t.……………………………………………………………….. (3) the equation below captures the temporal and cross section effects because we use panel data sets. the formula for spit is 0 plus 1b sizeit, 2b indit, 3b gen divit, 4b ownerit, 5leverageit, and it (4) 4. presentation of data and results the study examines the impact of corporate control mechanisms on listed businesses' stock price performance in nigeria from 2006 to 2020. board size (b size), board independence (b ind), board gender diversity (bg div), and board ownership (b own) are the variables of interest that we used to examine the impact of the corporate governance system on stock price performance. however, we included firm leverage as a control variable (leverage). 10 the statistics of the data set used in this investigation are summarized in the table below. table 4.1: statistical description of the corporate governance index s-price b-size b-ind b-own bg-diver leverage mean 11.98597 12.487 61.07058 13.33658 13.71667 83.70153 max 84.63 21 90 89.65 60 254.75 min 0.44 5 21.43 0 0 8.63 n 225 225 225 225 225 225 source: stata output compiled by authors according to the descriptive statistics, the mean stock price variable for the study period was around 11.99. this portrays the sampled companies in a favorable light. the year 2007 saw the strongest stock performance across the board for all studied firms, reaching an average height of 84.63, while the year 2018 saw the worst performance, with an average stock value of roughly 44 kobo. additionally, the descriptive statistics showed that during the studied period, on average, 13% of the directors at the tested organizations were female. however, we discover that board gender diversity reached a record high of 60% in 2010, demonstrating a very large divergence from the mean. this finding implies that among nigerian traded firms, the role of women on the board is continuing to acquire importance. the outcome reveals that throughout the time under investigation, board independence ranged from an average of 61 percent to a maximum of 90 percent. we also discover that board ownership, which is the equity held by board members relative to the total number of firm shares, followed the same trend as the board gender diversity variable. from 7 percent in 2007 to 16 percent in 2018, board ownership increased steadily on average. finally, we discover that in nigeria, quoted firms used debt financing the most in 2017. (254.75). however, on average, during the time under consideration, the majority of the studied enterprises used debt financing to the tune of 83.70. table 2. data normality test shapiro-wilk w test for normal dat variable obs w v z prob>z s_price 225 0.763 34.73 8.16 0.0000 b_size 225 0.977 3.27 2.73 0.0032 11 b_ind 225 0.964 5.24 3.80 0.0000 b_own 225 0.669 48.39 8.92 0.0000 bg_div 225 0.961 5.75 4.02 0.0000 lev 225 0.673 47.92 8.89 0.0000 source: stata output compiled by authors (2022) the rule of thumb states that a variable is not normally distributed if the probability value of the variable of interest is significant at 1 percent or 5 percent. the findings also show that all relevant parameters are regularly distributed, as some variables, like board ownership, leverage, and stock price, are significant at 1%, while others, like board size, independence, and gender diversity, are significant at 5%. table 3: correlation matrix result variables s-price b-size b-ind b-own bg-div lev s-price 1.0000 b-size -0.531 1.0000 0.4612 b-ind -0.0681 -0.4415* 1.0000 0.3444 0.0000 b-own -0.2426* 0.3386* 0.1291 1.0000 0.0006 0.0000 0.0720 bg-div 0.0520 0.1897* 0.0926 -0.0866 1.0000 0.4706 0.0076 0.1981 0.2288 lev 0.0220 0.1347 0.0762 -0.1873* -0.0307 1.000 0.7592 0.0604 0.2896 0.0086 0.6697 source: stata output compiled by authors (2022) a linear link between two or more explanatory variables is implied by correlation. regression estimators may be biased since they frequently have high variances because correlation makes it difficult to distinguish between the various impacts of the explanatory variables. in murray (2006). additionally, the regression model estimates cannot be derived only if the relevant variables are perfectly connected linearly. the likelihood of correlation is examined using the correlation matrix, which contains both dependent and independent variables. 12 pearson correlation matrices state that correlation coefficients must be less than 0.8, which is the threshold or cutoff correlation percent that previous studies have frequently suggested is where collinearity is likely to occur (gujarati 2003). you can predict one variable using the second predictor variable when there is a high correlation between the two predictor variables. the multicollinearity problem is this. analysis of the effects of independent factors on dependent variables becomes challenging as a result of unstable regression parameter estimates. such parameters have an extremely large se. there is no reason to be concerned about the effects of multicollinearity, according to a brief glance at table 4.2 above the result. however, a more sophisticated method known as the variance inflation factor test is used to further test the relationship between the independent variables (vif). in order to determine the level of variability, the study used the variance inflation factor test to examine the relationship between the independent variables. test for multicollinearity with variance inflation factor (vif) table 4: variance inflation factor test result variables vif 1/vif b-size 1.52 0.704960 b-ind 1.34 0.804160 b-own 1.26 0.860683 lev 1.15 0.951959 bg-div 1.24 0.959650 mean vif 1.30 source: stata output compiled by authors (2022) gujarati (2003) asserts that if the mean vif is close to 10, there are no consequences. the mean-variance inflation factor (vif) of the explanatory variables is shown in table 4:3 below. since the mean vif is within the range of 10 against which the presence of multicollinearity may be suspected, the result illustrates the absence of the repercussions of multi-collinearity in the model employed for the analysis. heteroscedasticity test the breusch-pagan/cook-weisberg test was utilized in this investigation to determine whether the data set used for the study had heteroscedasticity. the probability chi square value of 0.0005, which is statistically significant at the 5 percent level, showed that there was heteroscadasticity in the data set. however, 13 we use the robust regression analysis described below to account for the influence of heteroscedasticity. regression analysis the study found an r-squared value of 0.09, which means that throughout the study period, the independent variables jointly explained around 9% of the systematic fluctuations in stock price performance. this suggests that the independent variables used in this study were not able to fully explain the changes in stock price performance; therefore, the error term accounts for the remaining 91 percent of the variances. in addition to the foregoing, the following details are presented regarding each explanatory variable's unique findings from the fixed effect panel regression models: hypothesis 1: board size has no appreciable impact on listed banks' and real estate/construction companies' stock price performance in nigeria. the board size (b size) variable is shown in the robust least square regression model above with the following values: coef. = -0.775, t = -3.41, and p-value = 0.0008. according to the aforementioned findings, it is evident that board size has a negative and statistically significant impact on the stock price performance of listed banks and construction/real estate companies in nigeria. this result confirms earlier predictions that a one-member increase in the board's size would result in a marked decline in the sample firms' stock price performance. the study rejects the null hypothesis by accepting the alternative hypothesis in light of the findings. according to the study, the performance of stock prices is negatively impacted by board size in a statistically significant way. hypothesis 2: in nigeria, quoted banks and real estate and construction companies' stock price performance are unaffected by board independence. the variable of board independence (b ind) is shown in the robust least square regression model shown above (coef. = -0.129, t = -1.51, and p-value = 0.1327). in light of the aforementioned findings, it can be concluded that board independence has a negative but statistically minor impact on the stock price performance of quoted banks and construction/real estate companies in nigeria. this result does not match our preconceived notions because we anticipate that more board independence will enhance stock price performance. board independence has no statistically meaningful impact on stock price performance, the study finds, rejecting the alternative hypothesis. 14 hypothesis 3: in nigeria's quoted banks and real estate and construction industries, board gender diversity has no appreciable impact on stock price performance. the variable of board gender diversity (bg diver) (coef. =0.069, t = 0.75, and p value = 0.455) is shown in the robust least square regression model that was previously provided. according to the aforementioned findings, it is clear that board gender diversity has a favorable but statistically small impact on the stock price performance of quoted banks and construction/real estate enterprises in nigeria. this finding shows that stock price performance will improve, although only little, as the percentage of female directors on boards rises. we reject the alternative hypothesis because this result contradicts the a priori expectation and come to the conclusion that board gender diversity has a statistically insignificant positive impact on stock price performance. hypothesis 4: board ownership of listed banks and construction/real estate enterprises in nigeria has no appreciable impact on corporate performance. the variable of board ownership (b own) (coef. = -0.917, t = -5.89, and p-value = 0.000) is shown in the robust least square regression model that was previously presented. according to the aforementioned findings, it is evident that board ownership has a negative and statistically significant impact on the stock price performance of banks and construction/real estate companies in nigeria. according to this finding, stock price performance appears to be significantly dampened as the percentage of directors' shareholding rises. in this regard, we reject the null hypothesis and come to the conclusion that board ownership affects stock price performance statistically. discussion of the results board size it was discovered that adding a board member causes agency conflict, which lowers the stock performance of banks and construction/real estate enterprises in nigeria. the fundamental reason is that as the number of board members rises, so do the conflicts of interest among the directors, making it more difficult for them to make decisions that are appropriate and timely, which has an impact on the performance of the company. board gender diversity the finding backs up rose's (2007) argument that there may be a socialization process whereby the unconventional board members have taken on the conduct and 15 standards of the conventional board members and business leaders. rose (2007) argues that this process may be the reason why board gender diversity does not lead to quality performance. board independence the results show that non-executive directors are not generally well-liked by stakeholders. as a result, companies may suffer if the number of non-executive directors rises. this is because they may stifle management's strategic decisions and subject the company to excessive scrutiny because they lack the necessary business expertise and real independence. control/ownership of the board the outcome is consistent with the entrenchment effect theory, which contends that large board ownership percentages have a negative impact on stock price performance. as a result, the relationship that exist between board ownership and stock price interactions is either negative or nonexistent. leverage according to this study, firm leverage the amount of debt financing a company uses to boost its share price has not been proven to be very helpful in raising the stock prices of banks and indigenous named firms. 5. conclusion this study specifically seeks to examine the effect of corporate governance mechanism on stock price performance of quoted banks and construction/real estate firms in nigeria. this study notes that corporate governance mechanism have not been effective in tackling agency conflict hence the poor performance of stock price among quoted banks and construction/real estate firms in nigeria. the study recommends the minimizing of size of the board to optimal size of seven to eight members; non introduction of mandatory quotas, instead insist on competence and capability in these studied sectors; policy focus towards providing alternative incentives for managers instead of increasing the proportion of their stock; and employment of debt financing for firms with interest in long term projects to optimize financial leverage. references acheampong, p., agalega, e., & shibu, a. k. (2013). the effect of financial leverage and market size on stock returns on the ghana stock exchange: evidence 16 from selected stocks in the manufacturing sector, international journal of financial research, sciedu press, 5(1), 125-134, adami, r., gough, o., muradoglu, y. g., &sivaprasad, s. (2015). how does a firm’s capital structure affect stock performance? lund university libraries akinsulire, o. (2006). financial management (9th ed.). lagos: el-toda ventures amoateng, a. k., osei, k. t., ofori, a., &gyabaa, e. n. (2017). empirical study on the impact of corporate governance practices on performance: evidence from smes in an emerging economy. european journal of accounting auditing and finance research, 5(8), 50-61. berle, a., & means, d.g. (1932). the modern corporation and private property. new york: macmillan publishing. black, bernard, hasung jang, and woochan kim. (2005). "predicting firms' corporate governance choices: evidence from korea", journal of corporate finance (forthcoming) brigham, e. f., & erhard, m. c. (2004). financial management: theory and practice. uk: southwestern college publishers. brown, l., & caylor, m. (2004). corporate governance and firm performance. working paper. georgia state university. central bank of nigeria, cbn (2014). code of corporate governance for banks and discount houses in nigeria and guidelines for whistle blowing in the nigerian banking sector. cheng, s., lui, g., & shum, c. (2013). corporate governance, ownership and stock price during financial crisis. proceedings of american society of business and behavioral sciences, 20(1), 111-121. demsetz, h., & lehn, k. (1985). the structure of corporate ownership: causes and consequences. journal of political economy, 93, 1155-1177. dincer, b., & dincer, c. (2013). corporate governance and market value: evidence from turkish banks. international journal of academic research in business and social sciences, 3(1), 2222-2230. drobetz, w. (2002). corporate governance: legal fiction or economic reality. financial markets and portfolio management, 16(4), 431-439. fama, e., & jensen, m. (1983). separation of ownership and control. journal of law and economics, 26, 301-325. farinha, j. (2003). dividend policy, corporate governance and the managerial entrenchment hypothesis: an empirical analysis. journal of business finance & accounting, 30, 11731209. gompers, p.a., ishii, j., & metrick, a. (2003). corporate governance and equity prices. quarterly journal of economics, 118(2), 107-125. gujarati, d. n. (2003). basic econometrics. mcgraw-hill: new york. jensen, m. c. (1993). the modern industrial revolution, exit, and the failure of internal control systems. the journal of finance, 48(3), 831-880. 17 jensen, m. c., & meckling, w. h. (1976). theory of the firm: managerial behavior, agency costs, and ownership structure. journal of economics, 118, 107-155. klapper, l. f., & love, i. (2002). corporate governance, investor protection and performance in emerging markets. journal of corporate finance, 10(2), 703-728. kumar, n., &singh, j. p. (2013). effect of board size and promoter ownership on firm value: some empirical findings from india. corporate governance, 13(1), 88-98. malik, s. u. (2012). "relationship between corporate governance score and stock prices: evidence from kse-30 index companies."international journal of business and social science 3(4). mallette, p., & fowler, k. l. (1992). effects of board composition and stock ownership on the adoption of poison pills. academy of management journal, 35, 1010-1035. monem, r. m. (2013). determinants of board structure: evidence from australia. journal of contemporary accounting & economics, 9(1), 33-49. muradoglu, y. g., & sivaprasad, s. (2012). using firm-leverage as an investment strategy. journal of forecasting, 31, 260-279. myers, s., (2014) “how to think about corporate governance" western finance association keynote address, monterey, california, june 17, 2014. ongore, v., & k’obonyo, p. (2011). effects of selected corporate governance characteristics on firm performance: empirical evidence from kenya. international journal of economics and financial issues, 1(3), 99-122. organisation for economic cooperation and development (2004) oecd principles of corporate governance organization, 1(1), 101-124. oslo, g.f. (2007). quarter of norway’s firms face shutdown as female directors’ deadline approaches. the guardian, 27 december oyerinde, a. a. (2014). corporate governance and bank performance in nigeria: further evidence from nigeria. international journal of business and management, 9, 133139. peasnell, k.v., pope, p.f., & young, s. (2003). managerial equity ownership and the demand for outside directors. working paper, lancaster university securities and exchange commission, sec (2011). code of corporate governance in nigeria. sala, w. & elewa, m. (2016) the impact of corporate governance on stock price and trade volume. international journal of accounting and financial reporting 6(2). shin, p. & gulati, m. (2011). showcasing diversity. north carolina law review 89, 10171054. shleifer, a. (1989). management entrenchment: the case of manager-specific investments. journal of financial economics, 25, 123-139. 18 shleifer, a., & vishny, r. w. (1997). a survey of corporate governance. journal of financial economics, 52(2), 737-783. uche, c. (2004). corporate governance in nigerian financial industry. chartered institute of bankers of nigeria journal, 2, 11-23. velnampy, t., & pratheepkanth, p. (2013). corporate governance and firm performance: a study of selected listed companies in sri lanka. european journal of commerce and management research, 2(6), 123-127. wolfensohn, (1999). corporate governance is about promoting corporate fairness, transparency and accountability. financial times, 21st june. i gusau journal of accounting and finance (gujaf) vol. 3 issue 1, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria ii © department of accounting and finance vol. 3 issue 1 april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. iv prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. dr. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. v dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. vi call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7 th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ vii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ viii contents mediating effect of audit committee on board dynamic and creative accounting in nigerian firms abbas usman phd, shehu usman hassan phd 1 financial performance of banks in selected african countries: does institutional quality matter? toluwa celestine oladele phd, peters ade sanni 22 firm-specific characteristcs and financial performance of listed agricultural companies in nigeria abdulrazaq t. jimoh, john a. attah 33 effect of financial leverage on stock returns of listed companies in nigeria capital market abdulrahman abubakar, prof. ahmad bello, prof. s. a. abdullahi, dr. m. d. tahir 45 efficiency of deposit money banks in nigeria: data envelopment analysis approach mayowa gabriel ajao, phd, lucky charity omoregie, phd 57 credit appraisal, collection policy and loan performance of microfinance banks in kwara state, nigeria lukman a. o. abdulrauf 69 environmental sustainability disclosure and market value of listed oil and gas firms in nigeria munir aliyu saleh, sirajo bappah, prof. gbegi daniel orsaa, ibrahim adamu saleh phd 81 audit quality, tenure and real earnings management of listed nonfinancial firms in nigeria ahmed mohammed, ademu yahaya, musa zakariya 95 effect of ceo pay and ceo power on risk-taking of listed deposit money banks in nigeria ismaila yusuf, dr. salisu abubakar, dr. idris ahmed aliyu, dr. (mrs) aneitie charles dikki 104 nexus between taxation and foreign direct investment in nigeria daniel ayegbeni ulokoaga, esther ikavbo evbayiro-osagie (mrs), ph. d 115 working capital management and profitability of listed consumer and industrial goods companies in nigeria kwasau ntyak leah, samuel eniola agbi phd, lateef olumide mustapha phd 125 value relevance of earnings and book value: a comparative analysis between big4 and non-big4 audited listed firms in nigeria abdu abubakar, ishaya luka chechet phd, muazu saidu badara phd, yunusa nasiru phd 136 ix value relevance of international financial reporting standard 4 (ifrs 4) of listed nigerian insurance firms mariya mohammed hafiz, muhammad mustapha bagudo phd, salisu abubakar phd 145 determinants of audit fees of listed insurance companies in nigeria sagir lawal, phd, mohammed ibrahim, phd 158 taxation and social services: evidence from nigeria adegbite, tajudeen adejare, phd, abdussamad, olarinde 171 ownership structure and financial performance of quoted mortgage banks in nigeria awotundun, d. a., phd, jinadu, m. y. b., fakunmoju, s. k., phd. 183 capital structure and profitability of listed deposit money banks in nigeria rahji ohize ibrahim, kamaldeen ibraheem nageri, phd, abdullai agbaje salami, phd 194 1 taxation and social services: evidence from nigeria adegbite, tajudeen adejare, phd. department of accounting, alhikmah university, ilorin, kwara state +2348035793148, adetajud@yahoo.com abdussamad, olarinde department of business administration north central university, arizona, usa. mokolde.olarinde@gmail.com ariyo-edu, aminat arike department of accounting alhikmah university, ilorin, kwara state aminat.ariyo@alhikmah.edu.ng abstract this study econometrically examined taxation effect on social services in which how taxation incomes finance education services were investigated. data were collected from firs bulletin and cbn statistical bulletin covering 1981 to 2020. to realize econometric impact of taxation on social services, regression model, cointegration, vecm and granger causality wald test were analytically engaged. petroleum profit tax, company income tax, value added tax and custom and excise duties have positive significant impact on social services both in the short run and in the long run in nigeria. it is concluded that taxation positively ignited education services and vice versa. this displayed bidirectional causality amid taxation and social services. also taxation has positive significant impact on education services both in the short and long run in nigeria. the huge revenue earned by the government through taxation assisted government to improve her education and edut services. it is recommended that administration of taxes especially company income tax and customs and excise duties should be done in a way that collection and remittance cannot be evaded so that its effectiveness will be properly comprehended in the magnitude of social services provision. keywords: social services, education, financing, taxation 1. introduction education in nigeria has been a great challenge to both the government and private sectors in nigeria. most of the building in nigeria university and other sectors of education including both infrastructures and equipment have been experiencing outdating and dilapidation. the nexus amid taxation and education in nigeria is not disconnected. education in nigeria needs exigent financing. this is pertinent because no government can implement her functions effectively and productively without suitable financial funds at her disposal. funds are needed to fulfill righteousness on both academic and nonacademic staff, maintain both academic intellectuals and equipment. adequate financing’s importance on education cannot be overemphasized. for instance, in 1981, government of nigeria spent 0.17 billon to revamp education from collapsing when income realized from taxation is 4.73 billion. it was mailto:adetajud@yahoo.com mailto:mokolde.olarinde@gmail.com mailto:aminat.ariyo@alhikmah.edu.ng 2 increased to 2.4 billion when tax income was 18.33 billion in 1990 which displayed 243% increment on the education financing. government upsurged finance on education to 57.96 billion in year 2001 when realized 903.46 billion from taxes. this showcased 2315% increment compared to 1990. expenditure of government on education further increased to 170.80 billion in 2010 while income realized from taxes was increased to 1,907.58 billion (cbn, 2020). this further explained the efforts of government to stabilize education in nigeria using taxes income. expenditure on education was also skyrocket to 593.33 billion in 2019 when income garnered from all taxes was 4,725.60 billion during the period when country experienced crash in price of crude oil in world market. these are financed with taxation which are forcefully realized from both individual and private sector through effective firs. according to adeyemi (2011) education is financed in developed country by efficient taxation. taxation revenue which has replaced wealth regaling by government through crude oil which invariably crashed globally. despite the efforts of government to stabilize and improve education services with enormous spending on education, country is still battling with teachers/lecturers strike, dilapidated infrastructures, low quality education, brain drain, inadequate qualified lecturers, downplayed laboratories’ equipment and denigration of outputs. the question now is has government earned adequate taxes wealth capable of financing education? are the wealth realized from taxation and allocated for financing education not fully monitored? this study showcased the cordial relationship amid taxation and education financing in nigeria. 2. literature review taxation taxation is considered as an encumbrance which inhabitants must tolerate to manage his o government because of the fiscal functions to displaying in the country. taxation is germane sources of revenue influx for government, such revenue are utilised to funding or running public services and execute other social services. ochiogu (2004) delineates tax as an imposed levy showers on the individual and private/ corporate organization. it is imperative and germane source of intake typically represents more than ninety percent of government income (adams, 2001, adegbite & azeez, 2022). it is also referred to as the exhibition of civil responsibilities as ways of supporting government for effective provision of social services such as education, roads, security and other social services responsibilities for the wellbeing of the society. taxation is employed by government to influence economic activities positively or negatively so as to realize desired objectives(adegbite, 2021). therefore: ho1: taxation is indispensable to social services provision in nigeria social services and education social services are the cumulative of social amenities and facilities such as education, health, defense, transportation and other public goods which are provided for the enhancement and stabilization of citizenry. the services could be in the form of education services facilities such as health, transportation, good roads, water provision, qualified teachers and other education facilities provision. the reasonable economic plans are to upsurge economic growth through education which is the paramount subsets of social services. these services enhance per capita income which invariably surge up standard of living. education services facilitate and accelerate the existence of social, physical, and economic structures. if the populace are not deprived of these services, development of such country are absolutely possible. education services are seen generally as basic and essential services that must be available for development of both human and economy. the physical structures necessary 3 for the running of society can likewise be perceived as education services. these are specific elements which function as facilitator for improvement, development as well as enhancement in citizens’ welfare (adegbite, 2016). this can also unequivocally be seen as persistent rates of income per capita growth. todaro and smith (2011) in their submission, education services provision accelerated and facilitated development of any nation and also upsurge both material and human resources which ultimately enhance economic development. it is hypothesized that: ho2: taxation enhances education services financing favourably in nigeria theoretical review as the world economy swings towards more information based sectors. human capital and skills development becomes a pertinent issue for practitioners and policy makers involved in economic development, both at regional and national levels (jacobs, 2007). however, the effects of vocational and educational training activities exercise upon changing regional and national economies becomes less than thoroughly analyzed and explained. since the existence of theory of human capital in 1960s, numerous of researchers have struggled to discuss the related issues. the theory of human capital perceive training and schooling as investment in competences and skills. it is debated that based on expectation of investment returns, training and education decision were made solely or unanimously as they receive as a channels of boosting their productivity. a similar aspect of studies emphases on the interface between skills / educational levels of the employees and technological activities measurements. with reference to this theory, more skilled /educated labor force make it convenient for any organisation to adopt and actualize new technologies, thus reinforce returns on training and education. this theory is relevant to this studies because human capital which can be derived from education and training are the responsibilities of a responsible government. therefore, government can finance education from the proceeds of taxation. this theory emphasis that taxation when allocates it judiciously can finance education from primary schools to tertiary institutions. any nation that spend extensively on empowerment of her citizens will be developed in a decade. this theory further strengths that aggregate impacts of education on any country is growth and development. theory of infrastructure-led development was developed by agenor (2010). the theory proposes a long-term economic development based on education which was referred to as the main engine of growth. the theory stipulates that government investment in education enhances productivity of both commodities. the theory suggests that a large shift toward spending on social services and infrastructure especially education can generate desirable impacts on economy only if efficiency degree of social services is adequately high. the theory inveterate that if the social service such as education levels are low significantly, the human capital production and technology will be insignificant to economic development which can lead to low and poor productivities. for instance, in the nonexistence of edut services and formidable education system in nigeria, there will be devastation in human capital enhancement which will invariably dispense underdevelopment, and other sectors will also be drastically affected, which will affect economic development. however, this study also anchored on this theory because as long as adequate social services provision such as edut services and sound education services are certain, human capital can be enhanced, modern technology will be fully utilized, and economic and social benefits will be applauded. empirical review of related studies 4 adeyemi (2011) examined education financing in nigeria. financial review on education since the beginning of formal education in nigeria was unveiled. the education financing sources of both developing and developed countries were emphasized while nigeria debt servicing level and external debt stock level were given. the study displayed total revenue accruing to the federal government are allocated to education sectors periodically. the findings specified that education funding was less that 17% yearly despite that unesco advocated that 26% minimum of national budget must earmark on education. it was advised that effectively funding on education are recommended for any country that yearns for growth in future. yakovlev (2014) estimated the connected impact of personal income tax, and average tax rate on growth. the study analyzed the data collected with gmm and revealed that average tax rate is significantly and negatively connected with growth. but, statistical significance was absent in both variables while average tax rate was significant but negative in gmm model that considered all variables selected as endogenous. the multiple analysis indicators disclosed that state higher taxes were generally connected with low economic performance. in the same vein, ugwunta and ugwuanyi (2015) garnered cross-sectional data from subsaharan african countries to decide on non-distortionary and distortionary taxes effects on economic growth. the panel data technique was employed choosing fixed -effect model as a parameter. findings disclosed that distortionary tax impacted negatively and insignificantly on growth of economy but non-distortionary tax impacted on economic growth positively and insignificantly. onakoya et al. (2016) employed generalized least squares (gls) to investigate taxation impact on africa economic growth from 2004-2013. findings displayed that tax revenue has positive connection to african economic growth which invariably advocated that taxation promotes africa economic growth. the study at last concluded that african countries needed to enhance tax revenue so that africa economy would experience accelerating growth. adegbite (2016) examined education tax on nigeria human capital development. the study further investigated causality direction among human capital development, petroleum profit tax, education tax, and company income tax. co-integration together with granger causality tests were used to analyse data from 2000 to 2015. it was revealed from the outcome that education tax had impact on nigeria human capital development positively and significantly. the study advocated that government should exploit education tax revenues efficiently and efficiently for development of human capital in nigeria. oboh et al, (2018) analyzed tax revenue impact (direct and indirect tax) on the growth of economy of the countries belonged to economic community of west african states (ecowas), using sure (seemingly unrelated regression estimate) analysis for selected five (5) ecowas countries such as ghana, nigeria, sierra leone, burkina faso and benin. the data was realized from world bank world development indicators from 2000 to 2015. findings revealed that aggregated tax revenue possessed positive effect which is significant on economic growth. maganya (2020) engaged autoregressive distributed lag model (ardl) to investigate taxation effect on tanzania economic growth from 1996 to 2019. several preliminary tests which are sacrosanct such as stationary tests and pair-wise granger causality tests were also engaged the results divulged that taxes on domestic services and goods are positively and statistically connected to the growth of gdp but income taxes negatively and significantly 5 connected to the growth of tanzania gdp. the study advocated that government should focus at growing, sustaining, nurturing tax base in order to drive tanzania economic growth positively. adegbite (2021) gauged the effects of taxation on transportation in nigeria between 1981 and 2019. the study additionally assessed the causality between transportation and revenue of taxation in nigeria. vecm as an analytical tool together with johanson cointegration test, and vector autoregression were embraced for analysis. it was concluded that taxation assisted transportation financing in nigeria favourably and significantly. nevertheless, this study also restricted to transportation financing in nigeria but not extended to how internal security is being financed. the existing literature examined were restricted to taxation impact on economic growth except adeyemi (2011) and adegbite (2016) who extended their studies to education financing and human capital development respectively. also, the study on the impact of taxation on social services with referenced to education services in nigeria is inadequate which made the current study pertinent and relevant. however, this study is unique and stand out among the existing literature because of its impacts on social services, and the involvement of other econometric analytical tools in determining the extent of taxation on social services in nigeria. 3. methodology and model specification value added tax (vaadt), petroleum profit tax (pept), company income tax (cotax), custom and excise duties (cexdt), and edut data were collected from firs bulletin and cbn statistical bulletin covering 1981 to 2020 in order realized the econometric impact of taxation on edut through regression model, johansson cointegration (jtfc), analysis, vecm and granger causality wald (gcw) test. ppmc also was employed to examine the rapport between taxation and edut indicators. to survey taxation impact on edut services in nigeria, edut services is regarded as dependent variable while components of taxation such as vaadt, pept, cotax and cexdt are employed as independent variables. edut are the income aggregately spent by fgn on education sectors in nigeria. the regression model is: model 1: educ = ƒ (taxation) (1) educ = ƒ (pept, vaadt, cotax, cexdt μ) (2) educ= a0 + b1vaadt + b2cotax + b3cexdt + b4pept + μ1 (3) vecm model are as follows: ∑ ∑ ∑ ∑ ∑ (4) ∑ ∑ ∑ ∑ ∑ (5) ∑ ∑ ∑ ∑ ∑ (6) ∑ ∑ ∑ ∑ ∑ (7) 6 ∑ ∑ ∑ ∑ ∑ (8) where edut proxied as money exhausted on edut services provision and sustainability by federal government. is intercepts, are taxation coefficients of edut, cotax, pept, vaadt and cexdt respectively. s, t, m,i, and n, and are regarded as lags numbers. is error term (stochastic) with zero mean and constant variance 4. results and discussions 4.1. trend analysis showing taxation and education financing in nigeria fig 1 showed the trend analysis between taxation and education financing in nigeria. from fig 1, it is shown that relationship exist between taxation and education financing. according to cbn statistical bulletin, in 1981, the income realized from taxation is 4.73 billon while 17millon was spent on education but in 2019, 4,725.60 billon was realized from taxation in which 593.33 billon was dispensed on education in nigeria. it is further shown that taxation has pertinent roles on education financing in nigeria. financing of education responses as the results of increment in taxation income which translated that education benefited from income garnered through taxation. 4.2. the effect of taxation on education financing in nigeria table 1:the impact of taxation on education financing in nigeria depende nt variable independent variables coefficient standard error t p>/t/ (95% conf. interval) 0.00 500.00 1,000.00 1,500.00 2,000.00 2,500.00 3,000.00 3,500.00 4,000.00 4,500.00 5,000.00 trend between taxation and education financing in nigeria taxation education 7 educ pept .222557 .055226 4.03 0.000 .0011161 .0033861 vaadt .046051 .007151 6.44 0.000 -.0191533 .111258 cotax .0115629 .002581 4.48 0.000 -.0600851 .0369593 cexdt .053937 .006331 8.52 0.000 .3911438 .4875939 constant 19.72553 1.907692 10.34 0.000 -13873.38 9928.394 r 2 = 0.5753 adj r 2 = 0.5624 prob > f = 0.0000 f( 4, 34) = 335.72 source: author’s collation (2022) table 1 exposed taxation impact on educ in nigeria. it was divulged from table 1 that 1% increase in pept increases edut by 0.22%. this advocated that pept positively influence edut (β = .222557, t = 4.03, p> |t| = 0.010). vaadt also enhanced edut by 0.046%. this also advocated that vaadt imparted educ positively (β= .046051, t= 6.44, p>|t|=0.000). cotax, and cexdt increase educ by 0.11% and 0.053% with the significant outcome of t= 4.48 p>|t|=0.000; and t=8.52, p>|t|=0.000 < 0.005 respectively. the adjusted r 2 of (0.5624) 56.2% specifically predicted the incorporated independent variables sufficiently determined taxation effect on edut. it further indicated that taxation justified 56.2%% short run determinant of edut. however, the hypothesis that taxation significant influence educ is upheld. 4.2.1: test for unit roots table 2: unit roots test variables adf statistic critical value (1%) critical value (5%) critical value (10%) integration order remarks edut -3348 ** -3.682 -2.972 -2.618 i(0) stationary (level) peptax -3.566 ** -3.682 -2.972 -2.618 i(0) stationary (level) vadtax -4.124*** -3.682 -2.972 -2.618 i(0) stationary (level) cuedtax -5433*** -3.682 -2.972 -2.618 i(0) stationary (level) coitax -6322*** -3.682 -2.972 -2.618 i(0) stationary (level) (**) means significant at 5% and 10% only, but *** means significant in all (10%, 5% and 1%). source: author’s collation (2022) it was observed from table 2 that all the variables involved in this study are stationary at level because adf statistics of each variable is more than 5% and 10% critical value of 2.972 and -2.618 respectively. this authenticated that all variables are empty of unit roots in all the observations. 4.2.2 selection order criteria (soc) test table 3: soc on taxation and education financing in nigeria la g ll lr df p fpe aic hqic sbic 0 -2461.5 1.1e+55 140.943 141.019 141.165 1 -2318.95 260.46 25 0.000 1.6e+52 134.399 134.859 135.732 2 -2242.61 152.67 25 0.000 2.4e+51 132.391 133.234 134.835 3 -2174.28 136.67 25 0.000 2.5e+49 127.578 128.805 131.133 4 -1955.19 438.19* 25 0.000 9.1e+46* 121.388* 122.999* 126.054* endogenous: educ, pept, vaadt, cotax, cexdt exogenous: _cons source: author’s collation (2022) 8 soc test was done in order to circumvent overestimated and underestimated lag in this study, test of lag selection was carried out. in table 3, aic, fpe, hqic and sbic supported lag 4 as the acceptable lag to be adopted in this model. 121.388*, 9.1e+46*, 122.999* and126.054* of aic, fpe, hqic and sbic respectively supported lag 4 as vindicated in table 3. 4.2.3 jtfc on taxation and education services table 4: jtfc on taxation and education services rank eigen value parm ll trace statistic critical value 5% critical value 1% eigen value 0 55 -2360.0833 296.6055 68.52 76.07 1 0.96452 64 -2299.9848 176.4086 47.21 54.46 0.96452 2 0.87931 71 -2261.9234 100.2858 29.68 35.65 0.87931 3 0.81452 76 -2231.5966 39.6322 15.41 20.04 0.81452 4 0.57915 79 -2216.0182 2.4754** 3.76 6.65 0.57915 5 0.20977 80 -221.7805 0.20977 source: author’s collation (2022) table 4 created information about drift specification, sample, and lags numbers involved in the model. the core table comprises a row distinctly for “r” value, and cointegrating equations numbers. the number of cointegration was considered where the trace statistic is less than critical value of 5% and 10%. when r = 0, 1, 2, and 3, the trace statistic are far greater that critical values. contrarily, the trace statistic is less that critical values where r = 4 (2.4754 < 3.76 and 6.65 of 5% and 10% critical value respectively). this exposed that there are four cointegrating equations or vectors among the incorporated variables. this showed that they are cointegrated (incorporated variables) which call for vecm. 4.2.4 vecm (short run, and long run effects) table 5: vecm on taxation and education services (short run effects) equation parms rmse r sq chi2 p>chi2 d_ educ 17 13436.4 0.9494 337.4651 0.0000 d_ pept 17 4.2e+06 0.9059 173.3255 0.0000 d_ vaadt 17 43456.7 0.9364 264.8861 0.0000 d_ cotax 17 150117 0.8694 119.8257 0.0000 d_ cexdt 17 19984.6 0.9824 1007.29 0.0000 log likelihood = -2096.214 det(sigma_ml ) = 7.23e+45 aic = 124.8694 hqic = 126.2346 sbic = 128.8244 source: author’s collation (2022) discovered that pept, vaadt, cotax and cexdt have significant short run effects on educ because p>chi2 with value of 0.0000 for all variables below 0.05 sig level which invariably dispensed favourable short run effects of taxation on edut. table 6: jnri test on taxation and education financing in nigeria (long run effects) beta coefficient std error z p>|z| [95% conf. interval] _ce1 educ 1 . . . . 9 pept .7057357 .0373801 18.88 0.000 .0051401 .0063313 vaadt .5476494 .0172747 31.70 0.000 -.5815073 -.513791 cotax .1316053 .0137996 9.54 0.000 .1045585 .1586521 cexdt .5401607 .0320582 16.85 0.000 -.6029936 -.4773279 -cons 4802.174 . . . . source: author’s collation (2022) table 6 encompassed information about, equation fitness, sample and fitness of overall model. according to table 6, 1% triggers in pept increases edut by 0.70%. it advocated a positive effect of pept on edut which is significant (β= .7057357, t= 18.88, p>|t|=0.000). 1% increase in vaadt increases edut by 0.54%. this also means vaadt imparted edut positively and significantly (β= .5476494, t= 31.70, p>|t|=0.000). this means that if vaadt increases edut increases. furthermore, 1% surge in cotax increases educ by 0.13%. this however advocated a positive effect cotax on educ which also significant (β= .1316053, t= 9.54, p>|t|=0.000). moreover, 1% triggers in cexdt increases edut by 0.54%. this disclosed a positive effect of cexdt on edut (β = .5401607, t = 16.85, p>|t|=0.000). all the variables’ coefficient is econometrically significant as confirmed and supported by p>|z| equals to 0.000. the incorporated variables coefficient advocated the long run association with educ significantly and econometrically. 4.2.5 var on taxation and education services financing in nigeria table 7: var on taxation and education services financing in nigeria equation parms rmse r sq chi2 p>chi2 edut 21 12701.5 0.9976 14524.52 0.0000 pept 21 3.2e+06 0.9857 2410.583 0.0000 vaadt 21 20664.6 0.9982 19040.41 0.0000 cotax 21 87268.3 0.9838 2131.257 0.0000 cexdt 21 19759 0.9981 18518.38 0.0000 log likelihood = 2019.298 det(sigma_ml) = 8.92e+43 aic = 121.3885 hqic = 122.9992 sbic = 126.0545 source: author’s collation (2022) var in table 7 also confirmed that favourable effects of taxation on educ. that is cordially relationship existed among educ, pept, vaadt, cotax and cexdt. p>chi2 with value of 0.0000 for all variables below 0.05 sig level is the signal of favourable short run effects of taxation on edut. 4.2.6 gcw tests table 8: gcw test on taxation and education financing in nigeria equation excluded chi2 df prob> chi2 decision edut pept 86.085 4 0.000 pept granger cause edut edut vaadt 251.18 4 0.000 vaadt grangercause edut edut cotax 51.494 4 0.000 cotax grangercause edut edut cexdt 104.64 4 0.000 cexdt granger – cause edut edut all 577.76 16 0.000 all jointly grangercause edut pept edut 42.965 4 0.000 edut grangercause pept pept cotax 21.103 4 0.002 cotax granger cause pept 10 pept vaadt 76.288 4 0.000 vaadt grangercause pept pept cexdt 18.365 4 0.001 cexdt granger – cause pept pept all 657.94 16 0.000 all jointly granger cause pept vaadt edut 97.216 4 0.000 edut grangercause vaadt vaadt cotax 56.688 4 0.000 cotax granger cause vaadt vaadt pept 234.65 4 0.000 pept granger – cause vaadt vaadt cexdt 134.35 4 0.000 cexdt grangercause vaadt vaadt all 1175.5 16 0.000 all jointly granger cause vaadt cotax edut 39.839 4 0.000 edut grangercause cotax cotax pept 13.055 4 0.011 pept granger cause cotax cotax vaadt 74.786 4 0.000 vaadt grangercause cotax cotax cexdt 40.839 4 0.000 cexdt granger – cause cotax cotax all 707.55 16 0.000 all jointly granger cause cotax cexdt edut 11.441 4 0.000 edut grangercause cexdt cexdt cotax 29.406 4 0.000 cotax granger cause cexdt cexdt pept 41.295 4 0.005 pept granger – cause cexdt cexdt vaadt 552.01 4 0.000 vaadt grangercause cexdt cexdt all 1458 16 0.000 all jointly granger cause cexdt source: author’s collation (2022) it was shown in table 7 that all the incorporated variables granger caused edut. pept, because of prob > chi2 which is 0.000 less than 0.05, granger caused edut. in row 2 of the same table 8, it was displayed that edut also granger caused pept. this displayed bidirectional causality amid edut and pept. the policy implication is that pept is collected by government to also cater for edut services in the country. edut services is also provided to upsurge and increase intellectual and human capital of the designated workers. also, vaadt had chi2 of 251.18 with prob > chi2 of 0.000 < 0.05, this divulged that vaadt granger causes edut. it was also appeared in row 3 of the same table 8 that edut granger caused vaadt. this expatiated that human capital and intellectual development emitted vaadt because of the involvement of human in the stages of production of goods and services in which this tax are forcefully levied. without education services provision the human capital and intellectual would not have developed. furthermore, cotax displayed chi2 of 51.494 with prob > chi2 of 0.000 < 0.05. this further showed that cotax positively granger caused edut. in row 2 of the same table 8, edut also ignited cotax with chi2 of 100.14 and prob > chi2 of 0.000 which less than 0.005. this also displayed bidirectional causality relationship between edut and cotax. more so, cexdt with chi2 of 104.64 and prob > chi2 of 0.000 < 0.05, this also indicated that cexdt ignited granger causality relationship with edut. it was further exhibited that bidirectional causality relationship emitted between cexdt and edut because in the last row of table 8, edut showed chi2 of 22.142 and prob > chi2 of 0.008 < 0.05. the policy implication is that the money realized from cexdt added and supported edut services provision in nigeria. therefore, the hypothesis that taxation triggered edut service is accepted absolutely which translated that causality existed between edut and taxation. 4.3 discussion of findings this study econometrically examined taxation effect on social services with in which how taxation incomes determined education services was investigated. the findings exposed that pept enhanced edut significantly and positively both in long and short run. the implication of this is that government realized income are being spent on the provision of good edut and building of intellectual and human capital which invariably involving in the 11 development of the country. it was further revealed that pept ignited edut and vice versa. vaadt also increased edut provision positively and significantly as exposed in the outcome. this expatiated that vaadt which is being forcefully charged on the production stages enhanced edut provision. vaadt granger-caused edut and educ and vice versa. this explained further that investment in edut with tax income by government also ignited vaadt. educ services are also provided to upsurge and increase intellectual and human capital of the designated workers which invariably ignited vaadt. more so, cotax and cexdt positively influenced edut provision. that is, the realized incomes from these taxes have been employed efficiently to upsurge country edut provision. cotax and cexdt added to the country human, intellectual and edut services provision and sustainability which are the germane keys and parameters to nigeria economic, social, and technological development. this translated that without edut provision and enhancement, no income would be generated from taxation. also, taxation is a key that not limited promote sustainable growth but extended to minimizing poverty in underdeveloped or developing countries through provision of education. it also provides developing countries with a predictable and stable needed fiscal environment to enhance growth, finance physical and social infrastructure needed for sustainable growth and development as supported by (maganya, 2020; oboh et al., 2018). 5. conclusion this study econometrically examined taxation effect on education services in which how taxation incomes financing education services were investigated. data were collected from firs bulletin and cbn statistical bulletin covering 1981 to 2020. to realize econometric impact of taxation on social services, regression model, cointegration, vecm and granger causality wald test were analytically engaged. pept, vaadt, cotax and cexdt have positive significant impact on education services both in the short run and in the long run in nigeria. it is concluded that taxation positively ignited education services and vice versa. this displayed bidirectional causality amid taxation and education services. also taxation has positive and significant impact on education services both in the short and long run in nigeria. the huge revenue earned by the government through taxation assisted government to improve her education services. government financing on education expands general welfare, boosts growth and reduces poverty. it is recommended that administration of taxes especially cotax and cexdt should be done in a way that collection and remittance cannot be evaded so that its effectiveness will be properly comprehended in the magnitude of education services provision. references adegbite, t. a. (2016). empirical analysis of the effect of education tax on human capital. international journal of research in engineering and applied sciences, 6(12), 103–118. adegbite, t. a. (2021). taxation and transportation : granger causality approach in nigeria. studia universitatis vasile goldis‖ arad. economics series, 31(3), 1-20. adegbite, t. a., & azeez, b. a. (2022). company income tax revenue and economic growth : empirical evidence from sub-sahara countries in africa. the journal of economic research & business administration, 1(139), 39–49. adeyemi t.o. (2011) financing of education in nigeria: an analytical review. american journal of social and management sciences, 2(3), 295-303 central bank of nigeria (cbn) (2020), annual statistical bulletin. https//www.cbn.gov.ng 12 jacobs, b. (2007). optimal tax and education policies and investments in human capital. human capital: theory and evidence. cambridge: cambridge university press. maganya, m. h. (2020). tax revenue and economic growth in developing country : an autoregressive distribution lags approach. central european economic journal, 7(54), 205 217. oboh, j. o., chinonyelum, o. j., & edeme, r. k. (2018). tax revenue and economic growth in selected ecowas countries: evidence from sure model. international journal of academic research in accounting, finance and management sciences, 8(3), 310–324. onakoya, a.b., afintinni, o.i., & ogundayo, g.o. (2016). taxation revenue and economic growth in africa, journal of accounting and taxation, 9(2), 11-22. ugwunta, o. d., & ugwuanyi, u. b. (2015). effect of distortionary and non-distortionary taxes on economic growth: evidence from sub-saharan african countries. journal of accounting and taxation, 6(7), 106–112. yakovlev, p. a. (2014). state economic prosperity and taxation, mercatus center george manson university working paper 1(2), 14-19. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 i gusau journal of accounting and finance (gujaf) vol. 3 issue 3, october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ii © department of accounting and finance vol. 3 issue 3 october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com mailto:abupress2020@yahoo.com http://www.abupress.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos stat gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. muhammad aminu isa department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. prof. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeiza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vi advisory board members prof. kabiru isah dandago, bayero university kano,kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng mailto:elfarouk105@gmail.com http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng mailto:elfarouk105@gmail.com mailto:05@gmail.com http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ix contents capital structure and firm financial performance of listed deposit money banks in nigeria: moderating effect of board financial literacy anas idris abdulwahab, hussaini bala ph.d, mansur lubabah kwambo ph.d, & abubakar adamu 1 influence of socialization on msme compliance by mediating understanding and moderating knowledge of tax visits yayuk ngesti rahayu 17 does international financial reporting standard narrows audit expectation gap? musa ibrahim dauda, ibrahim adagye dauda, phd 35 sustainability reporting and financial performance of listed manufacturing firms in nigeria aiyesan, olabode olutola ph.d 49 firm attributes and financial reporting timeliness of listed consumer goods firms in nigeria akume james terkende, dele ikese karim 67 value relevance of accounting information for listed financial service firms in nigeria kassim busari, ishaya luka chechet ph.d, aliyu ahmed abdullahi ph.d, & ibrahim mohammed ph.d 87 nigeria economic growth and capital market development: does contributory pension scheme matter? akinwumi ayorinde olutimi, toluwa celestine oladele ph.d, &adeboye emmanuel sanmi 101 audit committee and financial reporting quality: the moderating effect of board independence of listed deposit money banks in nigeria kassim yusha’u shika, mark david kantiyok 117 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 x determinants of financial performance of listed deposit money banks in nigeria mary seansu lazarus, nurradden usman miko ph.d, & saifulahi abdullahi mazadu ph.d 140 human resource accounting and profitability of listed depositmoney banks in nigeria ahmad adamu ibrahim, ahmad rufa’i adamu, fatihu mahmud alhassan &muhammad iliyas abdulsalam 158 board independence, audit effectiveness and the quality of reported earnings in the nigerian consumer goods firms isah shittu ph.d, misbahu, abubakar muhammad 175 impact of capital structure on financial performance of listed agricultural companies in nigeria ahmad muhammad ahmad, shehu usman hassan ph.d., &abubakar abubakar 192 trade oriented money laundering and era of cybersecurity tax evasion in nigeria oluwayemi joseph kayode, adewole joseph adeyinka ph.d, adewale abass adekunle & kadiri kayode ph.d 205 effect of females in the boardroom on corporate sustainability reporting salami suleiman ph. d, olanrewaju atanda aliu ph.d 224 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 35 does international financial reporting standard narrows audit expectation gap? musa ibrahim dauda department of accounting, federal university of kashere, gombe state. nigeria musa.dauda.md@gmail.com ibrahim adagye dauda, phd department of accountancy, isa mustapha agwai i polytechnic lafia, nasarawa state nigeria daudaib22@gmail.com abstract the many arguments advanced by scholars as to international financial reporting standard’s capacity to enhance audit procedures and outcomes underscores this research’s quest for determining whether international financial reporting standard could help with the perceptional dilemma that triggered the long lingering audit expectation gap crisis. to this end, this study assays stakeholders’ perception as to whether the adoption of international financial reporting standard could have certain narrowing impact on audit expectation gap. the study adopted a mixed research design (i.e. exploratory and survey designs) by which structured questionnaires were administered to a purposeful randomly selected sample of 400 respondents drawn from audit practitioners, academics, accounting standards issuers, and members of professional accounting bodies within the north central states of nigeria and the federal capital territory to collect data which were analyzed using multiple regression with the help of stata 13 software. result of the analysis revealed that both international financial reporting standard induced quality financial report and complexity of audit work could narrow audit performance expectation gap in a significant positive manner, while international financial reporting standard’s induced audit quality was negative in narrowing the expectation gap. we recommend however, that even with the significant result leading to rejection of the null hypotheses, standard setters should look at ways to draw up standards that will harmonize accounting standards and auditing standards in a way that clearly spell out how every category of reportable transactions should be reviewed and reported so as to improve the quality of what auditors deliver to the public. key words: ifrs, audit expectation gap, financial reporting quality, audit quality doi.org/10.57233/gujaf. v3i3.179 1. introduction audit expectation gap has a long and persistent history. there is widespread concern with the existence of the expectation gap between the auditing profession and the public (hian & e’sah, 1998). the phrase “audit expectation gap” was first introduced into the literature over twenty years ago by liggio (as cited in mailto:musa.dauda.md@gmail.com mailto:daudaib22@gmail.com gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 36 olagunju, & leyira, 2012). since the introduction of audit expectation gap in research literature, different perspectives have been attributed to the concept in terms of its meaning. being the first to apply the concept in auditing literature, laggio (as cited in hian and e’sah, 1998) defines audit expectation gap as the difference between the levels of expected performance as envisioned by the independent accountant and by the user of financial statements. primarily, corporate financial reporting stares from the need for companies’ management to communicate the performance of their companies to their stakeholders, especially their shareholders, so as to enhance their decision-making ability. the primary objective of financial reporting is to provide high-quality financial information concerning economic entities useful for economic decision making (ndukwe, 2015). because corporate financial reporting is critical in driving strategic economic decisions, olakunori (2009) cited in (okoye & okendor, 2014) affirms that, to achieve the basic objectives of financial reporting, there is need for an acceptable coherent framework. prior to the issuance of international financial reporting standards, herein after ifrs, accounting frameworks were developed and issued locally. however, due to the global trend in business operations across the world, which sees modern corporations operating internationally, and the complication brought about by different countries maintaining their own sets of national accounting standards (ifrs, nd.), the ifrs were issued. ifrs is a set of international accounting standards (ias) that state how particular transactions and events should be reported in the financial statement of companies (ezejiofor, 2018), and is motivated by two factors, the comparability of information among countries and the quality of accounting information (julio-cesar et al. 2017). reasoning towards quality of accounting information as highlighted above, the introduction and issuance of ifrs should expectedly enhance the quality of financial reports and accounting information, and make them more reliable. this would simplify accounting procedures by allowing companies to use one reporting language throughout; it would also provide investors and auditors with a cohesive view of companies’ finances (rehana, 2017). these objectives align with global business stakeholders’ desire of securing a reporting framework that harmonizes global financial reporting standards so as to allay fraudulent reporting and bring about better and quality reporting in the wake of persistent corporate scandals that have kept the audit expectation gap crisis afloat. against this backdrop, adwan (2016) and hail et al. (2017) highlight that the demand for transparent, comparable, and reliable financial information in the stock markets is triggered by the high gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 37 profile corporate scandals in the u.s hence, the need for harmonization of accounting reporting standards and other measures to mitigate such occurrence. in the light of the above, developing and issuing financial reporting standards that would require thorough audit procedures for better quality audit becomes necessary hence, the issuance of ifrs. iaasb (as cited in sule et al., 2018) highlights that the prevalence of global financial crisis and complexity in financial reporting has prompted the attention of investors and other users of financial statements to demand more informative auditor’s reports. demanding more informative auditor’s report suggests expansion of the working base of auditors, reinforcement of accounting disclosure quality, decreasing the scope of earnings management, as well as increasing the value relevance of accounting information all of which have been identified by researchers (agyei-mensah (2013); arum (2013); ajekwe et al. (2017)) to derive from ifrs based financial statements. perhaps because the issuance and subsequent adoption of ifrs for financial reporting by companies across the world have been empirically determined to cause certain complexity in audit task (ajekwe et al. 2017) thereby requiring a more comprehensive and in-depth review and evaluation of financial statement prepared on the bases of the standard, a large number of researchers directed their efforts at determining the existence of relationship between ifrs and auditing, and documented some empirical evidence of the existence of relationship between ifrs and complexity of audit work, audit fee, audit quality, reporting quality, information quality, etc. in this connection, this paper aims at linking the possible effect of ifrs on some of those audit matters, to narrowing audit expectation gap. to achieve this objective, the paper hypothesized that ifrs-induced quality financial report does not narrow audit expectation gap, and that the complexity of audit work required by ifrs-based financial report does not narrow audit expectation gap. also, that audit quality occasioned by in-depth review of ifrs based financial report does not narrow audit expectation gap. the contribution of this paper lies in the lead for which it provides in directing the focus of accounting research towards finding ways of developing and using accounting standards to wholly address the problems leading to audit expectation gap. the remaining paper is structured into sections, with section two being dedicated to literature review, while section three discusses the research methodology; sections four, five and six present result of data analysis, discussion of findings, as well as conclusion and recommendations, respectively. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 38 2. literature review international financial reporting standard (ifrs) developed in the year 2001 by international accounting standard board (iasb), in the public interest, to provide a single set of high quality, understandable and uniform accounting standards (adetoso & oladejo, 2013), ifrs has been define as a uniform sets of reporting standards developed based on high-quality, compatible accounting standards that could be used for both domestic and cross-border financial reporting (negash, 2008); it is a series of accounting pronouncements published by the iasb to help preparers of financial statements, throughout the world, produce and present high quality, transparent and comparable financial information (price water house coppers nigeria, 2014). the development and issuance of ifrs has replaced the older term international accounting standard, with many of the standards forming part of ifrs maintaining their older name of international accounting standards (ias) (ashok, 2014). additionally, ashok also highlights that ifrs are considered ‘principles based’ set of standards in that they establish broad rules as well as dictate specific treatments. ifrs is comprise of international financial reporting standards (ifrs), international accounting standards (ias), and interpretations originated by the international financial reporting interpretations committee (ifric) and standing interpretations committee (sic) (akinyemi, 2012), with its development being predicated upon the desire to have sets of accounting standards that could bring about transparent, comparable, and reliable financial information. in view of this, fasina and adegbite (2014) argue that ifrs remains a set of standards with high quality accounting reporting framework as such, users of financial statements can easily compare entities' financial information between countries in different parts of the world. also, ashok (2014) maintains that a single set of accounting standards would enable international auditing firms to standardize training and ensure better quality of their work on a global scale. the development of ifrs requires compliance with certain due processes established under the ifrs foundation constitution. some of these processes are the publication of exposure draft which requires approval by nine (9) members of the iasb where there are less than sixteen (16) members, and ten (10) members in the case of more than sixteen members being present. other decisions of the iasb include the publication of a discussion paper which also requires a simple majority gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 39 of the members of the iasb present at a meeting attended by at least 60 percent of the members of the iasb, in person or by telecommunications. the development and issuance of ifrs over the years is believed to bring about certain benefits. accordingly, scholars and researchers reported amongst other benefits that the adoption of ifrs results in high quality, transparent and comparable financial statements that are based on modern accounting principles and concepts that are being applied in global markets (akinyemi, 2012); that it ensures transparency, uniformity, and comparability in preparation and presentation of financial statements on an international basis (daske & gebhardt, 2008); and that because ifrs has the capacity to enhance comparability of companies’ financial information and to improve the quality of communication to their stockholders, it decreases investor uncertainty, reduces risk, increases market efficiency and eventually minimizes the cost of capital (ashok, 2014). considering the foregoing, ifrs can be seen to also have certain beneficial tendencies regarding narrowing audit performance expectation gap. this is in the sense that the expectation gap crop up following faulty, erroneous and fraudulent reporting that led to corporate failures which users expected auditors to be able to unravel based on the expected nature of their work. since ifrs can provide benefits of ensuring transparency in preparation and presentation of financial statements which goes to decrease investor uncertainty and reduce risk, it might go a long way in helping with the expectation gap crisis because where financial statements are free, to a large extent, of error and risk of fraud, it would present the situation of companies the way they are and aid auditors’ work. though there are no clear cut studies that try to determine whether ifrs has narrowing effect on audit expectation gap, there are however studies that relate ifrs to matters of auditing generally, and since audit expectation gap stems from the resultant work of auditors in relation to financial statement, relating audit expectation gap to ifrs is considered relevant in the effort at finding ways to narrow audit expectation gap. in this light, this study considers the review of certain studies that relate ifrs to audit fee, complexity of audit work and procedures, audit quality, and quality of financial report in order to establish the possible link between the two concepts which are consider relevant based on the position that where ifrs proves impactful on the complexity of audit work and procedures, increases audit fee and cost, and enhance audit quality and financial reporting, it could also gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 40 demonstrate capacity to narrow audit expectation gap as is determined in this research. in the light of the above, yu and hua-wei (2020) empirically investigated whether the adoption of convergent ifrs in china affects the audit fees of initial public offerings (ipo) firms, using panel data for 1,094 nonfinancial ipos of a-shares listed on the shanghai and shenzhen stock exchanges between the period 2003 and 2012. the result revealed that audit fees increased following convergent-ifrs adoption in china among others, suggesting increase in the working base of auditors. the outcome of their study aligns with the result of an earlier study by bernard and alain (2018) who undertook a study of 1,651 swiss companies for a 15 years’ period using a hand-collected database and found that, with the exception of very large companies, firms using ifrs pay higher audit fee, and that in contrast, firms that later switched to local gaaps do not incur lower audit fee. this study supported the outcomes of many other studies who documented similar results. with ifrs being determined to increase audit fee, it goes to prove that ifrs requirement for auditing has become more complex among other factors. similarly, earlier related studies conducted in nigeria, ajekwe et al., (2017); adebayo and sharma, (2017) both documented increased audit fee of deposit money banks in nigeria and that of operational costs in nigeria, respectively, because companies paid higher audit fees to change their accounting treatment brought about by the adoption of ifrs also suggesting increased difficulty in the manner of work required of the auditors. also, abdul malik and ahmad, (2016) constructed a model for operational cost, and found that the adoption of ifrs increased the operational cost which in turn decreased the financial outcome of the companies. this also suggest that ifrs could lead to complexity in audit procedures which requires auditors to carry out more thorough review, hence demands improvement in the way audit assignments are to be conducted. in contrast however, bryce et al. (2015) earlier on initiated a comparison between audit fees and ifrs adoption in the australian market, and found that audit fees did not increase much in the australian market due to the adoption of ifrs. they believed that the audit fees remained the same because the previous standards, i.e. australian accounting standards (aas) were identical to ifrs thereby not presenting any extra difficulty in auditing. this outcome might have been influenced by the huge similarities existing between ifrs and the australian gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 41 gaap which goes to suggest a non-contradiction with results of studies that documented increase in audit fee as above. regarding reporting quality however, aminu and musa (2020) assessed user’s perception in nigeria regarding ifrs adoption and reporting quality, sampling 40 stockbroking firms, using descriptive cross-sectional survey design and reported ifrs adoption in nigeria to have improved the level of reporting relevance, and that ifrs based financial reports are found to be more complete, neutral and accurate. their findings suggest that ifrs compliant financial reports could demonstrate reduction in fraudulent reporting hence, curbs the possibility of manipulations that could lead to corporate failure, and might positively influence a reduction in the audit expectation gap. in the same vain, aderin and otakefe (2015) examines the impact of ifrs on the quality of financial reporting in nigeria with 4-year data from 23 companies in the agricultural, conglomerate, construction and healthcare sectors of the nigerian stock exchange for pre and post ifrs period using regression analysis. they found that financial reporting quality increased after the adoption of the ifrs for all the relevant proxies (i.e. value relevance, earnings quality and earnings management). other studies that linked ifrs to audit quality also found traces of significant positive relationship; gellings (2017) explored the relationship between ifrs and audit quality with audit fees as mediator in 2,479 european firms. measuring audit quality by the probability of a restatement and the discretionary accruals, he found that mandatory adoption of ifrs decreases the probability of restatements and the amount of discretionary accruals hence, increases audit quality. 3. methods and data the study adopted the mixed design method (i.e. exploratory and survey designs), in line with okafor and otalor (2013); nyor et al. (2016), by which questionnaires were used to collect primary data from a random purposeful sample of 400 respondents stakeholders drawn from audit practitioners, academia, accounting standards issuers, and members of professional accounting bodies in nigeria within the north central states, and the federal capital territory. our sample was based on the sampling table of glenn, (1992). however, only 279 of the 400 questionnaires distributed were returned, representing a response rate of approximately 70%. the questionnaire was designed using a 5-point likert scale, with (5) indicating strongly agreed opinion and (1) strongly disagreed opinion in gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 42 order to capture respondents’ views as to whether ifrs could have narrowing effect on audit expectation gap. the data collected were converted to a continuous form through the development of index to allow the use of regression in the analysis and hypotheses testing using the following linear model: 𝑌0 = α + 𝛽0𝑋0 + e where: 𝑌0= dependent variable = f(audit expectation gap aeg), α = constant, 𝛽0 = coefficients of independent variable, 𝑋0 = independent variable [ifrs] = f [complexity of audit work caused by ifrs – (ifrs-caw); ifrs induced audit quality – (ifrs_aq); and ifrs induced (ifrs-frq)], e = error term. by way of substitution, the following regression model was derived: aeg = α + 𝛽1𝐼𝐹𝑅𝑆_𝐶𝐴𝑊 + 𝛽2𝐼𝐹𝑅𝑆_𝐴𝑄 + +𝛽3𝐼𝐹𝑅𝑆_𝐹𝑅𝑄 + e 4. results and discussion of finding table 1. descriptive statistic variables aeg frq aq caw mean .6274194 .3749104 .5275986 .6501792 std. dev. .1979458 .1019482 .1077482 .1175666 min. 2 .2 .25 .35 max 1 .65 .8 1 obs. 279 279 279 279 source: authors computation from stata 13 output (2022) from the outcome of the research’s data analysis regarding summary statistic as in table 1 above, the mean score for aeg stood at 0.63 with a standard deviation of 0.20 suggesting respondents’ agreement to the existence of audit expectation gap since the mean score is close to the maximum score of 1 which is the highest index score from the likert scaled data indicating strong agreement to a statement. however, the mean score for the remaining variables frq, aq and caw standing at 0.37, 0.53 and 0.65 respectively, are indicative of different degrees of agreement with the statements that their link with ifrs could narrow aeg, with the exception of frq which suggests respondents’ indecisiveness as to whether the link between it and ifrs could have narrowing impact on aeg. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 43 in order to have valid coefficients for robust result, certain regression diagnostic tests were conducted. checking for the presence of heteroscedasticity, the breusch pagan/cook-weisberg test for heteroscedasticity was carried out, with result showing a chi square of 1.03 which is less than 2, and a probability score of 0.3094 which is insignificant at 5% level of significance hence, indicating homoscedasticity. table 2. correlation matrix aeg frq aq caw aeg 1.000 frq 0.081 1.000 aq -0.214 0.348 1.000 caw 0.059 0.307 0.623 1.000 source: author’s computation from stata 13 output (2022) the outcome of the test of multicollinearity amongst the variables presented in table 2 (correlation matrix) suggests the absence of multicollinearity as all the values of the correlation are less than 0.8. though the correlation between the dependent variable (aeg) and independent variable (aq) is inverse suggesting possible problem of multicollinearity, the outcome of our variance inflation factor (vif) however, indicates absence of excessive correlation as all factors are greater than 1.0 with tolerance values being less than 10. the mean of the vif is 1.51. table 3 regression result summary dependent variable independent variables aeg coefficient t-statistic p-value c .634 9.21 0.000 frq .284 2.42 0.016 aq -.823 -6.07 0.000 caw .493 4.03 0.000 model diagnostic: r-squared 0.125 adjusted r-squared 0.116 root mse 0.186 f-statistic 13.10 prob. (f-statistic) 0.000 source: author’s computation from stata 13 output (2022) gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 44 table 3 above presents the regression result of the data analysis to determine the effect for which ifrs induced financial reporting quality (frq), audit quality (aq), and complexity of audit work (caw) could have in narrowing audit expectation gap (aeg). as it relates to the model, the result indicates that the variance in aeg was explained by the model only to the extent of 12.51%, with r squared standing at 0.1251; the model was statistically significant in predicting aeg, f (3, 275) = 13.10, p = 0.000 at 5% level of significance hence, suggesting the goodness of the model fit, and statistical validity of the result for policy conclusions. the result also indicates that the constant is statistically significant at 5% significance level with the p-value standing at 0.000; the coefficient of the three independent variables of frq, aq and caw were also found to be statistically significant at 5 percent significance level as indicated by their p-values of 0.000, 0.016 and 0.000 respectively suggesting certain degree of relation between the independent variables and the dependent variable with frq and caw presenting positive coefficients and aq showing a statistically significant negative coefficient. this therefore implies that ifrs induced quality financial report (frq), and complexity of audit work (caw) do have positive narrowing effect on aeg, while ifrs induced audit quality (aq) present negative narrowing effect, meaning for 1% perceived drop in aq, aeg gets expanded by 0.82%. 5. conclusion and recommendations the proven ifrs’s capacity to influence audit quality, and to also cause complexity in the working base of auditors, has rendered it important in the effort to narrow audit expectation gap. as revealed by the outcome of this study, because ifrs tended towards complicating auditors’ work, it required the building of their capacity and skills through regular trainings and retraining which has caused improvement in their knowledge and skills and hence, enhanced their performance which in turn helps in narrowing the performance gap. with enhanced performance, the quality of audit report and that of the financial statement are also improved, affirming the commitment of auditors to a more robust performance that would bring about better reports, instills confidence in the minds of users, build better reputation for the profession in the wake of its battered image resulting from accusations of negligence that precedes the many corporate failures experienced across the globe. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 45 against the above backdrop, this paper recommends that, though the ifrs proves to be gap narrowing in the perspective of auditors’ performance, going forward, consideration should be given to the possibility of developing audit report that will be comprehensive enough to show in details how the ifrs and related auditing standards have been adhered to in the conduct of audit. standard setters should also look at ways to draw up standards that will harmonize accounting standards and auditing standards in a way that clearly spell out how every category of reportable transactions should be reviewed and reported in the recommended comprehensive audit report so as to improve the quality of what auditors deliver to the public. such standards should clearly and comprehensively state possible areas of material misstatement in financial reporting in order to curb judgement biases and reservations. this will go a long way in reducing manipulations and improving the professions’ reputation, and as well close the audit expectation gap. finally, this study is hindered by certain limitations as it used primary data collected from stakeholders within the north central states. views from stakeholders in other parts of the country were not part of the analysis thus limiting the extension of the outcome across the country. going by differences in orientation and other characteristics across the geopolitical zones of the country, researchers may try to extend study to cover the entire country so as to determine whether the outcome of this study could hold or not. references abdulmalik, s.o., & ahmad, a.c. (2016). corporate governance and financial regulatory framework in nigeria: issues and challenges. journal of advanced research in business and management studies, 2, 50-63. aderin, a., & otakefe, j.p. (2015). international financial reporting standards and financial reporting quality in nigeria. journal of science and technology, 35(3), 73-83. http://dx.doi.org/10.4314/just.v35i3.7 adwan, s. (2016). value relevance of ifrs and the effect of the financial crisis: evidence from european financial firms [doctoral thesis, essex business school, university of essex, england]. http://repository.essex.ac.uk/18286/1 adetoso, j.a., & oladejo, k.s. (2013). the relevance of international financial reporting standards in the preparation and presentation of financial statements in nigeria. research journal of finance and accounting, 4(7), 191 – 198. http://www.iiste.org http://dx.doi.org/10.4314/just.v35i3.7 http://repository.essex.ac.uk/18286/1 http://www.iiste.org/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 46 agyei-mensah, b.k. (2013). adoption of international financial reporting standards in ghana and quality of financial reporting disclosures. international journal of accounting and financial reporting, 3(2). doi: 10.5296/ijafr.v3i2.4489 ajekwe, c.c.m., onobi, s.d., & ibianke, a. (2017). effect of ifrs adoption on audit fees of listed deposit money banks in nigeria. european journal of accounting, auditing and finance research, 5(6), 77 – 87. http://www.eajournals.org. akinyemi, o.a. (2012). impacts of international financial reporting standards adoption on financial statements: the case of nigeria [unpublished master’s thesis]. vaasa university of applied sciences, finland. aminu, a., & musa, y.a. (2020). ifrs adoption and reporting quality: an assessment of user’s perception in nigeria. islamic university multidisciplinary journal, 7(1), 83 – 89. arum, e. d. (2013). implementation of international financial reporting standards (ifrs) and the quality of financial statement information in indonesia. journal of finance and accounting, 4(19), 200-209. http://www.iiste.org ashok, k.k. (2014). international financial reporting standard (ifrs): prospects and challenges. journal of accounting & marketing, 3(1), 1-4. doi: 10.4172/21689601.1000111 bernard, r., & alain, s. (2018). the impact of international financial reporting standards (ifrs) adoption and ifrs renouncement on audit fees: the case of switzerland. international journal of auditing, 22(3). http://www.onlinelibrary.wiley.com bryce, m., ali, m.j., & mather, p.r. (2015). accounting quality in the pre/post ifrs adoption periods and the impact on audit committee effectiveness: evidence from australia. pacific-basin finance journal, 35, 163-181. cohen, m.f. (1977). commission of auditors’ responsibilities: report of tentative conclusion. the american institute of certified public accountants historical collection. http://egrove.olemiss.edu/aicpa_assoc. daske, h., & gebhardt, g. (2008). international financial reporting standards and experts’ perceptions of disclosure quality. abacus, 42(3‐4), 461-498. doi:10.1111/j.14676281.2006.00211.x ezejiofor, r.a. (2018). effect of ifrs on value relevance of accounting information: evidence from quoted manufacturing firms in nigeria. http://www.eajournals.org/ http://www.iiste.org/ http://www.onlinelibrary.wiley.com/ http://egrove.olemiss.edu/aicpa_assoc gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 47 international journal of trend in scientific research and development, 2(5). fasina, h.t., & adegbite. t.a. (2014). empirical analysis of the effect of international financial reporting standard (ifrs) adoption on accounting practices in nigeria. acrhives of business research, 2(2), 1-14. doi:10.14738/abr.22.43 gellings, j. (2017). ifrs and enforcement on audit quality: incorporating the mediating effect of audit fees [unpublished master thesis]. nijmegen school of management, radboud university, nijmegen, the netherlands. hail, l., tahoun, a., & wang, c. (2018). corporate scandals and regulation. journal of accountingresearch, 56(2), 617671. doi:https://doi.org/10.1111/1475-679x.12201 hian, c.k., & e-sah, w. (1998). the expectation gap in auditing. managerial auditing journal, 13(3), 147–154. doi:10.1108/02686909810208038 julio-cesar, a., yao, f.c., & hudson, s.t. (2017). effect of ifrs on accounting information quality: evidence from brazil. international journal of economics and finance, 9(5). url:https://doi.org/10.5539/ijef.v9n5p44. negash, m. (2008). liberalization and the value relevance accrual accounting information: evidence from the johannesburg securities exchange. afro asian journal of finance and accounting, 1(1), 84-101. ndubuisi, c. (2014). an evaluation of audit expectation gap in nigeria, unpublished research project, department of accounting, university of lagos, nigeria. ndukwe, o. d. (2015). audit expectation gap and perception of financial reporting. international journal of managerial studies and research. 3(3), 23 31. nyor, t., orshi, t.s., & joseph, b.h. (2016). narrowing audit expectation gap through corporate governance, ican academic conference proceedings. okafor, c., & otalor, j.i. (2013). narrowing the expectation gap in auditing: the role of the auditing profession. research journal of finance and accounting, 4 (2), 43-51. okoye, p.c., & akenbor, c. (2014). financial reporting framework in nigeria and the adoption of the international financial reporting standards. https://doi.org/10.5539/ijef.v9n5p44 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 48 international journal of business and economic development, 2(1), 53 – 63. http:// www.ijbed.org olagunju, a., & leyira, m.c. (2012). audit expectation gap: perspectives of auditors and audited account users. international journal of development and management review (injodemar), 7. olowookere, j.k. (2005). fundamentals of auditing, ijebu-ode: triump publishers. rehana, i. (2017). an overview of international financial reporting standards (ifrs). international journal of engineering science invention, 6(5), 15-24. https://www.ijesi.org sule, s., yusof, n.z., & bahador, k.m. (2018). reducing audit expectation gap: the adoption of international standards on auditing (isa 700) in nigeria. advance research journal of multidisciplinary discoveries, 31(8), 50-54. tech, h.l., & azham, m.a. (2009). audit expectation gap: causes and possible solution. indonesian management and accounting research, 8(1). 1 – 19. yu, l.t., & hua-wei, h. (2020). does convergent-ifrs adoption in china increase audit fees? review of pacific basin financial markets and policies, 23(1), 1-21. http://www.ijbed.org/ http://www.ijesi.org/ http://www.ijesi.org/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 49 i gusau journal of accounting and finance (gujaf) vol. 3 issue 1, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria ii © department of accounting and finance vol. 3 issue 1 april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng editorial board editor-in-chief: prof. shehu usman hassan mailto:abupress2013@gmail.com iii department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. iv prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. dr. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. v dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. vi call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank‟s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7 th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ vii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ viii contents mediating effect of audit committee on board dynamic and creative accounting in nigerian firms abbas usman phd, shehu usman hassan phd 1 financial performance of banks in selected african countries: does institutional quality matter? toluwa celestine oladele phd, peters ade sanni 22 firm-specific characteristcs and financial performance of listed agricultural companies in nigeria abdulrazaq t. jimoh, john a. attah 33 effect of financial leverage on stock returns of listed companies in nigeria capital market abdulrahman abubakar, prof. ahmad bello, prof. s. a. abdullahi, dr. m. d. tahir 45 efficiency of deposit money banks in nigeria: data envelopment analysis approach mayowa gabriel ajao, phd, lucky charity omoregie, phd 57 credit appraisal, collection policy and loan performance of microfinance banks in kwara state, nigeria lukman a. o. abdulrauf 69 environmental sustainability disclosure and market value of listed oil and gas firms in nigeria munir aliyu saleh, sirajo bappah, prof. gbegi daniel orsaa, ibrahim adamu saleh phd 81 audit quality, tenure and real earnings management of listed nonfinancial firms in nigeria ahmed mohammed, ademu yahaya, musa zakariya 95 effect of ceo pay and ceo power on risk-taking of listed deposit money banks in nigeria ismaila yusuf, dr. salisu abubakar, dr. idris ahmed aliyu, dr. (mrs) aneitie charles dikki 104 nexus between taxation and foreign direct investment in nigeria daniel ayegbeni ulokoaga, esther ikavbo evbayiro-osagie (mrs), ph. d 115 working capital management and profitability of listed consumer and industrial goods companies in nigeria kwasau ntyak leah, samuel eniola agbi phd, lateef olumide mustapha phd 125 value relevance of earnings and book value: a comparative analysis between big4 and non-big4 audited listed firms in nigeria abdu abubakar, ishaya luka chechet phd, muazu saidu badara phd, yunusa nasiru phd 136 ix value relevance of international financial reporting standard 4 (ifrs 4) of listed nigerian insurance firms mariya mohammed hafiz, muhammad mustapha bagudo phd, salisu abubakar phd 145 determinants of audit fees of listed insurance companies in nigeria sagir lawal, phd, mohammed ibrahim, phd 158 taxation and social services: evidence from nigeria adegbite, tajudeen adejare, phd, abdussamad, olarinde 171 ownership structure and financial performance of quoted mortgage banks in nigeria awotundun, d. a., phd, jinadu, m. y. b., fakunmoju, s. k., phd. 183 capital structure and profitability of listed deposit money banks in nigeria rahji ohize ibrahim, kamaldeen ibraheem nageri, phd, abdullai agbaje salami, phd 194 1 working capital management and profitability of listed consumer and industrial goods companies in nigeria kwasau ntyak leah department of accounting nigerian defence academy, kaduna. kwasau.ntyak@gmail.com, +2347038960838 samuel eniola agbi phd department of accounting, nigerian defence academy, kaduna. lateef olumide mustapha phd department of accounting nigerian defence academy, kaduna. lomustapha@nda.edu.ng abstract many businesses find it difficult to productively organize their working capital and this causes more trouble than expected because, without it, it is oftentimes difficult to successfully run these businesses and expect profitability, stability, and continuity. this study, therefore, considers the effect of working capital management on the profitability of listed consumer and industrial goods companies in nigeria. data from the financial statements of the companies under investigation were used in the research. generalized least square regression, variance inflation factor, multicollinearity, heteroskedasticity, and the hausman specification test were used to analyze the data. it reveals that the inventory conversion time and working capital to revenue ratio have a significant outturn on their profit, however, the cash conversion period and current ratio have no impact on the profitability of listed consumer and industrial products companies in nigeria, according to this study. it recommends that managers of consumer and industrial goods companies should adopt positive working capital policies and strategies aimed at enhancing the working capital structure by ensuring that the inventory conversion period is reduced to be the barest minimum for possible upward review of profitability. thus, management must prioritize working capital management as it is currently viewed as a source of concern for many organizations. keywords: working capital management, consumer and industrial goods companies, profitability, return on assets 1. introduction the year 2020 was a very difficult one for many businesses as a result of the impact of covid19 on their operations. globally, businesses were forced to shut down in other to contain the virus from spreading further than it already has. the impact experienced by many businesses, especially manufacturing industries caused a major economic shock to the sector, particularly in their cash conversion cycle. the halting of business activities caused by the pandemic era led to a lower valuation of many companies‟ assets and this scenario caused so many effects on their short-term capital requisites making them unproductive in the management of their working capital. governments all around the world in a bid to slow the spread of covid19 ordered a reduction in operations of businesses and most cases a complete shutdown of these businesses, especially industrial and consumer goods and services. mailto:leahkwasau@gmail.com 2 working capital management, therefore, sought the attention of researchers as a result of this experience. when it comes to financial management, wcm is a particularly delicate topic that demands careful consideration in all businesses, regardless of their size (dinku, 2013). regardless of the size or type of the firm, every organization, profit-oriented or not, requires a significant amount of working capital and competent administration. profit-oriented businesses' survival in today's seemingly vibrant business environment is in jeopardy unless they can meet their short-term obligations. the fundamental goal of wcm is to achieve an ideal balance between its proxies, it is safe to say that a well-organized and perfectly managed working capital will assist in improving the firm's operating capacity to achieve its short-term liquidity. the flow of capital in any business environment is ultimately crucial to the company's survival as blood circulation is to a man‟s health (korede, 2017). working capital is referred to as a company's lifeblood, and it refers to the finances needed to run a business daily (soyemi & olawale, 2014, umara et al., 2009). lack of adequate working capital management remains one major reason why businesses will often run into trouble worldwide. it is very strenuous to run a successful business without it. working capital, therefore, is a critical component of any business entity that demands immediate and appropriate attention, as well as correct setup and administration. due to the scarcity of a company's resources, management must ensure that the working capital of the company is well managed to achieve high profitability and overall performance. a company's profitability is thought to be largely determined by how liquid it is. while liquidity and profitability are not synonymous, they are both important goals for most businesses. most businesses struggle to balance their working capital in a way that allows them to profit. as a result, they frequently incur debts, and their performance suffers in the long run, leaving the company unable to make its financial obligations on time. the study's major goal is to find out the extent of the effect wcm has on the profits of nigeria's listed consumer goods and industrial sectors. it is necessary to carry out this research in other to determine which proxies of factors of working capital management in nigeria's consumer and industrial goods industries need to be increased, maintained, or decreased. the research attempts to answer the following questions: a) what is the effect of the cash conversion circle on the roa of the listed consumer and industrial goods sector in nigeria? b) how does the inventory collection period impact the roa on listed consumers and the industrial goods sector in nigeria? c) does the working capital ratio to revenue have any impact on the return on assets of the listed consumer and industrial goods sector in nigeria? d) what is the extent of the effect the current ratio has on the return on assets of the listed consumer and industrial goods sector in nigeria? in light of the above questions, the following null hypothesis is proposed for the investigation: h01: the return on assets of the consumer and industrial goods companies is unaffected by the cash conversion circle. h02: the return on assets of the consumer and industrial goods firms is unaffected by inventory collection periods. h03: the working capital to revenue ratio does not cause any variation in the return on assets of consumer and industrial goods companies. 3 h04: in nigeria, the current ratio does not affect the return on assets of the listed consumer and industrial products industry. the outcome of this investigation will be valuable to the management of these companies in determining which aspects of working capital require special attention. this plan may include a shorter inventory holding/conversion period or an adjusted current ratio which may go a long way in the upward review of their profits. 2. literature review and theoretical framework working capital is the surplus of current assets over current liabilities in the gross concept, which is commonly referred to as gross working capital, where working capital is defined as the excess of current assets over current liabilities in the qualitative concept, which is commonly referred to as networking capital. networking capital is the variance between a company's current assets and liabilities. as a result, this is the number of current assets that will be left once all current liabilities have been paid off. working capital, according to windaus (2014), provides a clear indication of how well a corporation is managed and reliably reflects proper management. the degree or volume of current assets and liabilities can have different effects on a company's profitability, for example, having too many current assets can alter the company's profitability; however, having too few current assets can steer a significant reduction in liquidity and stock-outs, which can make it difficult to maintain the best working capital. profitability is an investment's ability to generate a profit from its use. every business's goal is to maintain a healthy financial position, which can only be accomplished if the company earns a profit on its investments. any company that continually fails to make a profit on all of its investments is doomed to collapse. the ability and capability of a business to earn and maintain a healthy financial position are measured by its profitability. as a result, organizational performance is primarily judged by profitability, which can only be recognized when the organization's financial situation is strong and provides a positive message to stakeholders and potential investors. oladimeji and aladejebi (2020) researched the impact on the profitability of smes in nigeria from 2014 to 2018. the study used regression analysis to examine the impact of independent variables on smes' profitability. the research found no link between working capital management and smes' profitability, and it suggests that government policies should be focused on promoting smes' growth and that smes, in turn, should use prudent working capital management to improve their structure and profitability. iyewumi et al. (2015) studied the impact of working capital management on the oil and gas sector's profitability in nigeria. for the period 1995 to 2011, secondary data was collected from a sample of two publicly traded oil companies in nigeria. the study used the ordinary least square regression method and discovered that the cash conversion cycle, average days' receivables, average days' payables, average days' inventory, and firm size all have a substantial impact on the profitability of nigeria's oil and gas business. sabo et al. (2015) examined the impact of working capital management on corporate profitability in seven (7) nigerian listed companies from 2008 to 2012. the results show that for the period studied, there is a positive and significant effect of average collection period (acp), current ratio (cr), and firm size (log size) on profitability, as well as a negative effect on inventory turnover period (itp) and average payment period (app) on profitability. 4 onodje (2014) investigated how the internal financial activity of working capital management affects the performance of seventy-five (75) listed manufacturing companies in nigeria for the period 2002-2012, data was gathered from the companies' publicly available financial statements and evaluated using fixed effect, random effect, and one-step difference gmm approaches. according to the findings, working capital management is a determinant of manufacturing company performance in nigeria. manufacturing performance is positively connected to the payable conversion period and inventory conversion period, whereas manufacturing performance is negatively related to payable deferral duration, cash conversion cycle, and debt-equity ratio period. finally, liquidity as measured by the quick ratio has no bearing on the firm's success. kajola et al. (2014) studied the impact of working capital management on the financial performance of thirty (30) industrial companies listed on the nigerian stock exchange for the period 2004 to 2010. the findings of the research using the ordinary least square regression method revealed that working capital management, as evaluated by the cash conversion cycle, is negatively and significantly connected to the firm's financial success, as assessed by return on assets. angahar and alematu (2014) investigated the impact of working capital on the profitability of the nigerian cement industry. the research was conducted over eight years, from 2002 to 2009, and the results revealed an insignificant negative influence of account receivables on profitability, while cash conversion had a significant positive effect on the profitability of the selected organizations. soyemi and olawale (2014) researched the comparative analysis of working capital management of brewery companies in nigeria and obtained data from texts, journals, and annual reports of the selected firms. the major finding from the study indicates that some of the companies were much more efficient when it came to receivables because they recorded high inventories and debtors while others were more efficient when it came to payables as their payback periods were shorter. the study recommended that the utmost concern of breweries and other manufacturing industries should be the management of their working capital by accelerating their collection periods and slowing down their payment period. owolabi and alu (2012) examined the effective working capital management and profitability of quoted manufacturing companies in nigeria for the period 2006 to 2010. working capital management had no substantial effect on the profitability of listed manufacturing companies in nigeria, according to the study, which used a purposeful sample technique and five companies for the study. management should improve in the area of cash flow management, according to the study, to increase the firm's worth in terms of profitability. uremadu et al. (2012) researched the topic effect(s) of working capital management and liquidity on the corporate profitability of quoted firms in nigeria through cross-sectional time-series data for the period 2005-2006. the results showed that there is a positive effect on the inventory conversion period, debtors' collection period, and a negative effect on the cash conversion period, creditor's payment period, on performance measured by return on assets, using descriptive statistics and an ordinary least squares regression model. owolabi and obida (2012) studied the association between liquidity management and corporate profitability of selected manufacturing firms listed in nigeria, data was gathered 5 from the companies' published annual reports, and descriptive analysis was used to demonstrate that liquidity management, as measured by the company's credit policies, cash flow management, and cash conversion cycle, has a positive coefficient and a significant outturn on corporate profitability over the period studied. ogundipe et al (2012) studied the impact of working capital management on firm performance and market value of listed non-financial in nigeria, a sample of 54 companies was taken. the data analyzed was gathered from the companies' annual reports from 1995 to 2009. the results reveal that the cash conversion cycle has a considerable negative impact on market valuation and business performance. the study also discovered that the debt ratio has a beneficial impact on market valuation while hurting business performance. the agency theory, risk, and return theory, operation and cash conversion theory, operational circle theory, and resource-based theory are all theories related to working capital management. this research is based on the risk and returns hypothesis, which is considered one of the most significant in portfolio management. every investment decision is made based on the risk-return relationship (richard, stewart & franklin, 2008). the notion that working capital management involves a barter between profits and liquidity ties working capital management to this idea. when a company chooses to be liquid, it sacrifices earnings, and vice versa. any of these options, whichever one is made, may result in a shortage or excess of working capital components in any business. 3. methodology and model specification this study's population consists of 32 consumer and industrial products firms that are listed on the nigerian stock exchange as of december 31, 2020. the usage of publicly-traded consumer and industrial products companies is justified by the data's availability and consistency. the impact of working capital management on financial performance, specifically profitability, of listed consumer and industrial goods companies in nigeria, is investigated in this study. the study used the census sampling technique, which meant that the sample included the whole population. the study used panel data from secondary sources that were quantitative, and data was taken from the firms' audited financial reports during the study period. after executing the appropriate tests and other robustness tests to assess the validity, the extracted data were analyzed using the stata 14 statistical program, and the results were utilized to test the specified hypotheses. profitability is the study's dependent variable, which is a return on total assets in operation, while the independent variables are cash conversion circle, inventory conversion period, working capital to revenue ratio, and current ratio (i.e. working capital components). return on assets is employed in this study because it demonstrates how successfully and efficiently a company uses its resources to generate money. to put it another way, it's a sign that a business is running smoothly. these variables were compiled and analyzed using a multiple regression model with stata 14 to show how working capital management variables affect profitability in nigerian consumer and industrial goods industries. the following is the regression analysis model that was used: roait = β0 + β1cccit + β2acpit + β3wcrit + β4cri,t + eit where; roa = profitability of consumer and industrial goods companies demonstrated by returns on asset 6 β0 = intercept, which is the value of y when x values are zero. ccc = cash conversion cycle icp = inventory conversion period wcr = working capital to revenue cr = current ratio e = error term normally distributed about the mean of zero β1, β2, β3, and β4 are coefficients for ccc, icp, wcr, and cr respectively. 4. results and discussion this section summarizes the findings of the study's data analysis and interpretation. the first portion offers a preliminary examination of the study sample using descriptive statistics, as well as a brief overview of the numerous robustness tests used to show the validity and dependability of the results. the regression results and findings of the explained and explanatory factors will be presented in the second half, and the discussion and testing of the study hypothesis, as well as implications from the findings, will be presented in the third part. table 1: descriptive statistics variable obs mean std. dev. min max roa 320 4.878 17.006 -179.92 108.9 ccc 319 -3.297 282.064 -1923.49 2711.76 icp 319 85.491 171.733 1.62 2550.07 wcr 320 .0189 .399 -3.14 .76 cr 320 1.324 1.298 .02 15.87 source: stata 14 output, 2022 table 1 summarises and interprets the explanatory variables, including mean, standard deviation, minimum, and maximum data set values for each variable. the average roa for 320 observations is 4.878125, with a standard deviation of 17.00696 as shown in the table. this means that during the study period, there was a considerable difference in profitability values across the listed companies. the average value for the cash conversion circle is -3.297774, with a standard deviation of 282.0641. this means that the cash conversion circle of the listed companies under investigation varies greatly. the data also reveals that the average conversion period has a mean value of 85.49163, a standard deviation of 171.7331 and a low of 1.62, and a high of 2550.07. the mean working capital to revenue ratio is 0.0189687, with a standard deviation of 0.399629, indicating that there are few differences in the practices of the listed companies under investigation. it also demonstrates that their poor working capital management and inability to strategically manage it could result in very low profitability. the current ratio average from the observations is 1.324281, meaning that the liquidity level across the companies is 1.324281 and the standard deviation is 1.298332, with the lowest liquidity level being 0.02 and the highest being 15.87. diagnostic tests results the shapiro wilk and shapiro francia data normality tests were conducted, and the results revealed that the data gathered for all variables were not normally distributed. as a result, instead of using the conventional stochastic standard error term in regressions, the robust 7 standard error is utilized to ensure the validity of the study results. this is done to address the data's normality issue and ensure the regression results' validity. the data set was additionally tested for multicollinearity using the heteroskedasticity test. this was done to satisfy one of the classical linear regression models' assumptions, which specifies that disturbances in population regression are homoscedastic. this indicates that the variance of the error component in the regression model is consistent; errors that do not have constant variance (are heteroskedastic) are called heteroskedastic. the presence of heteroskedasticity in the model's error term is indicated by a large chi-square value in the heteroskedasticity test result. the chi-square value was large and the p-value was little in the heteroskedasticity test done in this study, indicating a violation of the traditional linear regression assumption indicated above. as a result of the occurrence of heteroskedasticity, the researcher chose to use fixed and random effect regression to account for individual differences within units. this will ensure that any findings or inferences reached are accurate. table 2: regression result variable coefficient zvalue p-value ccc 0.0040 1.18 0.238 icp -0.02910 -3.03 0.002 wcr 11.91567 2.45 0.014 cr 0.9952 1.01 0.0312 constant 5.5258 3.36 0.001 r -square = 0.16000 wald chi2 = 40.55 prob>chi2 = 0.0000 source: stata 14 output, 2022 the hausman specification test revealed that a random-effects model is the better appropriate model for this regression. the random effect model result for roa is shown in the table above; the test indicated an insignificant probchi2 value of 0.1324 (higher than 0.05 or 5% level of significance), which explains why the random effect model result is presented. the cash conversion circle has a positive insignificant influence on roa in the model, implying that a unit increase in the cash conversion circle leads to an increase in roa of about 0.04. with a value of 0.002 at a 5% level of significance, inventory conversion time has a negative significant influence on roa, implying that a unit increase in inventory conversion days results in a -2.91 percent loss in roa. this demonstrates that some of the companies in this study store inventory for much too long before disposing of it; the longer inventory is held, the longer returns on assets are delayed, and those companies may lose money if inventory is maintained for longer than necessary. working capital ratio to revenue has a positive insignificant effect on roa, implying that a unit increase in wcr increases returns on assets by 11.91 percent. however, the insignificance could indicate that the management of these companies is more concerned with other factors that account for variations in roa than working capital. finally, the results show that the current ratio has a positive insignificant effect, implying that a unit increase in the current ratio leads to a 99.52 percent increase in roa, implying that the current ratio is only sufficient to cover liabilities and not to finance day-to-day operations that may lead to profitability. the panel's overall r2 is 16 percent. at a 1% level of significance, this model is 8 significant. f-statistics and wald chi-squares are interchangeable terms. the f-statistics were found to be significant at 1%, indicating that profitability, as assessed by roa and working capital management proxies, is consistent with the model. the regression equation's function is shown below. roai,t = 5.525 + (0.0040) ccci,t + (-0.0291) acpi,t + (11.91567) wcri,t + (0.99521) cri,t + ei,t test of hypotheses h01: the ccc has no significant effect on the roa of listed consumers and industrial goods sectors in nigeria. the ccc of nigeria's publicly traded consumer and industrial products companies has a zvalue of 1.18 and a coefficient of 0.0040, with a statistically insignificant p-value of 0.238. this finding indicates that the cash conversion circle of nigerian consumer and industrial products companies is insignificant in explaining and predicting their return on assets over the study period. with a positive coefficient, it means that if these organizations‟ management efficiently manages their various cash conversion circles, their return on assets will grow. the findings of oladimeji and adejebi (2020), owolabi and alu (2012), who found that ccc has no significant effect on profitability, are consistent with those of iyewumi et al (2015), angahar and alematu (2014), owolabi and obida (2012), onojie (2014), and kajola et al (2014), who found that ccc has a significant effect on profitability. according to the findings of this study, ccc is not a powerful explanatory variable in determining the financial performance of listed consumer and industrial goods companies in nigeria, so the null hypothesis, "cash conversion circle has no significant effect on the profitability of listed consumer and industrial goods companies in nigeria," can be accepted. h02: inventory conversion period (icp) has no significant effect on return on assets of listed consumer and industrial goods sector in nigeria. the model's random effect regression result reveals that the inventory collecting period has a z-value of -3.03 and a coefficient value of -0.02910 with a significant value of 0.002 as displayed in table1. this result indicates that the inventory conversion phase has a considerable negative impact on these companies' return on assets during the study period. because the coefficient has a negative sign, it means that every unit increase in icp leads to a reduction in profitability. as a result, management should guarantee that icp is effectively managed and does not surpass what it is now. iyewumi et al (2015), sabo et al (2015), onodje (2014), owolabi and alu (2012), and uremadu et al (2012) all came to similar conclusions (2012) in contrast to the findings of oladimeji and aladejebi (2020) and angahar and alematu (2014), who found that icp does not affect profitability, oladimeji and aladejebi (2020) and angahar and alematu (2014) found that icp does not influence profitability. at a 1% level of significance, icp was determined to have negative significance in this investigation. this means that the lower the roa, the more inventory is held for a lengthy time. as a result, the variable is found to be significantly related to the profitability of publicly traded consumer and industrial goods companies in nigeria over the study period. as a result, the findings support rejecting the study's second null hypothesis, which claims that the inventory period has no substantial impact on the return on assets of the consumer and industrial products sectors in nigeria. 9 h03: ratio of working capital to revenue (wcr) has no significant effect on the return on assets of listed consumer and industrial good companies in nigeria. the findings show that the ratio of working capital to sales has a substantial impact on the profitability of nigerian consumer and industrial goods enterprises. the coefficient of wcr is 11.91567 with a z-value of 2.45 and a p-value of 0.014, which is statistically significant at the five percent significance level, evidenced in table 2 above. the coefficient value indicates that an increase in wcr will have a considerable positive impact on roa. this finding demonstrates that wcr is strongly linked to roa and has a significant impact on the profitability of nigerian consumer and industrial goods companies. this result supports rejecting the study's third null hypothesis, which claims that the ratio of working capital to revenue has no meaningful impact on the return on assets of publicly traded consumer and industrial goods companies in nigeria. h04: current ratio has no significant effect on the return on assets of listed consumers and the industrial goods sector in nigeria. the z-value for the current ratio is 1.01 as reflected in table 2, with a coefficient of 0.9952 and a p-value of 0.312, as shown in table three, indicating an inconsequential result. this means that the current ratio has little impact on the profitability of nigerian consumer and industrial goods enterprises. the coefficient indicates that the current ratio is positive but negligible, implying that the enterprises are not effectively employing their current assets in a way that will have a major impact on asset returns. as a result, any increase in the current ratio will maintain investor confidence, but efficient use is required to increase returns. in contrast to sabo et al (2015), onodje (2014), and ogundipe et al. (2012), who reported a substantial effect of the current ratio on performance, this conclusion is consistent with owolabi and alu (2012). the current ratio was shown to be statistically positive and insignificant in determining the profitability of publicly traded consumer and industrial products companies in nigeria in this study. this conclusion provides sufficient evidence to accept the study's fourth null hypothesis, which argues that the current ratio has no substantial impact on the return on assets of listed consumer and industrial goods companies in nigeria. 5. conclusion and recommendation following the methodological examination of this research, findings, and discussion, the study concludes that the cash conversion cycle has a positive but modest impact on the profitability of listed consumer and industrial goods companies in nigeria. this suggests that the cash conversion cycle plays a little role in explaining variances in the roa of nigeria's publicly traded consumer and industrial products industries. the inventory conversion period has a negative and large impact on the profitability of nigeria's publicly traded consumer and industrial products companies, implying that the inventory conversion period has a heavy outturn on profits. as a result, a unit increase/decrease in inventory days have a considerable impact on these organizations‟ profitability. furthermore, the working capital to revenue ratio has a favorable and considerable impact on the profitability of the companies studied. this means that the more working capital available for operations, the higher the company's profitability, and that the current ratio has a negligible impact on the profitability of listed consumer and industrial goods firms in nigeria. 10 this means that having adequate current assets to cover liabilities does not always imply increased profitability. the study suggests that consumer and industrial goods companies reconsider their collection policies. as a result, they should look into the inventory conversion period for goods to boost company performance. consumer and industrial products companies should embrace as many smart working capital policies and methods as feasible to improve their working capital structure, as well as their profitability. managers should provide working capital management with the utmost attention and consideration because it is a concern for today's firms. references soyemi, a., & olawale, l. (2014). comparative analysis on working capital management of brewery companies in nigeria. international journal of finance and accounting, 3(6), 356-371. doi:10.2139/ssrn.2514668 angahar, p. a &alematu, a. (2014), impact of working capital on the profitability of the nigerian cement industry. european journal of accounting auditing and finance research, 2(7), 17-30. baños-caballero, s., garcía-teruel, p. j., & martínez-solano, p. (2014). working capital management, corporate performance, and financial constraints. journal of business research, 67(3), 332-338. doi: 10.1016/j.jbusres. 2013.01.016 barine, m.n. (2012). „working capital management efficiency and corporate profitability: evidence from quoted firms in nigeria,‟ journal of applied finance & banking, 2(2), 215237 28th ibima conference: theme -vision 2020: innovation management, development sustainability, and competitive economic growth 4417 dinku, t. (2013). impact of working capital management on profitability of micro and small enterprises in ethiopia: the case of bahir dar city administration. international journal of accounting and taxation, 1(1), 15–24. doi:0.15640/ijat iyewumi, t. a., remy, h., & omotayo, m. (2015), working capital management and firm‟s profitability: the case of oil and gas industry in nigeria. journal of electronics and computer science, 2(3), 1-21 kajola, s. o., nwaobia, a., &adedeji, s. b. (2014), working capital management and firm performance: evidence from nigerian listed firms. the international journal of humanities & social studies, 2(4), 121-129. kolapo, f.t., oke, m.o., &ajayi, l.b. (2015), effect of working capital management on corporate performance: cross-sectional evidence from nigeria. iosr journal of business and management (iosr-jbm), 17(2), 93-103. ogundipe, s. e, idowu, a. & ogundipe l. o (2012), working capital management, firms‟ performance and market valuation in nigeria. world academy of science, engineering, and technology 61(1), 1196-1200 onodje, m. a. (2014), working capital management and performance of selected nigerian manufacturing companies. global journal of management and business research: b economics and commerce, 14(3), 40-49 onyemaobi, c. a (2014), the impact of cash management on firms‟ financial performance: a study of some selected manufacturing firms in nigeria. the international journal of business & management, 2(11), 226-231. owolabi, s. a. &alu, c. n. (2012), effective working capital management and profitability: a study of selected quoted manufacturing companies in nigeria. economics and finance review vol. 2(6), 55 – 67. 11 owolabi, s. a., &obida, s. s. (2012), liquidity management and corporate profitability: a case study of selected manufacturing companies listed on the nigerian stock exchange. business management dynamics 2(2), 10-25. oladimeji, d. j. a., & aladejebi, d. o. (2020). the impact of working capital management on profitability: evidence from selected small businesses in nigeria. journal of small business and entrepreneurship development, 8(1). https://doi.org/10.15640/jsbed.v8n1a3 qazi et. al. (2011): “impact of working capital on firms‟ profitability”; african journal of business sabo, m., rabi‟u, s. j., usman, s. k., fatima, b. i., &tjjani, h. a., (2015), the effect of working capital management on corporate profitability: evidence from nigerian food product firms. applied finance and accounting, 1(2), 55-63. available @http://dx.doi.org/10.11114/afa.v1i2.842 umara, n., sabeen, k. k. & qaisar, a. (2009). international working capital practices in pakistan. international research journal of finance and economics, 32, 160-170. uremadu, s.o., egbide, b. & enyi, p.e. (2012). working capital management, liquidity, and corporate profitability among quoted firms in nigeria: evidence from the productive sector. international journal of academic research in accounting, finance and management sciences, 2, 80-97. retrieved from www.ideas.repec.org windaus. (2014). cash for growth pwc annual global working capital survey. retrieved from www.pwc.com https://doi.org/10.15640/jsbed.v8n1a3 i gusau journal of accounting and finance (gujaf) vol. 3 issue 1, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria ii © department of accounting and finance vol. 3 issue 1 april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. iv prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. dr. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. v dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. vi call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank‟s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7 th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ vii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ viii contents mediating effect of audit committee on board dynamic and creative accounting in nigerian firms abbas usman phd, shehu usman hassan phd 1 financial performance of banks in selected african countries: does institutional quality matter? toluwa celestine oladele phd, peters ade sanni 22 firm-specific characteristcs and financial performance of listed agricultural companies in nigeria abdulrazaq t. jimoh, john a. attah 33 effect of financial leverage on stock returns of listed companies in nigeria capital market abdulrahman abubakar, prof. ahmad bello, prof. s. a. abdullahi, dr. m. d. tahir 45 efficiency of deposit money banks in nigeria: data envelopment analysis approach mayowa gabriel ajao, phd, lucky charity omoregie, phd 57 credit appraisal, collection policy and loan performance of microfinance banks in kwara state, nigeria lukman a. o. abdulrauf 69 environmental sustainability disclosure and market value of listed oil and gas firms in nigeria munir aliyu saleh, sirajo bappah, prof. gbegi daniel orsaa, ibrahim adamu saleh phd 81 audit quality, tenure and real earnings management of listed nonfinancial firms in nigeria ahmed mohammed, ademu yahaya, musa zakariya 95 effect of ceo pay and ceo power on risk-taking of listed deposit money banks in nigeria ismaila yusuf, dr. salisu abubakar, dr. idris ahmed aliyu, dr. (mrs) aneitie charles dikki 104 nexus between taxation and foreign direct investment in nigeria daniel ayegbeni ulokoaga, esther ikavbo evbayiro-osagie (mrs), ph. d 115 working capital management and profitability of listed consumer and industrial goods companies in nigeria kwasau ntyak leah, samuel eniola agbi phd, lateef olumide mustapha phd 125 value relevance of earnings and book value: a comparative analysis between big4 and non-big4 audited listed firms in nigeria abdu abubakar, ishaya luka chechet phd, muazu saidu badara phd, yunusa nasiru phd 136 ix value relevance of international financial reporting standard 4 (ifrs 4) of listed nigerian insurance firms mariya mohammed hafiz, muhammad mustapha bagudo phd, salisu abubakar phd 145 determinants of audit fees of listed insurance companies in nigeria sagir lawal, phd, mohammed ibrahim, phd 158 taxation and social services: evidence from nigeria adegbite, tajudeen adejare, phd, abdussamad, olarinde 171 ownership structure and financial performance of quoted mortgage banks in nigeria awotundun, d. a., phd, jinadu, m. y. b., fakunmoju, s. k., phd. 183 capital structure and profitability of listed deposit money banks in nigeria rahji ohize ibrahim, kamaldeen ibraheem nageri, phd, abdullai agbaje salami, phd 194 1 credit appraisal, collection policy and loan performance of microfinance banks in kwara state, nigeria lukman a. o. abdulrauf department of accounting and finance kwara state university, malete, nigeria okelukman2003@yahoo.com abdul olalekan hassan department of accountancy, kwara state polytechnics, ilorin abstract the arrival of microfinance banks as another channel to mainstream the provision of financial services has become a major succour. yet, the banks encountered high risk of default which is not unconnected with the peculiarities in its lending policies. in view of this, the study examines the effect of credit appraisal policy and credit collection policy on loan performance of mfbs in kwara state, nigeria. the study employed survey research design and the population consists of bank managerial and senior staffers from which one hundred and forty (140) were drawn conveniently as sample data obtained through questionnaire were analyzed using descriptive and inferential statistics. the hypotheses for the study were tested using ordered logistic regression with average partial effects. the study found that collection policy significantly affects the loan performance of mfbs while credit appraisal policy does not significantly affect their loan performance as evidenced by their p-values. the study therefore concluded that collection policy influence loan performance of mfbs in kwara state. therefore, the study recommends that the credit appraisal policies should be restructure to capture the relevant information which will help these banks to determine the default intent of customers. also, further monitoring mechanism should be put in place for bank loan collection policy in order that its effectiveness in increasing loan performance is improved. keywords: credit appraisal policy, collection policy, microfinance, loan performance 1. introduction the unfolding of microfinance as another avenue to mainstream provision of financial services has offered an enormous succuor for most people and institutions that are hitherto unable to partake in the formal financial sector. aside contributing to the level of credit accessibility and financial inclusion, microfinance institutions have been described to assert great influence on socio-economic status of people, particularly, those in the rural areas (hitchcock, 2014). it is important that such a great contributor to socio-economic development is given required attention regarding its loan operations and performance. according to the world bank group of the international finance corporation (ifc) (2018), microfinance around the world, has built a solid track record as essential catalyst for poverty amelioration and has gained access to financial mainstream. it is equally on record that the recent industrial growth all over the world (which has reached approximately a hundred and thirty million clients) is traceable to the emergence of microfinance. in spite of this, the coverage of microfinance among the over three billion poor people in the world is still less than 20 percent of its potential market (arhin et al. 2019). mailto:okelukman2003@yahoo.com 2 extension of credit facilities is one of the major activities of all microfinance institutions, microfinance banks inclusive. this activity accounts for greater percentages in the overall operating assets of these lending institutions. however, some of the facilities extended by these institutions usually become nonperforming and eventually result in bad debts with adverse consequences for the overall financial performance of the institutions. the default risk arises as a result of a number of external factors, particularly, those related to economic downturn, as well as failure of internal processes within the lending institutions. these include, majorly, the business cycle (or economic fluctuations) and the prevailing lending policy of these institutions. lending institutions face multiple risks in their line of business due to the nature of business (lending) and prominent among these risks is the risk of default from borrowers. in fact, issue of loan default (npls) is becoming an increasing problem that threatens the sustainability of mfis in nigeria (nwanna, &oguezue, 2017). specifically, npl has been a source of misery for mfbs in nigeria because it adversely affects their financial position and operations in terms of liquidity, profitability, debtservicing capacity, lending capacity and ability to raise additional capital. for instance, according to estimates from statistical bulletin of the central bank of nigeria, the population of mfbs in nigeria in 2000 was 881, which corresponds to a liquidity of 61.42 percent. these numbers fell in 2011 to 821 mfbs and 58.7 percent liquidity ratio and fell further in 2018 to 529 mfbs and 23.57 percent of liquidity. the npl problem of mfbs might be linked to a number of factors; one of it is the mfbs‟ policies that back the lending process (omare, 2016). the major lending policies relate to credit appraisal procedure, management policy, collection policy and interest rates policy (lieber, 1986). prominent among the npl problem of mfbs are not unconnected with the credit appraisal procedure and collection policies. the procedure for appraising loan applications, which include the technical feasibility of the credit, its economic viability and creditworthiness of the borrower are usually time taking and with prohibitive costs. as such many mfbs do not have the capacity to carry out such operations in short period of time with the fact that there is pressure not to over-delay the appraisal process (omare, 2016). the collection policy and the way it affects non-performing loans of mfbs is another issue of great concern. borrowers of microfinance, as the name implies are small and micro entities, who are relatively more difficult to trace and locate when loans are due for repayment. an adequate collection policy might be helpful in ensuring a substantially large proportion of the granted loans and hence, reduce the non-performing components of loan portfolio. however, the micro nature of borrowers from microfinance banks poses a great challenge in the loan collection process. it is on the context of the problems above and the economic importance of mfbs that this study examines the impact that credit appraisal policy and credit collection policy have on loan performance of mfbs in kwara state, nigeria. in conformity with the problem stated above, the following research hypotheses stated in null form were tested to achieve the study objectives: ho1: credit appraisal policy does not have significant effect on the loan performance among deposit taking mfbs in kwara state. ho2: collection policy does not have significant effect on the loan performance among deposit taking mfbs in kwara state. 3 2. review of relevant literature microfinance consists primarily of providing financial services including, savings, microcredit, micro insurance, micro leasing and transfers in relatively small transactions designed to be accessible to micro-enterprises and to low-income households. the definition implies that microfinance are small credits or smaller scale advances offered to destitute individuals or people that have low salary or are independently employed or working (olanike & adebola, 2014). there are 3 classifications of mfbs in nigeria namely unit bank, state bank and national bank unit mfbs are licensed to operate in only one location, and also mandated to have a capital base of n200million. state mfbs are licensed to operate in a state or abuja, the federal capital territory. their capital requisition is n1billion and they are permitted to have branches opened within the same state or abuja, which federal capital territory. national mfb are licensed for operation in more than a state which including abuja, the federal capital territory. it is mandated to have paid-up capital base of n5 billion. the term non-performing loans is used interchangeably with bad loans and impaired loans as identified in fofack (2005). berger and de young (1997) also describes these types of loans as “problem loans” in broad context, loans that are outstanding in both interest and principal for a period of time contrary to terms and conditions spelt out in the loan agreement are considered as non-performing loans. addae-korankye (2014) defined non-performing loans as loans that have not been repaid for a period of ninety days. microfinance banks are majorly known for their credit facilities functions, with loans as their dominant assets, representing about seventy-five percent of their total assets. the implication of this is that loans stand as the operating income of microfinance banks, which may expose them to higher risks of failure if not repaid by borrowers (nyarko-baasi, 2018). defaulted loans are not favorable to microfinance banks, especially when the amount involved is high. although securities are held for most of the loans granted to borrowers, there is uncertainties surrounding the repayment. therefore, it becomes a non-performing loan when this risk turns out to materialize. according to the cbn prudential guidelines, an mfb is not permitted to fund any client beyond 7.5 per cent of its shareholders funds unimpaired by losses. the provisions for performing and non-performing loans are also given in terms of number of days of missed payment, description and allowance for probable loss as follows: table 1: provision for classified assets number of days of missed payment description allowance for probable loss (%) not more than 30 days performing 1 above 30 days but less than 60 days pass and watch 5 at least 60 days but not more than 90 days substandard 20 at least 91 days but not more than 180 days doubtful 50 4 more than 180 days lost 100 source: central bank of nigeria, 2019 according to this requirement, any loan with not more than 30 days of unpaid principal and/or interest is considered as a performing loan and there is only a 1% allowance for probable loss for such loans; a loan with above 30 but less than 60 days of unpaid principal and/or interest is considered as a pass and watch loan and there is a 5% allowance for probable loss for such loans; a loan with 61 to 90 days of unpaid principal and/or interest is considered as a substandard loan and there is a 20% allowance for probable loss for such loans; a loan with 91 to 180 days of unpaid principal and/or interest is considered as a doubtful loan and there is a 50% allowance for probable loss for such loans; and a loan with above 180 days of unpaid principal and/or interest of missed payment is considered as a lost loan and there is a 100% allowance for probable loss for such loans. given these classifications, all mfbs are required to review their loans and advances and other assets at least once every thirty days, and make appropriate provisions. lending policy is a set of guidelines and criteria developed by a bank and used by its employees to determine whether an application for a loan should be granted or turned down. it is also known as a statement of philosophy, standards, and guidelines that its employees must observe in granting or refusing a lending request (jacobson and roszbach, 1998). based on the previous studies, lending policy components include but not limited to credit appraisal procedure policy, credit portfolio planning and management policy, collection policy and interest rates policy. this study only considers two prominent policies that is credit appraisal policy and collection policy. the former has to do with how a lender appraises the technical feasibility, economic viability and bankability including creditworthiness of the prospective borrower. the latter systemizes the steps taken to recover amounts due prior to litigation. this includes: when costumers should be contacted, how they should be contacted, how disputes are resolved, when internal or external “collectors are used to step-up collection efforts, when and whether to turn the account over to litigation or writeoff the debt. theoretically, study is rooted in the postulations of the institutional theory regarding the importance of strong institutions in creating rules guiding economic activities to achieve legitimate outcomes which may not be efficient ones. strong institutions give birth to effective policies that can guide corporate activities, specifically in this case, the lending process. when the rules of the „lending game‟ are strong, effective policies such as those related to credit appraisal, management, collection and interest rates are developed to ensure appropriate checks are in place to guarantee a good loan performance which ensures borrowers pay back the borrowed financial facilities. wondimagegnehu (2012) examine the factors that account for of loans performance status in ethiopia. the mixed research approach was adopted for the study. survey was conducted with professionals engaged in both private and state-owned banks in ethiopia holding different positions using a self-administered questionnaire. in addition, the study used structured review of documents and records of banks and in-depth interview of senior bank officials in the ethiopian banking industry. the findings of the study showed that poor credit assessment, failed loan monitoring, underdeveloped credit culture, lenient credit terms and conditions, aggressive lending, compromised integrity, weak institutional capacity, unfair 5 competition among banks, willful default by borrowers and their knowledge limitation, fund diversion for unintended purpose, over/under financing by banks are ascribed to loan default. addae-korankye (2014) analyzed the causes and control of loan delinquency/default in microfinance institutions in ghana. the study showed that high interest rate, inadequate loan sizes, poor appraisal, lack of monitoring, and improper client selection are significantly john (2016) conducted a research on non-performing loans portfolio and its effect on bank profitability in nigeria. the results show that that non-performing loans portfolio has negative effect on bank profitability. the study further reveals that insider dealing involving over-extension of loans to promoters, directors and significant others that became bad and irrecoverable, is the bane of large non-performing loan portfolio in nigeria. 3. methodology the study used descriptive survey design which according to churchill (1991) is appropriate where the study seeks to describe the characteristics of certain groups, describes what exists and considers the existing conditions or relationships, current processes and tangible developing effects. population of the study comprises the managerial and senior staffers of tweny-nine (29) licensed mfbs operating in kwara state. a sample of 140 managerial and senior staffers (7 from each bank) was drawn from the 20 mfbs operating in ilorin, the state capital using convenience sampling technique. this is based on the suggestion of owino (2013), that these are the most conversant individuals to the issue related lending policies and non-performing loans. 5-point likert scale (for independent variables) and ordinal scale (for dependent variable) questionnaire was used to collect the data. data were analysed and the hypotheses were tested using ordinal logit regression model. following the theoretical postulation of the institutional theory, a multiple regression model is specified here by adapting the model from the study of abugah et al. (2017) as follows: …………………………………………… 1 whereas: lp is loans performance of microfinance banks in kwara state crpp is credit appraisal procured policy cpy is collection policy is the intercept term are the coefficients of the independent variables ε is the error term a priori expectations: β1 > 0, β2> 0, 4. results and discussions descriptive statistics out of the 140 questionnaires distributed only 135 were returned and this represents 97.8% response rate which is considered adequate for the study. demographic information of the respondents table 2: demographic distribution of respondents frequency percent cum. percent gender female 36 26.67 26.67 male 99 73.33 100.00 age 6 18 – 27 years 11 8.15 8.15 28 – 37 years 41 30.37 38.52 3847 years 58 42.96 81.48 48-57 years 20 14.81 96.29 58years and above 5 3.71 100.00 marital status single 39 28.89 28.89 married 82 60.74 89.63 others 14 10.37 100.00 education secondary/technical 12 8.89 8.89 ond/nce 25 18.52 27.41 bsc/hnd 74 54.81 82.22 postgraduate 24 17.78 100.00 position managing director 16 11.85 11.85 manager/head of unit 79 58.52 70.37 senior staff 40 29.63 100.00 experience less than 5years 23 17.04 17.04 6-10 years 62 45.93 62.97 11-20 years 31 22.96 85.93 over 20 years 19 14.07 100.00 source: author’s computations, 2022. as for the respondent gender, there is wide difference in the number of male and female gender of the respondents. only 26.67% (36respondents) of the surveyed managing directors, managers and senior officers are female whereas male group makes up to 73.33% (99 respondents). regarding the respondents age, results show that majority (representing 42.96%) falls within the age group of 38 – 47 years. 8.15% (11 respondents) fall within age-range less than 18-27 years, 30.37% (41 respondents) fall within age-range less than 28-47 years, 14.81% (20 respondents) fall within age-range less than 48-57 years and only 3.71% (5 respondents) fall within age-range 58years and above. with regards to marital status of the respondents, 28.89% (39 respondents) are single, 60.74% (82 respondents) are married while only 10.37% 7 (14 respondents) fall within the categories of others who may be window, divorced among others. regarding their highest educational qualifications, majority of the respondents have attained b.sc./hnd degree level. 54.81% (74 respondents) have b.sc./hnd as their highest educational qualification, 18.52% (25 respondents) are ond/nce holders, only 8.89% (12 respondents) are secondary/technical certificate holders and 17.78 (24 respondents) have postgraduate qualifications. as for the distribution of the respondents regarding the position they occupy in the organization, results show that majority of them are managers or unit heads with 58.52% (79 respondents) being managers or unit heads, 29.63 (40 respondents) are senior officials and 11.85% (16 respondents) being managing directors of their various banks. in terms of experience on their current positions, the results show that majority of the sampled respondents 45.93% (62 respondents) have being on their current position for between 6-10 years. 17.04% (23 respondents) have spent less than 5 years on their current role, 22.96% (31 respondents) have between 11-20 years of experience and only 14.07% (19 respondents) have over 20 years‟ experience on their current role in their banks. over all, the descriptive results of the demographic characteristics of the respondents reveal that the sampled respondents are relatively mature, and possess the least educational exposure and job experience required to reasonably provide answers to questionnaire items. preliminary analysis of the data this section presents the results of the preliminary „check and balance‟ analysis both prior to and after the main analysis. the tests carried out include reliability test (using cronbach‟salpa) and multicolinearity test (variance inflation factor) and model specification tests (using linktest). normality test was not conducted as it is not a prerequisite for linear probability models. reliability test the result as presented in table 3 depicted that the cronbach alpha statistics of 77%, 74% and 71% for loan performance, credit appraisal policy and collection policy respectively which are adjudged adequate. an acceptable standard is that it should range between 0.7 and 0.8 (field, 2006). this attests to the reliability of research instrument of data gathering. table 3: cronbach’s alpha statistics variables cronbach‟s alpha n loan performance 0.77 5 credit appraisal policy 0.74 8 collection policy 0.71 5 source: author’s computation, 2022 multicollinearity assessment multicollinearity test was carried out on the explanatory variables involved in the multiple regression analysis using variance inflation factor (vif). the variance inflation factor also indicates that problematic multicollinearity is not present in the model. this is obvious from the average vif of below 10 as presented in table 4. hence, multicolinearity problem is not severe or nonexistent. table 4: variance inflation factor variable vif 1/vif credit appraisal policy 2.37 0.2114 8 collection policy 4.82 0.2301 mean vif 3.60 source: author’s computations, 2021. asteriou and hall (2016) are of the opinion that vif values greater than 10 generally indicate a situation of problematic multicollinearity. this is always the case when r-squared of the model is exceeds a threshold of 0.9. model specification tests table 5 depicts the test for loan performance model specification with a view to ascertaining the correctness or otherwise of the model specified for the study. in other words the test is crucial to detect if the model specified is devoid of specification error. table 5: model specification test – loan performance model lending policies coefficient p-value _hat 1.052 0.001 _hatsq 0.108 0.056 constant 0.231 0.289 source: author’s computation, 2021. the study employs link test specification test. the test uses the linear predicted value (_hat) and linear predicted value squared (_hatsq) as the predictors of good model. for the model to be well specified the variable _hat must be statistically significant and the variable _hatsq must not have much predictive power except by chance that is, it must not be statistically significant at 0.05. also, as depicted in table 5 the _hat is statistically significant and _hatsq is not statistically significant at 0.01 and 0.05 respectively. the statistical significance of _hatsq 0.1 level of significant is an indication of nothing but a weak importance. conclusion can thus be drawn that the model is correctly specified. analysis of effect of credit appraisal policy and collection policy on loan performance among microfinance banks in kwara state to achieved research objective and test the study hypotheses linear probability model known as ordered logit model with average partial effect was employed. the model is tagged “model for loan performance”. in the model for loan performance, the study dependent variable is categorical and can be ordered, taking values of 1, 2, 3, 4 and 5 if the loan performance status for the mfbs is loss, doubtful, substandard, pass and watch, and performing respectively. the set of explanatory variables are also categorized in this model into credit appraisal policy and collection policy. table 6: ordered logit regression model of lending policies effects on loan performance variables coefficients p-value crpp 0.0316 0.683 (0.0773) cpy 1.126** 0.034 (0.527) observations f-statistic pseudo r-squared 135 7.10 *** 0.4958 wald test 8.15*** 9 jackknife robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 source: author’s computations, 2022 estimation of the model was done with jackknife robust estimates of standard errors to take care of the probable heteroskedasticity that may affect it. the results reveal f-statistic value of 7.10 with p-value of 0.01 indicating that the overall model is significantly explaining the probability of loan performance of mfbs. reported pseudo r-squared of 0.4958 also shows that the independent variables (lending policies) explain the dependent variables to a fairly large extent. the wald test of joint significance for all the two lending policies shows value of 8.15 which is statistically significant at 0.01. therefore, all lending policies (credit appraisal policy and collection policy) are jointly significant in influencing loan performance. on the one hand, from the estimation results of the ordered logit regression of the model in table 6, loan collection policy is statistically significant lending policy affecting the probability of loan performance of mfbs as evident from each of their low probability values. on the other hand, credit appraisal policy is statistically insignificant policy affecting the probability of loan performance of mfbs (with higher probability values than conventional significance level). more specifically, the mfbs‟ collection policy has increased probability of having a loan performing. table 7: average partial effects after ordered logit regression of lending policies effects on loan performance loss doubtful substandard pass and watch performing variables coef p-val coef p-val coef p-val coef p-val coef p-val crpp -0.004 0.578 -0.0006 0.555 0.0009 0.572 0.002 0.795 0.026 0.132 (0.008) (0.001) (0.003) (0.03) (0.009) cpy -0.098** 0.038 -0.043* 0.075 0.032** 0.001 0.132* 0.067 0.034*** 0.003 (0.028) (0.022) (0.007) (0.074) (0.006) jackknife robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 source: author’s computations, 2022 average partial effect, after ordered logit results, in table 7 shows how each of these factors affects the likelihood of each of the loan performance status. from the loan performance model, the mfbs‟ loan collection policy significantly reduces the likelihood of recording a loss loan this indicates that mfbs‟ collection policy have lower possibility of loan being loss by 0.098 probabilities. for doubtful loan status, collection policy significantly reduce the likelihood of microfinance bank loan having doubtful status. this indicates that collection policy has possibility of reducing the doubtful loans by 0.043 probabilities. for substandard loan status, the average partial effect shows that collection policy significantly increases the likelihood of recording a substandard loan. this indicates that mfbs‟ loan collection policy has higher possibility of loan being substandard by 0.032 probabilities. regarding the pass and watch loan status which is very close to performing, table 7 reveals that collection policy significantly increases the likelihood of microfinance bank loan being 10 pass and watch status. this indicates that mfbs‟ collection policy increases the possibility of loan being pass and watch by 0.132 probabilities. for the performing loans status, loan collection policy is an important factor that influences the likelihood of bank loans performing. this indicates that mfbs‟ loan collection policy increases the possibility of loan being performing by 0.034 probabilities. summary of hypothesis testing table 8 below depicts the summary of the results of the hypotheses tested, which show the rejection or otherwise for each of the hypotheses relating to lending policies and loan performance among microfinance banks in kwara state. table 8: summary of hypothesis testing numbering hypotheses techniques findings remarks ho1 credit appraisal policy does not have significant effect on the loan performance among deposit taking mfbs in kwara state. ordered logit insignificant p-value= 0.683 not rejected ho2 collection policy does not have significant effect on the loan performance among deposit taking mfbs in kwara state. ordered logit significant (+ve) p-value= 0.034 rejected source: author’s compilation, 2022 table 8 shows that the results of the study offer full support for the rejection of one out of two study hypotheses. the rejection of hypothesis implies that the explanatory variable influence the probability of loan performance of mfbs. it follows therefore that loan collection policy of mfbs influences their loan performance at 5% level of significance while the credit appraisal policy does not influence their loan performance even at 10% level of significance. however, for all the lending policies, the wald test reveals a value of 8.15 with p< 0.01 implying that all the policies are jointly important in influencing the loan performance for the mfbs in the study area. the consistency or otherwise of these findings with the theories and previous studies are discussed in the subsequent section in the study. discussion of findings this section is devoted to discussing the findings that emerged from the results of this study, particularly, those from the results used to verify the hypotheses of this study. as revealed in the results that the first hypothesis, which states that credit appraisal policy does not affect loan performance of mfbs in kwara state, is not rejected, the findings of this study in this situation imply that credit appraisal policy has not been effective in determining the performance of loans granted by mfbs in kwara state. this finding does not conform to the stated a priori expectation of this study, which was postulated that credit appraisal policy will increase the loan performance of these microfinance banks. furthermore, the finding does not conform to the studies of wondimagegnehu (2012), addae-korankye (2014), ngeno (2017), namutenda and muturi (2017), as it was in revealed in these studies that credit appraisal has effect in reducing non-performing loans and enhancing better performance of loans given out. further findings of this study revealed that loan collection policy has positive impact on loan performance of mfbs in kwara state. this finding suggests that the second hypothesis is rejected and consequently makes the finding to conform to the a priori expectation of this study which was postulated that collection policy will increase the loan performance of these 11 mfbs. this finding is also in line with the findings of the wondimagegnehu (2012) and namutenda and muturi (2017). this finding implies that effective collection policy put in place by these mfbs have been able to enhance the retrieval of granted loans as at the due dates and has in turn promote the increase in the level of loan performance of these mfbs. 5. conclusion, policy implication and recommendations the study concluded that the collection policy developed by mfbs in kwara state has been very effective in helping them to reduce their amount of non-performing loans they experienced from their customers and consequently increase the amount of performing loans they experienced. however, that credit appraisal policy put in place by microfinance banks in kwara state has not been effective in determining the performance of loans granted by these microfinance banks. a policy implication which may be drawn from this study is that inadequate and ineffective credit appraisal practices remain the bane of incessant nonperforming loan usually recorded by mfbs in kwara state. the inadequacy and ineffectiveness of credit appraisal procedure might stem from the fact that, policies put in place by managements of these mfbs have not taken into account, key issues that can enable them to screen out loans that have strong tendency of becoming non-performing. these issues include proper investigation of the loan applicants‟ past financial history, capital contribution, financial capacity, collateral adequacy, financial literacy and social engagements and the lending conditions, all of which can determine his or her loan repayment behaviour. the study recommended that the credit appraisal policies of microfinance banks in kwara state should be restructured and strengthened to capture the relevant information which will help these banks to determine the default intent of customers. also, collection policy should be monitored further in order that its effectiveness in increasing loan performance is improved. this should be done with increased and consistent reminder on the consequence of loan default and the benefits in timely repayment. references abugah, w. k., michael, n., & odoyo, (2017). effects of lending policies on loan performance of selected commercial banks in kisii county, kenya. international research journal of advanced engineering and science, 2 (3), 270-273. addae-korankye, a. (2014). causes and control of loan default/delinquency in microfinance institutions in ghana.american international journal of contemporary research, 4(12), 112-120. arhin, e., issifu, r., akyeampong, b., & opoku, i. n. (2019). analysis of non-performing loans (npl) among microfinance institutions (mfis) in ghana: evidence from the kasoa municipality. journal of economics, management and trade. 22(5), 1-10. asteriou, d., & hall, s. g.(2016). applied econometrics. london: uk, red globe press. berger, a. n & de young, r. (1997). problem loans and cost efficiency in commercial banks. journal of banking and finance, 21, 1-29 field, a. (2005) discovering statistics using spss. london: sage publications. fofack, h. l. (2005). nonperforming loans in sub-saharan africa : causal analysis and macroeconomic implications. policy research working paper; no. 3769. retrieved from https://openknowledge.worldbank.org/handle/10986/8498. john, n. u. (2016). non-performing loans portfolio and its effect on bank profitability in nigeria.independent journal of management & production, 7(2), 92-102. namutenda, o. k., &muturi, w. (2017). effect of lending policies on financial performance of microfinance institutions in kisii county kenya: a case study of kenya women finance trust. international journal of social science and information technology, 3(8), 2297-2319. https://openknowledge.worldbank.org/handle/10986/8498 12 ngeno, j. k. (2017). influence of lending policy on the quality of loan portfolio among deposit taking savings and credit co-operatives in starehe sub-county, nairobi, kenya. (master dissertation, university of nairobi, kenya). nwanna, i.o., & oguezue, f.c. (2017).effect of credit management on profitability of deposit money banks in nigeria. international journal of banking and finance research, 3(2), 137-160. nyarko-baasi, m. (2018).effects of non-performing loans on the profitability of commercial banks a study of some selected banks on the ghana stock exchange.global journal of management and business research, 18(2). olanike, b., & adebola, j. (2014). prime lending rates and the performance of microfinance banks in nigeria. evaluation review, 6(12), 131–137. omare, h. (2016). effect of credit reference bureau services on non-performing loan portfolios in kenya: a case study of deposit taking microfinance institution. retrieved from https://www.grin.com/document/500466 wondimagegnehu, n. (2012). determinants of non-performing loans: the case of ethiopian banks. (master dissertation, university of south africa). retrieved from https://core.ac.uk/download/pdf/43168979.pdf. https://core.ac.uk/download/pdf/43168979.pdf gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 i gusau journal of accounting and finance (gujaf) vol. 3 issue 3, october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ii © department of accounting and finance vol. 3 issue 3 october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com mailto:abupress2020@yahoo.com http://www.abupress.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos stat gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. muhammad aminu isa department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. prof. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeiza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vi advisory board members prof. kabiru isah dandago, bayero university kano,kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng mailto:elfarouk105@gmail.com http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng mailto:elfarouk105@gmail.com mailto:05@gmail.com http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ix contents capital structure and firm financial performance of listed deposit money banks in nigeria: moderating effect of board financial literacy anas idris abdulwahab, hussaini bala ph.d, mansur lubabah kwambo ph.d, & abubakar adamu 1 influence of socialization on msme compliance by mediating understanding and moderating knowledge of tax visits yayuk ngesti rahayu 17 does international financial reporting standard narrows audit expectation gap? musa ibrahim dauda, ibrahim adagye dauda, phd 35 sustainability reporting and financial performance of listed manufacturing firms in nigeria aiyesan, olabode olutola ph.d 49 firm attributes and financial reporting timeliness of listed consumer goods firms in nigeria akume james terkende, dele ikese karim 67 value relevance of accounting information for listed financial service firms in nigeria kassim busari, ishaya luka chechet ph.d, aliyu ahmed abdullahi ph.d, & ibrahim mohammed ph.d 87 nigeria economic growth and capital market development: does contributory pension scheme matter? akinwumi ayorinde olutimi, toluwa celestine oladele ph.d, &adeboye emmanuel sanmi 101 audit committee and financial reporting quality: the moderating effect of board independence of listed deposit money banks in nigeria kassim yusha’u shika, mark david kantiyok 117 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 x determinants of financial performance of listed deposit money banks in nigeria mary seansu lazarus, nurradden usman miko ph.d, & saifulahi abdullahi mazadu ph.d 140 human resource accounting and profitability of listed depositmoney banks in nigeria ahmad adamu ibrahim, ahmad rufa’i adamu, fatihu mahmud alhassan &muhammad iliyas abdulsalam 158 board independence, audit effectiveness and the quality of reported earnings in the nigerian consumer goods firms isah shittu ph.d, misbahu, abubakar muhammad 175 impact of capital structure on financial performance of listed agricultural companies in nigeria ahmad muhammad ahmad, shehu usman hassan ph.d., &abubakar abubakar 192 trade oriented money laundering and era of cybersecurity tax evasion in nigeria oluwayemi joseph kayode, adewole joseph adeyinka ph.d, adewale abass adekunle & kadiri kayode ph.d 205 effect of females in the boardroom on corporate sustainability reporting salami suleiman ph. d, olanrewaju atanda aliu ph.d 224 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 1 capital structure and firm financial performance of listed deposit money banks in nigeria: moderating effect of board financial literacy anas idris abdulwahab national identity management commission, kaduna, nigeria. anasabdulwahab5@gmail.com hussaini bala ph.d department of accounting faculty of administrative sciences and economics tishk international university, erbil, kurdistan region, iraq. mansur lubabah kwambo ph.d department of accounting kaduna state university, kaduna, nigeria. abubakar adamu department of accounting kaduna state university, kaduna, nigeria. abstract the purpose of this work is to examine the interaction of members of the board with financial knowledge on the association among capital structure with firm financial performance in the nigeria dmbs. empirical studies were reviewed to scrutinize the upshot of capital structure in connection to the performance of firms. as the result of the foregoing, this study introduces board financial literacy as a moderator variable to interact between capital structure with performance of firms. a correlational design was adopted. population and sample size of the study consists of 13 listed dmbs on the floor of nigeria stock exchange for the period 2012 to 2021. fixed effects regression model was employed to analyse the data of the study. diagnostic test was conducted to confirm the validity of the statistical inferences of the study. the result shows that bfl moderated the correlation involving defr with financial performance. also, the result found that efr and defr were not significant to the firm financial performance of dmbs in nigeria. this work recommends that board members with financial literacy should come up with effective policy towards encouraging debt financing in their entities by effective supervision so as to enhance the overall firms’ financial performance as well as safeguarding shareholders interest. research in future should replicate this topic in a domain other than dmbs. keywords: equity financing ratio, debt to equity financing ratio, firm age and leverage doi.org/ 10.57233/gujaf.v3i3.177 mailto:anasabdulwahab5@gmail.com gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 2 1. introduction it is imperative to document that firm financial performance is the major concern of every investor, stakeholders as well as the economy. given that, the wellbeing and survival of every corporation can be traced through the firm financial performance, financial managers therefore employs the necessary policies that are related to finance in other to attend an optimum capital structure in their different corporations so as to enhance their performance (mohammed, gugong & ayuba, 2022). various studies have been conducted to examine the correlation linking capital structure and firm financial performance in the operations of businesses (mohammed, gugong & ayuba, 2022; tanko, siyanbola, bako & dotun, 2021 and oladele, omotosho & adeniji, 2017). modigliani and miller (1958) was the pioneer theory in this context, followed by (jensen & meckling, 1976 and myers & majuf, 1984) which they provide a new definition of a firm and show how their analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problems. also, likely changes were asserted from other studies on firm financial performance of corporations involving capital structure of different sectors of the economy were (oladele, omotosho & adeniji, 2017; nikoo, 2015; abdel-jalil, 2014 and nirajini, & priya, 2013). however, despite the effort to revive and to restructure the nigerian banking system there has been a persistent corporate distress among the listed dmbs in nigeria over the years due to the instability in their financial performances (abdulwahab, 2021). also, theguardian.ng (2018) narrated the takeover of skye bank plc by polaris bank plc in 2018 as their problems emanated after it used short-term funds to buy local lender mainstreet bank in 2014 but failed to raise fresh cash. it had been in talks with shareholders and investors to raise capital but suspended plans after weak oil prices hit the capital markets and drove foreign investors away. numerous studies have investigated the nexus involving capital structure with firm financial performance in different context (oladele et al., 2017; hassan & muhammad, 2016; siddik, kabiraj & joghee, 2016; adesina, michael & adesina, 2015 and sultan & adam, 2015). nevertheless, findings of these studies point out a mixed result. particularly, ogiriki, andabai and werigbelegha (2018) examined the effect of financial leverage on corporate performance of firms in nigeria and gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 3 their result revealed a positive significant correlation. also, abdulla (2017) conducted a study on capital structure in a tax-free economy in uae. the findings of the study shown a positive significant association. similarly, dahiru (2016) investigated capital structure and financial performance of listed manufacturing firms in nigeria and the result of the study found a significant positive association involving capital structure with financial performance of the firms. on the other hand, ajibola and wisdom (2018) examined capital structure and financial performance of listed manufacturing firms in nigeria and the findings revealed a negative insignificant correlation with capital structure and financial performance. also, uremadu and onyekachi (2018) investigated the impact of capital structure on corporate performance of consumer goods firm in nigeria. the result documented an insignificant connection linking capital structure and the firm’s financial performance. this development gives the basis for the inclusion of a moderator variable (in line with baron & kenny, 1986) to explain the controversy in the reviewed literature. thus, bfl serve as moderator connecting capital structure with firm financial performance of dmbs in nigeria. numbers of the directors with financial knowledge in the constitution of the board are likely to affect the entity’s effective decision making as they possessed technical financial expertise. therefore, there is need to examine the moderating role of bfl on the nexus connecting capital structure with firm financial performance of dmbs in nigeria. this study examines how effective capital structure can be achieved by having board financial literacy, which may significantly improve firm financial performance. again, to the best of the researcher’s comprehension, the reviewed literatures with moderator variable were carried out in non-financial sector and foreign countries (tanko, siyanbola, bako & dotun, 2021; javeed & yaqub, 2017 and juma, 2010). thus, this current study will focus on the nigerian banking sector, in line with its significant role towards the economic growth and sustainability through the provision of services that are financial in nature to the general public as well as different individual business corporations. the main aim of this study is to examine the moderating role of board financial literacy on the nexus among capital structure with firm financial performance of dmbs in nigeria for the period of 2012-2021 because it is within the period that nigerian banking sector had an acquisition of skye bank plc by polaris bank plc in 2018. specific objectives of this study are as narrated below: gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 4 i. to examine the cause of equity financing on firm financial performance of dmbs in nigeria. ii. to investigate the effect of debt to equity financing on firm financial performance of dmbs in nigeria. iii. to examine the moderating effect of board financial literacy on the nexus between equity financing and firm financial performance of dmbs in nigeria. iv. to examine the moderating effect of board financial literacy on the nexus between debt to equity financing and firm financial performance of dmbs in nigeria. 2. literature review this section is premised on literatures on firm financial performance, equity financing, debt to equity financing and board financial literacy. firm financial performance refers to the measurement of total financial health of business. equity financing is the raising of capital from external sources through sale of shares of the company by a way of income retention. debt to equity financing is termed as an investment solvency of an entity. board financial literacy is the ability of the member of the board to understand and effectively use various financial experiences. 2.1 equity financing and firm financial performance basit and irwan (2017) in their study revealed that equity ratio has an insignificant correlation with the firms’ financial performance. conversely, chechet and olayiwola (2014) establish that equity financing is positively related to financial performance, using panel data through the annual reports of the listed companies under the nigerian stock exchange. also, awunyo-vitor and badu (2012) studied the link between equity financing and financial performance of listed ghanian banks for 11 years. the result documented a significant positive correlation involving equity financing with performance (financial) the firms. velnampy and niresh (2012) examine the nexus between equity finance and profitability and listed 10 sri lankan banks for the period of 8 years. negative correlation was established with equity finance and financial performance. in view of the foregoing, this will test the below hypothesis. h01: equity financing ratio does not significantly affect firm financial performance of dmbs in nigeria. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 5 2.2 debt to equity financing and firm financial performance uremadu and onyekachi (2018) opined that total debt ratio to equity has a negative and insignificant effect on roa. also, basit and irwan (2017) examined the effect of capital structure on firms’ performance on malaysian industrial sector. debt to equity showed a negative effect on roa of the firm. shaba and yaaba (2016) studied the effect of capital structure on bank profitability of deposit money banks for the period of 10 years in nigeria. capital structure was measured by owners’ funds and borrowed funds while, profitability was proxies by gross earnings of the domain. multiple linear regression result discovered a positive significant association with debt to equity financing and profitability. oladeji, ikpefan and olokoyo (2015) revealed a negative effect between leverage represented by debt to equity and firm performance of the study. amos and francis (2014) shows that debt to total equity is positive and significantly associated with financial performance of the listed non-financial companies in nigeria. again, maina and ishmail (2014) examine the effect of debt-equity ratio on performance for the period 10 years. the result reveals that short term debt to total assets has positive significant association with financial performance of firms listed at the nairobi. in view of the above, the below null hypothesis is formulated. h02: debt to equity financing ratio do not have significant effect on firm financial performance of dmbs in nigeria. 2.3 board financial literacy and firm financial performance reformed usaid (2009) narrated that any sme member (manager) who is has financial knowledge are more likely to make a wise business decision towards enhancing their services, products and work in partnership with self-assurance with the suppliers. kahveci & wolfs (2019) and peters, miller & kusyk (2010) established the nexus between board financial knowledge and firm financial performance respectively and the result reveal a statistically positive significant correlation with the firm financial performance. similarly, erin, arumona & omotayo (2019); kahveci & wolfs (2019); akhtar & liu (2018) and peters, miller & kusyk (2010) documented that entities that have an independent director with accounting and finance knowledge is likely to effectively enhance the entity’s performance. they employed a multiple regression analysis gotten from the audited annual report from their respective domain from nigerian stock exchange. pereira and filipe (2018) investigated how the quality of board members training will affect the financial performance of portuguese banks. sample of the study consist of 276 board members. findings of the study show a statistical positive significant gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 6 correlation between the whole educational parameters with the financial performance of the firm. h04: board financial literacy does not have significant impact on firm financial performance of dmbs in nigeria. 2.4 board financial literacy on capital structure and firm financial performance liu (2011) opined that board of directors (bod) is an essential aspect of corporate governance that is saddle with the responsibility to affect managerial decision. board of directors is essential key indicator of corporate governance which is saddled with the task to improve the effectiveness and efficiency in every organization (muhammad & kurawa, 2021). financial literacy of the board could have positive or a negative effect on a firm financial efficiency depending on the financial know how of the members constituted in the (bod) in relation to capital structure which could have a positive impact on the firm financial performance. liuraman and dabari (2020) investigated the moderating effect of board quality on capital structure and financial performance of listed industrial goods in nigeria for the period of 5 years. pooled regression was employed to run the regress of the study. also, result of the study found a positive significant relationship with capital structure and firm performance. again, iqbal and javed (2017) asserted that corporate governance mechanism has statistically and positively improve the interaction involving capital structure with performance (financial) of pakistan manufacturing firms. from the above assertion this study tests the below hypothesis: h05: board financial literacy has no significant impact on the relationship between capital structure and firm financial performance of dmbs in nigeria. considering the existing link between board financial literacy and firm financial performance from the previous literatures, this study employs board financial literacy in order to strengthen the correlation between capital structure and firm financial performance of dmbs in nigeria. however, as a result of the established gap from the previous studies, this study is underpinned by pecking order theory which was propounded by myers and majuf (1984) and supported by agency theory originated by (berle, & means, 1932). pecking order theory states that firm has order of preference for capital structure for the purpose of avoiding information asymmetry between managers of the firm gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 7 and potentials investors and other stakeholders. the theory assert that companies prefer internal financing such as retained earnings to short term debt, long term debt, equity among other source of external source of finance. also, agency theory clarifies on the association between the owner(s) of a firm and the manager(s) in any decision making which will enhance the performance of a firm. the theory deals with the agency’s problem that may result from conflict of interests either between the shareholders and managers or between the debt holders and stockholders. the agency theory also helps the relationship between principal and agent in terms of decision-making process, with respect to blends of capital structure of firm. 3. methodology correlational research design was employed because it describe the statistical relationship between two or more variables (olowokure et al. 2016). the population of this paper covers the entire dmbs in nigeria whose financial data are available on the floor of nse for the period of 2012 to 2021. as a result of the foregoing, polaris bank plc was filtered out due to the non-availability of data from 2012 to 2018. therefore, 13 dmbs mark up the sample size of this research. table 3: variables measurement and source variables measurements source dependent variable firm financial performance measured by an index yahaya (2022) & (ffp) derived from return on yahaya, farouk, assets, earnings per share lamidi, yusuf and and return on equity. dania (2015) independent variables equity financing ratio total equity / total assets. mohammed et al., (efr) (2022) & sultan and adam (2015) debt to equity financing total debts/ total equity. mohammed et al., ratio (defr) (2022) & eniola, adewunmi and adewunmi (2017) moderator variable board financial literacy proportion of bod tanko et al., (2021) & (fa) members who has certificate bala and kumai (2015) in accounting, finance, anan, acca and ican gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 8 control variables firm age measured as the number of years since listing. abdulwahab, bala, kwanbo and gwamna (2022) & qasim (2014) firm size (fs) natural log of total assets. abdulwahab et al., (2022) & rajha and alslehat (2014) leverage (lev) measured by the proportion of debt as a fraction of equity. yahaya (2022) & abdulwahab et al. (2022) source: generated by the authors, 2022. the study employed a multiple linear regression, direct and moderated models respectively. thus, the specific models are as stated below: direct model ffpit = β0+β1efrit+β2defrit+β3bflit+4fa+5fs+6lev+εit moderated model ffpit=β0+β1efrit+β2defrit+β3bflit+β4efr*bflit+β5defr*bflit+6fa+7f s+8lev+εit where: ffp = firm financial performance efr = equity financing ratio defr = debt to equity financing ratio bfl = board financial literacy fage = firm age fsiz = firm size lev = leverage β0 = constant β1 – β8 = co-efficient of efr, defr, bfl, efr*bfl, defr*bfl, fa, fsiz and lev in both models respectively. ε = other factors that were not included by this model i = participating firms (i = 13 banks) t = time variable (t = 10 years) gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 9 4.0 result and discussion table 4.1 descriptive statistics variables obs. min max. mean std. dev. ffpi 130 0.0751 0.7458 0.4135 0.2420 efr 130 0.0012 0.1837 0.1388 0.0652 defr 130 0.0236 3.0509 0.8500 1.0616 bfl 130 0.0000 0.8789 0.3104 0.2302 fa 130 5.0000 104.0000 27.7539 24.2845 fsiz 130 2.0215 3.6958 2.8413 0.4721 lev 130 0.0977 1.5630 0.5254 0.3834 source: extracted from stata 13 output table 4.1 shows that firm financial performance has an average of 41.3% which spread at 24.2% having minimum and maximum average at 7.5% and 74.5% respectively. also, efr revealed a mean value of 0.1388 and spread at 0.0652. 0.0012 and 0.1837 represents the minimum and maximum value respectively. again, defr has an average value of 0.8500 with a standard deviation of 1.0616. the minimum and maximum values are 0.0236 and 3.0509 respectively. more so, the moderator variable has a mean value that stood at 3.10% which implies that dmbs has an ineffective utilization of financial literate in the board members. the deviation of the data from the mean stood at 0.2302. the minimum and maximum values are 0.0000 and 0.8789 respectively. table 4.2 correlation matrix variables ffpi efr defr bfl fa fsiz lev ffpi 1.0000 efr -0.4059 1.0000 defr 0.0596 -0.0240 1.0000 bfl 0.0571 0.2469 0.1349 1.0000 fa -0.0689 0.1704 -0.2588 0.2565 1.0000 fsiz -0.1263 0.0750 -0.0047 0.0200 -0.1294 1.0000 lev 0.0350 -0.0116 0.0047 -0.0495 -0.1612 0.1111 1.0000 source: extracted from stata 13 output table 4.2 showed a positive significant association between defr, bfl & lev with ffpi of the sampled dmbs in nigeria. also, there is a negative significant correlation involving efr, firm age (control variable) and firm size (control variable) with ffpi of the sampled dmbs in nigeria. also, the correlations linking the independent variables are insignificant, which indicate absence of multicollinearity in the study’s model. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 10 table 4.3 diagnostic test variables vif tolerance value fa 1.25 0.8002 bfl 1.18 0.8482 defr 1.13 0.8858 efr 1.09 0.9188 fsiz 1.04 0.9620 lev 1.04 0.9644 mean vif 1.12 hettest chi2 1.29 hettest sig 0.2568 hausman prob. 0.0459 source: extracted from stata 13 output table 4.3 found that the data of the study are homoskedastic in nature evidenced from chi2 of 1.29 along with prob. 0.2568. thus, this study suggest that the original ols regression is not suitable thereby leading this study to conduct fixed effects regression and random effects regression to determine which of the two (2) models stands to be suitable for this study. the hausman test revealed a prob. chi2 of 0.0459. hence, fixed effects regression stand as the appropriate model of this study. also, the variable are free from multicolinearity, this is because none of the vif of the variables is up to 6 (gujarati, 1995). table 4.4 summary of regression results (fixed effects) direct moderated variables coefficients z value p value variables coefficients p value efr -0.6797 -1.12 0.264 efr*bfl 1.3657 0.457 defr -0.0002 -0.01 0.994 bfl 0.2330 2.44 0.016 fa 0.0074 1.09 0.278 fsiz -0.0294 -0.66 0.509 defr*bfl 0.1446 0.093 lev 0.0345 0.61 0.544 r2 0.2051 r2 0.2299 wald chi2 0.1663 wald chi2 0.1789 prob. chi2 0.0001 prob. chi2 0.0001 source: extracted from stata 13 output gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 11 table 4.4 shows that efr has a negative insignificant correlation with ffp of the dmbs in nigeria evidenced from p-value of 0.264 and coefficient of -0.6797. this implies that in every n1 increase in efr it will translate to a decrease by 67% in the ffp of the dmbs in nigeria. also, this outcome reveals that equity financing ratio is likely not to significantly influence the firm financial performance of dmbs in nigeria for the period under review. hence, the result of this model supported the formulated null hypothesis. also, the interaction of bfl with efr and ffp revealed a positive insignificant association. this means that in every n1 increase in efrbfl it will translate to no effect on the ffp. this also supported the null hypothesis formulated. in addition, the findings is in consistent with the work of basit and irwan (2017) & dahiru (2016) but contrary to that of (mohammed et al., 2022; tanko et al., 2021 and chechet & olayiwola, 2014). again, table 4.4 revealed that defr has a negative insignificant correlation with ffp of the sampled dmbs in nigeria evidenced from p-value of 0.994 and coefficient of 00.0002. this signifies that in every n1 increase in defr it will lead to no impact on ffp of the sampled dmbs in nigeria. this signifies that debt to equity financing ratio is likely not to have a significant influence on the firm financial performance of dmbs in nigeria for the period under review. hence, the result supported the formulated null hypothesis. also, the interaction of bfl with defr and ffp revealed a positive and statistically significant association with ffp of the sampled dmbs in nigeria. this means that in every n1 increase in defrbfl it will translate to an increase by 14% on the ffp of the sampled dmbs in nigeria. this also supported the null hypothesis formulated. in addition, the findings contradicts that of mohammed et al., (2022) and tanko et al. (2021) but it’s in cohort with that of (tanko et al. 2021 & uremadu & onyekachi, 2018). again, the control variables firm age, firm size and leverage shows an insignificant effect on ffp of dmbs in nigeria. this implies that the years which the banks have been in operations, the size of the banks as well as the leverage do not improve the financial performance of dmbs in nigeria. lastly, the moderated model explains ffp at 23% thereby attributing 77% to error term whereas the direct relationship model explains the ffp at 21% and the remaining 79% is accounted by the random error term. 5. conclusions and recommendations equity financing ratio and debt to equity financing ratio found no significant impact on ffp of dmbs in nigeria for the period under review. thus, the findings do not provide an effect to policy implications. on the other hand, the moderated model gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 12 of the study shows that defr has a positive significant effect on the ffp of dmbs. also, defr displayed an important part in influencing the ffp of dmbs in nigeria. this study again discovered a negative influence exist with equity on the overall success of the business. moreover, this study discovered that bfl has a significant positive influence on the firms’ performance (financial) of dmbs in nigeria. it is recommended that the board members should come up with effective policy towards encouraging debt financing in their entities with effective monitoring so as to enhance the overall firm financial performance as well as safeguarding shareholders interest. this could be through optimal capital structure by using more of debts than equity. this study calls for more studies to investigate the relationship between capital structures, board attributes (that were not captured in this study) and firm financial performance by testing data from other domain (non-financial) and for a longer period. lastly, findings and recommendations is strictly limited to the dmbs in nigeria. references: abdel-jalil, t. (2014). the impact of capital structure on the performance of the jordanian publicly held industrial companies. jordan journal of business administration, 10(6), 390–403. abdulla, y. (2017). capital structure in a tax-free economy: evidence from uae. international journal of islamic and middle eastern finance and management, 10(1), 22–37. abdulwahab, a, i., bala, h., kwanbo, m, l., & gwamna, y, j. (2022). corporate governance mechanisms, firm age and earnings quality of conglomerate firms in nigeria. polac economics review (per), 2(2), 1–10. abdulwahab, a, i. (2021). audit committee characteristics and financial reporting quality of listed deposit money banks in nigeria: moderating effect of whistle blowing policy. kaduna state university. adesina, j, b., michael, n, b., & adesina, o. (2015). capital structure and financial performance of commercial banks in nigeria. international journal of business and social research, 5(2), 21–25. https://doi.org/10.2139/ssrn.3925685 ajibola, a., & wisdom, o. (2018). capital structure and financial performance of listed manufacturing firms in nigeria. journal of research in international business and management, 5(3), 81–89. akhtar, s., & liu, y. (2018). sme managers and financial literacy; does financial gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 13 literacy really matter? journal of public administration and governance, 8(36), 353–373. https://doi.org/https://doi.org/10.5296/jpag.v 8i3.13539 awunyo-vitor, d., & badu, j. (2012). capital structure and performance of listed banks in ghana. global journal of human social science, 5(12), 56– 62. bala, h., & kumai, g, b. (2015). board characteristics and earnings management of listed food and bevarages firms in nigeria. international journal of accounting, banking and management, 3(3), 1–14. baron, r, m., & kenny, d, a. (1986). the moderator-mediator variable distinction in social psychological research: conceptual, strategic, and statistical considerations. journal of personality and social psychology, 51(6), 1173– 1182. basit, a., & irwan, f, n. (2017). the impact of capital structure on firms performance: evidence from malaysian industrial sector a case based approach. international journal of accounting & business management, 5(2), 1–17. berle, a, a., & means, g, c. (1932). the modern corporation and private property. reviews in american history, 18(4), 578–596. chechet, i., & olayiwola, o. (2014). capital structure and profitability of nigeria quoted firms. the agency cost theory perspective. american international journal of social science., 5(3), 1–16. dahiru, i. (2016). capital structure and financial performance of listed manufacturing firms in nigeria. ahmadu bello university zaria. eniola, o, j., adewunmi, a, a., & adewunmi, o, p. (2017). impact of capital structure on the profitability of selected quoted banks in nigeria. international journal of economics, commerce and management, 5(1), 543–552. erin, o., arumona, j., & omotayo, v. (2019). board financial education and firm performance: evidence from the healthcare sector in nigeria. academy of strategic management journal, 8(4), 25–36. gujarati, d, n. (1995). basic econometrics gujarati 5th edition.pdf (pp. 12–45). pp. 12–45. hassan, s, a., & muhammad, s, m. (2016). effect of profitability and financial leverage on capital structure in pakistan commercial banks. journal of accounting and public policy, 5(1), 336–342. iqbal, m., & javed, f. (2017). the moderating role of corporate governance on the relationship between capital structure and financial performance: gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 14 evidence from manufacturing sector of pakistan. international journal of research in business and social science, 6(1), 89– 105. https://doi.org/https://doi.org/10.20525/ijrbs.v6i1.624. javeed, a., & yaqub, s. m. (2017). revisiting capital structure and firm value: moderating role of corporate governance: evidence from pakistan. developing country studies, 7(5), 2224–2225. jensen, m, c., & meckling, w, h. (1976). theory of the firm: managerial behavior, agency costs and ownership structure. journal of financial economics, 3(4), 305–360. juma, a, w, j. (2010). the moderating influence of corporate governance on the relationship between capital structure and the firm value of companies quoted at the nairobi stock exchange. university of nairobi. kahveci, e., & wolfs, b. (2019). family business, firm efficiency and corporate governance relation: the case of corporate governance index firms in turkey. academy of strategic management journal, 18(1), 1–12. liu, s. (2011). board governance and earnings management of chinese listed companies. a published thesis for master of philosophy in environmental and development economics degree. submitted to the department of econonics university of oslo, china. liuraman, z., & dabari, i, j. (2020). moderating road of board quality on capital structure and financial performance of listed industrial goods companies in nigeria. atbu journal of accounting and finance, 1(1), 53–65. maina, l., & ishmail, m. (2014). capital structure and financial performance in kenya: evidence from firms listed at the nairobi securities exchange. international journal of social sciences and entrepreneurship, 1(11), 1–14. modigliani, f., & miller, a. (1958). the cost of capital, corporate governance and the theory of investment. the american economic review, 5(2), 261–297. mohammed, i., gugong, b, k., & ayuba, a. (2022). capital structure, board size and financial performance of listed deposit money banks in nigeria. nda journal of management sciences research, 2(1), 12–25. muhammad, s., & kurawa, j, m. (2021). board attributes and value of listed insurance companies in nigeria: the mediating effect of earnings quality. international journal of management science and business administration, 8(1), 7–23. https://doi.org/10.18775/ijmsba.18495664 5419.2014.81.1001 myers, s., & majuf, c. (1984). capital structure puzzle. national bureau of economic research cambridge, 5(5), 55–64. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 15 nikoo, s, f. (2015). impact of capital structure on banking performance: evidence from tehran stock exchange. international research journal of applied and basic sciences, 9(5), 923–936. nirajini, a., & priya, k, b. (2013). impact of capital structure on financial performance of the listed trading companies in sri lanka. international journal of scientific research publications, 3(5), 1–9. ogiriki, t., andabai, p., & werigbelegha, b. (2018). effect of financial leverage on corporate performance of firms in nigeria. research journal of finance and accounting, 9(4), 2–15. oladeji, t., ikpefan, a, o., & olokoyo, f, o. (2015). an empirical analysis of capital structure on performance of firms in the petroleum industry in nigeria. journal of accounting and auditing, 5(3), 1–15. oladele, a, s., omotosho, o., & adeniji, d, s. (2017). effect of capital structure on the performance of nigerian listed manufacturing firms. european journal of business and management, 9(7), 12–26. olowokure, o, a., tanko, m., & nyor, t. (2016). firm structural characteristics and financial reporting quality of listed deposit money banks in nigeria. international business research, 9(1), 106–122. https://doi.org/10.5539/ibr.v9n1p106 pereira, v, m, m., & filipe, j, a, c, b. (2018). quality of board members’ training and bank financial performance: evidence from portugal. international journal of economics and business administration, 6(3), 47–79. peters, s., miller, m., & kusyk, s. (2010). how relevant are corporate governance and corporate social responsibility in emerging markets? journal of accounting and auditing: research & practice, 11(4), 429–445. qasim, a. (2014). the impact of corporate governance on firm performance: evidence from the uae. european journal of business management, 6(22), 118–124. rajha, s, k., & alslehat, f, a, z. (2014). the effect of capital structure on the performance of islamic banks. interdisciplinary journal of contemporary research in business. shaba, y., & yaaba, n. (2016). capital structure and profitability of deposit money banks: empirical evidence from nigeria. european journal of business and management, 8(23), 24–32. siddik, a, n., kabiraj, s., & joghee, s. (2016). impacts of capital structure on performance of banks in a developing economy: evidence from bangladesh. international journal of financial studies\, 5(3), 21– gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 16 36. sultan, s, a., & adam, m, h. (2015). the effect of capital structure on profitability: an empirical analysis of listed firms in iraq. uropean journal of accounting, auditing and finance research, 3(2), 61–78. tanko, u, m., siyanbola, a, a., bako, p, m., & dotun, o, v. (2021). capital structure and firm financial performance: moderating effect of board financial literacy in nigerian listed non financial companies. journal of accounting research, organization and economics, 4(1), 48–66. https://doi.org/10.24815/jaroe.v4i1.18322 the guardian.ng. (2018). how to curb incidence of banks’ failure in nigeria. uremadu, o, s., & onyekachi, o. (2018). impact of capital structure on corporate performance in nigeria with special focus on consumer goods firm sector of the economy. current investigation on agricultural research., 7(3), 2–18. velnampy, t., & niresh, j, a. (2012). the relationship between capital structure and profitability. global journal of management and business research, 13(12), 66–74. yahaya, o, a., farouk, b, k, u., lamidi, y, s., yusuf, m, j., & dania, i, s. (2015). impact of competition on the financial performance of listed deposit money banks in nigeria. journal of economics and sustainable development, 6(13), 52–61. yahaya, o, a. (2022). corporate social responsibility and financial performance: evidence from nigeria. international journal of accounting and finance review, 10(1), 107–117. https://doi.org/10.1142/s10944060225000xx gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 17 i gusau journal of accounting and finance (gujaf) vol. 3 issue 1, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria ii © department of accounting and finance vol. 3 issue 1 april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. iv prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. dr. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. v dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. vi call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank‟s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7 th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ vii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ viii contents mediating effect of audit committee on board dynamic and creative accounting in nigerian firms abbas usman phd, shehu usman hassan phd 1 financial performance of banks in selected african countries: does institutional quality matter? toluwa celestine oladele phd, peters ade sanni 22 firm-specific characteristcs and financial performance of listed agricultural companies in nigeria abdulrazaq t. jimoh, john a. attah 33 effect of financial leverage on stock returns of listed companies in nigeria capital market abdulrahman abubakar, prof. ahmad bello, prof. s. a. abdullahi, dr. m. d. tahir 45 efficiency of deposit money banks in nigeria: data envelopment analysis approach mayowa gabriel ajao, phd, lucky charity omoregie, phd 57 credit appraisal, collection policy and loan performance of microfinance banks in kwara state, nigeria lukman a. o. abdulrauf 69 environmental sustainability disclosure and market value of listed oil and gas firms in nigeria munir aliyu saleh, sirajo bappah, prof. gbegi daniel orsaa, ibrahim adamu saleh phd 81 audit quality, tenure and real earnings management of listed nonfinancial firms in nigeria ahmed mohammed, ademu yahaya, musa zakariya 95 effect of ceo pay and ceo power on risk-taking of listed deposit money banks in nigeria ismaila yusuf, dr. salisu abubakar, dr. idris ahmed aliyu, dr. (mrs) aneitie charles dikki 104 nexus between taxation and foreign direct investment in nigeria daniel ayegbeni ulokoaga, esther ikavbo evbayiro-osagie (mrs), ph. d 115 working capital management and profitability of listed consumer and industrial goods companies in nigeria kwasau ntyak leah, samuel eniola agbi phd, lateef olumide mustapha phd 125 value relevance of earnings and book value: a comparative analysis between big4 and non-big4 audited listed firms in nigeria abdu abubakar, ishaya luka chechet phd, muazu saidu badara phd, yunusa nasiru phd 136 ix value relevance of international financial reporting standard 4 (ifrs 4) of listed nigerian insurance firms mariya mohammed hafiz, muhammad mustapha bagudo phd, salisu abubakar phd 145 determinants of audit fees of listed insurance companies in nigeria sagir lawal, phd, mohammed ibrahim, phd 158 taxation and social services: evidence from nigeria adegbite, tajudeen adejare, phd, abdussamad, olarinde 171 ownership structure and financial performance of quoted mortgage banks in nigeria awotundun, d. a., phd, jinadu, m. y. b., fakunmoju, s. k., phd. 183 capital structure and profitability of listed deposit money banks in nigeria rahji ohize ibrahim, kamaldeen ibraheem nageri, phd, abdullai agbaje salami, phd 194 1 efficiency of deposit money banks in nigeria: data envelopment analysis approach mayowa gabriel ajao, phd department of banking and finance faculty of management sciences university of benin, benin city, nigeria. ajao.mayowa@uniben.edu lucky charity omoregie, phd department of banking and finance faculty of management sciences university of benin, benin city, nigeria. lucky.omoregie@yahoo.com abstract in today’s turbulent and competitive operating environment, the survival of banks depends on the efficient use of scarce resources. this study examines the efficiency of ten (10) selected banks in nigeria for the period of five (5) years (2016 to 2020). the efficiency measures of constant return to scale (crs), variable return to scale (vrs) and return to scale (rts) were employed using the data envelopment analysis (dea) approach. the findings from empirical analysis show that only five banks, guarantee trust bank (gtb), first city monument bank (fcmb,) access bank, union bank and sterling bank were significantly efficient in nigeria with respect to crs and vrs for the period considered. however, all the banks were significantly efficient in the long run with respect to rts. therefore, the study recommends that the less efficient banks should study and understand the strategies adopted by the efficient banks. the study also recommends that investors/shareholders should invest more on the efficient banks such as gtb, fcmb, access bank, union bank and sterling bank. again, the study recommends that the inefficient banks like zenith, first bank, uba and wema should be encouraged to focus more on long term project and explore ways to be more operationally efficient and move towards innovation. regulatory authorities should ensure strict compliance to resources management policies. keywords: efficiency, banks, dea, input-output jel classifications: c14, c67, g21 i. introduction the goal of the financial sector is to mediate the economic and investment desires of financial units by reallocating assets among them (banya and biekpe, 2018). the banking sector being an essential part of the financial system performs an essential function in the mobilization and distribution of savings. banks are involved in customers‟ most liquid asset (cash), and generally enhance the development of country‟s economy (banya and biekpe, 2018). the nigeria banking system is not considerably different from the ones of other nations; since it is among the utmost significant contributors within the financial system playing an important role in the growth of nigeria economy. currently, well-developed financial markets and banking establishments are frequently taken into consideration to be a circumstance beneficial to economic growth (diallo, 2018; belke, ulrich & ralph, 2016; zhang, ling, sheng & na, 2016; destefanis, sergio, christian & lubrano, 2014; balkevicius, 2012). as mediators, they strongly make contributions to the effective redistribution of assets in the market, fund company projects, therefore stimulate financial increase, sustain long-term mailto:ajao.mayowa@uniben.edu 2 dealings with firms, and reduce the challenges of information asymmetry as well as alleviating economic instabilities (grmanová & ivanová, 2018). in the current competitive environment, nigerian banking sector offers a comprehensive financial services. for banking sectors in nigeria, it is necessary to adequately considered operational economic of scale advantage with forward looking perception (grmanová & ivanová, 2018). the main contribution of the banks to a long-term plan is the evaluation of its roles from the viewpoint of performance and productivity. an advanced and proficiently operational banking system accelerates the improvement of other enterprise spheres within the country‟s economic system and consequently impacts the development of the whole nation (ključnikov & popesko, 2017; kubiszewska, 2017; nuhiu, hoti & bektashi, 2017). as asserted by kubiszewska (2017), the current state of competitive atmosphere necessitates modifications in determining and managing economic factors. the primary standard is an adjustment from employing strictly financial determining factors to setting wider range of non-financial determining factors. collection of variables and their evaluation are key aspects of banks financial management, which is expected to be consistent with its strategic desires as to performance and productivity with regards to the definite threats and structured boundaries. therefore, banking sectors are now employing superior techniques of risk management in the organization and not necessarily because of the current supervisory treaty (belás & cipovová, 2012). when evaluating its definite position, financial institution is making an attempt to accurately measure its strengths and flaws in the areas of pricing, products, communication policy, distribution, organization structure and management (puriwat & tripopsakul, 2017; gąsiorowski, 2016). hence, “the reason banks are involved in employing different techniques and seek to discover the most appropriate grouping of financial and non-financial determining factors to be employed in the direction of more evaluation. there are nonparametric and parametric techniques of efficiency evaluation. the frequently used technique in current banking sector is the non-parametric technique recognized as the data envelopment analysis (dea). this technique permits evaluating the efficiency of conversion of several inputs into multiple outputs with the help of efficiency score” (aigbovo and igbinoba, 2019:250). the major challenges confronting managers of banking institutions is the tendency to control inputs more than outputs since they are usually faced with the goal of generating maximum outputs with minimum resources (inputs). this necessitated the use of input-output approach to examines the efficiency of deposit money banks in nigeria, using data envelopment analysis technique. the extant literature shows that various studies have been done on efficiency in the banking industry (diallo, 2018; grmanová & ivanová, 2018; ključnikov & popesko, 2017; kubiszewska, 2017; worimegbe & benneth, 2019). most studies investigated the technical, cost and profit efficiency applying non-parametric techniques consisting of the data envelopment analysis (dea) and parametric techniques consisting of the stochastic frontier approach (sfa) to evaluate the different efficiency methods with conflicting results. these studies were carried out in the developed nations in the world such as the u.s, europe and asia countries. however, there are limited empirical studies in nigeria using dea approach in evaluating the efficiency of banks. some studies such as osamwonyi and imafidon (2016), fapohunda, ogbeide and igbinigie (2017), obayagbona and ogbeide (2018) focused on efficiencies of quoted manufacturing companies in nigeria. however, studies by eriki and osifo (2015), worimegbe and benneth, (2019), aigbovo and igbinoba (2019), david, isaac and koye (2017) only considered one year. this current study differs from the above in that; 3 it does not only focus on the deposit money banks, but also have and extend scope of five (5) years (2016-2020). hence, the objectives of this study is to evaluate the degree of efficiency of deposit money banks in the utilization of inputs to generate outputs nigeria. whereas there is an increase in study on the subject, however what establish input and output of banks remains a controversy within the literature. essentially, there are three methods in ascertaining bank input and output. value added, user cost techniques and intermediation. hence, total deposits (dpst) and debt (debt) are recognized as input variables, whereas total loans and advances (laa) and net profit (nprft) as output variables. the other sections of this paper are in the following order. extant literatures were reviewed in section two while the research methods adopted for the study were discussed in section three. the presentation and interpretation of data analysis were covered in section four while section five contains the summary of major findings, recommendations and conclusion. 2. literature review parametric and non-parametric methods have been employed in analyzing banks efficiency. portela and thanassoulis (2005) viewed that efficiency in the banking industry can be measured from the profit point of view, transaction, and operations. farrel (1957) considered productivity efficiency from the standpoint of technical and allocation of resources. bank efficiency can also be measured in terms of cost and profit efficiency, as established by thaguna and poudel (2013). the main goals and objectives of bank managers are to seek ways of generating high profit despite the competition, increase customers‟ deposits and sales via increasing value-added operations. worimegbe and benneth, (2019) stated that bank managers concentrate their resources and operation on profit maximization, sales increase, increase customer base, and create new channels of effective distribution of bank products. dea is a technique for evaluating efficiency of the decision making unit (dmus) employing linear programming techniques to enclose observed input-output vectors as firmly as feasible (dyson, thanassoulis & boussofiane, 1991). dea permits a couple of inputs-outputs to be measured on the equal time with none assumption on data distribution. in each case, performance is evaluated in line with a proportionate adjustment in inputs or outputs. dea model can be segmented into input-oriented model which is capable of minimizing inputs at the same time satisfying at least the given output levels and output-oriented model which is capable of maximizing outputs without demanding more of any of the observed input values. according to charnes, cooper and rhodes (1978: 435), “dea models can be segmented into returns to scale by including weight constraints. initially suggested the efficiency measurement of the dmus for constant returns to scale (crs), where all dmus are functioning at their optimum scale. there are also the variable returns to scale (vrs) efficiency measurement model which permit the segmentation of efficiency into technical and scale efficiencies in dea”. yao (2007) stated that data envelopment analysis (dea) is a method for evaluating the comparative efficiency of peer decision making units (dmus) with several inputs and outputs. halim and mevlut, (2013) stated that dea is very important when measuring performance with the aim of making decision, therefore to understand our targets through the help of these decisions in commercial world. data envelopment evaluation is equally a technique to evaluate the comparative efficiencies of a set of organizational unit which includes branches of banks or school when there are multiple in proportionate inputs and outputs (cooper, charnes & rhodes, 1978). 4 halim and mevlut (2013) aver that dea operate on the basis of multi inputs and outputs and it has accompanied a quick procedure in practice in addition to speedy theoretical enhancement. dea is now been employed in determining technical productiveness of profit making inter companies which are in production and service sectors. there is always a constraint when analysing ratios of inputs and outputs of complicated organizations generating a number of outputs. it is not typically feasible to reach a sure end with these ratios. thus, dea is a substitute to inadequate techniques. dea is an efficiency technique of evaluating without a parameter, developed for determining comparative events of economical decision units that appears to be the same, concerning the services or goods they produce (halim & mevlut, 2013). this study relies on the production concept as advocated by koutsoyianis (2003), which avers that production ability is a collection of inputs essential for the formation of one unit of output. various approaches might be employed to produce a ware; however the generation technique as stated by koutsoyianis (2003) combines a design work which communicates to a specialized connection associating factor sources of input as well as output. regarding this study, the production concept holds that performance determining factors of macroeconomic variable input sources could affect the efficiency (variable yield) of bank. consequently, there is a practical correlation between bank and production. this study employed cobbdouglas production function to indicate the practical link between factor inputs and outputs (bank efficiency) in nigeria. the cobb-douglas production function is indicated as; y = pc α b β i where y = output p = total factor productivity c= capital b = labour α and β = elasticity coefficients of capital and labour, respectively. in the theoretical background, total deposits (dpst) and debt (debt) are recognized as input variables, while total loans and advances (laa) and net profit (nprft) as output variables. 2.1 empirical review many researchers have attempted to answer the question of whether banks are operationally efficient through empirical investigations with mixed findings, which are highlighted below: in developed economies, halim and mevlut (2013) examined efficiency depth with data envelopment analysis (dea) in service industry and sampled 21 turkish banks. the study shows that thirteen banks remained vigorous, whereas eighty of them existed lower than efficiency boundary and found dynamic organizations by analysing data extracted from ccr. diallo (2018) studies bank efficiency and industry boom for the duration of financial crises using dea approach. the study found that efficiency helps banks to be extra resistant to shocks, thus significantly affecting growth positively. grmanová and ivanová (2018) examined the banks efficiency in slovakia employing dea models. they find the leading three banks at slovak national banking industry to be efficient in both years analysed. cakar, koker and narin (2021) study the prediction of the efficiency of four turkish bank branches using neurotic fuzzy dea approach. the prediction obtained from the analysis are more realistic using the contributions of bank managers for bank branches to remain opened or closed based on the efficiencies of each branch. novickyt and droždz (2018) investigated banking sector performance in lithuanian employing dea approach from 2012 to 2016. the efficiency ranking was evaluated with a 5 non-parametric boundary input-oriented dea technique with the variable return to scale (vrs) as well as the constant return to scale (crs) rules. the study found out that the performance of lithuanian banks examination centred on the vrs theory denotes that superior outcomes are demonstrated by the regional banks. the technical efficiency analysis founded on the crs theory denotes parent group and the branches demonstrated higher efficiency than regional banks with success at working at the exact scale. in asia, nand and archana (2014) examined efficiency analysis of the indian banking sector using dea and found that dea has the capacity to handle series of inputs and outputs and is suitable in unveiling connections that are concealed for other techniques. other benefits of dea are the ability to quantify for every evaluated unit and analyze sources of inefficiency. in africa and emerging economies, alfradi (2020) provides an analysis of the performance of seventeen libyan banks from 2004 to 2010 using dea technique. the findings indicated a positive relationship between bank efficiency and return on assets, risk and operating size. jelassi and delhoumi (2021) examine what determine the technical efficiency of the commercial banks operating in tunisia from 1995 to 2017 using data envelopment analysis. the results of the dea show that bank technical efficiency increases with capitalization and inflation, it however decreases with size, bank branches and management to staff ratio. focusing on nigeria, eriki and osagie (2015) investigated the determining factors of performance efficiency in 2009 and considered 19 selected banks in nigeria. variable returns to scale (vrs), constant returns to scale (crs) and scale efficiency model were employed by using the data envelopment analysis (dea) method. the evaluation procedure was done employing dea frontier software and found that bank age as well as bank size are positively correlated with bank performance efficiency, whereas board ownership structure as well as board independence are adversely linked to nigeria bank performance efficiency. osamwonyi and imafidon (2016) examined if nigeria listed industrialized firms are functioning on the production possibility boundary, which is, if they are scale and technically efficient. output orientated dea was employed in the study with the input determining factors as total asset, operating expenses, cost of goods sold and shareholder‟s equity, while the output variables are return on equity, net profit, sales/turnover and return on asset. the 85% score of average variable return to scale and 76% scale efficiency mean score revealed the level of nigeria listed manufacturing firms‟ efficiency. the analysis denotes that thirtyone firms out of the fifty-eight firms selected for the study are operating on production possibility boundary whereas the twenty-seven firms remaining are not. david, isaac and koye (2017) investigated the performance of deposit money banks in nigeria for the period of three years before, during and after the 2004–2005 consolidation. using dea and found that small banks have the tendency to be more cost efficient than average and large banks. meanwhile, medium banks have the tendency to be more cost efficient than large banks, while large banks usually lead in cost efficiency score in post consolidation period. cost efficiency of the banks was the highest all through consolidation, accompanied with the aid of pre-consolidation and least in 3 years after consolidation. worimegbe and benneth, (2019) applied dea to assess the influence of financial institutions efficiency on bank performance in nigeria deposit money banks. using a sample of fifteen (15) deposit money banks, they found that international banks are more transactional efficient in terms of operational efficiency relative to regional as well as national banks. also, the international banks are more profit efficient relative to regional as well as national banks. 6 the empirical literatures above revealed that diallo (2018), halim and mevlut (2013), novickyt and ivanova (2018) and nand and archana (2014) investigated the efficiency of service industry and banks in the developed countries. osamwonyi and imafidon (2016) examined the efficiency of quoted manufacturing companies in nigeria while, worimegbe and benneth (2019), eriki and osagie (2015) and david, isaac and koye (2017) investigated the efficiency of banks in nigeria. these studies considered one year. however, this present study examines the efficiency of banks in nigeria employing data development approach (dea) for the period of five years spanning 2015 to 2019. 3. methodology this study employed data envelopment analysis (dea) to investigate the efficiency of deposit money banks in nigeria. the sample size of ten (10) banks was selected using convenience sampling techniques (availability and accessibility of data) for the period of five years 2016-2020. in this study, each bank employed in the sample is characterized as a dmu. dea investigated the efficiency of the banks employing the various inputs they used to generate various outputs. a production boundary is said to symbolize the highest degree of output possible for a given level of inputs (muhammad, 2011). “consequently, a technically efficient bank might operate at the production boundary. that means it yields the highest outputs for a given level of inputs. the implication is that a bank technically inefficient might operate below the boundary. this is due to the fact that bank‟s output might be lower than the highest possible. alternatively, financial institutions may be said to be technically efficient if it makes use of lowest inputs to provide a given level of outputs, and this suggests that where a financial institution employed more than the highest level of inputs it would be regarded as technically inefficient” (aigbovo and igbinoba, 2019). dea method was employed to analyse the data based on variable return to scale (vrs) constant return to scale (crs), and return to scale (rts). therefore, we used total deposits (dpst) and debt (debt) as input variables, whereas total loans and advances (laa) and net profit (nprft) as output variables. the data were obtained from central bank of nigeria (cbn) 2020 audit of nigerian banks. the data envelopment analysis (dea) model aigbovo and igbinoba, (2019:252) “supposing each bank used in the sample is decisionmaking unit (dmu) and every one generating diverse outputs with x different inputs. employing this relationship, we have the efficiency ratio model thus: ei = where: ei = relative efficiency of the dmu k = number of outputs produced by the dmu l = number of inputs used by the dmu yi = i th output produced by the dmu xi = j th input used by the dmu ui = k x l vector of output weights and vj = l x 1 vector of input weights. i runs from 1 vector to k and j runs from 1 to l. k ∑ i =1 l ∑ j =1 7 decision rule: a bank with a score of one (1) is efficient, while a score below one (1) means the bank is inefficient”. 4. results and findings table i: descriptive statistics debt dpst laa nprft mean 30879158 4.87e+08 3.74e+08 15519939 median 258021.5 3037572. 1619723. 89664.00 maximum 3.02e+08 3.67e+09 2.48e+09 86159353 minimum 0.000000 569116.0 338726.0 5182.000 std. dev. 67738548 8.21e+08 6.17e+08 28228731 skewness 2.771193 1.833212 1.626586 1.564281 kurtosis 10.03266 6.061974 4.716542 3.719247 jarque-bera 167.0341 47.53822 28.18677 21.46919 probability 0.000000 0.000000 0.000001 0.000022 sum 1.54e+09 2.44e+10 1.87e+10 7.76e+08 sum sq. dev. 2.25e+17 3.30e+19 1.86e+19 3.90e+16 observations 50 50 50 50 source: authors’ computation, 2022 figure i: graphical analysis of the inputs and outputs data of sampled banks from the table i, the average (mean) value for debt, dpst, laa and nprft respectively stood at 308, 4.8, 3.7 and 155. the median value of debt is 258 while that of dpst is 303. that of laa and nprft is 162 and 896 respectively. maximum value for debt, dpst, laa and nprft respectively is 3.02, 3.6, 2.4 and 861. the minimum value for debt, dpst, laa and nprft respectively stood at 0.00, 569, 338 and 518. the accompanying standard deviations are minimized at 677, 8.2, 6.1 and 282 respectively for debt, dpst, 8 laa and nprft. the skewness result of 2.7 for debt, 1.8 for dpst, 1.6 for laa and 1.5 for nprft are close to zero to indicate normal distribution of the variables. the jaqua – bera and probability results for debt, dpst, laa and nprft of 167.0 and 0.000, 47.5 and 0.000, 28.1 and 0.000 and 21.4 and 0.000 confirms the absence of outlier in the observed data. the trends of the input and output data for the ten sampled banks from 2016 to 2020 is graphically analyzed and presented in figure i test of efficiency the efficiency of ten (10) selected banks in nigeria for the period of five years (2016 to 2020) was analysed using the dea model. below is the empirical result. table i1: dea result for banks efficiency banks dmu crs_te vrs_te nirs_te scale rts fidelity dmu:13904 0.350861 0.356233 0.749240 0.984919 1.000000 fidelity dmu:5457 0.402583 0.404947 1.000000 0.994163 1.000000 fidelity dmu:17768 0.426440 0.426440 1.000000 1.000000 0.000000 fidelity dmu:22926 0.373188 0.373188 0.871944 1.000000 0.000000 fidelity dmu:28425 0.402927 0.571537 0.915395 0.704989 1.000000 fcmb dmu:4760666 0.619352 0.857116 1.000000 0.722600 1.000000 fcmb dmu:1_43e+07 0.691330 1.000000 1.000000 0.691330 1.000000 fcmb dmu:8612978 0.659896 0.946746 1.000000 0.697014 1.000000 fcmb dmu:1_50e+07 0.574587 0.797243 0.812876 0.720717 1.000000 fcmb dmu:1_77e+07 1.000000 1.000000 1.000000 1.000000 0.000000 access dmu:6_59e+07 0.657090 0.984635 0.994905 0.667344 1.000000 access dmu:6_17e+07 0.487936 0.998567 1.000000 0.488636 1.000000 access dmu:5_13e+07 0.472401 1.000000 1.000000 0.472401 1.000000 access dmu:7_36e+07 0.475607 1.000000 1.000000 0.475607 1.000000 access dmu:7_36e+07 0.572501 1.000000 1.000000 0.572501 1.000000 gtb dmu:5_09e+07 1.000000 1.000000 1.000000 1.000000 0.000000 gtb dmu:6_98e+07 1.000000 1.000000 1.000000 1.000000 0.000000 gtb dmu:8_04e+07 0.592958 1.000000 1.000000 0.592958 1.000000 gtb dmu:8_62e+07 1.000000 1.000000 1.000000 1.000000 0.000000 9 gtb dmu:8_50e+07 0.932825 0.997476 1.000000 0.935186 1.000000 zenith dmu:105663 0.671874 0.690155 0.766377 0.973511 1.000000 zenith dmu:124252 0.645571 0.660008 0.779896 0.978127 1.000000 zenith dmu:173791 0.421353 0.427809 0.557708 0.98490 1.000000 zenith dmu:193424 0.350014 0.355074 0.425820 0.985748 1.000000 zenith dmu:208843 0.904879 0.931476 0.904879 0.971446 1.000000 first bank dmu:15148 0.088068 0.089531 0.122201 0.983663 1.000000 first bank dmu:12243 0.090593 0.091923 0.140195 0.985532 1.000000 first bank dmu:37708 0.131445 0.133097 0.212956 0.987585 1.000000 first bank dmu:58232 0.160009 0.162138 0.209564 0.986871 1.000000 first bank dmu:73665 0.143090 0.145057 0.153304 0.986437 1.000000 union dmu:18035 0.753672 1.000000 0.753672 0.753672 1.000000 union dmu:15885 0.869028 1.000000 1.000000 0.869028 1.000000 union dmu:11239 0.689478 0.769664 1.000000 0.895816 1.000000 union dmu:18438 0.506511 0.554908 0.537657 0.912783 1.000000 union dmu:24375 0.623614 0.680409 0.658377 0.916527 1.000000 uba dmu:47642 0.353304 0.364688 0.453475 0.968783 1.000000 uba dmu:47541 0.332950 0.353580 0.595075 0.941654 1.000000 uba dmu:41396 0.268707 0.334852 0.979758 0.802466 1.000000 uba dmu:41047 0.215344 0.253597 1.000000 0.849157 1.000000 uba dmu:62750 0.233887 0.269173 1.000000 0.868909 1.000000 wema dmu:2273205 0.305108 0.583173 1.000000 0.523186 1.000000 wema dmu:2591800 0.503679 0.716702 0.901709 0.702773 1.000000 wema dmu:2301158 0.454499 0.743520 1.000000 0.611280 1.000000 wema dmu:3359259 0.448806 0.637510 0.737392 0.703998 1.000000 wema dmu:5210748 0.375987 0.501317 0.536428 0.749999 1.000000 sterling dmu:10293 0.608667 0.691014 0.643840 0.880832 1.000000 10 sterling dmu:5182 0.778693 1.000000 1.000000 0.778693 1.000000 sterling dmu:7954 0.886070 0.994757 1.000000 0.890740 1.000000 sterling dmu:9468 0.541368 0.598246 0.854204 0.904926 1.000000 sterling dmu:10163 0.638930 0.691486 0.767278 0.923995 1.000000 source: authors’ compilations and computation, 2021 with stata dea software from table 1 above, the whole technical efficiency analysis founded on the constant returns to scale (crs) show that only guarantee trust bank (gtb) and first city monument bank (fcmb) are efficient. however, gtb is more efficient as its three years out of five years considered are efficient, while fcmb is only efficient in the fifty year. the rest nine (9) banks are inefficient. the implication is that only gtb could effectively employ their input (debt and deposit) to generate adequate output (loan and advances and net profit). though, fcmb was also able to utilized their input to generate output, but not as efficient as gtb. the technical efficiency founded on the variable returns to scale (vrs) shows that fcmb is efficient in second and fifty years, access bank is efficient in the third, fourth and fifth year, gtb is efficient in all the years except in the fifth year, union bank is efficient only in the first and second year, while sterling bank is only efficient in the second year. the result shows that five banks are efficient, whereas the other five banks are inefficient. two banks (gtb and access bank) out of the five (5) efficient banks considered are more efficient. however, the result denotes that fcmb, gtb, access bank, union bank and sterling are technically efficient, which implies that the five banks are able to employ their input variables to generate the desired output variables. thus, other five banks (fidelity, zenith, first bank, uba and wema) underutilized their resources (input) to generate the desired result (output). returns to scale efficiency (rts) is the disparity or variation in output, which is the efficiency from a proportional upsurge of all the input. it also describes what happen to long run returns when the scale of production increases, as all input level comprising physical asset usage are variable. hence, the return to scale efficiency result shows that all the banks are efficient. the implication is that all the banks have the capacity to convert variable inputs to desired output in the long run. the study examines the efficiency of banks in nigeria employing a sample of ten (10) selected banks for the period of five (5) years using the data envelopment analysis (dea) approach. the efficiency scores modes of crs, vrs and rts efficiency were adopted. the findings of this study reveal that not all the banks were significantly efficient. the result of constant return to scale (crs) technical efficiency revealed that only gtb and fcmb were significantly efficient for the period considered. the variable return to scale (vrs) result shows that five banks (fcmb, gtb, access bank, union bank and sterling) were significantly efficient for the period considered. however, finding further revealed that the selected banks are efficient in the long run in nigeria as indicated by the return to scale (rts). the implication of our findings based on crs-te and vrs-te suggests that banks underutilized their inputs except fcmb, gtb, access bank, union bank and sterling. furthermore, the result with respect to crs, vrs and the number of years 11 considered shows that some banks were more efficient than other in this order; gtb with three (3) years of crs efficiency and four (4) years vrs efficiency. fcmb was with one (1) year of crs efficiency and two (2) years of vrs efficiency. access bank was only efficient in terms of vrs for three (3) years. similarly, union bank was only efficient in terms of vrs for two years, while sterling bank was only efficient in terms of vrs for one year. however, the implication of return to scale (rts) findings suggests efficiency for all the banks in the long run when all variable inputs are fully employed. 5. conclusion and recommendations the findings of this study denote that the sampled banks operate at different level and degree of efficiency during the period under consideration. while five banks (zenith, first bank, uba and wema) were not efficient using crs and vrs, except in the long run as indicated by the rts, the other five (5) banks (fcmb, gtb, access bank, union bank and sterling) were significantly efficient as indicated by the crs and vrs. however, all the banks were efficient in the long run as revealed by rts. therefore, the study recommends that the inefficient banks should understudy the strategies of the efficient banks and applied such strategies for them to move in the path of efficiency. besides, investors/shareholders should invest more in the efficient banks such as gtb, fcmb, access bank, union bank and sterling bank. most importantly, all selected banks should be encouraged to focus more on long term project and explore ways to be more operationally efficient and move towards innovation. regulatory authorities should ensure strict compliance to resources management policies and also formulating monetary policies that will improve the operational efficiency of banks at all time. references aigbovo, o., & igbinoba, n. o. (2019). efficiency of listed banks in selected sub-saharan africancountries: a data envelopment analysis approach, dutse journal of economics and development studies (dujeds). 8,241-261. alfradi, k. (2020). efficiency and determinants of libyan banks. archives of business research 8(4), 1-16 balkevicius, b., & art¯uras, o. (2012). influence of the financial sector on economic development. business systems and economics 2, 82–94. banya, r. & biekpe, n. (2018). banking efficiency and its determinants in selected frontier african markets. economic change and restructuring 51, 69-95. belke, a., ulrich, h., & ralph, s. (2016). regional bank efficiency and its effect on regional growth in „normal‟ and „bad‟ times. economic modelling 58, 413–26. cakar, t., koker, r., & narin, m. a. (2021). neurotic fuzzy-data envelopment analysis to forecast efficiency of bank branches. tem journal 10(4), 1751-1760. charnes, a., cooper, c., & rhodes, e. (1978). measuring the efficiency of decision making units. european journal of operational research, 2, 429-444. david, m. o., isaac, a. o., & koye, g. b. (2017). deposit money banks‟ efficiency in three years after, during and before the 2004–2005 consolidation in nigeria, the puzzle on size. banks and bank systems, 12(3), 193-203. destefanis, o., sergio, a., christian, b., & lubrano, g. l. (2014). financial development and local growth. evidence from highly disaggregated italian data. applied financial economics 24, 1605–15. diallo, b., & boubacar, c. (2018). bank efficiency and industry growth during financial crises. economic modelling 68, 11–22. emmanuel, a. b. (2020). nigeria‟s top 5 banks. nairametrics. 12 eriki, p.o., & osagie, o. (2015). determinants of performance efficiency in nigerian banking industry: a dea approach. international journal of economics, commerce and management united kingdom 3(2), 1-13. fapohunda, f.m, ogbeide, s.o. & igbinigie, o.o. (2017). empirical assessment of manufacturing companies efficiency in nigeria. data envelopment analysis (dea) approach. research journal of finance and accounting. 8 (22), 45-59. gąsiorowski, j. (2016). managing security in electronic banking legal and organisational aspects. forum scientiae oeconomia, 4(1), 123-136. grmanová, e., & ivanová, e. (2018). efficiency of banks in slovakia: measuring by dea models. journal of international studies, 11(1), 257-272. halim, k., & mevlut, m. (2013). performance measurement with data envelopment analysis in service industry: banking application. business management dynamics 3(5), 37-5. jelassi, m. m. & delhoumi, e. (2021). what explains the technical efficiency of banks in tunisia? evidence from a two-stage data envelopment analysis. financial innovation 7, 64-75 kent, m., & mahadzir, i. (2005): efficiency and productivity growth of domestic and foreign commercial banks in malaysia. cardiff business school, abe conway building cardiff university, colum road cardiff cf10 3eu, united kingdom, 2,5, 15-24. ključnikov, a., & popesko, b. (2017). export and its financing in the sme segment. case study from slovakia. journal of competitiveness, 9(1), 20-35 koutsoyiannis, a. (2003). theory of econometrics. new york, palgrave macmillan kubiszewska, k. (2017). banking concentration in the baltic and western balkan states selected issues. oeconomia copernicana, 8(1), 65-82. muhammad, t. (2011). a dea analysis of bank performance in nigeria. mpra paper no. 33560. nand, k., & archana, s. (2014). efficiency analysis of banks using dea: international journal of advance research and innovation, 1 (20) 120-126 novickyt, l., & droždz j. (2018). measuring the efficiency in the lithuanian banking sector: the dea application: int. j. financial stud. 6, 37-40. nuhiu, a., hoti, a., & bektashi, m. (2017). determinants of commercial banks profitability through analysis of financial performance indicators: evidence from kosovo, business: theory and practice, 18, 160-170. obayagbona, j., & ogbeide, d.o. (2018). data envelopment analysis and the quality of quoted companies in nigeria. journal of economics and development studies (jeds) 6(1), 57-77. osamwonyi, i.o. & imafidon, k. (2016). the technical efficiency of manufacturing companies on the nigerian stock exchange. journal of applied finance & banking, 6(1), 127-138 puriwat, w., & tripopsakul, s. (2017). the impact of e-service quality on customer satisfaction and loyalty in mobile banking usage: case study of thailand. polish journal of management studies, 15(2), 183-193. sufian, f. (2009). determinants of bank efficiency during unstable macroeconomic environment: empirical evidence from malaysia. research in international business and finance 23, 54-77. worimegbe, p., & benneth, e. (2019). the effect of bank efficiency on bank performance in deposit money banks in nigeria. european journal of applied business management, 5(3), 20-31. yao, c., liang, l., & joe, z. (2007). o.r. applications equivalence in two-stage dea approaches. european journal of operational research, 193, 600–604 13 zhang, l., sheng, z., & na, t. (2016). financial system risk tolerance capacity and economic growth: evidence from a cross-country analysis. global economic, review 45, 97– 115 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 i gusau journal of accounting and finance (gujaf) vol. 3 issue 3, october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ii © department of accounting and finance vol. 3 issue 3 october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com mailto:abupress2020@yahoo.com http://www.abupress.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos stat gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. muhammad aminu isa department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. prof. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeiza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vi advisory board members prof. kabiru isah dandago, bayero university kano,kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng mailto:elfarouk105@gmail.com http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng mailto:elfarouk105@gmail.com mailto:05@gmail.com http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ix contents capital structure and firm financial performance of listed deposit money banks in nigeria: moderating effect of board financial literacy anas idris abdulwahab, hussaini bala ph.d, mansur lubabah kwambo ph.d, & abubakar adamu 1 influence of socialization on msme compliance by mediating understanding and moderating knowledge of tax visits yayuk ngesti rahayu 17 does international financial reporting standard narrows audit expectation gap? musa ibrahim dauda, ibrahim adagye dauda, phd 35 sustainability reporting and financial performance of listed manufacturing firms in nigeria aiyesan, olabode olutola ph.d 49 firm attributes and financial reporting timeliness of listed consumer goods firms in nigeria akume james terkende, dele ikese karim 67 value relevance of accounting information for listed financial service firms in nigeria kassim busari, ishaya luka chechet ph.d, aliyu ahmed abdullahi ph.d, & ibrahim mohammed ph.d 87 nigeria economic growth and capital market development: does contributory pension scheme matter? akinwumi ayorinde olutimi, toluwa celestine oladele ph.d, &adeboye emmanuel sanmi 101 audit committee and financial reporting quality: the moderating effect of board independence of listed deposit money banks in nigeria kassim yusha’u shika, mark david kantiyok 117 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 x determinants of financial performance of listed deposit money banks in nigeria mary seansu lazarus, nurradden usman miko ph.d, & saifulahi abdullahi mazadu ph.d 140 human resource accounting and profitability of listed depositmoney banks in nigeria ahmad adamu ibrahim, ahmad rufa’i adamu, fatihu mahmud alhassan &muhammad iliyas abdulsalam 158 board independence, audit effectiveness and the quality of reported earnings in the nigerian consumer goods firms isah shittu ph.d, misbahu, abubakar muhammad 175 impact of capital structure on financial performance of listed agricultural companies in nigeria ahmad muhammad ahmad, shehu usman hassan ph.d., &abubakar abubakar 192 trade oriented money laundering and era of cybersecurity tax evasion in nigeria oluwayemi joseph kayode, adewole joseph adeyinka ph.d, adewale abass adekunle & kadiri kayode ph.d 205 effect of females in the boardroom on corporate sustainability reporting salami suleiman ph. d, olanrewaju atanda aliu ph.d 224 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 101 nigeria economic growth and capital market development: does contributory pension scheme matter? akinwumi ayorinde olutimi the administrative staff college of nigeria (ascon). ayotomiwa2011@gmail.com, +2348030431713. toluwa celestine oladele ph.d department of banking and finance university of ibadan, nigeria toluphil51@gmail.com, +2348068991525. adeboye emmanuel sanmi the administrative staff college of nigeria (ascon). wadeboye@yahoo.com, phone: +2348074285797 abstract whether the contributory pension scheme (cps) has addressed the shortage of capital for investments, the challenge of full compliance with the system and the shortage of investment outlets spurred the interest to investigate the impact of the cps on capital market development and economic growth from 2005 to 2021. secondary data was adopted for this study, and the data were extracted from the national pension commission and world development indicators. the study employed the auto-regressive distribution lag (ardl) model as an estimation technique. the empirical results show that among the proxies for gross domestic product, total pension fund asset (tpfa) was significant in both the short and long run, which showed that a 1% increase in tpfa would produce a 0.0028% increase in the gdp. also, among the proxies for capital market development, total pension fund asset (tpfa) was significant in both the short and long run, which showed that a 1% increase in tpfa would produce a 0.024% increase in capital market development. based on these findings, the study concluded that cps influenced capital market development and economic growth. consequently, this study recommended, among others, that the npc should continue to partner with relevant stakeholders such as pension fund administrators and custodians by making its investment regulations more flexible and encouraging increased pension fund investments. keywords: capital market, economic growth, contributory pension scheme, ardl. doi: https://doi.org/10.57233/gujaf.v3i3.183 1. introduction the world's pension issue was credited to the french and british governments when they made special provisions for public servants (haruna, makama & daniel, 2015). pension in nigeria public service came into being with the enactment of the mailto:ayotomiwa2011@gmail.com mailto:toluphil51@gmail.com mailto:wadeboye@yahoo.com https://doi.org/10.57233/gujaf.v3i3.183 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 102 pension ordinance of 1951 during the british colonial era with retrospect effect from january 1, 1946 (barrow, 2008; nafisat, 2015). consequently, the pension programme was modelled after the british structure, where the government or employer set aside funds to provide colonial retirement benefits to its staff. other decrees were promulgated following the 1958 pension act to cater for different categories of workers, such as the private sector, police, agencies and the armed forces (gunu &tsado, 2012). these decrees, which remained operative laws in the public service and the military pension in nigeria until 2004, were known as defined benefit (db) or pay-as-you-go scheme. the federal government supported it through financial allocation, and the pension division of the office of the head of service of the federation oversaw its administration (balogun, 2016). the old pension schemes were met with notable and decisive defeats following the attendant challenges and problems that marred their successful operations. they include lack of adequate and untimely budgetary provisions, increase in salaries and pensions, lack of effective regulation and supervision of the system, it was poorly funded or unfunded, owing to inadequate budget allocations, corruption and pension liabilities estimated to be about n2 trillion, in addition to too many private sectors not been covered by the scheme. (haruna, makama & daniel, 2015; yunusa, 2009). due to the failure of the old scheme, a new pension scheme, known as the pension reform act (pra) 2004 or contributory pension scheme (cps), became a reality to ameliorate the inadequacies of the old pension scheme thereby gearing the economy towards growth (farayibi, 2015). it established a uniform pension system for both the public and private sectors, respectively. it also made it mandatory for employers and employees of both private and public sectors to contribute to employees' retirement benefits, coupled with establishing an agency to regulate all pension matters in the country (asekunowo, 2009; gunu & tsado, 2012). the cps is relevant to nigeria's capital market development and economic growth by growing its pension assets from n649.92 billion in 2006 to n13.42 trillion in december 2021 (pencom, 2022). therefore, it is credible that the introduction of cps could serve as a tool for realising savings mobilisation goals, contribute to the development of the capital markest and impacting positively on the economic growth (price waterhouse coopers, 2016). however, a significant concern is whether the cps has achieved the above milestones on the one hand, and on the other hand, whether it has significantly gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 103 impacted the nation's domestic capital market and economic growth respectively. consequently, there are still questions on whether the cps introduction has addressed the scarcity of funds for long-term investments in nigeria and whether this fund as gone a long way in impacting the capital market and eventually engendering economic growth. this is because many pension funds are yet being taken as government bonds (pencom, 2016). as a result, many private and public sectors are refusing the scheme (maduekwe, 2015; james, 2013; al-faki, 2006 & achimugu, ocheni & akabo, 2015). studies (balogun, 2006; ogwumike, 2008; osaze, 2000 & vitas, 2000) expressed confidence about the contributory pension scheme's potential to mobilise savings. notwithstanding, as of 2014, full compliance with the pra 2004 amended remained low. also impacting capital market development and economic growth is the shortage of investment outlets. the objectives of the pra 2004 restrict pension contributions held by the pension fund custodians and administered by pension fund administrators (pfas) to limited categories of investment outlets. this has continued to inhibit the pfa managers' investment decision-making performance (bgl report, 2010). the implication is that a large portion of pension funds contributions are left un-invested, and the consequence is that there will be a diminution in income accruing to contributors. to further worsen the above problem, is the underdevelopment of the capital market. over 70% of the total market capitalisation belongs to the top twenty companies; thus, there would be a pool of pension funds chasing a few quality investments (gunu &tsado, 2012). the pra 2004 adopted the chilean pension model with an expectation of capturing the potential of millions of contributors, making the pension industry the most potent buy-side investor in the country (bgl report, 2010). however, the reality is very different. employee and employer compliance has been a significant challenge to pra 2004. this can be due to the knowledge gap and general misconception (odia & okoye, 2012). despite the informal sector reportedly employing over 35 million nigerians, there are no strict procedures to assure compliance (nwanne, 2015). only 9.55 million contributors, or 13.70% of the 69.68 million people employed in the official and informal sectors, have cooperated with the programme. this suggests that the pra 2004 purposefully left an opportunity for the scheme's noncompliance (nbs, 2021). many studies (walker & lefort, 2002; mesike & ibiwoye, 2012; gunu & tsado, 2012; romer 2006; stiroh, 2003; iyiola, munirat & nwufo, 2012; okoro, 2014; alejandro & mark, 2016; meng & pfau, 2010) have examined contributory pension gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 104 schemes, capital market development and economic growth. they opined that the cps is a backbone for mobilising savings and, by implication, developing the domestic capital market and fostering the country's economic growth. nevertheless, their studies did not adequately consider some salient economic factors such as stock market liquidity, interest rate, exchange rate, increase in the labour force, gross capital formation and technology growth. in this regard, this study covered the above gap. following these arguments, this study investigates whether the cps is a catalyst for capital market development and economic growth. as a result, the above arguments gave rise to the following research questions: what is the contributory pension scheme's impact on the gross domestic product? to what extent does the contributory pension scheme affect the nigeria capital market? hence, to answer the research questions above, the following hypotheses were formulated: h01: contribution pension scheme has positive and significant impact on gross domestic product. h02: contribution pension scheme will lead to a significant improvement in the nigerian capital market. this study covered the period from 2005–2021. this is because the cps was enacted into nigerian law on june 25, 2004, and the licences for the administrators of pension schemes were issued on march 5, 2005. (maduekwe, 2015). the findings of this study will be useful to pension regulatory authorities and other stakeholders in their policy formulation. this study will also be a platform for future research and expanding intellectual frontiers. 2. literature review empirical evidence levine (1991) investigated growth, taxation, and stock markets. a thorough literature analysis was conducted as part of the study to highlight the role financial markets play in economic growth. the study developed an endogenous growth model to explain this association better. the study also showed that stock markets foster growth by enabling enterprises to exchange ownership without interfering with internal production processes and enabling firms to diversify their portfolios. it concluded that tax policy affects growth directly by altering investments and indirectly by changing financial contracts' incentives. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 105 catalan, wilbert, kenneh, friedman, and paddison (2000) findings showed that contractual savings institutions like pension funds cause capital market growth. furthermore, growing contractual savings sectors' potential benefits were more substantial for developing countries than developed countries. the influence of nigeria's cps on economic growth was examined by gunu and tsado (2012). findings revealed that the ratio of pension funds to total market capitalisation gradually increased marginally from 2007 to 2010, showing that the contributory pension system has improved the mobilisation of savings, which translates to economic growth. using the error correction model (ecm) technique, mesike and ibiwoye (2012) investigated whether pension reform will accelerate the growth of nigeria's financial industry. according to the performance analysis of all the factors, the reform phase produces long-term contractual savings and encourages the growth of the securities market. madukwe (2015) assessed the importance of the link between nigeria's market capitalisation (mc), ordinary local share (los) of the contributory pension plan, and pension asset under management (aum). the study additionally used a pairwise correlation model. according to the study, the contributory pension plan had no discernible influence on nigeria's capital market. it was determined that the national contributory pension scheme's money pool was invested and distributed among various assets. however, it had no appreciable impact on the expansion of the nigerian capital market throughout the period under consideration. nwanne (2015) investigated the effect of nigeria's contributory pension plan on economic development using the ordinary least square (ols) regression approach. findings showed that while pension deposits have a favourable and considerable influence on economic development, pension funds have a negative impact. it was suggested that pension funds should broaden their investment options and increase their compliance and mobilisation of participants' savings efforts. farayibi (2015) examined the impact of the functioning of the funded pension system since its beginning in 2004 on economic development in nigeria. findings showed that nigeria's commercial and governmental sectors dramatically expanded their contributions to pension funds, creating a sizable investment pool for the capital and money markets. the study found that, with prudent risk and portfolio management by pension administrators and custodians, contributory pensions might increase nigeria's gross domestic product (gdp). gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 106 edogbanya (2013) examined the impact of contributory pension scheme on nigerian economic development. the objective of this study was to examine how contributory pension scheme influence the gross domestic product (gdp) in nigeria. the main problem of the study was centred on the nature and effect of risk prevailing in the pension assets management. data were collected from both primary and secondary sources and analyzed using percentage. the research work adopted correlation analysis for testing secondary data and anova for the primary data. the result of correlation analysis using t-test revealed that contributory pension scheme (cps) has significant impact on the gdp while the result of anova revealed that risk prevalent has positive effect on the pension fund management. the researcher therefore, recommends that the pension fund administrators should invest in less risky portfolio to enhance prompt payment of pension to retirees. adeoye (2015) did an evaluation of the pension industry in nigeria. the paper assessed the success and challenges of pension industry in nigeria, as a result of various reforms that had taken place. the study made use of both primary and secondary source of data. findings from the study showed that the pension reform act (pra) 2004 make it possible for the industry to grow. moreover, the empirical evidence showed that there was a positive relationship between contributory pension scheme (cps) and gross domestic product (gdp). bijlsma, bonekamp, ewijk and haaijen (2017) in their paper; funded pensions and economic growth, analyzed the impact of funded pensions on capital markets and economic growth. they opined that if larger savings through funded pensions lead to deeper capital markets, this can be expected to have a positive effect on economic growth in particular for firms that rely on external finance. in their study, they used differential impact on firms with less or more external finance to study the effect of pension saving on economic growth. the study used data for 69 industrial sectors in 34 oecd countries for the period 2001-2010, findings from the study showed a significant impact of pension assets on growth in sectors that are more dependent on external financing. for a sector with average external dependence an increase in the pension assets to gdp ratio by one standard deviation (40 percentage points) increases growth by 0.24 percentage points. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 107 3. methodology model specification the model for this study is rooted in solow growth theory and calderon rosellmodel. the first model is based on the augmented solow growth model modified by mankiw, romer and weil (1999). model 1 the original model by mankiw et al. (1999) is stated as: in( yt )= in a0 + gt + syt – (n+g+ ð)kt 𝐿𝑡 (1) mankiw et al. (1999) modified the solow growth model by adding a0as vector, which allows the inclusion of variables of interest where ( yt ) = output per capita, a0= initial level of technology and other factors, 𝐿𝑡 gt= technological progress, g= rate of technological progress, s= rate of savings, n= growth in the labour force. λ = syt – (n+g+ ð)kt…………………………………………………….(2) in this study λ proxy capital formation in( yt )= ina0 + gt + λ…………………………………………………… (3) 𝐿𝑡 the study modified equation 3; the dependent variable becomes economic growth (ggdpp), and the vector a0is expanded to accommodate those variables of interest to the research work. the vector a0 is expanded and stated as; ina0 =β0 + β1exch + β2lnglr + β3intpfa + β4inmc + β5int ----------(4) substituting equation 4 into 3 while the dependent variable is replaced with economic growth inggdppt=β0+ β1excht + β2inglrt + β3intpfat + β4inmct + β5intt + β6ingtt + β7inλt+ εt where: ggdpp= economic growth; exch= exchange rate; glr= growth in the labour force gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 108 tpfa= total pension fund asset for the period; mc= market capitalization; int= interest rate λ = gross capital formation; and gt= technology progress. model 2 the second model, which addressed capital market development, is based on the calderon-rosell model. calderon-rossell (1991) developed a model or theory that explored capital market development's main determinants. this model is one of the most comprehensive efforts to lay the groundwork for a financial theory of the growth of capital markets. the main indicators in this approach are economic growth and stock market liquidity. the model is stated as: mcd = sml, ggdpp …………………………………………………….(6) mcd= capital market development; sml = stock market liquidity ggdpp = economic growth the model is modified to allow the inclusion of other variables of interest. thus it is stated as: mcd = β0+ β1smlt + β2inggdppt + β3intpfat+β4ingcft+ β5intt + εt-----(7) mcd= market capital development; sml=stock market liquidity; int= interest rate ggdpp= growth gdp per capita; tpfa= total pension fund asset; and gcf= gross capital formation equations 5 and 7 were used to achieve the objectives of this study β= intercept; t= time period εt = error term β1–β7&β1–β5 = parameters the study employed the autoregressive distribution log (ardl) as the estimation technique. ex-post facto was employed for the research design. ex-post facto does not give the researcher direct control of variables because their manifestations have already occurred or because they are inherently not easily manipulated. this study's time series data were obtained from various sources, including the national pension commission annual reports and world development indicators. it is expected that β1–β7&β1–β5, which are parameters in equations 5 and 7, will contribute positively to both the capital market development and economic growth. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 109 4. data analysis and interpretation of results pre-estimation test according to pesaranet al. (2001), to avoid spurious results, it is imperative to conduct pre-estimation before determining the estimation technique. therefore, the parameter estimates were subject to various econometric tests. thus, the study employed augmented dickey-fuller (adf), unit root test, auto-regressive distribution lag (ardl) bound test and error correction model (ecm) as estimation techniques. table 2: test for stationarity variable adf statistics 1% critical value p-value stationarity ∆gdpp -5.128885 -3.610453 0.0001 i(0) d(cmd) -6.890903 -3.615588 0.0000 i(1) d(exch) -6.101799 -3.615588 0.0000 i(1) dgcf -4.743700 -3.610453 0.0004 i(0) d(∆lf) -11.81686 -3.621023 0.0000 i(1) d(ptfa) -4.648318 -3.615588 0.0006 i(1) int -5.507968 -3.610453 0.0000 i(1) d(sml) -7.420748 -3.615588 0.0000 i(1) source: author's computation, 2022. augmented dickey-fuller (adf) unit root test was conducted to test the order of stationarity of the variable. table 2 shows that the variables were a combination of i(0) and i(1) the analysis of long-run relationship (ardl bounds test) since the variables of the model are the combination of the i(1) and i(0) series ardl bound test is the most suitable for testing of long-run relationship (pesaranet al.,2001) table 3: cointegration test for the two models null hypothesis: no long-run relationships exist ardl (2, 0, 0, 0, 0, 2, 1) model 1 ardl (1, 1, 1, 0, 1, 0) model 2 test statistic value test statistic value f-statistic 4.76 f-statistic 4.51 k 7 k 5 i1 bound 3.61 i1 bound 3.79 i0 bound 2.45 i0 bound 2.62 source: author's computation, 2022. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 110 significance level (5%) the result of the ardl bound test displayed in table 3 shows that the null hypothesis of no long-run relationshipat5%statistical significance level will be rejected for the two models because the value of the f-statistic in model 1(4.76) and model 2 (4.51) are more significant than the i1 bound value (3.61) and (3.79) respectively when ∆gdpp (growth gdp per capita) and cmd (capital market development) are treated as the dependent variables for model 1 and 2 respectively. accordingly, it can be concluded that there exists a long-run equilibrium relationship between the variables in the two models in this study. table 4: the result of the short-run and long-run coefficients of the ardl short-run coefficient variable coefficient std. error t-statistic prob. d(loggdp(-1)) 0.275765 0.152833 1.804353 0.0828 d(exh) -0.031267 0.010802 -2.894584 0.0076 d(loglf) 0.011251 0.001545 1.374117 0.1811 d(logptfa) 0.002995 0.001065 2.812206 0.0317 d(logcmd) 0.257795 0.092624 2.783248 0.0099 d(rintr) 0.163832 0.045511 3.599825 0.0013 d(rintr(-1)) -0.120546 0.051137 -2.357323 0.0262 d(loggcf) -0.532599 0.392904 -1.355546 0.1869 cointeq(-1) -0.706606 0.262662 -6.497347 0.0000 cointeq = _gdp (-0.0183*exh + 0.0000*labour -0.0018*ptfa + 0.1511 *cmd + 0.2560*rintr -0.0320*gcf + 2.2961 ) long run coefficients variable coefficient std. error t-statistic prob. exh -0.018321 0.006459 -2.836723 0.0087 loglf 0.004327 0.002552 1.454397 0.1578 logptfa 0.002755 0.000892 3.088565 0.0311 logcmd 0.151057 0.046045 3.280648 0.0290 rintr -0.256035 0.049424 -5.180361 0.0000 loggcf -0.032032 0.153684 -0.208428 0.8365 c 2.296100 4.271190 0.537579 0.5954 r-squared = 0.6911320; adjusted r-squared= 0.615223; f-statistic=8.423521; prob. (f-statistic) = 0.000032 selected model: (2, 0, 0, 0, 0, 2, 1) source: author's computation, 2022. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 111 with a coefficient value of 70.6%, the lag error correction term cointeq(-1), which quantifies the adjustment rate to restore long-run equilibrium in the dynamic model, has the anticipated negative sign. at a 1% significance level, it is statistically significant. the high coefficient shows that the speed of adjustment to long-run equilibrium is very high if there is a deviation in the short-run dynamic. this supports the results of the bound test f-statistic that the long-run equilibrium relationship between ∆gdp and its main determinants is attainable. table 5: the result of the short-run and long-run coefficients of the ardl short-run coefficient variable coefficient std. error t-statistic prob. d(sml) 0.098861 0.118787 0.832257 0.4121 d(rintr) 0.074750 0.027477 2.720457 0.0082 d(logptfa) 0.05286 0.012550 4.211952 0.0003 d(loggcf) 0.911894 0.643310 1.417504 0.1670 d(loggdp) 0.584271 0.234758 2.488820 0.0188 cointeq(-1) -0.895250 0.123931 -3.996182 0.0004 cointeq = cmd (0.1996*smc -0.4890*rintr + 0.0026*ptfa + 0.9119 *gcf + 2.4862*_gdp -16.1717 ) long run coefficients variable coefficient std. error t-statistic prob. sml 0.199619 0.054898 3.636179 0.0005 rintr 0.489037 0.256532 1.906336 0.0666 logptfa 0.02397 0.008749 2.739742 0.0063 loggcf 1.453925 0.562713 2.583777 0.0151 log∆gdp 2.486160 0.752409 3.304267 0.0025 c -16.171685 12.245780 -1.320592 0.1970 r-squared = 0.769667; adjusted r-squared= 0.667150; f-statistic=6.532245 prob. (f-statistic) = 0.000048 selected model: ardl (1,0,1,0,1,1) source: author's computation, 2022. with a coefficient value of 89.5%, the lag error correction term cointeq(-1), which quantifies the adjustment rate to restore long-run equilibrium in the dynamic model, has the anticipated negative sign. at a 1% significance level, it is statistically significant. the high coefficient shows that the speed of adjustment to long-run equilibrium is very high if there is a deviation in the short-run dynamic. this supports the bound test f-statistic results; the long-run equilibrium relationship between capital market development and its main determinants is attainable. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 112 residual diagnostic test serial correlation, heteroskedasticity and normality tests were conducted to ensure that models are void of biased results. the errors of these models must be serially independent. the parameter estimates will not be consistent because of the lagged value of the dependent variable that appears as regressors in the model. when a regression model includes the lagged value of the dependent variable as a regressor, using the durbin-watson d test to detect serial correlation will be biased in such a model. the result of the breusch-godfrey test from the two models shows that h0 cannot be rejected because the p-value of obs*r-squared and f-statistic in both models is more than 0.05 significant level (see table 1 from the appendix). heteroskedasticity occurs when a model's error term's variance is not constant; it varies as an independent variable. it causes the standard error estimates biased, leading to unreliable hypothesis testing. there are numerous tests to detect heteroskedasticity in the model, but the breusch-pagan-godfrey test is used in this study. from table 2 in the appendix, the results show that all the criterion (f statistic and obs* r-squared) agrees that the estimated ardl model 1(2, 0, 0, 0, 0, 2, 1)and ardl model 2 (1, 0, 1, 0, 1, 1) in this study are free from the problem of heteroskedasticity because the p-value (0.0764 and 0.1054) of model 1 and p value(0.0903 and 0.1126)of model 2 is greater than 0.05 significant. also, the jarque-berra test shows that the error terms of the estimated ardl model 1 (2, 0, 0, 0, 0, 2, 1) and ardl model 2 (1, 0, 1, 0, 1, 1) are generally distributed because their respective p-value of 0.080 and 0.43 is more than the 0.05 significance level. discussion of findings the result in table 4 shows that ∆gdp is a negative function of the exchange rate in the short-run and long-run under the period review and is statistically significant at a 1% significance level. the negative coefficient of d(exch) and exch implies that both the short and long-run rise (fall) in the exchange rate moves at a faster rate (slower rate) than the growth rate of outputs in the economy. the result reveals that at a 1% significance level, a 1% reduction in the exchange rate is expected to raise economic growth by 0.018 in the long run. changes in the labour force were insignificant in the short and long run. this could be attributed to nigeria's continuous unemployment rate rise in the previous years. the pension fund was both positively significant in the short and long run; it implies that the increase in the pension fund scheme tends to increase economic growth. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 113 economic growth is a positive function of capital market development in both the short and long run; a 1% increase in capital market development produces a 0.15% increase in economic growth (∆gdp). interest rates negatively influenced economic growth in the short-run and long-run, respectively. a 1% increase in interest rate produces a 0.25 increase in economic growth in the long run. gross capital formation was not significant both in the short-run and long-run. table 5 shows that capital market development is a negative function of stock market liquidity in the short-run and long-run under the period review. it is statistically significant at a 1% significance level. the positive coefficient of d(sml) and sml implies that both the short and long-run rise (fall) in the stock market liquidity moves at a faster rate (slower rate) than the growth rate of capital market development. the result reveals that at a 1% significance level, a 1% increase in stock market liquidity is expected to raise capital market development by 0.199% in the long run. a 1% increase in pension total fund assets produces a 0.024% increase in capital market development. this result aligns with the findings of levine (1991). gross capital formation was not significant in the short-run but became substantial in the long run; a 1% increase in gross capital formation promotes capital market development by 1.45. capital market development is a positive function of economic growth in the short-run and long-run under the period review, and it is statistically significant at 1%. a 1% increase in economic growth increases capital market development by 2.5%. 5. conclusion and recommendations the study concluded that cps influenced capital market development and economic growth based on the findings. the study further infers that an improvement in cps shall lead to an improvement in nigeria's gdp and capital market. consequently, the study recommended that the national pension commission partner with relevant stakeholders such as pension fund administrators and custodians, making its investment regulations more flexible and encouraging increased pension fund investments. also, the government should implement a mechanism to unify the contributory pension system across the federation states, both the private and public sectors. finally, periodical fund returns should be transparent enough to build the utmost trust of contributors in the scheme. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 114 references achimugu, a., ocheni, s. i.,&akubo, d. (2015). evaluation of the contribution of portfolios of the new contributory pension scheme in nigeria economy. european journal of accounting and finance research, 3(10), 331-342. adeoye, a.a., (2015). an evaluation of pension industry in nigeria. economic business alejandro, b., & mark, h. (2016). macroeconomics: a growth theory approach. al-faki, m. (2006). the nigerian capital market and socio-economic development. a paper presented at the 4th distinguished faculty of social sciences, public lectures, university of beninnigeria, 9 -16. asekunowo, v. o. (2009). funded contributory pension scheme, financial deepening and economic growth: what does evidence say so far about the nigerian economy? cbn bullion, 3(2), 32-44. balogun, a. (2006). understanding the new pension reform act (pra) 2004. cbn bullion, 33 (2), 23-29. barrow, g. (2008). pension fund administration in nigeria. abuja, nigeria: pen and pages ltd. bijlsma, m., bonekamp, j., ewijk, c., & haaijen (2017). funded pensions and economic growth, de economist, 166: 337-362 bgl pension report (2010). situating nigeria in the global pension industry. a publication of bgl group. catalan, e., wilbert, v., kenneh, w., friedman, f.,&paddison, o. (2000). public pension funding and us capital formation: a medium, run view. journal of macroeconomics 25(1), 45-47. edogbanya, a., (2013). an assessment on the impact of contributory pension scheme to nigerian economic development, global journal of management and business research, 13(2), 4660 fariyibi, a., (2016). the funded pension scheme and economic growth. retrieved from https://mpra.ub.uni-muenchen.de/73613. gunu, u., & tsado, e., (2012). contributory pension system as a tool for economic growth in nigeria. international journal of business and behavioural science, 2(8), 6 – 13. haruna, m., makama, l. l., & daniel, d., (2015). effect of contributory pension scheme on economic development of nigeria. international journal of innovative research and creative technology, 2(2), 34 – 45. iyiola, o., munirat, y., &nwufo, c. (2012). the modern portfolio theory as an investment decision tool. journal of accounting and taxation, 4(2), 19 28. https://mpra.ub.uni-muenchen.de/73613 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 115 james, i. e., (2013). evaluation of pension fund administration in nigeria. ican student journal, 17(4), 11 – 15. levine, r., (1991). stock markets, growth and tax policy. journal of finance, 46 (4), 1445 – 1465. maduekwe, o. d., (2015). effect of contributory pension scheme on capital market in nigeria. international journal of management and commerce innovations, 2(2), 202 – 211. mankiw, n. g., romer, d., & weil, d. n., (1999). a contribution to the empirics of economic growth. the quarterly journal of economics, 107(2), 407 437. meng, c.,& pfau, w. (2010). the role of pension fund in capital market development. retrieved fromwww.grips.ac.jp/r.centre/wp.../10 17. mesike, g., & ibiwoye, a., (2012). pension reform and financial market development nexus: evidence from nigeria. international journal of academic research in business and social sciences, 2(6), 123-123. nafisat, a., (2015). pension scheme in nigeria: history, problems and prospects. arabian journal of business and management review, 5(2), 1 – 6. national bureau of statistics (2021). nigerian gross domestic product report, fourth quarter. nwanne, t. f. i., (2015). impact of contributory pension scheme on economic growth in nigeria. global advanced research journal of management and business studies, 4(8) 333 – 337. odia, j. o., & okoye, a. e., (2012). pension reform in nigeria: comparison between the old and the new scheme. afro african journal of social sciences, 3(3), 271-284 ogwumike, f. o., (2008). prospects and challenges of 2004; pension reform scheme in nigeria: some lessons from chilean experience. cbn bullion, 32(2), 22-31. okoro, c., (2014). pension assets: catalyst for economic development.zenith economic quarterly journal, 34-42. osaze, b. e., (2000). the nigeria capital market in the african and global financial system. benin: consult group limited. pencom (2021). national pension commission data. retrieved from www.pension.gov.ng. pension reform act (2014). national pension commission, retrieved from www.pencom.gov.ng. http://www.grips.ac.jp/r.centre/wp.../10%20-%2017 http://www.pension.gov.ng/ http://www.pencom.gov.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 116 price waterhouse coopers (2016). pension at state government level: the new era" the nigerian pension industry 2016 strategic meeting report. retrieved fromwww.pwc.com/ng. romer, d., (2006). advanced macroeconomics (3rd edition). new york: mcgraw-hill. solow, r. m., (1956). a contribution to the theory of economic growth. quarterly journal of economics. 70(1), 65-94. stiroh, k. j. (2003). information technology and the us productivity revival: what do the industry data say? american economic review 3(1), 109 – 126. vittas, d. (2000). pension reform and capital market development: feasibility and impact preconditions. world bank development research group. working paper 24. walker, e., & lefort, f. (2002). pension reform and capital market: are there any (hard) links? social protection discussion paper, 0201, world bank. yunusa, a., (2009). an evaluation of public perception of the new pension scheme in nigeria: a study of the perception of the academic staff of ahmadu bello university, zaria. http://www.pwc.com/ng gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 117 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 118 i gusau journal of accounting and finance (gujaf) vol. 3 issue 1, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria ii © department of accounting and finance vol. 3 issue 1 april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng editorial board editor-in-chief: prof. shehu usman hassan mailto:abupress2013@gmail.com iii department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. iv prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. dr. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. v dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. vi call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7 th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ vii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ viii contents mediating effect of audit committee on board dynamic and creative accounting in nigerian firms abbas usman phd, shehu usman hassan phd 1 financial performance of banks in selected african countries: does institutional quality matter? toluwa celestine oladele phd, peters ade sanni 22 firm-specific characteristcs and financial performance of listed agricultural companies in nigeria abdulrazaq t. jimoh, john a. attah 33 effect of financial leverage on stock returns of listed companies in nigeria capital market abdulrahman abubakar, prof. ahmad bello, prof. s. a. abdullahi, dr. m. d. tahir 45 efficiency of deposit money banks in nigeria: data envelopment analysis approach mayowa gabriel ajao, phd, lucky charity omoregie, phd 57 credit appraisal, collection policy and loan performance of microfinance banks in kwara state, nigeria lukman a. o. abdulrauf 69 environmental sustainability disclosure and market value of listed oil and gas firms in nigeria munir aliyu saleh, sirajo bappah, prof. gbegi daniel orsaa, ibrahim adamu saleh phd 81 audit quality, tenure and real earnings management of listed nonfinancial firms in nigeria ahmed mohammed, ademu yahaya, musa zakariya 95 effect of ceo pay and ceo power on risk-taking of listed deposit money banks in nigeria ismaila yusuf, dr. salisu abubakar, dr. idris ahmed aliyu, dr. (mrs) aneitie charles dikki 104 nexus between taxation and foreign direct investment in nigeria daniel ayegbeni ulokoaga, esther ikavbo evbayiro-osagie (mrs), ph. d 115 working capital management and profitability of listed consumer and industrial goods companies in nigeria kwasau ntyak leah, samuel eniola agbi phd, lateef olumide mustapha phd 125 value relevance of earnings and book value: a comparative analysis between big4 and non-big4 audited listed firms in nigeria abdu abubakar, ishaya luka chechet phd, muazu saidu badara phd, yunusa nasiru phd 136 ix value relevance of international financial reporting standard 4 (ifrs 4) of listed nigerian insurance firms mariya mohammed hafiz, muhammad mustapha bagudo phd, salisu abubakar phd 145 determinants of audit fees of listed insurance companies in nigeria sagir lawal, phd, mohammed ibrahim, phd 158 taxation and social services: evidence from nigeria adegbite, tajudeen adejare, phd, abdussamad, olarinde 171 ownership structure and financial performance of quoted mortgage banks in nigeria awotundun, d. a., phd, jinadu, m. y. b., fakunmoju, s. k., phd. 183 capital structure and profitability of listed deposit money banks in nigeria rahji ohize ibrahim, kamaldeen ibraheem nageri, phd, abdullai agbaje salami, phd 194 1 value relevance of international financial reporting standard four of listed nigerian insurance firms mariya mohammed hafiz department of accounting ahmadu bello university, zaria mariyaummi@gmail.com muhammad mustapha bagudo phd department of accounting ahmadu bello university, zaria mmbagudo@yahoo.com salisu abubakar phd department of accounting ahmadu bello university, zaria drsalisua@gmail.com abstract there is growing concern among regulators and investors over the depreciation in the value of listed insurance firms in nigeria. the study examines the value relevance of the information content of ifrs 4: insurance contracts disclosure of listed insurance firms in nigeria for the period 2012 to 2020. it further compares value relevance of accounting numbers, with high ifrs 4 disclosures and those with lower disclosures. the study adopted correlational research design. the population for the study consisted of all the 26 insurance firms listed on the nigerian stock exchange as at 31 st december 2020, with a sample size of 15 firms. the ohlson price model was adopted for the study. using robust ordinary least square regression, the study found ifrs 4 disclosures to be value relevant. also, eps of insurance firms with high compliance with ifrs 4 is not more value relevant than that of firms with low compliance with ifrs 4, bvps of insurance firms with high compliance with ifrs 4 is more value relevant than that of firms with low compliance with ifrs 4. overall, findings from the study strengthen the position that ifrs improves the quality of accounting information in annual reports. furthermore, the study recommends among others that management of insurance firms should work towards improved compliance with ifrs 4 as this would boost investor confidence thereby improving their performance in the stock market. keywords: accounting information, ifrs 4, ohlson model, value relevance, 1. introduction enhancements in accounting standards have been regarded as an essential mainstay of many economic changes targeted at ensuring a more efficient operation of capital markets alfaraih (2009). the goal of unifying financial reporting practices is geared toward effective financial integration across borders. international financial reporting standards (ifrs) are said to have enhanced financial integration by ensuring that in the field of financial reporting, majority of the countries in the world both developed and developing are speaking the same language. the adoption of international financial reporting standards has been upheld as a step to improve financial reporting practices and accounting information specifically to encourage efficient capital markets (bolibok, 2014). unifying the financial reporting fundamental concepts and methodologies will serve as a roadmap for providing relevant and reliable mailto:mariyaummi@gmail.com mailto:mmbagudo@yahoo.com 2 accounting information. this is because investors need high-quality accounting information to boost their confidence in both local and international markets (nobes & parker, 2008). value relevance signifies the ability to describe stock market action such as stock price reaction to information disclosed in companies’ financial statements (alkali & lode, 2016). the subject of value relevance of accounting information is a prominent issue as it contributes greatly towards aiding investors in predicting stock prices. value relevance refers to the power of accounting variables such as earnings and book values in determining the market prices of shares (barizah & bakar, 2011). in 2004, the iasb issued ifrs 4 phase i which became operational in 2005 as an interim guide to insurance contracts with full standards enclosed in ifrs 17 to take effect in 2023. ifrs 4, insurance contracts consolidates all the requirements for the insurance contract disclosures including reinsurance contracts issued and held by insurance firms except for others covered by other standards. ifrs 4 is aimed at improving financial reporting on insurance contract by insurers and ensuring that insurance companies disclose information making clear the amounts in an insurer's statements resulting from insurance contracts, as well as the amount, timing and uncertainty of the future cash flows from insurance contracts to help users to understand the financial statements (ifrs 4). ifrs adoption in the insurance sector is geared towards ensuring that financial reports align with global best practice. however, the levels of compliance with ifrs disclosure requirements, regardless of assertions by most firms that their financial statements conform, fluctuate across firms. auditors also often fail to express opinion regarding ifrs compliance or non-compliance (onyekwelu & ubesie, 2016). according to pricewaterhousecoopers, (2015) nigerian insurance industry is also fraught by weak regulation and enforcement mechanisms. this illustrates the need for the industry and professional bodies to step up efforts to mitigate the challenges leading to the sector's poor performance (oji, 2019). concerns have also been raised by regulators and investors over the depreciation in the value of listed insurance firms. the problems in the sector were attributed to weak regulation, low insurance penetration in the country as well as certain poor business practices (oji, 2018). also, ifrs 4: insurance contracts, has been criticized by auditors, practitioners and financial analysts as it allows the insurance companies to use old parameters in calculating their financial outcomes and positions while they can also recognize profit when their insurance coverage is not yet provided. further criticism also rests on invisibility of real profit drivers (hogendoorn, 2018). studies have been conducted on compliance with ifrs and value relevance both in advanced and developing countries. for example; adeyemo, et al. (2017); alade, (2018); elbakry, et al. (2017); nijam and jahfer (2018) odoemelam, et al. (2019) umoren, et al. (2018); and so forth provided empirical evidence on ifrs adoption and value relevance focusing largely on comparing ifrs accounting numbers and those before ifrs adoption. however, with regards to ifrs 4: insurance contracts and value relevance of accounting information, few studies have been conducted such as the study by wu and hsu (2011) which focused on taiwan, london and euromarkets. to the best of the researcher’s knowledge no study has examined the value relevance of ifrs 4 disclosure requirements and further examined how variations in levels of these disclosures among firms affect the value relevance of their related accounting numbers. in line with the issues highlighted in the sector and gaps identified, the need to examine the value relevance of accounting information, specifically information required under ifrs 4 which is particularly exclusive to the sector cannot be over 3 emphasized. this study seeks to expand the pool of literature on value relevance by exploring a sector which has hitherto not been given enough attention in extant literature. 2. literature review the usefulness of accounting information to investors and other stakeholders in decision making has been studied extensively in the accounting research literature. since the work of ball and brown (1968) which found that financial information is correlated with market value of firms, the subject has gained increased popularity among researchers resulting in a large body of literature on the subject. these studies determine whether or not specific accounting information (most commonly numbers) are used by individuals in determining the market value of equity (reflected in stock prices) of a reporting entity. the ability of the accounting numbers to influence stock prices is what is termed in the accounting literature as the value relevance of accounting information. information presented in financial statements is said to be value relevant if it is able to capture and summarize firm value (kargin, 2013). since the objective of financial reporting is to provide information about an entity that is useful to a wide range of users in making decisions, for this information to be useful, it must be relevant. financial information is said to be relevant if it is capable of influencing the decisions of users. in this regard, the ability of financial statements to effectively guide investors in their investment decisions depends largely on whether or not the information they contain is relevant, value relevance implies the ability of the information contained in financial statements to explain stock market measures (umoren & enang, 2015). 2.1 ifrs and value relevance of accounting information since its inception, ifrs has garnered a lot of attention from researchers, this has resulted in a large body of literature on the subject. in conducting this study, some of these have been consulted. in a similar study in nigeria, bagudo (2016) linked the value relevance of accounting numbers under ifrs with those under nigerian sas. the study further examined how compliance with ifrs disclosures affected the information content of the ifrs accounting numbers. employing both the price and return models, the study found ifrs accounting numbers to be more value relevant than those of nigerian sas. the study also found that compliance with ifrs disclosures enhanced the information content of the accounting numbers. the study covers 114 companies listed on the nse across different sectors, however the period of the study is limited to the years 2009 – 2014; including only two years after the adoption of ifrs in nigeria. the study was not specifically conducted on insurance sector and the results cannot be conveniently applied in insurance due to regulatory and operational disparities. alade (2018) conducted a study using nigeria. the study focused on “bottom-line items of three contents of financial statement and level of compliance with the standard”. the study used a sample of sixty-nine (69) firms based on purposive sampling technique drawn from a population of 128 quoted firms for an eight-year period from 2008 to 2015. the study used a modified ohlson price valuation model and found that ifrs adoption has substantial influence on value relevance of accounting information in income statement and statement of affairs. the study also found an overall compliance level of 91 percent. the study also found that compliance levels were value relevant. the study examined compliance with all ifrs standards across several sectors and differs from the examination of the industry-specific 4 standard this study intends to carry out. the study was not specifically conducted on insurance sector and the results cannot be conveniently applied in insurance due to regulatory and operational disparities. in another study in ghana, badu and appiah (2018) investigated the value relevance of accounting information for the period 2005 to 2014. the research found that equity earnings and book values are positively and significantly related to equity prices, and that income has played a greater role when compared to equity book values. they further confirmed that regardless of the adoption of the ifrs in ghana, the value relevance of book values and earnings had weakened considerably over the period. the study was conducted in ghana and there is the need for another study to produce findings applicable to nigeria also, nijam and jahfer (2018) examined the role of ifrs adoption on value relevance of accounting information. the study adopted ohlson (1995) price regression model to explain value relevance using eps and bvps for the period of 2010 to 2014. the study used a sample of 188 companies quoted in colombo stock exchange (sri lanka). the study employed pooled regression and confirmed that bvps and eps significantly and positively influence market price per share after ifrs adoption. rodosthenous (2017) during the early period of financial crisis experienced by greece between 2010 and 2012 studied how value relevant accounting information is. the study used ohlson model (1995) with a sample of 150 firms among the listed firms among the listed firms in greece. the study found that earnings is positively and statistically linked to share prices in period of crisis. the empirical study studied many firms cutting across many sectors of greece economy; due to heterogeneous nature of the firm the findings cannot be applicable to a particular sector like agriculture. uwuigbe et al. (2016) also conducted his study with a view to investigating the value relevance of accounting information among the listed banks in nigeria between 2010 and 2014. the study also maintained ols technique of analysis and a sample of 15 banks. the study found earnings per share to have a positive but significant relationship with share prices. the next study was conducted by sullubawa (2015) with an objective of investigating how value relevant of accounting information is among listed companies in nigeria. additionally, the study also studied the impact of ifrs on the value relevance of accounting information of nigerian listed companies. samples of 68 companies listed nse were used and the study covered 6 years (2009-2014). with 2009 and 2011 as pre-period between and 2012-2014 as post period. the study used pooled ordinary least square model to analyse the data gathered from thompson reuters data stream furthermore, the study documented that accounting information of listed companies in nigeria is value relevant by using the ohlson model. earnings was found to be positively and significantly related to market value of equity. so also, the study found value relevance of earnings to have increased in the post-adoption period. however, the study is somewhat deficient because the data used for analysis is gotten from an online data source not hand collected by the researcher from the firms’ financial statements or regulatory bodies. therefore, the reliability of the data is of doubtful authenticity alfraih and alanezi (2015) also conducted a study aimed at critically analysing the association between international financial reporting standards (ifrs) mandatory 5 disclosures compliance and the value relevance of accounting information. this association was examined within the context of listed companies in kuwait, the value relevance of financial statement information, specifically earnings was empirically examined using ohlson’s (1995) model that captures the compliance level with ifrs among the listed firms. the study took a sample of 119 listed firms and used ols technique of analysis; the results of the study show that there is statistically significant association between the compliance level with ifrs and the value relevance of earnings to investors in kuwait exchange. however, cross sectional data was used, but this study will improve on that by using panel data alfaraih (2009) examined the role of compliance with ifrs disclosure on value relevance of accounting information of listed firms in kuwait. the study made use of 16 firms that complied with ifrs for the period 1995 to 2005. the study found a high average compliance level of 72.6% for the sampled firms. findings further confirmed that compliance with ifrs disclosure positively influenced the firm values using both the price model and the return model. the study also found that value relevance of book value and earnings per share significantly declined during the ifrs period. this study also covers a period prior to ifrs adoption in nigeria and was conducted outside nigeria. wu and hsu (2011) investigated with respect to the embedded value (ev) disclosure of ifrs 4. the study examined listed insurance firms in taiwan stock exchange, london stock exchange and the euronext exchanges for the period of four (4) years from 2005 to 2008. the study used a sample 150 firms; 25 from taiwan exchange, 50 from london exchange and 75 from euronext exchange. they found an incremental role for the book value of equity in the equity value of insurance companies which indicated that the problem of accounting maladjustment in the insurance industry leads to demand for fair value accounts. tsalavoutas and dionysiou (2014) evaluated the extent of compliance with ifrs mandatory disclosures on a sample of 150 greek listed firms for 2005 financial year. they found that on average the ifrs disclosure compliance level is 75 percent. using ohlson model, they found that the beta of earning of companies with high compliance is meaningfully larger than that of firms with low compliance levels. although similar in objectives, it differs from the current intended study in terms of jurisdiction and period of examination. abu-dieh (2015) studied the role of ifrs 16 adoption on the quality of financial statements in palestine. the study analyzed a sample of 32 palestinian listed firms for the period of ten (10) years from 2003 to 2012. the study divided the firms into pre and post adoption with the adoption year as 2007. the study utilized multiple linear regression models and found evidence that eps and bv were more value relevant after ifrs adoption. similarly, the study had been published since 2015 and the data used may be obsolete hence the need for another study alashi and dumlu (2015) also conducted a study on the impact of ifrs adoption on value relevance of net income using a sample of 100 manufacturing firms listed in borsa istanbul from the period 1996 to 2013. they utilized pool, random and fixed effect regression models to measure explanatory power of earnings over weighted average of share price at announcement day. they provided evidence that value relevance of accounting information escalated after the adoption of ifrs. the study had been published since 2015 and the data used may be obsolete hence the need for another study 6 juniarti, et al (2018) evaluated the role of ifrs adoption on value relevance using the ohlson (1995) model. the study used a sample of 60 listed manufacturing firms in indonesia stock exchange (idx) from 2007 to 2014.results from their analyses showed that value relevance of accounting information increased subsequent to ifrs adoption. the study focused on manufacturing firms not insurance. the value relevance of accounting data in south korea was examined by ki, et al (2019). with a comparison of firms listed on two different markets. the study evaluated value relevance from the perspective of both individual and consolidated accounting numbers for a ten (10) year period. ifrs adoption has been shown to reduce the value of accounting information. in addition, after ifrs adoption, the value relevance of “kse” listed companies decreased while the value relevance of “kosdaq” listed companies increased. the study further concluded that ifrs enhanced comparability of financial statements. however, the study was conducted in korea; an entirely different economy signaling theory centers on information asymmetry among two parties (spence 2002), it explains how capital market participants react to information disclosures. information asymmetry occurs as a result of separation of ownership (shareholders) from management (agents). the managers as agents of the companies have direct information about the companies which the shareholders and potential investors do not have. the managers are always unwilling to make available transparent information to the investors. thus, if firms do not disclose their economic position fairly, or report false information, then information asymmetry ensues between the firm and users of its financial information. with the absence of information symmetry users of financial reports may have a distinct reaction to availability and unavailability of information. according to watson, et al (2002), asymmetries can be lessened when the party with more information signals to others. the accounting information such as book values, earnings per share and share price of a firm can be used for information purpose and it also acts as a signal to the firm’s stakeholders. the iasb provides a conceptual framework and ias/ifrs that act as guiding principles and procedures for the preparation and presentation of financial report (iasb, 2018). preparers are expected to adhere to the framework and standards to improve the credibility and decision usefulness of their accounting information thereby reducing information asymmetry. signaling theory explains that better disclosures of accounting information reduce information asymmetry leading to better signals (watson, shrives & marston 2002). as established from prior studies, ifrs adoption has increased the qualitative characteristics of financial data thereby leading to better quality signals. (atoyebi et al., der, masri and abubakari, 2018; ki, leem & yuk, 2019, temile, 2018; 2018;). 3. methodology the study adopted correlational research design using panel data from a sample of fifteen of the twenty-six (26) insurance firms listed on the nigerian stock exchange as at december 2020. the study used a filter to adjust the population and get a sample size. all insurance companies listed after 2012 were excluded, also, insurance firms that do not have complete annual reports were excluded. the study obtained secondary data from the annual reports and accounts of the listed insurance firms in nigeria and the nigerian stock exchange (nse) fact book for the period of nine (9) years from 2012 to 2020. the hypotheses formulated were tested using ohlson’s (1999) model. also, multiple regression in line with ohlson (1995) price model was employed. the information gathered was summarized using descriptive statistics and evaluated using stata version 13. 3.1 model specification and variables measurement 7 the study employed modified ohlson (1995) price model to examine the value relevance of accounting information during the period of the study. according to ohlson (1995), the value of firms’ equity can be expressed as a function of its earnings and book values as follows: share priceit = α + β1bvpsit+ β2 epsit + εit this study therefore modified the ohlson model to include level of ifrs 4: insurance contracts disclosures, which the modified model is represented as follows; share priceit = α + β1bvps+ β2 epsit + β3 cindxit + εit ……………………………… … (1) for comparison between high and low compliance with ifrs 4, the models are; share price (high)it = α + β1bvpsit+ β2 epsit + εit ………………………………...……. (2) share price (low)it = α + β1bvpsit+ β2 epsit + εit …………………………………………. (3) where, share price = market price per share, bvps = book value per share eps = earnings per share, cindx = level of ifrs 4 disclosure share price (high) = market price per share of high compliance firms share price (low) = market price per share of low compliance firms α = intercept β1β3 = coefficients of independent variables ε = error term the book value per share (bvps) was arrived at by dividing the shareholders’ fund of each firm with the number of outstanding ordinary shares in issue for each firm. earnings per share (eps) was arrived at by dividing earnings by number of outstanding ordinary shares in issue for each firm. for price per share, the study made use of the selected firms’ market share prices at exactly three months after accounting year ends. the level of disclosure provided by listed insurance firms was measured using a disclosure index. the index was adopted from that of bagudo, (2016) who constructed the index by developing a checklist based on the text of ifrs 4 to ensure that the index encompassed all of the requirements of the standard. thus, the number of items included in the current study’s index was determined by the standard itself. the resulting checklist includes 25 items spread across different categories of information. each firm’s annual report was examined for these items and an un-weighted disclosure index was calculated. high and low disclosure levels are determined relative to the mean. 4. results and discussions table 1: descriptive statistics overall high compliance low compliance n mean sd min max n mean sd min max n mean sd min max share price 135 0.623 0.533 0.2 3.05 57 0.717 0.689 0.2 3.05 78 0.553 0.373 0.2 2.63 eps 135 1.39 0.318 -1.4 1.477 57 0.283 0.372 -0.22 1.477 78 0.069 0.237 -1.4 1 bvps 135 1.424 1.421 0.286 9.77 57 1.904 1.644 0.285 7.60 78 1.07 1.2 0.298 9.77 ifrs4dx 135 0.683 0.057 0.56 0.8 source: output of summary of statistics obtained from stata 13, 2021 8 table 1 shows the descriptive statistics for all variables. the average share price of the sample insurance firms is n0.73 with a minimum and maximum of n0.21 and n 2.94 respectively. the average value of 0.73 per share is an indication that the share prices of the listed insurance firms in nigeria does not appreciate much. the results also reveal a standard deviation of 0.558 (n 0.56) indicating low variability across the firms. eps has a mean of n 1.39 and standard deviation of n0.318. the average value shows that the insurance firms are on average making earnings of 1.39 naira per share. from the value of the standard deviation, it can be deduced that the eps are not tightly clustered around the mean of data under study, invariably the insurance firm’s earnings are different from firm to firm. moreover, the minimum value is – n 1.4 and n 1.477 as maximum value thus, it has a large range of eps reading from the minimum and maximum values. the results also show that bvps has a mean of n 1.424 with a standard deviation of n1.42, which reflects that bvps values are not widely spread around the mean. the minimum and maximum are n 0.286 and n 9.77 respectively. this result shows that the average is far lower than the maximum value and minimum value implying a wide range of variation in the net asset value of listed insurance firms in nigeria. finally, the average of ifrs 4 disclosure (ifrs4dx) among sampled listed insurance firms is 68.3%, with a standard deviation of 5.8% indicating low variation in disclosure levels across the sampled firms. the minimum and maximum disclosures are 56% and 8% respectively. diagnostic tests results table 2: normality of data variables obs z prob>z shareprice(overall) 135 61.28 0.000 share price (high) 57 16.51 0.000 share price (low) 78 43.63 0.000 source: normality using stata 13, 2021 table 3: multicollinearity variables vif 1/vif eps 1.39 0.720 bvps 1.56 0.641 cindex 1.27 0.788 source: output from stata 13, 2021 table 4: heteroscedasticity test model chi 2 p-value mps(overall) 60.92 0.000 mps(high) 14.38 0.000 mps(low) 7.11 0.008 source: output from stata 13, 2021 9 before performing the final regression, the study conducted a diagnostic analysis to maintain the un-biasness of parameters as argued by (wooldridge, 2012). one classical assumption of ols regression model is that the error terms are normally distributed. the normality of the residual was tested using jacque-bera test at 5% level of significance. the residual values of all the three models revealed significant p-value of 0.000 which is less than 5% level of significance. this suggests that the residuals are not normally distributed. the multicollinearity test showed that all the vif values are less than 10 and the tolerance values are not less than 0.1. the result provides evidence that there is no indication of multicollinearity among the explanatory variables. to evaluate homoscedasticity, the study used breusch pagan / cook-weisberg test for all three models. the results revealed that all three models had a p-value of 0.000, which is significant at 1%. this implies the presence of heteroscedasticity and the null hypothesis that variance of the residuals is constant (homoscedastic) is rejected. due to the presence of heteroscedasticity, the study performed a robust regression of ordinary least squares (ols) that overcame the problem. therefore, this study reports the results of pooled robust ols. table 5: robust ols regression results variables overall high disclosure low disclosure constant (a0) 2.361(1.13) -1.04(-7.00) *** -0.4757(-0.82) eps (β1) 0.361(1.60) 0.380(2.41) * 1.314(1.85) * bvps(β2) 0.142(2.81) *** 0.354(3.26) *** 0.070(3.81) *** ifrs4dx 1.982(2.49) ** r squared 0.143 0.166 0.081 f 4.4 5.39 7.40 prob ˃ f 0.006 0.007 0.001 *** p<0.01, ** p<0.05, * p<0.1 source: stata output, 2021 as seen in table 5, the results of pooled robust ols in models 1, 2 and 3 show r 2 values of 0.143, 0.166 and 0.081 which imply that 14.3%, 16.6% and 8.1% of variations in share prices of the sampled firms in the respective models are explained jointly by the independent variables – earnings per share, book values per share and ifrs 4 disclosures (model 1) captured in the models. the results also reveal that all three models are fit and statistically significant. 4.1 value relevance of ifrs 4: insurance contracts disclosures as seen in table 5, the result of pooled robust ols in model one shows that ifrs 4 (ifrs4dx) has a positive coefficient of 1.98 and a p-value of 2.49 which is significant at 5%. this shows that increase in ifrs 4 disclosure will have positive and significant effect on share price of listed insurance firms in nigeria. this indicates that stock market prices of the listed insurance firms are influenced by corporate accounting disclosures, in this case, those required under ifrs 4 which are therefore value relevant. this is also consistent with signaling theory as ifrs are considered to be qualitative and useful for decision making. 10 4.2 value relevance of earnings as see in the table 5, although earnings per share have a positive relationship with share prices of the sampled firms, in the first model (model 1), this relationship is not statistically significant. in models 2 and 3 however, the results reveal that this relationship is statistically significant at 10%, meaning eps is value relevant. comparing the two models, eps is more value relevant in firms with lower levels of ifrs 4 disclosures (model 3) with a higher coefficient of 1.314 compared to a coefficient of 0.380 of the higher disclosure firms (model 2). this further implies that where corporate accounting disclosures such as those required under ifrs 4 are adequately provided, investors or stock market participants rely less on eps values for investment decision making – since these decisions are ultimately responsible for fluctuations in stock prices as supported by extant value relevance literature, (bagudo, 2016; kargin, 2013). 4.3 value relevance of book values results from the table 5 also reveal that book values are positively associated with share prices of listed insurance firms in nigeria. the coefficients of 0.142, 0.354 and 0.070 are all statistically significant at 1%, this strengthens the position that book values are value relevant (nijam & jahfer, 2018). comparing models 1 (high disclosure) and 2 (low disclosure), the coefficients of 0.354 and 0.070 indicate that in the sampled firms, book values are more value relevant in firms with higher disclosure than those with lower disclosures. this implies that investors – or stock market participants, pay more attention to book values of firms with higher levels of ifrs 4 disclosures in the nigerian insurance sector. 5. conclusion and recommendations the study was carried out to examine the value relevance of the information content of ifrs 4: insurance contracts disclosures of listed insurance firms in nigeria for the period 2012 to 2020. it further compared value relevance of accounting information between firms with high and those with low compliance with ifrs 4. the study found that ifrs 4 disclosures are value relevant in the nigerian insurance sector. the study also found bvps of firms with high levels of disclosure to be more value relevant than that of firms with lower levels. findings also suggest that with higher compliance with ifrs 4, eps are not more value relevant. overall findings from the study strengthen the position that stock market participants value good quality corporate accounting information for decision making. providing better quality information through enhanced disclosures as required under ifrs would greatly impact all stakeholders; potential investors would be better informed, while firms will overcome the challenges of the threats imposed by information asymmetry and weak investor confidence in the sector. these benefits will ultimately enhance the performance of insurance firms in the stock market by building confidence among potential investors. in line with findings, the study recommends that firms should improve their financial reporting practices through increased compliance with set standards and industry specific regulations. regulatory bodies should also provide clear and adequate guidelines for firms to align with best practices, as well as, regular monitoring and evaluation to ensure full compliance. this is because stakeholders cannot be properly protected without transparency which is enhanced by quality financial reporting. potential investors should also consider information in annual reports as a means of appraising firms for investment purposes. 11 improved financial reporting practices would go a long way in enhancing some of the developments needed in the nigerian insurance sector. references abu-dieh, a.m. (2015). the impact of the adoption of international financial reporting standards on the quality of financial statements in palestine. birzeit university alade, m.e. (2018). effect of international financial reporting standards adoption on value relevance of accounting information of nigerian listed firms (doctorate thesis jomo kenyatta university of agriculture and technology, kenya) alashi, m., & dumlu, t. (2015). relevancy of accounting information under ifrs at borsa istanbul (bist) for manufacturing firms. journal of economics, finance and accounting, 2(2), 152-163. alfraih, m., & alanezi, f. (2015). the value relevance of mandatory corporate disclosures: evidence from kuwait. international journal of business and finance research, 9(3), 1-18. alfaraih, m. (2009). compliance with international financial reporting standards (ifrs) and value relevance of accounting information in emerging stock markets: evidence from kuwait (doctoral thesis, queensland university of technology, australia). retrieved from http://eprints.qut.edu.au/36377/1/mishari_alfaraih's_thesis.pdf alkali, m. y., lode, n.a. (2016). relevance of accounting the value disclosures among listed nigerian firms : ifrs adoption. iranian journal of management studies (ijms) 9(4): 707–40. bagudo, m. m. (2016). compliance and value relevance of international financial reporting standards (ifrs) mandatory adoption in nigeria. doctoral thesis. malaysia. ball, r., & brown, p. (1968). an empirical evaluation of accounting income numbers. journal of accounting research(autumn), 159-178. barizah, nur, b. & abubakar. (2011). incentives for disclosure of accounting information in public sector : a literature survey.” international research journal of finance and economics ,75. bolibok, p. (2014). the impact of ifrs on the value relevance of accounting data of banks listed on the warsaw stock exchange. copernican journal of finance and accounting, 3(1), 33-43. der, b.a., masri, m.h.& abubakari, m.s. (2018). a comparative study of the value relevance of accounting information between financial andnon-financial companies listed on the ghana stock exchange. afro-asian j. finance and accounting, 8(3), 271295 elbakry, a.e. nwachukwu, j.c. abdou, h.a. & elshandidy, t. (2017). taxation comparative evidence on the value relevance of ifrs-based accounting information in germany and the uk. journal of international accounting, auditing and taxation 28, 10–30 iasb (2018). conceptual framework for financial reporting. retrieved from https://www.iasplus.com/en/standards/other/framework ionascu, m., ionascu i., sacarin, m. & minu, m. (2018). benefits of global financial reporting models for developing markets: the case of romania. plos one 13(11), https://doi.org/ 10.1371/journal.pone.0207175 juniarti, ferbiana h., novitasari1, k. & tjamdinata, w. (2018). the value relevance of ifrs adoption in indonesia. jurnal akuntansi dan keuangan, 20(1) , 13-19 doi: 10.9744/jak.20.1.13-19 issn 1411-0288 print / issn 2338-8137 online http://eprints.qut.edu.au/36377/1/mishari_alfaraih's_thesis.pdf https://www.iasplus.com/en/standards/other/framework https://doi.org/ 12 karğin, s. (2013). the impact of ifrs on the value relevance of accounting information: evidence form turkish firms. international journal of economics and finance, 5(4), 71-80. ki, d.h., leem, w.b.& yuk,j.h.(2019). the effect of ifrs adoption on the value relevanc of accounting information: evidence from south korea. investment management and financial innovation, 16(2).,http://dx.doi.org/10.21511/imfi.16(2).2019.07 naicom (2018). the tier-based minimum solvency capital model for insurance companies. retrieved fom https://www.naicom.gov.ng/docs/circulars/the%20tbmsc%20for %20insurers%20-%20insurers'comm%20-%20v2ppp%2033.pdf nobes, c. & parker, r. (2008). comparative international accounting, eleventh edition, england:pearson nijam, h.m. & jahfer, a. (2018). ifrs adoption and value relevance of accounting information: evidence from a developing country. global business review 19(6) 1– 21, doi: 10.1177/0972150918794571 http://journals.sagepub.com/home/gbr ohlson, j.a. (1995). earnings, book values, and dividends in equity valuation, contemporary accounting research, 11, 661-687. oji, h. (2018, march 8). investors worry over stagnation in insurance share prices. retrieved from: https://guardian.ng/business-services/money/investors-worry-over-stagnationin-insurance-share-prices/ oji, h. (2019, july 23). insurance stocks stagnate under harsh environment, low patronage. retrieved from: https://guardian.ng/business-services/insurance-stocks-stagnate-underharsh-environment-low-patronage/ odoemelam, n. okafor, r.g. & ofoegbu, n.g. (2019). effect of international financial reporting standard (ifrs) adoption on earnings value relevance of quoted nigerian firms. cogent business & management, 6, 1-2 https://doi.org/10.1080/23311975.2019.1643520 onyekwelu, u. l. & ubesie, m.c (2016), relevance of international financial reporting standards on accounting quality in nigeria, research journal of finance and accounting 7(15), 39-46, www.iiste.org. osinuga, d. (2016) the challenges of the nigerian insurance industry. linkedin https://www.linkedin.com/pulse/challenges-nigerian-insurance-industry-damilola-b-laciarb-uk pricewaterhousecoopers (2015). africa insurance trends. pricewatercooper, https://www.pwc.com/ng/en/ assets/pdf/nigeria-insurance-survey.pdf spence, m. (2002), 'signaling in retrospect and the informational structure of markets', american economic review, 92(3), 434-459. temile, s.o. (2018). an analysis of the effect of ifrs adoption in nigeria on the quality of published financial information, phd thesis, university of salford. umoren, a.o, & enang r.e. (2015). ifrs adoption and value relevance of financial statements of nigerian listed banks. international journal of finance and accounting 2, 4(1): 1-7 doi: 10.5923/j.ijfa.20150401.01 4(1): 1–7. umoren, a.o., akpan, p.w. & ekeria, e.v. (2018). value relevance of accounting information in nigerian listed financial companies. advances in research 16(1), 18 watson, a., shrives, p. & marston, c. (2002), 'voluntary disclosure of accounting ratios in the uk', the british accounting review, 34(4), 289-313. wu, r. c. & hsu, a.w. (2011). value relevance of embedded value and ifrs 4 insurance contracts. the geneva papers, 36, 283–303. doi:10.1057/gpp.2011.5 https://www.naicom.gov.ng/docs/circulars/the%20tbmsc%20for%20%20insurers%20-%20insurers'comm%20-%20v2ppp%2033.pdf https://www.naicom.gov.ng/docs/circulars/the%20tbmsc%20for%20%20insurers%20-%20insurers'comm%20-%20v2ppp%2033.pdf http://journals.sagepub.com/home/gbr https://guardian.ng/business-services/insurance-stocks-stagnate-under-harsh-environment-low-patronage/ https://guardian.ng/business-services/insurance-stocks-stagnate-under-harsh-environment-low-patronage/ https://www.linkedin.com/pulse/challenges-nigerian-insurance-industry-damilola-b-l-aciarb-ukhttps://www.linkedin.com/pulse/challenges-nigerian-insurance-industry-damilola-b-l-aciarb-ukhttps://www.pwc.com/ng/en/ 13 tsalavoutas, i., & dionysiou, d. (2014). value relevance of ifrs mandatory disclosure requirements. journal of applied accounting research, 15(1), 22-42 14 1 gusau journal of accounting and finance (gujaf) vol. 2 issue 4, october, 2021 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria 2 impact of board attributes on earnings quality of listed insurance companies in nigeria sabo mohammed department of accounting yusuf maitama sule university, kano sabomuhammad80@gmail.com, +2348027912454 ibrahim magaji barde professor of accounting department of accounting bayero university, kano imbarde@yahoo.com, +2348036028453 abstract this research examined the impact of board attributes on the earnings quality of nigerian listed insurance businesses. the study employed documented data from the annual reports and accounts of the sampled companies from 2009 to 2018. the population of the study is made up of all twenty-seven (27) insurance companies listed on the nigerian stock exchange, with fifteen (15) selected as the study sample. using stata version 14, the data was analyzed using descriptive statistics to obtain summary statistics for the variable, pearson correlation analysis, and the multiple regression approach. it was revealed that the size and independence of the board of directors had a significant impact on the quality of earnings. female directors and board meetings, on the other hand, have no significant influence on the earnings quality of nigerian listed insurance companies. as a result, the study concludes that board characteristics influence the earnings quality of listed nigerian insurance companies.hence, the study suggests that investors should pay more attention to companies with a large number of directors, as stipulated by the naicom code of corporate governance, which states that the minimum number of board members should be 7 and the maximum number should be 15, in order to minimize earnings manipulation. naicom should also ensure that the terms of the code are fully observed in order to improve the quality of earnings of nigeria's listed insurance companies, in order to have effective oversight by independent directors. keywords: board size, board independence, women directors, board meetings, earnings quality 1. introduction those that utilize financial reports for contracting and decision-making processes are interested in the effectiveness of financial reporting quality. this is because a company's earnings, as stated in financial statements, are a gauge of its ability to provide financial data to relevant users (hassan & farouk, 2014). the earnings information of a company is an important indicator of its financial performance. when there is less information asymmetry it means that there is enough, precise, and reliable earnings (i.e., good quality earnings) provided by the firm to the capital market, and it provides insight into its actual worth. a reliable financial report is also required by capital markets. as a result, a company's financial statements must be accurate, relevant, and free from any form of manipulation. therefore, earnings quality is a credible representation of expected profits, and stated profits will assist consumers in making wise financial decisions. finance providers, such as shareholders and debt holders, rely largely on financial statements due to limited access to managerial information. because financial reporting gives meaningful information to the organization's external parties, managers have greater incentive to manipulate earnings to their benefit (haruna, et al., 2018). as a result, financial statements must demonstrate the veracity and accuracy of financial information in order for shareholders to make informed mailto:sabomuhammad80@gmail.com mailto:imbarde@yahoo.com 3 decisions. hence, lack of precision in financial data, the shareholders and other users tend to make incorrect judgments and decisions. hence, an efficient corporate board can improve a company's poor earning quality and weak financial base. the board of directors is in responsible for supervising the actions of the company in order to fulfill its goals. they are also in charge of making sure that reported earnings are free of all significant errors and misstatements in order to achieve the firm's long-term goal of enhancing shareholder and market value. effective corporate boards, according to chi, lisic, et al., (2013), prevent managers' opportunistic behavior and minimize misleading and inaccurate reporting. therefore, the corporate governance structure set out the rights and obligations of various corporation participants, such as the board of directors, management, shareholders, and other stakeholders, as well as the rules and methods for taking decisions. it also provides the structure through which the company's goals are determined, as well as the means of achieving those goals and monitoring performance (bandiyono, 2019). the board of directors of a corporation is the highest executive body of the corporation, elected by its shareholders to represent it within the legal framework. they have such responsibilities under the companies and allied matters act 2020, and their respective articles of associat ion, as well as all other business laws and rules. it is made up of a group of individuals tasked with making longterm decisions concerning the company's future. boards of directors are in charge of making policy choices, developing strategic plans, and overseeing executive actions in order to achieve the firm's overall goals. because of the board's influence, it's critical to understand how decisions are made at the board level and whether board characteristics play a significant role in decision-making in order to achieve the firm's goals. by adopting and implementing the decisions, the board of directors should maximize the company's market value. while operating the company, the board of directors should ensure that shareholders receive long-term and consistent revenue. when conducting business, the board should pay special attention to establishing a balance between the interests of shareholders and the company's growth potential. hence, having a robust corporate board structure can offer a variety of benefits, including supporting the company in producing high-quality profitability (abubakar, 2013). therefore, the board of directors is responsible for ensuring that the reported earnings are free of managerial manipulation. it is on the basis of this that the study set to evaluate the impact board attributes on earnings quality of listed nigerian insurance companies. it is driven by the fact that most prior studies have excluded financial services corporations, particularly insurance companies, due to the industry's unique reporting requirements.for this study, board attributes are seen from board size, board independence, board meetings, and gender diversity. the companies and allied matters act (cama), cap. c20, lfn, 2020, as legislated in nigeria, provides that: "a director of a firm has a fiduciary duty to the firm and must act with honesty and integrity in all transactions with or on behalf of the firm. as such, stakeholders may have concerns about the directors' trustworthiness in their actions and responsibilities. also, according to section 282 of the cama stipulates that "every director of a company shall exercise the powers and discharge the duties of his office honestly, in good faith and the best interest of the company, and shall exercise the degree of care, diligence, and skills, which a reasonably prudent director would exercise in a comparable circumstance. 4 furthermore, directors must develop and maintain a high level of integrity, honesty, transparency, and accountability in order to satisfy stakeholders and justify their actions. similarly, section 334 of cama compels the company's directors to compile and publish financial statements for the year to the company's members at the annual general meeting. the board's duty is to provide the corporation's entrepreneurial management with a framework of prudent and effective controls that makes risk assessment and control easier. the board of directors should also set the company's strategic goals, ensure that the necessary financial and human resources are in place to achieve those goals, and assess management performance. all board members must make decisions objectively in the company's best interests to acknowledge and fulfill their duties to its shareholders and others (abdullahi, 2011). non-executive directors, for their part, should positively challenge and assist in the creation of development of strategy suggestions. they should monitor the progress report and analyze management's performance in fulfilling organization's goals and objectives. they should guarantee the integrity of financial information and financial controls, as well as the robustness and protection of risk management systems. they are in charge of deciding the proper levels of executive director salary, as well as hiring and removing executive directors when necessary. they are also in charge of ensuring the quality of the reported earnings and monitoring the quality of the information contained in financial statements. earnings are regarded as the most important piece of information that can help interested parties make decisions. because the earnings information contained in the company's annual financial statements is so important, managers will go to great lengths to generate financial statements that are attractive to both internal and external stakeholders. earnings quality is used by investors to evaluate a company and make informed judgments. as such, when investors lack access to high quality information on a company's earnings, they usually charge a high cost of capital to compensate for the risk, which may have a negative impact on the overall value of the company (leuz& verrecchia, 2004). 2.1 review of related empirical literature the impact of board attributes on the quality of earnings of nigerian conglomerate firms was investigated by haruna et al., (2018). to collect data from the audited accounts, a secondary source of data was utilised. two-step regressions were employed in order to assess the data. the results reveal that board attribute proxies have a significant impact on the earnings quality of nigerian conglomerate firms. this reveals that board features are critical in minimizing unethical managerial behavior and hence increasing earnings quality in nigerian conglomerate companies. egbunike and odum (2018) also looked into the impact of board leadership structure on the quality of earnings in nigerian industries. a secondary source of data collection was used to obtain data from the audited accounts. the data was analyzed with the use of a pooled ols regression model. the findings show that the size and composition of the board of directors have a significant positive effect on the earnings quality of nigerian manufacturing companies. also, tunji et al., (2019) investigated the impact of corporate governance on the quality of reported earnings in nigerian deposit money banks. over a ten-year period, cross-sectional data were collected from ten (10) nigerian stock exchange-listed deposit money banks (2008-2017). both descriptive and inferential statistics were used to analyze the data. as a proxy for reported 5 earnings quality, earnings predictability was utilized, while board size, board independence, and foreign directorship were proxies for corporate governance. the study discovered that board size has a positive and insignificant relationship with earnings quality; board independence has a negative but insignificant association with earnings quality; and firm size has a negative and insignificant association with earnings quality. the research was conducted in the banking industry. thus, the financial sector was utilized in this study, with a focus on nigerian insurance companies. in their work, rajeevan and ajward (2019) investigated the impact of designated corporate governance characteristics and the degree of earnings management in a sample of sri lankan public companies. a total of 70 colombo stock exchange (cse) listed companies were chosen based on their highest market capitalization from 2015 to 2017 and represented the beverage, food and tobacco, diversified, hotel and travel, manufacturing, oil palms, and health care sectors, accounting for 59.9% of the cse's total market capitalization. the study discovered a connection between board independence and earnings management that was both positive and significant. however, it could not find any significant effect of board size and meetings on earnings management. furthermore, schrawat et al. (2019) focused on the impact of corporate governance on india's earnings management practices on 1613 non-financial organizations in the indian sub-continent; they used random-effect point estimates. the data was collected between 2004 and 2018. the study looked at four different aspects of corporate governance: board size, ceo–chair duality, managerial ownership, and audit committee independence, with discretionary accruals serving as a stepping stone for determining income misappropriation. the modified jones model (dechow et al., 1995) was used to generate the results for this. the empirical findings are consistent with the corporate governance concept. the size of the board of directors, which is one of the corporate administration features, was found to have no influence on earnings management. the analysis confirms that in emerging countries, corporate governance essential have a detrimental impact on the problem of earnings manipulation. the importance of the study is heightened by the predominance of the so-called "interest conflict" between minority and majority shareholders in emerging nations like india, as opposed to between executives and proprietors. in malaysia, hashim et al. (2019) studied the link between board diversity and earnings quality in companies listed on the bursa malaysia main market. malaysia is a country having a diverse population of ethnic and cultural backgrounds, which may have a positive effect on earning quality. they also looked into whether the internal audit role was done in-house or outsourced as a measure to improve the firms' earnings quality. the earning quality of the sample companies was found to be significantly impacted by nationality, diversity, and ethnicity diversity. gender and age diversities, on the other hand, had no discernible impact on the quality of earnings. in related study, debnath et al. (2019) investigated the relationship between female board membership and real earnings management in the setting of an emerging economy in bangladesh. during the years 2000-2017, the study used a sample of 2193 firm-year observations listed on the dhaka stock exchange. the existence and proportion of female directors on the board, as well as the presence of independent female directors, are all positively associated with real earnings management, according to their research. therefore, enterprises with female directors are more likely to engage in higher degrees of earnings management, such 6 as reduced-price discounts, unfavorable lending terms, and smaller production capacities. their research also shows that companies with female directors are more likely to follow defensive financial reporting strategies and deploy more income-decreasing earnings. their colleagues in companies with lower female representation on the board, on the other hand, are significantly less likely to engage in similar activities. as a result, the permanence of female directors may be a major solution to the problem of income-increasing real earnings management. as a result, corporate governance helps to minimize real earnings management, especially when a female director is appointed to the board. al-azeez et al. (2019) investigated whether board attributes have an impact on earnings management in global oil and gas corporations. they were represented by the board characteristics of board independence, board size, board diversity, and ceo duality. this study used secondary data and quantitative research approach for one-year period. a sample of 71 companies from the top 250 was chosen. board independence has a considerable impact on earnings management reduction, according to the findings of this study. the size of the board, on the other hand, has no influence because a larger board is less efficient at monitoring it. it is more difficult for board members to oversee management when there are more members on the board, and gender diversity has a significant impact on the reduction of earnings management. in another study, olum et al. (2019) used data analysis of 152 companies listed on the tehran stock exchange from 2011 to 2016 to assess the impacts of female directors on the board of directors and the audit committee (gender diversity) on earnings quality. the archive-based method was used to collect data, and regression analysis was used to evaluate hypotheses using the unbalanced panel data method. the findings revealed that women's participation in the audit committee had a significant impact on the quality of earnings. gender diversity in the board of directors, on the other hand, had no significant effect on the company's earnings quality, according to the findings. the presence of women's representatives in management positions improves effective supervision and the eminence of financial reporting. this improves the quality of earnings by increasing the independence of the board of directors and the audit committee. in nigeria, oyebamiji (2020) examined the impact of board characteristics on the earnings quality of nigeria's public listed financial institutions. secondary data was used in the study. the population included all 16 financial firms listed on the nigerian stock exchange. the top 10 banks whose shares were regularly traded on the stock exchange were chosen using a targeted sample technique. over a ten-year period, data regarding board characteristics and earnings quality were gathered from the selected firms audited financial statements and the nigerian stock exchange fact book (2008-2017). pooled ordinary least square, fixed effect, and random effect estimation approaches were used to examine the data. the result from the study showed that board independence and board size had a positive and negative significant relationship respectively with earnings quality, while board meeting does not exhibit any statistical significance. daniel et al. (2020) investigated the impact of board size on real earnings management in nigerian listed companies. the expo facto research design was used, focusing on secondary data from the listed companies' annual reports. for the 2009-2018 financial years, a simple random sample technique was used to select 31 companies from a total of 57. the hausman test, which 7 was examined using e-views 10, was utilized to carry out this purpose, and three techniques of panel regression estimation were used: pool, fixed effect, and random effect by the hausman test. the data show that board size has no influence on earning management. the results indicated that the board of directors is a corporate governance structure that helps to prevent earnings manipulation. based on the above review, it is clear that none of these studies was conducted in the nigerian insurance companies, hence this necessitates the conduct of this study. 3. methods and techniques the main objective of this study is to examine the effect among board attributes and earnings quality of listed insurance companies in nigeria from 2009 to 2018. the firms and variables investigated in this section of the study are discussed, as well as the data distribution patterns and statistical approaches used to investigate the impact of these variables (board size, board independence, women directors, and board meetings) on earnings quality. the non-survey method was used to obtain data for this investigation. this is for the fact that the accounting data needed for this study may be found in the sampled firms published annual reports and accounts. the population of this study includes all 27 nigerian insurance companies that are publicly listed on the nigerian stock exchange. the criteria for selecting the working population were that the company had to be listed by 2009 without being delisted, and that data was available for the study period, which was 2009 to 2018. as a result, 15 companies fulfilled the criteria and were included in the sample.in order to conduct this research, multiple regressions were used. this data analysis technique is used to determine the effects of iv on the dv. past research and various studies undertaken by different scholars on the studied variables influence the choice and selection of variables. 3.2.1 variables of the study and their measurements this study used two types of variables, the dependent and the explanatory. 3.2.2 the dependent variable to measure earnings quality, this study used a cross sectional variation of the modified jones model (dechow et al. 1995 and jones 1991) using a discretionary accrual as a proxy. discretionary accruals have long been used as a proxy for earnings management. the modified jones model, according to dechow et al (1995), is the most powerful model for evaluating discretionary accruals. it is used by schrawat et al., (2019), nwoye et al., (2020), and daniel et al., (2020) to signify lower quality and vice versa. to back up their claim, fodio et al. (2013) specifically used discretionary accruals as a proxy for earnings quality in nigerian insurance firms because all of the variables in the model can be found in the firms' annual report and accounts, hence justify the use of modified jones model. discretionary accruals can be obtained as follows: da = tacc – nda tacc=nda+ da where tacc = total accruals nda = non-discretionary accruals da = discretionary accruals 8 it 0 1 it 2 it 3 4 it 5 6 it 7  taccit = a (1/assetsit -1) + a1 (δ revit – δrecit) + a2 ppeit +eit where taccit = total accruals in year t for firm i δ revit = revenues in year t less revenues in year t -1 for firm i δrecit = receivables in year t less receivables in year t -1 for firm i ppeit = gross property, plant and equipment in year t for firm i eit = error terms (residuals) in year t for firm i all variables are scaled by total assets year t-1. note eit (residuals) represents the discretionary accruals. 3.2.3 the explanatory variables this comprises the independent and control variables. the independent variable is board attributes represented by board size, board independence, board meetings and board diversity which could be measured as follows; a) independent variables i. board size (bs) is the number of directors on the board (gulzar &zongjun, 2011; gill & bigger, 2013; tahir et al. 2019; meirini, 2020; fadiri et al. 2020) ii. board independence (bi) is measured by the ratio of outside or non-executive directors to the total number of directors (hassan, 2011; mohammad, 2012; hassan et al. 2020; fadiri et al. 2020). iii. board meeting (bm) is the number of meetings held by the board within a year (ntim & osei, 2011; gill & bigger, 2013; tahir et al. 2019) iv. board diversity (bd) is the ratio of female directors to the total number of directors (dalton & dalton, 2010; ahmad et al. 2016; gull, et al 2017; charitau et al. 2017; olum et al. 2019) b) control variables i. firm size: the size of a company has a significant impact on its success. bigger corporations appear to be more profitable than smaller companies (vijayakumar &tamizhselvan 2010). the board of directors of larger enterprises has a tendency to rein in the executive directors' excesses. in this study, the natural log of total assets was used as a proxy for firm size. ii. firm age: for the purpose of this study, firm age was proxied as the number of years since listing. this is consistent with amran (2011), samaila (2014) and qasim, (2014), who proxied age as the year of listing on the stock exchanges. iii. profitability: this can be calculated by dividing net profit before interest and tax by total assets as used by saad (2010) and shehu (2014). 3.3 model specification in order to assess the impact of board attributes on earnings quality, the study adopts with little change the model used haruna et al., (2018) as follows: eq     bs where:   bi   bm   gd   prof   fs   age it it eq= earning quality bs= board size bi= board independence it it 9 bm= board meetings gd= gender diversity prof= profitability fs= firm size age = firm age β0 = intercept β1 – β9 =coefficients ԑ = error term 4. results and discussion the statistical software stata (version 14) was used to examine the relationship between the study's variables. the statistical properties of the variables in the study model are simply represented by descriptive statistics. such data can be found in table 1 below. all of the variables were gathered from the relevant information on the sampled companies' directors' reports and financial statements. 4.1 descriptive statistics table 1: descriptive statistics result variables mean std. dev. min max skewness kurtosis eq 0.094 0.087 0 0.560 1.849 8.070 bs 9.453 2.410 4 16 0.378 3.166 bi 0.655 0.112 0.380 0.91 -0.080 2.515 wd 0.133 0.117 0 0.5 0.869 3.336 bm 4.727 0.874 4 6 0.559 1.549 size 9.960 0.202 9.626 10.273 -0.070 2.040 roa 0.024 0.068 -0.099 0.126 -0.294 2.306 age 13.967 8.066 2 29 0.454 1.827 source: stata output, 2021 table 1 show that the average board size, as measured by the number of board members, was nine members, with minimum and maximum values of four and sixteen members respectively. these ratios are close to wenhoa et al. (2020) findings of 5 and 17 for chinese listed enterprises, and lower than hassan et al. (2020) findings of 3 and 15 for egyptian firms. this research demonstrates that the code of corporate governance for insurance companies (2009) rules for board membership was obeyed by most of nigerian insurance firms. on the other hand, according to the naicom code of corporate governance of nigeria, some of these companies have violated the requirement by having four (4) members on the board of directors, which is less than the minimum number of five (7), and by having sixteen (16) board members, which is more than the maximum number of fifteen (15). (2009). this indicates that some nigerian insurance businesses have failed to meet the standards of the industry's code of corporate governance (2009), which stipulated that the board should consist of no fewer than seven and no more than fifteen members. also, the average level of board independence was 66 percent, with minimum and maximum values of 38 percent and 91 percent, respectively, as shown in table 1. it means that some of the 10 industry's sampled companies did not meet the minimum requirement of having at least 60% of their board members be independent, which is below the minimum requirement; however, others have about 91 percent of their board members be independent, which is above the minimum requirement. this percentage is greater than arif's (2019) findings, which showed 22 percent and 67 percent for pakistani listed insurance companies, respectively. in addition, table 1 reveals that women directorship had a mean of 13%, indicating that on average 13% of the board members of the selected companies were women, with a minimum of 0% and a high of 50%. this is lower than the 91 percent reported by akpotor et al. (2019) in some chosen nigerian companies. according to the findings, some corporations have 100% male board members, while others have 50% female board members. the naicom code of corporate governance does not require a corporation to have women on its board of directors; however, diversity of board members is advocated. the table also reveals that, on average, the boards of the selected companies held five meetings every financial year, with values of four and six. when compared to hassan et al. (2020), who reported that the maximum number of meetings held by egyptian enterprises was 15 times, this result is lower. the standard deviation of 0.87 reveals that the number of meetings held by the firms varied over time. this indicates that nigerian insurance firms followed the naicom code of corporate governance (2009), which stipulated that the board should meet at least four times annually. 4.2 correlation result table 2 shows the correlations between the iv’s and the dv. the table depicts the relationships between all of the pairs of variables in the regression model, as well as the relationships between all of the explanatory variables and the explained variable, as well as the relationships between all of the independent variables. this provides information on the size of the independent variable pairs. table 2. spearman correlation matrix variabl es eq bs bi wd bm size roa age vif eq 1.000 bs -0.222 1.000 1.24 bi 0.120 0.048 1.000 1.15 wd -0.024 -0.268 -0.075 1.000 1.09 bm -0.122 0.247 0.281 -0.071 1.000 1.18 size -0.139 0.166 0.226 0.147 0.249 1.000 1.08 roa -0.161 -0.005 0.035 0.023 0.025 0.191 1.0000 1.30 age -0.054 0.055 0.126 0.038 0.027 0.201 0.152 1.0000 1.06 source: stata output, 2021 the correlation coefficients between the dependent variable (eq) and the explanatory variables are shown in table 2. (board size, board independence, women directorship, board meetings, size, roa, and age). the path of the association is indicated by the sign of the correlation coefficient (positive or negative). the correlation coefficient's absolute values show the strength of the association, with bigger values suggesting more significant relationships. since each variable has a perfect positive linear association with itself, the correlation coefficients on the 11 major diagonal are 1.00. the correlation coefficient between board size and eq is -0.222, as shown in table 2, which is not near to one. also, the result shows that eq correlates positively with board independence (bi) the table shows that women's directorship is negatively correlated with eq, although the relationship is weak a coefficient of -0.024, which is far from 1. the table also shows that eq correlates negatively with board meetings (bm), firm size, return on assets (roa), and age in the nigerian insurance companies, but the relationship is weak, as evident from the coefficient of -0.122, -0.139, -0.54, and -0.161, respectively. collinearity, is said to occurs when two or more predictors are correlated, and multicollinearity, which occurs when more than two independent variables or predictors are correlated, imply interdependence between the predictors or independent variables and, if large in magnitude, has a negative impact on the independent variables' predictive ability. a variance inflation factor (vif) test was used to found whether or not there was a collinearity problem, and the results showed that there was none. because the variance inflation factor (vif) test results range from a minimum of 1.06 to a high of 1.36, a vif of 5.00 is considered evidence of nonexistence of collinearity (barde 2009 and samaila 2014). as a result, the link will have no effect on the independent variables' capacity to forecast. hence this research established the absence of collinearity. 4.3 regression result a regression model's goal is to figure out how an independent variable affects a dependent variable. to assess the accuracy of the linear fit to the model, the researcher calculated the coefficient of multiple as shown in the table below: table 3: ols regression eq coefficients std. errors z p> izi bs -0.0075019 0.0031099 -2.41 0.017 bi 0.1410018 0.0659421 2.14 0.034 wd -0.0425224 0.0626560 -0.68 0.498 bm -0.0101360 0.0086090 -1.18 0.241 size -0.0341850 0.0379330 -0.90 0.369 roa -0.1885812 0.1045447 -1.80 0.073 age -0.0002428 0.0008833 -0.27 0.784 constant 0.47455530 0.3588253 1.32 0.188 r-square 11.70 adjusted r 2 07.35 probability 0.0121 source: stata output, 2021 as a proxy for earnings quality, discretionary accrual (da) was used. a negative association indicates lower earnings management, which leads to higher earning quality, and vice versa. table 3 shows that the explanatory variables (bs, bi, wd, bm, size, age, and roa) examined by the model explain 12 percent of the change in eq with a cumulative r2 of 0.117. other variables not included in the model account for about 88 percent of the variation in the 12 variable. it's also worth noting that the model is accurate (0.0121). this indicates that the entire model fits the level of variability between the dependent and explanatory variables. at a 5% level of significance, the data show a negative and significant association between board size and discretionary accruals, with a negative z value of -2.41 and a p-value of 0.017. furthermore, the negative coefficient of -0.0075 shows that increasing the board size by one person while keeping all other variables constant will improve the quality of reported earnings of nigerian listed insurance companies. this indicates that the board is monitoring the operations of the management in order to prevent earnings manipulation. it also supports the stakeholders' theory, which says the board should consist of many members as more members in the board lead to the reduction of earnings management. these findings is consistent with the findings of fodio et al. (2013), ibrahim (2013), wali (2014), lilian et al. (2016), egbunike& odum (2018), and khan et al. (2019), who discovered that board size improved the level of earnings quality. but is contrary to that of rahman & ali (2006), ahmed et al. ((2006), salihi (2014) and oyebamiji (2020), who revealed that larger board does not improve the quality of reported earnings. however, contrary to the position of schrawat et al. (2019), tunji et al. (2019), al azeez (2019), hassan et al. (2020), and daniel et al. (2020), who documented that board size does not determine earnings quality. table 3 further shows that, at a 5% level of significance, board independence, as defined by the proportion of independent directors on the board, is positively and significantly associated to discretionary accruals. with a positive coefficient of 0.1410, this is proven. unfortunately, this implies that independent directors do not monitor or manage executive directors' excesses. as a result, they are unable to defend and protect the interests of shareholders and other stakeholders. independent directors are not influenced by management and are capable of efficiently monitoring executive directors and increasing the quality of financial information provided to users (ibrahim, 2013). furthermore, the research shows that increasing the number of independent members on a board has a positive effect on the quality of earnings of nigerian insurance companies. this could be because outside members aren't involved in the company's day-to-day operations; their presence, on the other hand, could serve as an effective monitoring tool for the board, resulting in higher-quality financial reports. lilian et al. (2016), fadizilah (2017), schrawat et al. (2019), and oyebamiji et al. (2019) have all shown similar results. they discovered a link between board independence and earnings management that was both positive and significant. sukeecheep et al. (2013), fodio et al. (2013), ibrahim (2013), wali (2014), al azeez (2019), samaila (2014), egbunike& odum (2018), and hassan et al (2020) on the other hand discovered that board independence has no effect on the quality of earnings. furthermore, women's directorship has a negative and insignificant connection with discretionary accruals at the quoted insurance companies in nigeria. this suggests that board diversity has no impact on the reported earnings of nigerian insurance companies. a p-value of 0.498 and a coefficient of -0.0425, respectively, support the conclusion. this result is consistent with hashim et al. (2019) and olum et al. (2019), but not with shuaibu (2014), abubakar et al. (2017), and al azeez et al. (2019). according to the authors, board diversity has a negative and significant impact on earnings management. but hoang et al. (2014) discovered a significant positive effect of board diversity on the reported earnings quality. 13 meetings of the board have a negative but statistically insignificant effect on financial reporting quality. the coefficient of -0.0101 and the p-value of 0.241 support this conclusion. sukeecheep et al. (2013), rajeevan &ajward (2019), al-mukit&keyamoni (2019), hassan et al. (2020), and oyebamiji et al. (2020) disagree with this. this research suggests that frequently meeting boards do not make actions that increase the quality of reported earnings. they only meet to discuss matters unrelated to the reported earnings' quality. al-shammari (2010), samaila (2014), shuaibu (2014), and mustapha et al. (2010) all disagree with the findings (2019). 5. conclusions and recommendations the need of having an effective board of directors cannot over emphasized, because in corporations, the owners are usually kept distinct from the managers, even when the owners are part of the management (particularly the board of directors). the board of directors is in charge of regulating the company's operations and monitoring management's activities to ensure that the company's earnings are free of manipulation and of high quality. according to the findings, the size and independence of the board of directors have a significant impact on the earnings quality of nigerian insurance companies. however, women's directorships and board meetings have no impact on the earnings quality of publicly traded insurance companies. hence, the paper concludes that, based on the study's findings, board size is an important indicator of earnings quality, and that board attributes mechanism plays a crucial role in determining the earnings quality of nigeria's listed insurance companies. furthermore, board size is a crucial indicator of the earnings quality of listed insurance companies in nigeria, as most of the industry's companies follow the naicom code of corporate governance 2009, which requires the appointment of a minimum of four and a maximum of fifteen board members. it illustrates that having a larger board reduces earnings management operations and hence enhances the quality of earnings.as the number of independent board members grows, however, board independence has a negative impact on the quality of reported earnings. this suggests that executive directors' excesses are not monitored and controlled by independent directors. as a result, they are unable to defend and protect the interests of shareholders and other stakeholders. based on the above conclusion the study suggest that investors should pay attention to companies with a large number of directors, as per the naicom code of corporate governance, which specifies that the minimum number of board members should be 7 and the maximum number should be 15, guaranteeing that earnings manipulation is minimized. naicom shall guarantee that the terms of the code are fully observed in order to improve the quality of earnings of nigeria's listed insurance companies, in order to have effective oversight by independent directors. the research further suggests that more research be done on the same problem in a different sector or industry, and that other aspects of board structure and earnings quality attributes not included in this study be included. references abubakar, a. (2013). corporate governance and discretionary loan loss provision in deposit money banks in nigeria. ahmadu bello university, zaria: maters thesis. abubakar, i. a., rokiah, b. i., & sitraselvi, a. c. (2017). the effect of board attributes on real eranings management in nigerian financial institutions. journal of accounting, business and finance research, 1(1), 76-83. ahmad, i., ahmed, f., abid, a., & abdulaziz, a. (2016). corporate governance attributes and firm value: evidence from pakistan. research journal of finance, 7(7). 14 ahmed, k., hossain, m., & adams, m. b. (2006). the effects of board composition and board size on the informativeness of annual accounting earnings. corporate governance an international review, 14(5), 418-431. akpotor, v. a., osemwengie, o. f., & imuentinyan, e. c. (2019). corporate board diversity and au dit quality. journal of accounting, business and social sciences, 1(2), 83-100. al-mukit, d. m., & keyamoni, j. t. (2019). corporate governance and earnings management practices among listed firms: a study on post stock market crisis period in bangladesh. journal of asian business strategy, 9(1), 1-9. alshammari, a. (2010). corporate governance and earnings management in saudi listed firms. malaysia: un published maters thesis universiti utara. amran, n. a. (2011). corporate governance mechanisms and company performance: evidence from malaysian companies. international review of business research, 7(6), 101-114. arif, h. m. (2019). corporate governance and financial performance: a pragmatic investigation from insurance industry of pakistan. net journal of business management, 6(2), 8-16. bandiyono, a. (2019). the efect of good corporate governance on poltical connection on firm value. journal akuntansi, 23(3), 333-348. barde, i. m. (2009). an evaluation of accounting information disclosure in the nigerian oil marketing industry. kano: un published thesis submitted to department of accounting, bayero university. cama. (2020). companies and allied matters act. charitou, a., georgiou, i., & soteriou, a. c. (2017). corporate governance, board composition, director expertise and value: the case of qulaity excellence. multinational finance journal, 20(3), 181236. chi, w., lisic, l. l., long, x., & wang, k. (2013). do regulations limiting management influence over auditors improve audit quality: evidence from china. journal of accounting and public policy, 32(2), 176-187. dalton, d. r., & dalton, c. m. (2010). women and corporate board of directors: the promise of increased and substantive paticipation in the post-sarbanes -oxley era. business horizons, 53(3), 257-268. daniel, e. k., ameh, j., & aza, s. (2020). the effect of board size on real earnings managementof financial institution in nigeria. bingham university journal of accounting and business, 1-13. debnath, n. c., patnaik, b. c., & satpathy, i. (2019). female directorship and real earnings management in bangladesh: towards an analytical assessment. management science lteers, 9(2019), 17231740. dechow, p. m., sloan, r. g., & sweetney, a. p. (1995). detecting earnings management. accounting review, 193-225. egbunike, c. f., & odum, a. n. (2018). board leadership structure and earnings quality: evidence from quaoted manufacturing firms in nigeria. asian journal of accounting research, 3(1), 82111. fadiri, a., ramzan, s., arif, m., & shoukat, a. (2020). corporate governance and firm value: an empirical study on manufacturing companies listed on pakistan stock exchange. al-qalam, institute of islamic studies, 25(1), 227-243. fadzilah, n. m. (2017). board of directors characteristics and earnings management of family owned companies. international journal of accounting and business management, 5(2). fodio, m. i., ibikunle, j., & chiedu, v. (2013). corporate governance mechanism and reported earnings quality in nigerian insurance firm. international journal of finance and accounting, 2(5), 279286. gill, a. s., & bigger, n. (2013). the impact of corporate governance on working capital management efficiency of america manufacturing firms. managerial finance, 39(2), 116-132 gull, a. a., nekhili, m., nagati, h., & chtioui, t. (2017). beyond gender diversity: how specific attributes of female directors affect earnings management. the british accounting review, 1-2 15 gulzar, m. a., & zongjun , w. (2011). corporate governance characteristics and earnings management: emperical evidence from chinese listed firms. international journal of accounting and financial reporting, 1(1), 133-151. haruna, d., kwambo, l. m., & hassan, s. u. (2018). board characteristics and earning quality of listed conglomerates firms in nigeria. international journal of business policy and governance, 5(3), 14-37. hashim, f., ahmed, e. r., & huey, y. m. (2019). board diversity and earnings quality: examining the role of internal audit as moderator. australasian accounting, business and finance journal, 13(4), 74-91. hassan, a. e., soliman, m. m., ragab, a. a., & rageb, m. a. (2020). the effect of corporate governance mechanisms on earnings management in egyptian listed firms in stock market. international journal of scientific engineering research, 11(4), 1609-1628. hassan, s. u. (2011). corporate governance and financial reporting quality: a case study of nigerian money deposit bank. international journal of research in computer application and management, 1(26), 12-1 hassan, s., & farouk, m. (2014). firm attributes and earning quality of listed oil and gas companies in nigeria. research journal of finance and accounting, 5(17), 11 17. ibrahim, m. (2013). corporate governance mechanism and earnings quality of nigerian deposit money banks. accounting frontiers, 69. jones, j. (1991). earnings management during import relief investigations. journal of accounting, 29(2), 193-223. khan, m. a., khidmat, w. b., ullah, f., & khan, n. u. (2019). corporate governance and earnings management: the role of the board of board of directors. sarhad journal of management sciences, 5(2), 317-342. leuz, c., & verrecchia, r. e. (2004). firm's capital allocation choices, information quality and cost of capital. 25. lilian, o. n., ferry, b. g., clifford, o. o., & solomon, e. (2016). corporate governance and earnings quality of listed banks in rivers state. international journal of business and management invention, 5(7), 29-33. meirini, d. (2020). the effcet of corporate governance and reporting quality on firm value. journal of islamic accounting, 1(1), 1-16. mohammed, f. (2012). the impact of corporate governance on banks performance in nigeria. journal of emerging trends in economics and management sciences, 3(3), 257-260. mustapha, u. a., rashid, n. n., 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. national insurance commission (naicom) code of corporate governance of insurance companies 2009. 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). nwoye, c. m., anichebe, a. s., & osegbue, i. f. (2020). effect of audit quality on earnings management in insurance companies in nigeria. athens journal of business and economics, 6, 1-29. olum, m. k., barandagh, m. i., & abdi, m. (2019). the impact of gender diversity in board of directors and audit committee on earnings quality. journal of accounting knowledge, 10(1). oyebamiji, o. a. (2020). board attributes and earnings quality of listed financial firms in nigeria. journal of business management and marketing, 3(5), 38-45. qasim, a. (2014). the impact of corporate governance on firm performance: evidence from the uae. european journal of business management, 6(22), 118-124. rahman, r. a., & ali, f. h. (2006). board audit committee, culture and earnings management: malaysian evidence. managerial auditing journal, 21(7), 783-804. 16 rajeevan, s., & ajward, s. (2019). board characteristics and earnings management in sri lanka. journal of asian business and economic studies, 27(1), 1-18. saad, a. n. (2010). corporate governance and audit qualification: empirical study from saudi arabia and oman. malaysia: masters thesis. salihi, a. a. (2014). the relationship between board characteristics nd earnings management in nigerian listed companies. malaysia: un published m.sc thesis, universiti utara. samaila, i. a. (2014). corporate governance and financial reporting quality in the nigerian oil marketing industry. (unpublished doctoral thesis) bayero university, kano. sehrawat, n. k., kumar, a., lohia, n., bangal, s., & agarwal, t. (2019). impact of corporate governance and earnings management: large sample evidence from india. asian economics and financial review, 9(12), 1335-1345. shehu, m. (2014). the relationship between corporate governance and dividend payout ratio: evidencefrom malaysia. malysia: m.sc thesis. shuaibu, h. (2014). impact of board characteristics on earnings management of foods and beverages companies in nigeria. journal of accounting research, 10(2), 67-88. sukeecheep, s., yarram, s., & al-farooque, o. (2013). earnings management and board characteristics in thai listed companies. a paper presented at the international conference on business, economics and accounting. bangkok-thailand. tahir, s. h., asif, m., sarwar, r., shabir, g., & haider, k. (2019). mediation role of financial health to concomitant of corporate governance and firm value. blaymes, 12(4), 52. tunji, s. t., ifeanyi, o. p., chibuzo, o. o., & adeleye, o. r. (2019). corporate governance and reported earnings quality in deposit money banks in nigeria. international journal of business management review, 7(5), 26-37. vijayakumar, a., & tamizhselvan, p. (2010). corporate size and profitability: an emperical analysis. journal of bloomers of research, 3(1), 44-53. wali, a. b. (2014). board size, composition and financial reporting quality of listed manufacturing firms in nigeria. journal of nigerian accounting association, 16(1), 177-197. 17 impact of board attributes on earnings quality of listed insurance companies in nigeria 1. introduction 2.1 review of related empirical literature 3. methods and techniques 3.2.1 variables of the study and their measurements 3.2.2 the dependent variable 3.2.3 the explanatory variables a) independent variables b) control variables 3.3 model specification 4. results and discussion 4.1 descriptive statistics 4.2 correlation result table 2. spearman correlation matrix 4.3 regression result table 3: ols regression 5. conclusions and recommendations gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 1 corporate ownership structure and investors’ confidence of listed deposit money banks in nigeria jaafaru modibbo department of accounting ahmadu bello university, zaria +2348064363820, +2349054441984 jafarmodibbo@icloud.com ibrahim tijjani department of accounting ahmadu bello university, zaria +2348036591626, +2348119386803 muazzamtj@gmail.com abstract this paper investigates the effect of corporate ownership structure on investors’ confidence of listed deposit money banks in nigeria. the study adopted correlational research design using panel data collected from annual reports and accounts of 14 deposit money banks in nigeria that form the whole population of the study for the period of 10 years (2010-2019). descriptive statistics was used to analyze data in order to provide summary statistics for the variables. pearson’s correlation technique was employed in order to analyze and ascertain the extent of the relationship between the dependent and independent variables. the fixed effect regression results revealed that institutional investors have a positive and significant relationship with investors’ confidence. the result further shows that insider and block ownership has a negative and statistically significant relationship with investors’ confidence. and on the contrary foreign ownership has no significant relationship hence did not play any role in influencing investors’ confidence of listed deposit money banks in nigeria. based on the findings, the study recommends managers of listed deposit money banks in nigeria should give more room to institutional investors to own more shares so that the higher their interest, the more they will be willing to monitor the activities of the firms. this will enable investors to have more confidence in the firms. insider ownership should be monitored and reduced by the securities and exchange commission; this will prevent insiders from owning a substantial amount of equity which give them the freedom to act in their best interests at the detriment of other shareholders. the study further recommends managers of listed deposit money banks should ensure that their firms desist from higher levels of block holder ownerships in order to reduce ownership concentration. keywords: corporate ownership, investors’ confidence, listed deposit money banks. 1. introduction the formation of joint stock companies coupled with industrial revolution has brought about different issues of trust and accountability in the modern business mailto:jafarmodibbo@icloud.com mailto:muazzamtj@gmail.com gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 2 environment as ownership and control of corporations are separated. in the modern corporations, monetary resources pooled by investors are managed by a decision making body referred to as board of directors or as management committees. the management is expected to act in a fiduciary capacity, handle, direct, oversee and supervise the judicial usage of the joint resources of the investors to ensure quality decision making which will enable maximum shareholder wealth creation. one of the critical drivers of every economy, its financial markets and business cycle is the confidence investors have in the economy and the capital markets. investors are confident when the news about the future is appealing and the share prices in the stock market are rising. when investors’ confidence in an economy increases, investors will want to buy more consumer goods as well as invest in stocks and shares. on the other hand, when investors’ confidence decreases, consumer spending and investment tend to fall. therefore, investor’s confidence is a reflection of good firm performance and stock market price appreciation, which are summed up to shareholder wealth maximization. according to kumar and zattoni (2014), upholding this confidence is important for public firms because their growth and survival depend on the resources and funds provided by outside investors. in view of the strength of investors’ confidence, capital markets researches strongly maintain that lack of transparency and accountability as well as the problem of information asymmetry is responsible for the apparent loss of confidence in stock values (ann 2006). investments are always risky and managers and inside owners apparently have a well-versed view of which projects are likely to thrive or flop, while outside investors have no access to such information and therefore cannot differentiate between good and bad investments. one of the prerequisites for a strong capital market according to black (2001) is ensuring that minority shareholders have access to ‘reliable’ information about the value of a company’s business and also have confidence that insiders will not appropriate most or all of the value of their investment. hence, shleifer and vishny, (1997) and claessens, (2002) opined that corporate governance has a significant influence on investors’ confidence by making it difficult for self-interested managers and controlling shareholders to divert the firm’s resources to nonproductive investments. while stressing the significance for studying investor confidence, li, lai and tang (2016) pointed that investor confidence is connected with the steady and strong development of capital markets, the researchers further stressed that the formation mechanism of investor confidence is relatively complex. the seminal work of shleifer and vishny (1997) concluded that corporate gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 3 governance relates to the ways in which the shareholders of corporations guarantee themselves being paid a return on their investment. while in the same vein hansmann (2000) added that ownership structure is the hard core of corporate governance in which a firm’s “owners,” is those persons who share two prescribed rights: the right has control over the firm and the right to have a share in the firm’s profits. the ownership structure is defined by the distribution of equity with regard to votes and capital as well as the identity of the equity owners (raji 2012). furthermore, lins (2020) argued that corporate governance could assist in aligning the interest of shareholders, managers and other stakeholders via a constitutive ethical basis which will enable organizations achieve their long term strategic objectives as well as build a strong shareholder value and lay foundation for a commanding market share. based on the preceding arguments, good corporate governance will lead to a better financial performance and increase in corporate value and hence lead to an increase in investors’ confidence (newell & wilson, 2002). from these theoretical postulates on investor confidence, existing empirical studies have investigated different aspects of corporate governance in relation to investor confidence. for example, li, lai and tang (2016) found that corporate governance is positively correlated with investors’ confidence and the corporate governance level of varying industries has diverse level of impact on their investor’ confidence. additionally, there is lagged effect in investors’ confidence meaning, investors’ confidence in the previous year has a positive impact on the current year investors’ confidence. this study is motivated by many factors, one, the study is motivated by the recent needs by capital markets to enhance and improve the corporate governance status of listed companies. hence, this study focuses on the effect of corporate ownership structure on investor confidence in the deposit money banks in nigeria. the study is also motivated by the recent crises of failures and defaults in the nigerian banking industry, which eroded the confidence of investors and the general public. for instance, historical trend of nigerian banking sector revealed a series of credit and liquidity problem as well as failures of banks, which according to emeka (1997) was first started in 1930. moreover, the industry also witnessed crises in the 1990s and makes the first bail-out of 13 banks necessary by the nigerian deposits insurance corporation (ndic) and cbn. recently, nigerian banks suffered wide spread of financial crises which led to declaration of many banks as distress, and takeovers and mergers including the rescue of 8 banks through capital and liquidity injections, as well as prosecution of the banks’ chief executives (sunusi, 2012). gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 4 these problems according to soludo (2004) are as a result of poor corporate governance. this therefore call for investigation of different corporate governance aspect in order to find a lasting solution to issues of confidence in the banking sector, this study is an effort towards that. this study therefore assumes that since corporate ownership structure as one of the mechanisms of corporate governance improves the confidence of investors in a particular firm, bring about corporate accountability, strengthen the quality and reliability of public financial information as well as augment the efficiency and integrity of the stock market. the study is an attempt to find out how ownerships by institutions, insiders (managers and directors), foreigners and block-holders affect the confidence of investors in the nigerian capital markets. these forms of ownership were examined by previous literature such as lauterbach and tolkowsky (2004), achleitner, kaserer and moldenhauer (2005), mueller and spitz (2006), cornett, marcus, saunders, & tehranian (2007), karami (2008), numazu and kerman (2008), ezazi, sadeghisharif, alipour, and amjad (2011), li et al (2016), mcgraw, larsen, kahneman and schkade (2010), lee and shailer (2008), alnaser, shaban and al-zubi (2014), wu, xu and phan (2011), and du (2014) and the findings are conflicting and inconclusive, necessitating further researches on the topic. the main objective of the study is to examine the effect of corporate ownership structure on the investor confidence of listed deposit money banks in nigeria. the specific objectives of the study are; i. to evaluate the effect of institutional ownership on the investors’ confidence of listed deposit money banks in nigeria. ii. to assess the effect of insider ownership on the investors’ confidence of listed deposit money banks in nigeria. iii. to determine the effect of foreign ownership on the investors’ confidence of listed deposit money banks in nigeria. iv. to examine the effects of block ownership on the investors’ confidence of listed deposit money banks in nigeria. consequently, the following hypotheses are formulated in null form: h01: institutional ownership has no significant effect on the investors’ confidence of listed deposit money banks in nigeria. h02: insider ownership has no significant effect on the investors’ confidence of listed deposit money banks in nigeria. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 5 h03: foreign ownership has no significant effect on the investors’ confidence of listed deposit money banks in nigeria. h04: block ownership has no significant effect on the investors’ confidence of listed deposit money banks in nigeria. the study focuses on the ownership aspect of corporate governance of banks in relation to investor confidence in nigeria. the study therefore is restricted to deposit money banks listed on the floor of the nigerian stock exchange (nse) market during the accounting period 2010 to 2019. investor confidence in the context of this work refers to the aggregate investor confidence examinable in the market prices. while ownership mechanisms considered in this study are the insider ownership (managerial and directors ownership), institutional ownership, foreign ownership and block-holders. the study covers a period of 10 years (2010-2019). this study is significant and timely looking at the current growing need of solution to crises of confidence in nigerian stock market, which is associated to some corporate failures in recent times. therefore, the reminder of this paper consists of four sections. after the current section, section two is the literature review, section three is the methodology used in the study, section four is the findings and finally, section five is summary and conclusions of the study. 2. literature review and theoretical framework several empirical studies were conducted using different proxy for investor confidence, like firm performance, and market values to examine the effectiveness of corporate governance and its control mechanisms. the findings from the studies are conflicting and inconclusive necessitating the need for more studies on the topic. ho and wong (2001) carried out a study and discovered that impact of corporate governance structure could warrant effective accountability mechanism and intensify the reliability and high standard of governance information and increase nobility and efficiency of the capital market in order to enhance the confidence of investors. leora and inessa (2004) depended on governance rate of 14 emanating companies to analyze and found out the relationship between corporate governance rate and information variation. mitra and cready (2005) in addition to previous studies that examined the effect earnings management and corporate governance mechanisms found that checks by the institutional investors also assist to avert managerial exploiting reporting attitude and enhance the value of governance. their study concluded that institutional shareholders intercede and gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 6 minimize the self-serving behaviour of corporate managers in financial reporting based on a sample of 136 companies belong to the s&p 500 group and 237 belong to nons&p 500 category for the period (1991-1998). in malaysia, abdullah (2006a) studied the effect of management and nonexecutives interest on the financial irritation of firms on 86 comparable samples of distressed and non-distressed companies for a period of 1999-2001. though the study was unable to detect empirical data on the link between board independence and ceo duality on firm value, the work found significant effect of management interests on firm value at the lower and higher level of ownership. thus, abdullah (2006b) broadens abdullah (2004) work on financial performance by examining the extent to which firm’s performance, internal governance of board of directors and ownership structure determine the remuneration of directors of public listed companies in malaysian. even though the study did not discover a relationship between performance and directors’ remuneration, he finds negatively significant evidence between board independence and the extent of non-executive director’s interest with directors’ remuneration levels and put forward that the extant of these two governance mechanisms are effective in restricting the level of directors’ remuneration in malaysia. according to him malaysian institutional investors prefer short-term investment rather than long-term achievement that that make their decision to dispose their substantial shareholdings inevitably depress the market share price dramatically that support ‘myopic investor’ hypothesis. however, finding by abdullah (1999) may be arguable for recent capital market development that shows greater institutional investors’ participation as corporate monitoring. institutional investors in malaysia nowadays have become a substantial and influential constitution that plays a huge remarkable part in corporate governance to protect minority shareholder’s interest. a study by wahab, how and verhoeven (2008) discovered an evidence of a negative and significant mono-directional causality that occur from institutional ownership to performance which indicates that institutional shareholding is a determinant of poor performance in of firms but on the contrary poor performance is not a determinant of institutional ownership. furthermore, the study found that use corporate governance practice is used by institutional investors to gauge the investment decisions they take which suggest that good corporate governance practices in firms entice more institutional ownership. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 7 chung and zhang (2011) discover that when their huge amount of excess free cash flow that affects significantly level of corroboration that exist in the role institutional shareholder play in reducing the discretionary accrual and surplus free cash flow. the existence of institutional investors with sizeable number of shareholdings prevent managers from undertaking in income growing discretionary accruals when companies are having excess free cash flow, nonetheless, in the absence of free cash flow agency problems, the institutional investors do not constructively compel the management’s utilization of earnings increasing discretionary accrual. also, lauterbach and tolkowsky (2004) discover taking 144 firms as sample in israel, that tobin's q is optimized the moment votes of control group reaches 67%. this proof holds water when ownership structure is regarded as exogenous and feeble when it is regarded endogenous. kaserer and moldenhauer (2005) examine the existence of correlation between performance of firms and insider ownership. the work studies in 2003 a data of 245 firms in germany where they established a significant positive relationship between firm performance, as gauged by performance of stock price in relation to insider ownership and tobin’s q. in germany also, mueller and spitz (2006) find the impact of managerial ownership on financial outlook of small and medium enterprises with motivational hypothesis testing, in the study. for the period 1997 to 2000, a sample data of 356 firms was examined in services industry that have link with business-oriented research. the study finds a positive impact on performance of firms with managerial ownership rate, above 40 percent. cornett et al (2007) in their study examined the impact of institutional shareholders on performance using the rate of operating cashflow as a yardstick of performance big firms. the study established a positive significant impact on the ratio of operating cash flow to sales as a measure of performance by the level of institutional shareholders. karami (2008) examined the impact of institutional ownership on informational content of profit. his study assessed and gathered date in respect of supervisory role of institutional investors from the view point of how much can the informational content of reported earnings be caused by institutional ownership. in this research, the different were assessed regarding institutional owners. in an attempt examine the impact of institutional ownership on informational content firm profit two models of multiple linear regression were employed. from the outcome of date examined from of this study, the rate of ownership held by institutions reduce the information content of the reported returns on profit, thus the gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 8 rate of information of profit is increased by the extent of institutional ownership structure on one hand. numazu and kerman (2008) examined the relationship between ownership structure and performance of companied listed on stock exchange in tehran. the major theorem of the studied laid emphasis on impact of ownership structure on performance of the studied companies. panel data was examined to assess the evidence. they separated ownership structure institutional and private as two different classes of ownership where the private ownership is further slatted into three classes which managerial, corporate and outsider ownership. results from this work show that there is no positive relation between institutional ownership and firm performance on one hand and significantly positive relationship between the companies’ performance and ownership structure. it further shows a negative impact on the level of performance by the managerial shareholding in respect of private ownership. from the sample of companies, they studied, there was no empirical data showing the impact outsider investors. the 34 investors in the private ownership on the other hand proved more meaningful corporate investors possessing the major ownership in the companies. the study indicated majorly that the ownership structure and performance of the companies have a significant relation. ahmadpour and krdtbar (2008) investigate the level of impact on behavior of corporate earnings management examined by the role of monitoring tools of corporate governance in attitude of corporate earnings by management inactive members of institutional investors and that of board of directors. the data indicated that institutional shareholders and inactive managers have no meaningful part to lessen the uncommon contractual records. sadeghi sharif and bahadori (2009) study the relationship between dividend pay-out ratio and ownership structure of firms in tehran listed on the floor of stock exchange. analyses from the study indicate the existence of a positive influence on the dividend pay-out ratio (dpr) by the extent of the ownership of the greatest shareholder and also the extent of ownership of five greatest shareholders of the firm, i.e. the firms that have greater level of ownership possessed by a shareholder or by its five greater shareholders, have a more dpr, in relation to the companies whose ownership is dispersed and concentration in ownership expands the firm's dpr. also the relevance of being more institutional ownership in company’s dpr was proved. hence, at the time company’s institutional ownership grows it increases dpr. on the contrary, the dpr decreases when the individual shareholders ownership in a company grows. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 9 ezazi et al (2011) analyzed impact on share price volatility caused by ownership structure on in tehran. the results of this research indicate that the price of shares of the companies whose more percentage of shares are held by their greatest shareholders may have more volatility and the share price volatility of the companies that the more percentage of their shares is hold by individual shareholders is lower. it needs to be observed that the yardstick of members of the board of directors and institutional shareholders and that of ownership of five greater shareholders might not indicate any reason for investors interested in share price volatility. lee and shailer (2008) show that disclosure of corporate governance information might increase independence of board of directors to enhance the role of management layer and board of directors and strengthen the integrity of financial statement and in lead to an increase in the investors’ confidence. mcgraw et al. (2010) believed that the confidence in investor confidence originated from their assessment and vision of what the future holds and was as a result of bias thought that makes them positive in the anticipation of favorable return of the ventures and convinced outcome in the future and had no fear of misfortune and uncertainties of the future. li, et al (2016) select the factors of corporate governance rate to analyze and assess the impact corporate governance extent on retaining and expanding investors’ confidence from likely interested investors. the study evaluates the impact of confidence of in investors’ and the extent to which corporate governance appreciates. they selected a sample a-share companies listed in shanghai stock exchange of china from 2011-2013 is selected as the sample to analyze the panel data. the study revealed that a greater level of corporate governance leads to more confidence of investors. on the same vein, investors’ confidence is also motivated by the broader level of the market arena comes with multiple opportunities which explains the peculiarities of the market therefore, the level of meaningfulness of corporate governance extent varies by industries in respect of the perception of investors’ and their extent of confidence. however, the findings indicate a positive lag effect in the confidence of investors. li et al. (2005) also held that corporate governance with high quality could improve corporate value and bring abundant return to investors. higher corporate governance level could produce better consistency and stability for corporate operation strategy and better guarantee the investment in the future and make gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 10 investors more confident. li et al. (2012) believed from his evaluation, huge rate corporate governance was influential for reducing the dissymmetry degree of information and assisting investors to appreciate the worth of firm and reduce investment uncertainty by means of useful information disclosure. lei, wang and jin (2012) suggested that investor confidence was the product of market factors and corporate factors and the empirical result showed that stronger investor confidence was associated with higher governance quality. wu et al. (2011) examined corporate governance, investor emotion and excessive portfolio investment. the findings reveal that listed companies of our country generally participated in portfolio investment and face the challenges of excessive portfolio investment to some extent. the reason was investors in high spirit instead of imperfect corporate governance structure. part of literatures took investor confidence as an intermediate target. nabil et al. (2014) study how effective corporate governance structure improves investor confidence, it ensures corporate accountability, improves the reliability and quality of public financial information, and enhances the integrity and efficiency of the capital market. the study has covered 10 public companies in jordan. the study concluded that corporate governance in publics companies is effective in jordan because it is complying with state and federal statutes, complying with listing standards, and implementing best practices suggested by investor's activists and professional organizations. further recommendations by the research include maintaining the current level of investors' confidence and to work on developing the legal framework for corporate governance in the light of the proposed development of a conceptual framework. güner, malmendier and tate (2008) studied the benefits of having financial expertise at the organizational level of directors. the research concluded that the existence of director’s expert in financial control could affect the confidentiality of companies through the creation of more accurate information and better audited financial states. haniffa and cooke (2002) reported that firms with a higher proportion of board members with accounting and finance expertise tend to disclose more voluntary information to reflect their credibility and reputation. wagner (2008) added that during the composition of a board, a compromise must exist between independence and competence in order to create an optimally efficient group. thus, the existence of qualified directors is an indicator of the quality of published information. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 11 analysis of corporate ownership as a control mechanism can be conducted on different theoretical assumptions. one of these theories is the property right hypotheses which according to alchian (1965), firms operating in the private sector arena ought to perform better and more profitably than firms in the public sector. because in the case of government-owned firms, as shleifer and vishny (1997), point out that while they are technically controlled by the public, they are run by bureaucrats who can be thought of as having extremely concentrated control rights, but no significant cash flow rights. the property rights theorem has been tested else-where. majumdar (1998) has tested the property right theory by comparing the financial performance of state owned, private owned, and mixed state-private ownership firms and found that the most profitable firms were the private owned, followed by mixed ownership. state owned enterprises had the worst performance. many other studies like shleifer and vishny (1997), and shleifer (1998) ramaswamy (2001) have drawn similar conclusions. however, demsetz and villalonga (2001) argued that the ownership structure of a corporation should be thought of as an endogenous outcome of decisions that reflect the influence of shareholders. another theory that explains the role of ownership in corporate governance monitoring and control is the institutional theory. this theory emphasizes the influence of socio-cultural norms, beliefs and values, regulatory and judicial systems on organizational structure and behavior. according to north (1990) institutions regulate economic activities through formal and informal rules as a basis for production, exchange and distribution. in addition to these features, emerging economies are characterized by greater imperfections in the markets for capital, products and managerial talent. accordingly, the concept of ownership concentration was discovered by morck, shleifer and vishny (1988) and shleifer and vishny (1986). apparently, this has steered to the foundation of the agency theory in corporate governance, which la porta, lopez‐de‐silanes, and shleifer (1999) described in the formulation of ultimate controller; they consider voting power to be the definition of firm ownership, rooting out that most of controlling shareholders of listed firms control the firms by through pyramid structure approach and cross holding, which in most cases could lead to central agency problem. in contrary, the perception of berle and means (1932) described that spreading ownership indicates that ownership is separate from management, which, as jensen and meckling (1976) stressed, may lead to agency problems between managers and other stakeholders like shareholders and debtors. these two theories serve as theoretical frameworks that underpin the variables of the study. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 12 3. methodology, variables and model the study employed correlational research design. the reason for employing a correlational research design is that it is perfect in establishing cause and effect relation among variables. the population of this study consists of all the 14 listed deposit money banks listed on the floor of the nigerian stock exchange (nse) as at 31st december, 2019. therefore, this work examines the whole population of the study. the study adopts secondary data; financial statements of all the sampled firms for the period of 10 years (2010 – 2019) was be used to compute ratios that will be used for the variables of the study. this study employed panel multiple regression technique for data analysis. this is because regression technique analysis is effective and efficient in providing statistical estimate of the relationship or impact of one variable(s) on another variable. hence, this is in agreement with the objectives of the study which is to examine the effects of corporate ownership structure on investors’ confidence in the deposit money banks in nigeria. the study employed appropriate robustness tests which include test for heteroskedasticity, autocorrelation and multicolinearity to ensure fitness and validity of the results. hausman specification test and breusch and pagan lagrangian multiplier test for random effects were also conducted to decide between fixed and random effect results as to which is more appropriate and suitable for interpretation. in addition, data normality test has been applied; in essence, the study in this regard ensured that the results produced estimators that are best linear unbiased estimators (blue). the measurement of the variables of the study is presented in this section, as indicated by table 1 as follows; gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 13 table 1: variables definition and measurement variables definition/measurements dependent variable investor confidence (invc) is defined as the price-to-book (p/b) ratio consistent with li et al., (2016) independent variables institutional ownership (insow) is measured by the proportion of equity capital own by institutions at the end of the accounting year. insider ownership (indow) is measured by the proportion of equity shares own by insiders (directors and managers) at the end of accounting period. foreign ownership (frnow) is measured by the proportion of equity capital own by non-nigerian citizens and institutions at the end of the accounting year. block ownership (blcow) is measured by the proportion of 5% and above equity capital ownership at the end of the accounting year. control variables board independence (bind) is measured by the proportion of outside/nonexecutive/independent directors to total directors at the end of accounting period. source: authors compilation, 2020 in order to estimate the effect of ownership structure on investor confidence, the following econometric models will be used: invcit = β0 + β1insowit + β2indowit + β3frnowit+ β4blcowit + β5bindit + εit where: invcit = the p/b ratio of bank i in year t. insowit = institutional ownership in bank i in year t. indowit = insider ownership of bank i in year t. frnowit = foreign ownership of bank i in year t. blcowit = block ownership of bank i in year t. bindit = board independence of bank i in year t. intercept = β0; β1,β7 = coefficients εit = stochastic error term/residual gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 14 4. findings table 2 below presents the summary of the descriptive statistics which is the minimum, maximum, mean and standard deviation of the variables. table 2: descriptive statistics variable minimum maximum mean std. dev. invc insow indow frnow blcow bind 0.3619 0.0000 0.1504 0.0383 0.0000 0.0000 0.8540 4.2155 15.4455 0.8214 4.4342 1.0000 0.1202 1.1432 3.3421 0.1274 0.7392 0.6863 0.0514 0.4625 2.2394 0.7322 0.5288 0.3012 source: output of stata, 2020 table 2 above presents the detailed account of the descriptive statistics of the dependent and independent variables. from the table, investors’ confidence has a minimum value of 0.3619 and 0.8540 as maximum value. the variable also has a mean value of 0.1202 and a standard deviation of 0.0514 that showed that there is relative discrepancy in investors’ confidence in different years in the sampled deposit money banks. it can also be seen from the minimum value that a lot of investors have lower confidence. this may be because of the corporate failures that rocked the banking industry in recent times and that have damaged investor interests. the table also showed that the minimum and maximum values of institutional ownership are 0.0000 and 4.2155 respectively, and the variable has 1.1432 as mean and 0.46.32 as standard deviation. the mean indicates that on average, institutional ownership in listed deposit money banks in nigeria is 1.1432% of the equity and the standard deviation shows that the data deviate from the mean by 46.25%. the minimum value of insider ownership is 0.1504 and the maximum value 15.4455 while the mean and the standard deviation is 3.3431 and 2.2394. the mean value indicates that on average, 3.3421% of the shares of listed deposit money banks in nigeria is held by insider owners with a maximum of 15.4455%. foreign ownership has a minimum value of 0.0383 and a maximum value of 0.8214. the mean percentage of the variable is 0.1274 implying that 12.74% of the share ownership in the listed deposit money banks in nigeria is held by shareholders and the standard deviation shows that the data deviate from the mean gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 15 by 73.22%. the mean value of block holder ownership is 73.92% with minimum and maximum values of 0.0000 and 4.4342 respectively. the standard deviation of 0.5288 showed that the data deviate from the mean by 52.88%. lastly, the minimum and maximum values of board independence are 0.0000 and 1.0000 respectively and the mean value is 0.6863 while the standard deviation is 0.3012. correlation results table 3 below presents the result of the pearson correlation analysis which was carried out to estimate the nature of the relationship between the variables and to also determine the existence if there is of any multi collinearity among the variables. table 3: correlation matrix variables invc insow indow frnow blcow bind invc 1.0000 insow 0.2239 1.0000 indow -0.3287 -0.0393 1.0000 frnow 0.0728 -0.0066 -0.0091 1.0000 blcow -0.3862 -0.0786 0.0201 0.0290 1.0000 bind 0.0789 0.1020 -0.0544 -0.0381 -0.1248 1.0000 source: output of stata, 2020 table 3 presents the results of the correlation between ownership structure (institutional ownership, insider ownership, foreign ownership, block holder ownership, and board independence) and investors’ confidence of listed deposit money banks in nigeria. the table shows that there is a positive relationship between institutional ownership and investors’ confidence from the correlation coefficient of 0.2239. the table also shows that investors’ confidence is negatively correlated with insider ownership and block holder ownership from the correlation coefficient of -0.3287 and -0.3862 respectively. foreign ownership has a positive relationship with the investors’ confidence of listed deposit money banks in nigeria as shown by the coefficient of 0.0728. also, the relationship between board independence and investors’ confidence proved to be positive as indicated by the correlation coefficient of 0.0789. however, the relationship amongst the variables themselves is not found to be significant to the extent that one can conclude that there is multicollinearity unless gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 16 the variance inflation factor and tolerance values are comparatively beyond the established rule of thumb. also, the correlation coefficients of the independent variables did not exceed 50% which suggests the absence of multi-collinearity among the explanatory variables. it is however not safe to conclude that there is no multi-collinearity issue unless the variance inflation factor (vif) and tolerance values are tested. thus, the variance inflation factor (vif) and tolerance value are advanced measures for assessing multicollinearity among the regressors. the variance inflation factor (vif) and the tolerance values were found to be concurrently smaller than ten and one respectively, indicating the absence of multicollinearity. post estimation test the results also reveal that there is a presence of heteroscedasticity in the data because the probability of the chi-square is less than 5% (prob>chi2=0.0000). this result implies that there is a violation of assumption number four of the classical linear regression model which states that there must be constant variance in the error term that is the disturbance ui appearing in the population regression function are homoscedastic. hausman specification test was then conducted to decide between the two models, so as to select the preferred one. the hausman test detects violation of the random effects modeling assumption that the explanatory variables are orthogonal to the unit effects. if correlation does not exist between the independent variables and the unit effects, then the estimates of β in the fixed effects model should be similar to estimates of β in the random effects model. the result obtained from the test on table 4.3 returned a ch2 value of 39.72 that is statistically significant. this shows that the dataset has met the asymptotic assumption of the hausman specification test. as a result, fixed effect model was preferred. summary of regression result the summary of the regression results obtained from the fixed effects model is presented in table 4 below: gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 17 table 4: fixed effects regression results variables coefficient z statistics z sig constant 0.0567 3.62 0.000 insow 0.0142 1.66 0.099 indow -0.0126 -5.02 0.000 frnow 0.0041 0.83 0.407 blcow -0.0213 -2.84 0.005 bind -0.0054 -0.44 0.000 r2 0.2541 f 8.24 prob>chi2 0.0000 source: generated using stata, 2020 the cumulative r2 (0.2541) which is the multiple coefficient of determination gives the proportion of the total variation in the dependent variable explained by the independent variables jointly. hence, it signifies that 25.41% of the total variation in investors’ confidence of listed deposit money banks in nigeria is caused by their ownership structure: institutional ownership, insider ownership, foreign ownership, block holder ownership and board independence. similarly, the result of the f statistics (8.24) shows that the explanatory variables in the model are significant and that they added value to the model as confirmed by the prob>chi2 (0.0000). this indicates that the model is fit and the regressors are properly selected, combined and used. this further implies that for any changes in the ownership structure of listed deposit money banks in nigeria, their investors’ confidence will be directly affected. the f-statistics or wald chi-squared statistics are really the same thing in that, after normalization of the chi-squared and the limiting distribution of the f as the denominator, degrees of freedom goes to infinity. so the f statistics of 8.24 which is significant at 1% indicates that the ownership structure and investors’ confidence model is fit. the coefficient of insider ownership is -0.0126 while the z statistics is significant at 1% (0.000) and the coefficient of block holder ownership is -0.0213 while the z significance is 0.000. this indicates a negative relationship between insider ownership, block holder ownership on one hand and investors’ confidence on the other hand that is significant at 1% level of significance. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 18 the significant negative relationship between insider ownership and investors’ confidence implies that an increase in insider ownership decreases investors’ confidence because when insiders have large ownership stake, they might be powerful and as a result, they do not consider other shareholders. for every point increase in insider ownership, investors’ confidence will decrease by the coefficient value. also the significant negative relationship between block holder ownership and investors’ confidence implies that an increase in block holder ownership decrease investors’ confidence. institutional ownership is positively related to investors’ confidence as indicated by the coefficient of 0.0142 which is statistically significant at 10% level of significance. this implies that for every point increase in institutional ownership, investors’ confidence increase by the coefficient value. the coefficient of foreign ownership is 0.0041 which indicates that it has a positive association with investors’ confidence with a z significance value of 0.407 which is not statistically significant. therefore, the variable did not play any significant role in influencing investors’ confidence of listed deposit money banks in nigeria. the coefficient of board independence is -0.0054 which indicates that the variable has a negative and significant association with investors’ confidence. 5. conclusion this study contends that ownership structure through institutions, insiders, blockholders, and foreigners could bring fairness, transparency, accountability, and responsibility to both shareholders and improve investors’ confidence in the nigerian banks. it is therefore concluded that institutional ownership played a significant role in influencing investors’ confidence. for institutional owners, there are more incentives to monitor and influence the management, because they will be more affected by decisions of the management. insider ownership and block holder ownership have a negative and statistically significant relationship with investors’ confidence. when insiders have a large ownership stake, they often might be so powerful and do not consider other shareholders. insiders owning a substantial fraction of a firms’ equity give them greater freedom to pursue their own best interests and they become entrenched. block holder ownership and investors’ gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 19 confidence are found to have a negative and statistically significant relationship. the result of the study implies that investors’ confidence of listed deposit money banks in nigeria declines as block holder ownership increases. references abdullah, s. n. (2006a). board structure and ownership in malaysia: the case of distressed listed companies. corporate governance, 6(5): 582-594. abdullah, s. n. (2006b). directors' remuneration, firm's performance and corporate governance in malaysia among distressed companies. corporate governance, 6(2): 162-174. accounting and public policy, 25(4), 409434. achleitner, a. k., kaserer, c., & moldenhauer, b. (2005). german entrepreneurial index gex-ein style-index zur performance eigentümergeführter unternehmen. der finanzbetrieb, 7, 118-126. ahmardpour k., & krdtbar f. (2008). investigating the relationship between non duty members of board of directors andinstitutional investors with the behavior of corporate earnings management. journal of finance, 55(1): 87– 130. alchian, a. a. (1965). the basis of some recent advances in the theory of management of the firm. the journal of industrial economics, 30-41. alnaser, n., shaban, o. s., & al-zubi, z. (2014). the effect of effective corporate governance structure in improving investors' confidence in the public financial information. international journal of academic research in business and social sciences, 4(1), 556. ann, m. a. (2006). an analysis of the price/book ratio of two maltese listed companies. bank of valletta review, no. 34, autumn 2006 black, b. (2001). the corporate governance behavior and market value of russian firms. emerging markets review, 2(2), 89-108. chung, k. h., & zhang, h. (2011). corporate governance and institutional ownership. journal of financial and quantitative analysis, 46(1), 247273. claessens, s., & fan, j. p. (2002). corporate governance in asia: a survey. international review of finance, 3(2), 71-103. cornett, m. m., marcus, a. j., saunders, a., & tehranian, h. (2007). the impact of institutional ownership on corporate operating performance. journal of banking & finance, 31(6), 1771-1794. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 20 demsetz, h., & villalonga, b. (2001). ownership structure and corporate performance. journal of corporate finance, 7(3), 209-233. du, y. (2014). board size, investor confidence and agricultural listed corporate value. macroeconomics, 5(2), 243-254. ezazi, m. s., sadeghisharif, s. j., alipour, m., & amjadi, h. (2011). the effect of ownership structure on share price volatility of listed companies in tehran stock exchange: an empirical evidence of iran. international journal of business and social science, 2(5), 163-169. güner, a. b., malmendier, u., & tate, g. (2008). financial expertise of directors. journal of financial economics, 88(2), 323-354. haniffa, r. m., & cooke, t. e. (2002). culture, corporate governance and disclosure in malaysian corporations. abacus, 38(3), 317-349. hansmann, h. (2000). the ownership of enterprise. harvard university press. ho, s. s., & wong, k. s. (2001). a study of the relationship between corporate governance structures and the extent of voluntary disclosure. journal of international accounting, auditing and taxation, 10(2), 139-156. imam, m. o., & malik, m. (2007). firm performance and corporate governance through ownership structure: evidence from bangladesh stock market. international review of business research papers, 3(4), 88-110. jensen, m. c., & meckling, w. h. (1976). theory of the firm: managerial behavior, agency costs and ownership structure. journal of financial economics, 3(4), 305-360. karami, g. h. (2008). the review of relationship between the final owners and the concept of gain information. auditing review journal, 9, 54-61. kumar, p., zattoni, a. 2014. corporate governance, information, and investor confidence. corporate governance: an international review, 22: 437– 439. la porta, r., lopez‐de‐silanes, f., & shleifer, a. (1999). corporate ownership around the world. the journal of finance, 54(2), 471-517. lauterbach, b., & tolkowsky, e. (2007). market-value-maximizing ownership structure when investor protection is weak. advances in financial economics, 12, 27-47. lee, j., & shailer, g. (2008). the effect of board‐related reforms on investors' confidence. australian accounting review, 18(2), 123-134. lei, g. y., wang, w., & jin, x. (2012). quality of corporate governance, investors’ confidence and stock return. accounting research, 2(1): 512-525 leora, f. k., & inessa, l. (2004). corporate governance: an international review. wiley blackwell, 12(4), 461-478. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 21 li, x. l., lai, j. j., & tang, j. (2016). study of the influence of corporate governance level on investors’ confidence. canadian social science, 12(5), 8-16 lins, k. v., & servaes, h. (2002). is corporate diversification beneficial in emerging markets?. financial management, 5-31. majumdar, s. k. (1998). assessing comparative efficiency of the state-owned mixed and private sectors in indian industry. public choice, 96(1-2), 1-24. mcgraw, a. p., larsen, j. t., kahneman, d., & schkade, d. (2010). comparing gains and losses. psychological science, 21(10), 1438-1445. mitra, s., & cready, w. m. (2005). institutional stock ownership, accrual management, and information environment. journal of accounting, auditing & finance, 20(3), 257-286. mueller, e., & spitz‐oener, a. (2006). managerial ownership and company performance in german small and medium‐sized private enterprises. german economic review, 7(2), 233-247. newell, r., & wilson, g. (2002). a premium for good governance. mckinsey quarterly, 3(2), 20-23. north, d. c. (1990). a transaction cost theory of politics. journal of theoretical politics, 2(4), 355-367. numazu, m., & kerman, e. (2008). the effect of ownership structure on the performance of listed firms in tehran stock exchange. journal of accounting and auditing review, 53(15), 83-100. ramaswamy, k. (2001). organizational ownership, competitive intensity, and firm performance: an empirical study of the indian manufacturing sector. strategic management journal, 22(10), 989-998. sanusi, l. s. (2012). banking reforms and its impact on nigerian economy. being a lecture delivered at the university of warwick’s economic summit, uk 17th february. shleifer, a., & vishny, r. w. (1997). a survey of corporate governance. the journal of finance, 52(2), 737-783. soludo, c. c. (2004, july). consolidating the nigerian banking industry to meet the development challenges of the 21st century. in being an address delivered to the special meeting of the bankers’ committee, held on july (vol. 6, p. 2004). wagner, j. (2008). a note on why more west than east german firms export. international economics and economic policy, 5(4), 363-370. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 22 wahab, e. a. a., how, j., & verhoeven, p. (2008). corporate governance and institutional investors: evidence from malaysia. asian academy of management journal of accounting and finance, 4(2), 67-90. wu, j., xu, d., & phan, p. h. (2011). the effects of ownership concentration and corporate debt on corporate divestitures in chinese listed firms. asia pacific journal of management, 28(1), 95-114. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 1 firm attributes and executive compensation of conglomerates in nigeria aliyu saidu national board for arabic and islamic studies, kaduna state +2348036039896, +2348052364748, aliyusaidu85@gmail.com, saidualiyu@ymail.com ahmad muhammad lawal tissa, school of accountancy university ultra malaysia +2348032872424, +601158616764 abstract executive compensation, particularly in the western countries has over the years received intense media and research interest particularly from the occurrence of large corporate failures. this brought to the fore, the seemingly huge compensation been received by the executive directors irrespective of the nature of the performance of the companies they manage. this study examined the impact of firm attributes on executive compensation using panel data from a sample of six listed conglomerates in nigeria for a period of nine years (2010-2018). ordinary least square (ols) was used as technique of data analysis. the findings revealed a positive and significant impact of firm financial performance (that is: return on asset and return on equity) on executive compensation while executive ownership had a negative and significant effect on executive compensation of listed conglomerates in nigeria. the study concluded that firm financial performance and executive ownership impact on the quantum of compensation paid to the executive directors, while institutional ownership, board composition and board size does not significantly. therefore, it is recommended that the listed conglomerates in nigeria should improve the design of the compensation of the executive directors with financial incentives and stocks (equity) as it will enhance the maximization of the shareholders’ wealth. keywords: executive compensation, roa, roe, institutional ownership, executive ownership, board composition, board size and conglomerates firms 1. introduction corporate governance is involved with methods in which all events interested in the well-being of a company try to make sure that managers and different insiders take measures or undertake mechanisms that safeguard the interests of shareholders. such measures are necessitated because of the separation of ownership from management, which is an increasingly essential feature of the cutting-edge firm, mainly the conglomerate companies, in which the executive directors are involved in dealing with varied operations. when dealing with a firm, mailto:aliyusaidu85@gmail.com mailto:saidualiyu@ymail.com gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 2 executive directors may also act of their satisfactory interest rather than the interest of the company’s owners (shareholders). for instance, the managers may take steps to increase the dimensions of the firm in conjunction with their pay, which won't necessarily increase the profitability of the company they manipulate (the primary problem of the shareholder).one of the methods to cope with the issues springing up from the foremost-agent relationship, is to see how some attributes of the company together with monetary overall performance, ownership structures and board characteristics influence the compensation been received with the aid of the executive directors (ibrahim, 2011). since firm commonly has various classes of shareholders and no longer all of them will either be targeted same records set or have the ability to monitor or look at perfectly the moves of executive directors, therefore it is paramount to offer them with incentives to take moves which are within the nice interest of the shareholders. several researchers like gorre (2011) are of the view that executives’ reimbursement plans ought to be designed in a way that it's going to align the pastimes of self-interested executive officers with those of shareholders. thus, the plans must have incentive schemes that make executive compensation a feature of firm financial performance. the incentive schemes should additionally result in an extensive relation among executive repayment and firm monetary overall performance, which can be inspired with the aid of the mechanisms of corporate governance. however, in keeping with their perspectives, conyon & leech (1994) documented that the incapability for earlier studies to file a sizable payperformance link can be attributed to the non-inclusion of ownership structures and board traits in studying executive compensation. for this reason, this study included institutional and executive ownership along with board composition and size as board characteristics. the arguments concerning executive compensation/incentives are not the simplest manner to resolve the enterprise problems, however also wanted a scrutiny mechanism of corporate governance to address the leading controversies. without corporate governance mechanisms, executive directors are able to freely carry out moves that pursue their non-public interest and such profits through the executives are constantly detrimental to the shareholders’ interest. in this context, governance mechanisms are needed to determine the quantity of executive reimbursement and overall performance tracking undertaken by way of management (kim & nofsinger, 2007). gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 3 ownership structure and board of director characteristics play an essential position in addressing organization hassle. when business enterprise ownership is diverse, then ability for sub-most effective stage of tracking exists, since an individual shareholder is unable to absolutely appropriate the gains from the monitoring feature. the size and composition of board of directors also serve as a vital mechanism for setting executive compensation and act on behalf of the shareholders in representing their interest. but where non-executive officers dominates the board, they are much more likely to bring more breadth of knowhow to the firm, by monitoring and controlling the managers’ action. the obliging question for the average scholars on firm financial performance, ownership structures, board characteristics and executive compensation studies, is whether the compensation of executive officers reflects economic performance of the company they manage. however, despite a large volume of researches that have been conducted by some notable researchers on this discourse, some of which include the work of jensen & murphy (1990), conyon & leech (1994), ozkan (2007), gregg, jewell, & tonks (2010) and muhammed (2015), to find the answer to the question raised above, yet there is no real consensus on their findings. in nigeria, the study is also aware of a clear gap in the empirical research on this area. it is likewise discovered that to the quality of the researchers’ understanding, few studies of the aforementioned area focused exclusively on banks, with ayodele (2012) and kurawa & saidu (2014) discovering a direct and significant relationship between executive compensation and financial performance while muhammed (2015) found no relationship. this necessitated this study to be carried out in the non-service firm with inclusion of corporate governance variables (ownership structure and board characteristics). this study focused on listed conglomerates in nigeria, because the researcher identified a suitable context in which managers might take steps to increase the size of the firm along with their pay, which may not necessarily increase the profitability of the entity they manage. this is so, if one considers the inter-woven relationships between the mother corporations and their subsidiaries both of which can be indexed inside the stock exchange. the foremost objective of this study is to examine the impact of firm attributes on executive compensation of indexed conglomerates in nigeria, while the precise targets are to study the effect of: i. return on asset on executive compensation of listed conglomerates in nigeria. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 4 ii. return on equity on executive compensation of listed conglomerates in nigeria. iii. institutional ownership on executive compensation of listed conglomerates in nigeria. iv. executive ownership on executive compensation of listed conglomerates in nigeria. v. board composition on executive compensation of listed conglomerates in nigeria. vi. board size on executive compensation of listed conglomerates in nigeria. in line with the targets of the study, the following null hypotheses were formulated: ho1: return on asset has no significant impact on executive compensation of listed conglomerates in nigeria. ho2: return on equity has no significant impact on executive compensation of listed conglomerates in nigeria. ho3: institutional ownership has no significant impact on executive compensation of listed conglomerates in nigeria. ho4: executive ownership has no significant impact on executive compensation of listed conglomerates in nigeria. ho5: board composition has no significant impact on executive compensation of listed conglomerates in nigeria. ho6: board size has no significant impact on executive compensation of listed conglomerates in nigeria. it is believed that the empirical evidence of this study could enable the committee concerned with setting or designing the executives’ compensation, in such a way that will align the interests of self-involved executive directors with those of shareholders. it will also enable the regulatory authority (sec) to examine whether corporate firms are implementing the disclosure requirement of executive officers’ full remuneration. finally, in line with the finally, in keeping with the findings of preceding research, findings of this studies work will certainly add to the growing frame of know-how and constitutes basically the contribution of the studies. the remaining part of this study is prepared as follows: section two provides the overview of the relevant literature concerning the subject matter and the theoretical framework. section three dealt with the methodology adopted for the purpose of this study. section four centered on the discussion of the results. while conclusion and recommendations are presented in section five. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 5 2. theory and practice firm financial performance and executive compensation early empirical study on top executive pay and performances is credited to lewellen & hunstaim (1970). their work found a high level of direct relationship between executive compensation and profits as well as stock value of firms. the key pitfall of this study lies in the fact that the study focused on profitability as against other performance parameters. jensen & murphy (1990) explored ceo compensation and company overall performance for a duration of thirteen years ranging from 1974 – 1986. 1295 us firms were taken into consideration over the length of the study. the study utilized an all-inclusive estimate of the pay for overall performance sensitivity (pps), and also took into consideration; compensation, dismissal and stockholdings. they used the pps to measure the effect of total compensation which represents the proportion of the share of the ceo in wealth creation. their findings discovered that, the relationship between pay and performance is not significant. the study found firm length to be an important determinant of the pps. the study indicated that ceos in small companies tend to acquire more stock and have more compensation based incentives, which will result to high pps. they concluded that the discoveries are at variance with agency theory and optimal contracting. even though a direct relationship between ceo pay and firm overall performance exists, the relationship is not significant to play an important role as a solution to the agency problem. in a cross sectional study, ruge-murcia (2005) investigated the effect of ceo cash compensation and total compensation against distinctive performance measures (i.e. earnings per share, return on equity, return on assets, and net profit margin), in a collection of listed 168 canadian companies in the course of 2003. the results of the study showed that eps, roe, roa and npm were all positive and statistically related to ceo compensation, at various levels of significance. the major setback with this cross sectional study is the exclusion of time period (panel data) that could have enabled the researcher in observing changes in level of executive compensation in line with the performance measures. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 6 hojen (2007) moved away from using salary or cash compensation or total compensation in measuring executive compensation, but based this study on equity-based compensation and firm performance, within 1998-2006 for the sample of listed danish companies. return on assets (roa), return on equity (roe) and tobin’s q were applied in measuring performance, while stock options, warrants and employee shares were used for equity-based compensation. the empirical investigation of roa, roe and tobin’s q as overall performance proxies, showed that there are no significant effects from compensation program adoption on an entity operational performance, when comparing pre-adoption performance with post-adoption performance for the sample of listed danish companies. by differentiating the time period for measuring performance proxies from security price analysis and reporting of the findings as a whole could be deceptive but rather individual model should be formulated and tested. duffhues & kabir (2008) found a significant negative relationship between total pay and company performance. the study was based on the compensation of the entire board of directors that was collected from 135 sampled dutch firms during the period 1998-2001. both accounting and market-based performance measures were used (roa, ros and annual stock return), while executive compensation was measured as cash and total compensation. a lagged performance degree was used to account for the executive compensation on the premise that the executive pay in one year is usually determined by previous year’s company performance; but this may not capture the total performance effect as the executive directors are extra worried with lengthy-run interest of concerned company. aduda (2011) examined the relationship between executive compensation and firm performance on indexed banks at the nairobi stock exchange. the study considered practical form relationship between the level of executive remuneration and accounting performance measures through using a regression model that relates pay and performance. a non-significant indirect relationship was obtained between roa, roe in opposition to executive compensation and that accounting measures of performance are not key considerations in determining executive compensation among the banks in kenya and that size is a key criterion in determining executive compensation because it was significantly but negatively related to compensation. the negative relationship suggested the capping of executive compensation to ensure maximization of returns to shareholders. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 7 in a structured questionnaire consisting of 25 items as tool for statistics collection and analyzing the data using chi-square technique, ayodele (2012) examined the effect of executive compensation structure and ownership on firm performance. the findings of the analysis revealed that there is a strong relationship between management ownership and bank’s market value. although, the finding shows that executive compensation structures do not affect bank’s market value. the study also revealed that among larger commercial banks, size is a key factor in determining executive compensation as reported by jensen & murphy (1990) who found it to be significantly but indirectly related to compensation. therefore, there is need to reign in the executive compensation inclination in smaller banks to favour bigger shareholders who equal as bank directors to the detriment of returns and smaller owners of the bank. the study relied solely on primary data which could be subjective when compared to secondary data that has a level of validity, reliability and objectivity as used by this study. kurawa & saidu (2014) in their study examined the impact of top executive compensation on financial performance of nigerian banks using causal research design, where they quantified board remuneration as a function of capital adequacy ratio, profit before tax, return on assets and return on equity. the study found a direct and significant link between executive compensation (excluding nonexecutive directors) and the profit before tax of the sampled banks. that study is one of the few published studies on executive compensation and firm performance in nigeria, but it assumed not to include any corporate governance variables like board’s composition, audit committees size, duality of board, that the study believed to have significant influence on compensation contract. muhammed (2015) investigated the controversy as to whether executive compensation in nigerian money deposit banks (mdbs) can be explained by the underlying performance of the banks they are managing and thus a reflection of optimal contracting or managerial power. the study sampled nine deposit money banks over the period 2006-2012, and the findings of the study showed that roa, board size, board independence, and other board members’ percentage stock ownership are not significantly related to pay and it reaffirms that ceo pay in nigerian mdbs is not based on performance, but favored a managerial power view of ceo pay. the study assumed the highest pay disclosure to represent its ceo pay which could not be so but to other directors, which can be due to executive characteristics such as tenure or gender. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 8 institutional ownership and executive compensation ownership structures play a great role in changing the executive pay-forperformance relationship. institutional ownership has both the motivation and power to compel managers to act in consonant with value maximization objective of a firm. noe (2002) suggested that massive shareholders have incentives to monitor activities of managers, resulting in a higher firm value. while ozkan (2007) is of the view that large shareholdings can allow institutional investors to exert greater impact on corporate issues. hartzell & starks (2003) found that institutional ownership concentration is positively related to the pay-for-performance sensitivity of executive compensation and negatively related to the level of compensation of non-banking firms; this suggests that institutional ownership might serve as monitors that mitigate the agency problem. conclusions were drawn that firms with more concentrated institutional owners pay executives less and make this pay more sensitive to performance (i.e. lower cash-based pay, and lower direct compensation). shehu (2011) noted that institutional ownership emerged as an important tool for protecting minority interest. this is because large institutions have the opportunity, resources and ability to constrain managers’ behaviour and they also represent ownership concentration in some cases because of their ability to make bulk purchases of the firm’s equity shares. in a broader study, suherman, rahmawati & buchdadi (2011) investigated on the question of whether firm performance and corporate governance mechanisms are determinants of executive compensation. the research employed panel data and sampled 13 financial companies listed during the period 2007-2009 on indonesian stock exchange. the result showed that firm performance measured by roa and institutional ownership significantly affects the executive compensation. in furthering the study of hartzell & starks (2003), smith & swan (2013) critiqued the aforementioned researchers’ results, as so sensitive with respect to the use of firm size as a control variable, because they measured institutional holdings as a fraction of institutional share ownership, and managerial option grants as a fraction of total market capitalization. smith & swan (2013) study covered nineteen years (1992 to 2010) and found that institutional concentration has no such effects when firm size is controlled for with a logarithmically transformed market capitalization, instead of hartzell & starks (2003) raw market capitalization. they concluded that institutional shareholdings are not associated with executive pay, which the gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 9 researchers ascribed to other factors such as, firms been perfect in monitoring the executives by paying them correctly, or because of heterogenity in monitoring (e.g., the corporate board), or because firms are never able to monitor effectively (and overpay) although the researchers were not consistent as of their justification to their findings. it is evidenced that prior study’s findings on the impact of institutional ownership and executive compensation are inconclusive, as differences were recorded from their findings and focus were exclusively on financial firms but the focus of the present study is on non-financial firm. executive ownership and executive compensation agency costs arise where managers exploit their superior facts to maximize their own utility. where the ceo has a tangible investment in the company, the separation between owners and managers is minimized and should, in theory, lead to a reduction in agency problems and they essentially become managementcontrolled-and-owned companies, and therefore are less subject to moral hazard problems (antle & smith, 1986). conyon & leech (1994) are of the notion that director ownership can assist in aligning the interests of directors with those of shareholders. that is, with higher director ownership, directors would be likely not to divert resources away from value maximization, as they bear part of the costs of their actions. thus, one would expect higher director shareholdings might limit excessive ceo compensation packages leading to an indirect relationship between director ownership and ceo compensation (i.e. incentive alignment effect). hence, the relationship between directors’ ownership and the alignment of shareholder and directors’ interests can be non-monotonic, meaning that the marginal effect of increased directors’ share ownership depends on the current level. at higher levels of directors’ ownership, outside investors might find it difficult to monitor the directors’ behavior since higher ownership gives directors more direct control over the company, increasing their ability to resist outside investors’ pressures. increased director ownership can also give directors greater voting power and control, which could lead to their entrenchment. also, higher director shareholdings might inhibit the external corporate control market and, in so doing reduce the effectiveness of internal monitoring. in another development, nulla (2013) investigated the connection between ceo cash compensation and ceo power, which was defined as ceo: age, shares gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 10 outstanding, shares value, tenure, turnover, 5 percent management ownership, and 5 percent individual/institutional, of 120 companies of nyse index companies covering the period 2005 to 2010. the result showed that ceo turnover, 5 percent management-controlled and 5 percent owner-managed, had an indirect group firmsized effect on ceo cash compensation. in contrary, ceo shares, ceo shares value, and ceo tenure had a direct group firm-sized effect on ceo cash compensation. however, ceo age had a mixed group firm-sized effect on ceo cash compensation, but the study excluded non-cash components such as stock options and long-term benefits from the above reviewed studies, the researchers’ views were just on the shares held by the ceos but this study included all the shares held by the executive directors as they are also involved in the management of the firm. board composition and executive compensation board composition is one of board characteristics which might be anticipated to play a critical role in synchronizing the interest of the managers and that of the shareholders. corporate governance structure in nigeria requires that number of non-executive officers on the board should be more than that of the executive officers. also, the non-executive officers must comprise of independent directors appointed on the basis of experience and competence. since the outside directors do not possess any interest regarding the shareholding of a firm, in order to maintain their reputation, they are expected to act in such a manner that maximizes the value of the organization. core & guay (2001) reported a direct relationship between ceo compensation and structure of the board of directors. the study reported that when board composition consists of independent directors (non-executive directors), ceos have the advantage of receiving a higher compensation. this can be due to the fact that the ceo has some form of affiliation or relationship with nonexecutive directors, which can align compensation advantaged for the ceo. fernandes (2005) investigated the determinants of managerial compensation, with emphasis on the relation between compensation and firm performance, along with analyzing the role of non-executive board members in mediating shareholders’ and managers’ relations and interests. the study sampled 58 companies that were listed in euro next lisbon from 2002-2004. the result showed that firms with more nonexecutive board members pay higher wages to their executives. furthermore, it also gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 11 shows that firms with zero non-executive board members actually have a stronger relationship between executive compensation and firm performance and have a better alignment of shareholders’, although the study found no relation between compensation and shareholder’s wealth thereby contradicting the finding of komari & faisal (2007), who reported no relationship between independent directors and executive compensation. suherman et al (2011) investigated on the question of whether firm performance and corporate governance mechanisms are determinants of executive compensation. the research employed panel data and sampled 13 financial companies listed during the period 2007-2009 on indonesian stock exchange. the result showed that firm overall performance measured by roa and the proportion of independent commissioner (independent officers) affect the executive compensation. the period of study is relatively small and the corporate governance mechanisms could have included more variables like remuneration committee and audit committee to examine any possible management of the company’s earning. muhammed (2015) reported a non-significant relationship between board independence and ceo pay in a study of nigerian money deposit banks (mdbs) in order to investigate the controversy as to whether executive compensation can be explained by the underlying performance of the banks they are managing and thus a reflection of optimal contracting or managerial power. the study sampled nine deposit money banks over the period 2006-2012. the result of the study was consistence with core, holthasusen & larcker (1999) and contradicts seok, lee& kang (2012), because it reported that the more independent a board is, the greater the total, incentive, and fixed pay to the ceo. board size and executive compensation seok et al (2012) investigated the correlation between the quality of boards, and pay allocation of executive teams. data were collected from risk metrics consisting largely of s&p major index firms about the directors from 1996-2006. their findings showed that board size is negatively related to executive compensation, which is consistent with the study of faleye, hoitash & hoitash (2011), but in contrast to core et al (1999) who reported a direct correlation between board size and ceo compensation with a sample from 1982 to 1984. in a study of ceo compensation in money deposit banks in nigeria: optimal contracting or managerial power carried out by muhammed (2015) to examine gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 12 whether ceo compensations are a reflection of the bank’s financial performance. among the results reported, board size was found not to be related to ceo compensation, despite the overall result favouring managerial power to ceo pay. this result contradicts the findings of gregg et al (2011) and sigler (2011) that found size to be positively associated with ceo compensation, which of course portray the point made by jensen (1993) that larger boards are ineffective. the theoretical framework that best explained the relationship among the variables of study is optimal contracting approach of agency theory. this theory views executive compensation as a means for enforcing the agency contract between a principal and an agent, and thereby solving agency problems between shareholders and executives, notably through a process of alignment managers’ interests with shareholders’ interests (grabke-rundell & gomez-mejia, 2002). in order to motivate executives to perform as effectively as possible and according to the interests of shareholders, risks are transferred to risk-averse executives through incentive-based compensation packages. consequently, the optimal contract theory considers determination of compensation as a question of “pay design” which will, in the optimal case minimize agency costs. it integrates the agency theory perspective of jensen and meckling (1976) that proper incentivization (bonus) of the agent (executive directors) through pay together with appropriate monitoring (ownership structure and board of director characteristics) will make him act in utmost interest of the owners. thereby, the optimal contracting theory implies that executive compensation contracts are usually bargained at arms’ length between the board of directors and the executives; compensation levels would be the output on market forces; and the structure of executive compensation would reflect the intention to provide executives an incentive to act as efficiently as possible from the perspective of the shareholders. in this context, the board of directors is of major importance as it is responsible for structuring the executive compensation packages in the interest of the shareholders and making sure that the executives serve shareholders’ interest. 3. methodology and specification of model the research design employed in this study is correlation design. the preference of the design was informed by the effectiveness of the design in revealing the association of two or more variables and the impact of one variable on another. data was collected from secondary sources through the use of nigeria stock exchange fact book and financial statement for duration of nine (9) years (2010 – 2018). the population of this study comprises of all six (6) conglomerate firms gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 13 listed in the nigerian stock exchange as at 31st december, 2014. the data was empirically analyzed using ordinary least square (ols) multiple regression techniques with the help of stata 11. the model used to test the hypotheses formulated for this study is presented below. execomp it = β0 + β1roa it + β2roe it + β3 instowns it + β4 execowns it + β5 bcom it + β6 bsize it + β7 fsize it + ε it where: β0 = intercept β1β5= coefficient of the independent variables execomp = executive compensation (log of cash compensation of firm ‘i’ in period ‘t’). roa = return on asset (ratio of net income before interest and tax to total asset value of firm ‘i’ in period ‘t’) roe = return on equity (ratio of equity value to total asset value of firm ‘i’ in period ‘t’). instowns = institutional ownership (proportion of share owned by institutional investors to total number of shares of firm ‘i’ in period ‘t’) execowns= executive ownership (proportion of share owned by the executives to total number of shares of firm ‘i’ in period ‘t’) bcom=board composition (number of non-executive directors divided by total board size of firm ‘i’ in period ‘t’) bsize = board size (number of board members of firm ‘i’ in period ‘t’) fsize = firm size (natural logarithm of total assets of firm ‘i’ in period‘t’) εit = residual or error term of firm ‘i’ in period ‘t’ 4. result and discussions this section dealt with empirical presentation, discussion of data extracted from the annual reports and accounts of the sampled firms as well as the tests of hypotheses formulated earlier in the first section. table 1: descriptive statistics variables min max mean std. dev. execomp 8.22 12.76 10.41 1.22 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 14 source: author’s compilation generated using stata, 2020 table 1 reports the descriptive statistics for the dependent and independent variables respectively (execomp= executive compensation, roa= return on asset, roe= return on equity, instown= institutional ownership, execown= executive ownership, bcom= board composition, bsize= board size, fsize= firm size). from the table, it can be seen that the executive compensation for the sample of the study was on average of #69 million. the range was however wide as is evidenced by a minimum pay of #3.9 million and a maximum pay of #405 million. however, it may not be possible to infer anything from this range because analyzing the large variation without taking into context issues such as inflation would be misleading. the financial performance of the sampled conglomerate firms as proxied by roa and roe averaged .09 and .20 respectively. the maximum and minimum return on equity is 1.88 and .02 which is higher than the return on asset of .63 and -.32. institutional ownership represents 30% of shareholders on average. this indicates that majority of the shareholders representing 70% in the conglomerate firms in nigeria are individuals. although, the executive ownership could held up to the maximum of 40% shares in the sampled conglomerate firms under study and with a minimum and average of .00 and .06 respectively. the highest number of board size in the listed conglomerates in nigeria is 11, average of 9 and minimum of 5, which indicates that on average board size, was neither too large nor too small. the non-executive directors have an average of 67% of the board of directors. it also shows that 91% of the directors are non-executive directors while 9% are executive directors, as supported by the standard deviation (.11) of the board composition for the firms. furthermore, the size of the conglomerate firms in terms of total asset for the sample averaged #143 billion and a maximum of #824 billion. roa roe -.32 .02 .63 1.88 .09 .20 .16 .29 instown execown bcomp bsize .05 .00 .5 5 .87 .40 .91 11 .30 .06 .67 8.52 .30 .12 .11 1.46 fsize 14.24 18.24 16.09 .93 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 15 table 2: correlation matrix source: author’s compilation generated using stata, 2020 *correlation is significant at 1% **correlation is significant at 5% variables execomp roa roe instown execown bcom bsize fsize execomp 1.000 roa .160 1.00 roe .307** .114 1.00 instown -.157 -.109 -.232 1.000 execown -.560* -.139 -.267 .426* 1.000 bcom .347** -.000 .053 -.347** -.276** 1.000 bsize .480* -.007 .446* -.182 -.546* -.259 1.000 fsize .375* -.258 -.178 .266 -.007 .390* .122 1.000 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 16 table 2 shows the correlation matrix with the correlation coefficient between all pairs of variables along with their significances. the result shows that roa is 16% positively related with executive compensation of listed conglomerates in nigeria, although not significant when compared to the positive correlation of roe (31%), board composition (35%) and board size (48%) with executive compensation at 5% and 1% significant level respectively. but institutional and executive ownership are negatively related to executive compensation. the table also revealed an insignificant relationship between the explanatory variables themselves except for board size that was negatively and strongly correlated with executive ownership of the sampled firms under study to about 55%. however, this may not be enough evidence to strongly justify the presence or existence of multicolinearity and autocorrelation problems among the independent variables under study before computing the tolerance value and vif. where the result obtained from the tolerance value and vif was above the expected limits and inconsistent with the rule of thumb of less than 1 and 10 then the problems of multicolinearity exist among the independent variables. the tolerance value and vif were computed to assess the presence of multicolinearity using stata 11, and the result found was consistently less than 1 and 10 respectively. this is indicating that multicolinearity is not posing a hitch and the appropriateness and fitness of the model of study. table 3: regression results source: output stata, 2020 variables coefficients t-statistics t-sig vif tolerance cons .177 .07 .942 roa roe 1.477 .851 1.84 1.76 .072 .085 1.12 1.36 .895 .734 instown execown bcomp bsize fsize r2 adj r2 f. statistics -.005 -4.316 .271 .089 .574 -.01 -3.14 .20 .80 3.40 .993 .003 .843 .427 .001 .547 .478 7.94 1.58 1.74 1.64 1.79 1.67 .632 .576 .610 .558 .599 significance 0.000 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 17 the multiple coefficient of determination (r2) gives the ratio of total variation in the dependent variable expanciated by the explanatory variable jointly. it signifies that 55% of the whole variation in executive compensation of listed conglomerates in nigeria is caused by their return on asset, return on equity, proportion of shares held by institutions, proportion of shares held by executive directors, proportion of non-executive directors, board size and firm size, while 45% is caused by factors outside the model. the f-statistics is 7.94, which shows that the model is ok and the explanatory variable are properly chosen, combined and adopted. roa and executive compensation firm financial performance measured by roa is found to be significant and positively correlated with executive compensation at 10% level of significance, indicating that the higher the return on asset of listed conglomerates in nigeria, the higher the compensation received by its executive directors. it also shows that at every one percent (1%) increase in roa, the compensation received by the executive directors of listed conglomerates in nigeria increases by #1.84k. therefore, this provides reason of not accepting hypothesis one of the study, which stated that return on asset has no significant impact on executive compensation of listed conglomerates in nigeria. this result is consistent with the findings of jensen & murphy (1990), conyon & leech (1994), wallsten (2000), kato & kubo (2004), gregg et al (2005), ruge-murcia (2005), ozkan (2007), boostman (2009), gorre (2011), ayodele (2012), scholtz and smit (2012), givas (2013) and kurawa & saidu (2014), but contrary to the reported results of hojen (2007), duffhues & kabir (2008), tariq (2010), aduda (2011) and erick et al (2014). roe and executive compensation roe is also found to be significant and positively associated with executive pay at 10% level of significance, indicating that, the higher the return on equity of listed conglomerates in nigeria, the higher the compensation received by its executive directors. this shows that at every one percent (1%) increase in roe, the compensation received by the executive directors of listed conglomerates in nigeria increases by #1.76k. this implies that roe is significantly affecting the compensation received by the executive directors, which could be due to benefits in form of bonuses attached to the compensation of the executives in relation to the performances of the firms they manage and could help in aligning the interest of shareholders and the interest of the executives. therefore, this provides evidence for rejecting hypothesis two of the study, which stated that return on equity has no significant impact on executive compensation of listed conglomerates in nigeria. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 18 the result is consistent with the findings of jensen & murphy (1990), conyon & leech (1994), hall & liebman (1998), wallsten (2000), kato & kubo (2004), gregg et al (2005), ruge-murcia (2005), ozkan (2007), boostman (2009), gorre (2011), sigler (2011), ayodele (2012), scholtz and smit (2012), givas (2013) and kurawa & saidu (2014), which showed that roe is also found to be significant and positively associated with executive compensation but contrary to the reported results of tariq (2010), aduda (2011) and erick et al (2014). institutional ownership and executive compensation looking at the relationship between institutional ownership and executive compensation, a negative relation is observed with a coefficient of -0.005 and tvalue of -0.1 but not statistically significant. this association indicates that for every increase in shares held by institutions, the compensation to be received by the executive directors of listed conglomerates in nigeria will decrease by #0.1k. the negative association between institutional ownership and executive compensation might serve as monitors that mitigate the agency problem and also can effectively limit the amount of executive pay. it provides evidence but not good enough (because it is in line with agency theory expectation) of failing to reject hypothesis three of the study, which states that institutional ownership has no significant impact on executive compensation of listed conglomerates in nigeria. consistent with this finding is the work of noe (2002), hartzell & starks (2003), and gan et al (2012), where institutional investors are negatively associated with total executive compensation but contrary to ozkan (2007) and suherman et al (2011) findings, as shown that institutional ownership promotes higher total executive compensation. however, relationship between institutional ownership and executive compensation as reported by smith & swan (2013). executive ownership and executive compensation the regression result in respect of the association between executive ownership and executive compensation shows that executive ownership is inversely related with executive compensation at 1% level of significance with a coefficient of -4.316 and t-value of -3.14. this result shows that for every increase in shares held by executive directors of listed conglomerates in nigeria, the compensation to be received by them will reduce by #3.14k. it further revealed that the higher the shareholding held by the executives, the lower the compensation they earn. this could be ascribed to the reduction of agency problem because the division between owners and managers is minimized to the extent that the executives are not just managers but also owners. in line with the result reported, it provides evidence of gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 19 rejecting hypothesis four for the study, which states that executive ownership has no significant impact on executive compensation of listed conglomerates in nigeria. this finding is consistent with conyon & leech (1994) and contrary to nulla (2013). board composition and executive compensation the regression result revealed that non-executive directors as measured by the proportion of non-executive directors on the board are positively related with executive compensation with a coefficient of 0.271 and t-value of 0.20. this shows that for every increase in the number of non-executive in the board, the executive compensation of listed conglomerates in nigeria will increase by #0.20k. it implies that the non-executive directors of listed conglomerates in nigeria are unable to align the interest of the shareholders and the managers, evidenced by the regression result which shows that the executive compensation of listed conglomerates increases as the number of non-executive directors increases. this provides evidence of failing to reject hypothesis five of the study, which states that board composition has no significant impact on executive compensation of listed conglomerates in nigeria. in support of this result is the work of core, holthasusen & larcker (1999), ozkan (2007), muhammed (2015) and contrary to core & guay (2001), fernandes (2005) and suherman et al (2011). board size and executive compensation the expectation is that firms with relatively small size are more effective in terms of decision making and implementation. however, the result in respect of board size and executive compensation is positively related and shows that board size has a coefficient of 0.089 and t-value of .80. this shows that as the number of members on board increases, the compensation to be received by the executive directors of listed conglomerates in nigeria will increase by #0.80k. this result further explained the positive relationship between the non-executive directors and executive compensation, as their large number only further increases the level of pay of the executives. the reported result in respect of board size provides an evidence of failing to reject hypothesis six of the study, which states that board size has no significant impact on executive compensation of listed conglomerates in nigeria. this finding is consistent with those of core et al (1999) gregg et al (2011) and sigler (2011) but contradicts the findings of faleye et al (2011) seok et al (2012) and muhammed (2015). gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 20 5.1 conclusion and recommendations the study draws its conclusions based on the empirical and statistical evidence provided, that roa and roe that were used as proxy for financial performance have a positive and significant impact on executive compensation of listed conglomerates in nigeria, which could be attributed to benefits in form of incentives (bonuses) attached to the compensation of the executive directors in relation to the performances of the firms they manage. while board composition and institutional ownership were positively and negatively but not significantly associated with executive compensation respectively. the association between executive ownership and executive compensation within the listed conglomerates in nigeria was found to be negative and significantly influencing the compensation received by its executives. the study recommended that listed conglomerates in nigeria should improve the design of the compensation package of the executive directors with financial incentives that will enhance the maximization of shareholders’ wealth, as it is empirically proven that it reduces agency cost. furthermore, they should be mandated as required by law to fully disclose, individually, all the components of the compensation of the executive directors as this will not only benefit the users of the financial reports and accounts but also will aid researchers in their quests. also, compensation of the executive directors of listed conglomerates in nigeria can be strengthened with the use of long term pay (equity), which will encourage them to be part of the owners of the firms they manage. references aduda, j. (2011). the relationship between executive compensation and firm performance in the kenyan banking sector “journal of accounting and taxation, 3(6). antle, r., & smith, a. (1986). “an empirical investigation of the relative performance evaluation of corporate executives,” journal of accounting research, 24(1), 1-39. ayodele, j.c. (2012). executive compensation structure, ownership and firm performance nexus: an empirical analysis. european journal of humanities and social science, 17(1), nigeria. issn 2220-9425 boostman, b. (2009). pay for performance. accounting, auditing and control group, unpublished core, j.e., & guay, w.r. (2001). stock option plans for non-executive employees, journal of financial economics 61(2), 253-287. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 21 core, j.e., holthausen, r.w., & larcker, d.f. (1999). corporate governance, chief executive officer compensation and firm performance. journal of financial economics 51, 371-406. conyon m.j., & leech, d. (1994). top pay, company performance and corporate performance: oxford bulletin of economics and statistics, 56 (3). duffhues, p., & kabir, r. (2008). ‘is the pay-performance relationship always positive? evidence from the netherlands’, journal of multinational financial management, 18(1), 45–60. erick t. k, kefah, b.a., & nyaoga, r.b. (2014). the relationship between executive compensation and financial performance of insurance companies in kenya. research journal of finance and accounting www.iiste.org issn 2222-1697 (paper) issn 2222-2847 (online) 5(1). faleye, o., hoitash, r., & hoitash, u. (2011). “the costs of intense board monitoring.” journal of financial economics 101(1), 160-181. fernandes, n. (2005). board compensation and firm performance: the role of independent board members, ecgi working paper series in finance (http://ssrn.com/abstract_id=830244). gan, h., victoravich, l.m., & xu, p. (2012). institutional ownership and executive compensation: evidence from u.s. banks during the financial crisis (http://ssrn.com/abstract=191099). gorre, e.a. (2011). executive compensation and firm performance: analysis of dutch listed firms. amsterdam business school, accountancy and control. grabke-rundell, a., & gomez-mejia, l. r. (2002). power as determinant of executive compensation, human resource management review 12, 1, 323. gregg, p., jewell, s., & tonks, i. (2011). executive pay and performance: did bankers’ bonuses cause the crisis? working paper, university of bristol, reading and bath. grivas, g. (2013). ceo compensation and firm performance: an empirical study for solvent and financially distressed firms. an unpublished master thesis, tilburg university. hartzell, j.c., & starks, l. (2002). institutional investors and executive compensation, journal of finance, 58, 2351-2374. hassan, s. u. (2011). “corporate governance and financial reporting quality: a case study of nigerian money deposit bank”, international journal of research in computer application and management, 1(26), 12-19. http://www.iiste.org/ gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 22 hojen, v.m. (2007). equity-based compensation and firm performance. an unpublished thesis, aarhus school of business, aarhus university. https://www.cornell.edu/search/ ibrahim, h. (2011). effects of corporate governance on capital structure of listed firms in nigeria. unpublished doctoral dissertation, ahmadu bello university, zaria. jensen, m.c. & murphy, k.j. (1990). performance pay and top-management incentives. journal of political economy98(2), 225-264. kato, t., & kubo, k. (2004). ceo compensation and firm performance in japan: evidence from new panel data on individual ceo pay. journal of japanese and international economies 20, 1-19. kim, k. a., & nofsinger, j. r (2007). corporate governance. second edition. newjersey: pearson prentice hall. komari, n., & faisal. (2007). “analisis hubungan struktur corporate governance dan kompensasi eksekutif,” journal keuangan dan perbankan, 2, 213-224. kurawa, j.m., & saidu, s.k. (2014). executive compensation and financial performance of listed banks in nigeria: an empirical analysis. researchjournali’s journal of accounting 2(3). lewellen, w., & huntsman, b. (1970). managerial pay and corporate performance. american economic review, 60, 710-720. muhammed, a.n. (2015). ceo compensation in money deposit banks in nigeria: optimal contracting or managerial power? seminar paper presented in the department of accounting, ahmadu bello university zaria. noe, t.h. (2002). investor activism and financial market structure; review of financial studies, 15, 289-319 nulla, y.m., (2013). the empirical study of the relationship between ceo cash compensation and ceo power in american companies, journal of marketing management1(1), 01-12. ozkan, n. (2007). ceo ‘compensation and firm performance: an empirical investigation of uk panel data‟ journal of economic literature. ruge-murcia, f. (2005). firms performance and ceo compensation in canada. an unpublished thesis canada. seok, w., lee, c., & kang, h.g. (2012). how board quality affects ceo and executive team pay (http://ssrn.com/abstract=2078876). sigler, k. j. (2011). ‘ceo compensation and company performance’. business and economics journal, 31 smith, g.s., & swan, p.l. (2013). do concentrated institutional investors really reduce executive compensation whilst raising incentives? gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 23 suherman, rahmawati, w., & buchdadi, a.d. (2011). firm performance, corporate governance, and executive compensation in financial firms: evidence from indonesia. tariq, u. (2010). ceo compensation: relationship with performance and influence of board of directors. unpublished master’s thesis in business administration. wallsten, s.j. (2000). executive compensation and firm performance: big carrot, small stick. standford institute for economic policy research. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 i gusau journal of accounting and finance (gujaf) vol. 3 issue 3, october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ii © department of accounting and finance vol. 3 issue 3 october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com mailto:abupress2020@yahoo.com http://www.abupress.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos stat gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. muhammad aminu isa department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. prof. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeiza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vi advisory board members prof. kabiru isah dandago, bayero university kano,kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng mailto:elfarouk105@gmail.com http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng mailto:elfarouk105@gmail.com mailto:05@gmail.com http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ix contents capital structure and firm financial performance of listed deposit money banks in nigeria: moderating effect of board financial literacy anas idris abdulwahab, hussaini bala ph.d, mansur lubabah kwambo ph.d, & abubakar adamu 1 influence of socialization on msme compliance by mediating understanding and moderating knowledge of tax visits yayuk ngesti rahayu 17 does international financial reporting standard narrows audit expectation gap? musa ibrahim dauda, ibrahim adagye dauda, phd 35 sustainability reporting and financial performance of listed manufacturing firms in nigeria aiyesan, olabode olutola ph.d 49 firm attributes and financial reporting timeliness of listed consumer goods firms in nigeria akume james terkende, dele ikese karim 67 value relevance of accounting information for listed financial service firms in nigeria kassim busari, ishaya luka chechet ph.d, aliyu ahmed abdullahi ph.d, & ibrahim mohammed ph.d 87 nigeria economic growth and capital market development: does contributory pension scheme matter? akinwumi ayorinde olutimi, toluwa celestine oladele ph.d, &adeboye emmanuel sanmi 101 audit committee and financial reporting quality: the moderating effect of board independence of listed deposit money banks in nigeria kassim yusha’u shika, mark david kantiyok 117 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 x determinants of financial performance of listed deposit money banks in nigeria mary seansu lazarus, nurradden usman miko ph.d, & saifulahi abdullahi mazadu ph.d 140 human resource accounting and profitability of listed depositmoney banks in nigeria ahmad adamu ibrahim, ahmad rufa’i adamu, fatihu mahmud alhassan &muhammad iliyas abdulsalam 158 board independence, audit effectiveness and the quality of reported earnings in the nigerian consumer goods firms isah shittu ph.d, misbahu, abubakar muhammad 175 impact of capital structure on financial performance of listed agricultural companies in nigeria ahmad muhammad ahmad, shehu usman hassan ph.d., &abubakar abubakar 192 trade oriented money laundering and era of cybersecurity tax evasion in nigeria oluwayemi joseph kayode, adewole joseph adeyinka ph.d, adewale abass adekunle & kadiri kayode ph.d 205 effect of females in the boardroom on corporate sustainability reporting salami suleiman ph. d, olanrewaju atanda aliu ph.d 224 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 49 sustainability reporting and financial performance of listed manufacturing firms in nigeria aiyesan, olabode olutola ph. d department of accounting adekunle ajasin university, akungba-akoko, ondo state nigeria olabodeaiyesan@yahoo.com abstract this study examines the effect of sustainability reporting (sr) on financial-performance of listed manufacturing firms in nigeria from 2010 to 2020. ex-post facto research design was employed and 24 firms form 8 sectors were sampled. data were sourced from their annual report and analysed using panel-regression technique. the study found positive significant connection linking dp, ers and r&d and financial performance while crs has negative insignificant effect on financial performance. base on the findings, the study concluded that sr has positive influence on financial performance of listed manufacturing firms in nigeria. the study recommended that relevant authorities should encourage firms to report sr on real-time and make reporting compulsory and not voluntary. there should be strict enforcement on firms to increase investment in r&d as this will increase profitability and help climate change. keywords: community relation, research & development, dividend, employee relation and financial performance doi: https://doi.org/10.57233/gujaf. v3i3.180 1. introduction sustainability reporting is the incorporation of the environmental, social and economic aspects of an organization to the reporting and communication to the interested parties (camelia, et al, 2020). it is either voluntary or mandatory information disclosed by firms (garg, 2015; fodio, abu-abdissamad, & oba, 2013). sr guidelines were developed by the global reporting initiative (gri) and they are reviewed as the exigency for them arise. principles prescribed by aa1000 aps standard (accountability principles standard 2008) issued by the accountability institute, business charter for sustainable development, developed by the international chamber of commerce (icc) in this area and other instructions. all these instructions and guidelines have been adopted to help business around the world and develop the reporting framework on economic, environmental and social aspects of business operations. sr gives a framework on how activities that happen in firms outside its business operations are reported to stakeholders. mailto:olabodeaiyesan@yahoo.com gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 50 the dividend policy and financial-performance was developed as a base for the decision whether or not profit made from the business transaction by firms after all expenses incurred were deducted would be distributed to the shareholders in form of dividend or plough back to the organization for reinvestment (enekwe, nweze & agu 2015). companies are today required to raise financial reporting requirements, which is crucial to their survival, especially in a time when environmental challenges are having a severe influence on human lives, agricultural goods, and marine life (clerverline, 2021; asaju & aome, 2015; atanu & olorundare, 2017; bassey, 2019; alshbili & elamer, 2019). as a result, stakeholders are currently pressuring enterprises to start creating their sustainability report (kpmg, 2011; emuebie, 2021; owolabi & okulenu, 2020). by communicating a company's commitment to all stakeholders, sustainability reporting (sr) improves the corporate image of a company's products and services and increases credibility. some researchers suggested that sr has a beneficial impact on financial performance (hongming, ahmed, and hussan, 2020); awadzie, soku & botchwey, 2022) while other scholars have cont opinion about sr and financial accomplishment (ordu & amah, 2021; clarissa & rasmini, 2018; wasara & ganda, 2019). consequently, sr is a report created and distributed by businesses to promote sustainable development. in order to meet the needs of the present without jeopardizing the capacity of future generations to do the same, sustainable development must be practiced (brundtland report, 1992). the practice of sr, sometimes known as corporate social responsibility, has not sufficiently gained popularity in developing nations, particularly nigeria. according to earlier studies (igbekoyi, ogungbade & olaleye, 2021; owolabi & okulenu, 2020), sr is insufficient and insignificant in nigeria since sr variables are not incorporated into enterprises' accounting frameworks and it is more of an ethical practice than resource base. in sri lanka (thayaraj & karunarathe, 2021) and indonesia (clarissa & rasmini, 2018), sr was found to be extremely low due to the absence of parliamentary legislation and the accounting body's lack of any unique economic, social, or environmental standards. due to a lack of a suitable framework for environmental disclosure and qualified environmental auditors to conduct audits, sr in south africa was determined to be low (wasara & ganda, 2019). sr is said to have made little impact in sub-sahara africa kenya and mauritius (wachira & bendt, 2019) because reporting sr is not mandatory. there gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 51 is low performance in bangladesh (qamruzzaman, jahan & karim, 2021) because gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 52 of different voluntary disclosure creates inconsistency. sr had low performance in pakistan (mahmood, kouser & masuad, 2019) also because disclosure is voluntary. the glitches in sr in developing countries speak volume, and they imply the weak implementation of sr because disclosure is not mandatory. low investment in r&d, poor employee relations, low risk management, poor health and safety management, customer satisfaction, dividend payout, waste production, operating costs, energy waste, earnings-per-share, return-on-capital-employed, return-on assets, labor practices, training and education, human rights, sewage treatment, and gas emission are key issues in sr which made companies dis-trust their host communities. this study contributes to sr and financial-performance literature by adding to the empirical research body of sr in nigeria (uyagu, et al, 2017; nzekwe, okoye & amahalu, 2021; onoja, okoye & nwoye, 2021). financial-performance measures a firms’ overall financial level over a particular time duration and is used for comparism of general performance of different firms’ operating in identical industry (henri and journeoult, 2010). therefore, the study ascertains the effect of sr on financial-performance of listed firms in nigeria. to achieve this feat dividend policy, community cost, research and development, employee cost and return-on-assets are proxies used. dowwling and pfeffer (1975) propounded legitimacy theory. it is an assumption that the steps taken by an entity are most appropriate within which the social culture, norms and values are aligned with (suchman, 1995) as cited in (bassey, effiok & eton 2013). therefroe, this study is anchored on legitimacy theory because the policies of the society and that of the firms’ align. 2. review of empirical studies taib and ameer (2012) investigated the connection linking corporate sustainability-practices and financial-performance in the uk and us between 2005 and 2009. annual reports recorded and multiple-regression models were used. the finding revealed negative insignificant outcome on financial accomplishment. community, business ethics and environment indices do negative effect financial performance of companies. this imply that innovation in computing power and language would ease the choice of reporting medium in the future and it is advisable to report community, diversity, environment, recruitment, and promotion in real time as they occur. the aspect of reporting community relation achieve real-time gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 53 as it occurs is quite missing in developing countries as they are report later. agba, mboto & micheal (2013) evaluated the influence of wages and other conditions of service on employees’ performance. primary data were collected and presented in graph, pie chart and bar chart. the finding revealed significant positive influence on employee performance. job performance are shaped by regular and good wages; followed by conducive work environment, availability of internet facilities, good library, recognition/award, regular promotion, training opportunities, access to medical care and communication flow. the study suggest that managers of formal organizations should properly remunerate workers as well as provide conducive work environment for their employees. singh (2014) investigated the consequences of corporate-social-responsibility information on the financial-performance of firms in the uk for 5 years (2008 to 2012). the survey data and ordinary-least-square model were used. the result showed negative non-significant connection linking good social-practices and financial accomplishment both in short-term scenario and long-term. in this study, philanthropy gesture by firms in developed countries do not increase profitability. heggeseth and moen (2016) sampled 247 norwegian industrial companies between 2004 and 2009 on the consequences of intensity in r&d on financial accomplishment during financial crisis of multiple-regression technique was used. the result showed that companies with more investment in r&d aid financial performance during financial crisis. also, r&d investment was more during the financial crisis than in other periods according to the study of abdel and raed (2017) examined the impact of r&d cost on financial-performance of listed pharmaceutical firms in jordan for 4 years (2006 to 2010). secondary data and simple-linear regression technique was use to analyse the data. the finding showed significant positive connection linking r&d cost and firm accomplishment in developed countries. also, r&d cost lead to future benefits in current and subsequent years. the study is of the opinion that more funds should be committed to investment in research and development freihat and kanakriyah (2017) investigated the connection linking r&d and performance of jordanian from 2006 to 2015. the survey data and multiple-regression technique were used for analysis. the result indicated significant positive connection linking r&d and performance measured by return-on-assets, return-on-equity, and earnings-per-share. increased funds on research and development will increase profitability. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 54 abose, eze & sowunmi (2018) investigated the outcome of human resources management on non-financial performance of banks in nigeria. the survey data and ordinary-least square method were used. it was discovered that reward management have positive significant effect on reward and employee performance. the scholars argued that the expectations of all firms is to manage and have an open employment policy that will enhance efficiency and effectiveness of staff member. umobong and agburuga (2018) assessed the connection linking financial accomplishment and corporate-social-responsibility of quoted-firms in nigeria for 16 years (2005 to 2015). secondary data and multiple-regression model were used. the finding revealed negative significant outcome linking community relation cost and return-on-assets and return-on-capital-employed firms with better financial accomplishment make better information make higher return-on-investment. the study is of the view that poor infrastructure could be the reason for poor relationship with performance. ajibada, amuda and olurin (2019) evaluated dividend policy and financial performance of quoted manufacturing firms in nigeria and kenya between 2008 and 2017. secondary data and ordinary-least square model were used for analysis. the finding revealed significant positive connection linking financial achievement in kenya while nigeria recorded non-significant negative. the study suggest that companies should concentrate on dividend strategy. however, the study did not take into account the other measures of profitability since it considered 2 major economies from west and east africa. hashim, ries and huai (2019) examined the impact between corporate-social-responsibility and financial-performance in southeast african countries from 2013 to 2017. secondary data and multiple regression model were used for analysis. the finding unconcealed non-significant connection linking relation and financial accomplishment. the study additionally found that community relations price, worker relations cost has non-significant association with monetary performance. this discovery is an indicator that poor infrastructural amenities coupled with bad employee policy can lead to negative outcome with financial-performance. idewere & murad (2019) investigated dividend policy and financial-performance in nigeria. data were collected over a period of six (6) years (2009 to 2014) and panel-regression model was use for analysis to analyse the data. the study discovered positive important connection linking dividend payout magnitude relation and financial accomplishment. other finding revealed negative and non-significant connection linking dividend interest and financial accomplishment. companies ought to try to keep up healthy and some gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 55 stable dividend policies. this might be earned by investment incomes that offer positive internet gift values, thereby generating vast earnings. jian, feng and chen (2019) evaluated the association linking research-and development, advertising and firm’s financial accomplishment in south korea from 2012 to 2016. multiple-regression technique and secondary data were used. the finding revealed positive significant association linking financial accomplishment with large firms’ while negative significant impact exists in tiny firms. kayode, adeyinka & abiodun (2019) assessed the effect of employees’ remunerations on productivity in nigerian breweries plc. primary data and pearson product correlation coefficient models were applied for analysis. the outcome revealed significant positive connection linking remuneration packages and employee’s performance. further finding revealed quick payment of remuneration has great influence on employees’ productivity. the study suggested that remuneration package such as overtime, constant remuneration payment, promotes morale and increase team cohesion and that employee benefits has great influence on employee productivity. amankwah and agyemang (2020) explored in their study the outcome of dividend on financial-performance in ghana for 7 years (2012 to 2018). the survey data was obtained and panel-regression model were used for analysis. the finding revealed non-significant positive connection between variables. companies have to be compelled to reward dividends where they are financially strong. further finding confirmed that dividend is vital issue moving the monetary performance. porini (2020) upshot the effect of dividend payout ratio on financial-performance in tanzania between 2013 and 2018. panel data extracted from audited and analysis descriptive analysis and inferential analysis that's central tendency and multiple regressions were used to analyse the data. the outcome revealed significant positive outcome on financial accomplishment. moreover, the management variables resembling size of asset and growth in sales and leverage have connection with financial accomplishment. in the study of adhikari, (2020) the researcher examined the connection linking staff trainings and development costs, total staff costs and profit of nepalese firms between 2016 and 2020. secondary source of data and panel-regression model were applied to analyse the data. this finding revealed that banks focus on trainings and development of staff. staff cost has significant positive connection linking staff cost with operational profit. the study suggests that government should invest more on human capital development and invest more on research and development. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 56 several studies have been carried out on dividend policy, community relations, employee relation and research and development with divergent views on their literature but few studies have been carried out on a combination of all the variables as one and see the effect on financial performance of manufacturing companies. the study also seeks to contribute on the effect of research and development on financial performance which has not been well explored in nigeria. in developing countries, community cost is not reported on real-time and rarely does it influence performance as seen from the literatures reviewed. 3. methodology and model specification ex-post facto research design was adopted for the study. the population is 64 listed firms and 24 were selected for 11 years (2010 to 2020) using stratified and random sampling method. the reason for choosing manufacturing firms over other firms listed on the nigerian stock group is because manufacturing firms constitute the major area where the society is affected by these companies for example water pollution, air pollution and soil pollution. the reasons for conducting the study from 2010 is because the world just came out of recession during that period and ifrs (international financial reporting standard) was also adopted in nigeria in 2010. these manufacturing firms pollute the society and they are expected to bring back part of it to the environment. the study adopted the general multiple ordinary least square (mols) regression model base in line with the specific objective variables of the study. the regression model is as specified by frances galton (1974) modified by nnamani, onyekwelu & ugwu (2017). to empirically express the relationship between return on assets and sustainability accounting reports of quoted manufacturing companies in nigeria, the base line model equation is specified as thus; roait = β0 + β1dpoit + β2crcit + β3ercit + β4r&dcit + eit where; i =number of companies or cross section t=no of time periods roa = return on assets of quoted manufacturing companies, β0 = the constant term, dp = dividend policy, crc = community relation costs, erc = employee relation costs, and r&dc = research & development costs, β1-4 = coefficients estimated or the coefficients of slope parameters. et= error term. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 57 4. results and discussion of findings 4.1 descriptive statistic analysis table 1: descriptive statistics roa dp crc erc r_d mean 0.064903 0.043952 0.014431 1.560304 0.137041 median 0.043126 0.022769 0.001526 0.090413 0.004291 maximum 3.237088 0.487146 1.968699 376.9860 21.80103 minimum -2.359907 0.000000 0.000000 0.003173 0.000000 std. dev. 0.303419 0.060109 0.121754 23.19431 1.357415 skewness 2.390875 2.862122 15.76020 16.15435 15.50915 kurtosis 63.39361 15.95867 253.3415 261.9767 247.6523 jarque-bera 40372.78 2199.272 700308.2 749240.5 668985.9 probability 0.000000 0.000000 0.000000 0.000000 0.000000 source: researcher’s computation, 2021. table 1 above reports the descriptive statistic such as mean, median, standard deviation, maximum, minimum, jarque-bera, kurtosis and skewness. average return on asset is 0.064 and median value of 0.043. the standard deviation of 0.303, indicates the existence of low degree of disparity among the firms roa. it shows that their roa is close. more so, the maximum of roa is 3.23, while -2.359 is the minimum. 4.1.2 panel unit root test result table 2 panel unit root test variable llc(levin, lin & chu t*) lps(im, pesaran and shin w-stat) order of integration remarks statistics p-value statistics p-value crc -6.12411 0.0000 -2.48152 0.0065 i(0) stationary at level dp -13.9791 0.0000 -5.98683 0.00000 i(0) stationary at level erc -6.31463 0.0079 -2.97528 0.0015 i(0) stationary at level r_d -17.8788 0.0000 -8.93847 0.00000 i(0) stationary at level roa -9.16390 0.0000 -4.27973 0.0000 i(0) stationary at level source: researcher’s computation, 2021 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 58 carrying out unit root test before estimating the model was a necessary step in order to choose the most appropriate estimating technique. studies have shown that panel data have tendency of been mean variant and therefore, there was need to test the stationarity condition of these variables. also, the prevailing problem of spurious regression had necessitated the test for unit root of panel series variables. however, examining the stationary property of panel data series prior to analysis the relationship among the variables has been described as fundamental due to the challenges posed by non-stationary series in regression analysis. this is important as the proposed methodology (panel regression) for the analysis can only be used to estimate models involving variables that are integrated of order zero i(0). table 3. correlation analysis: ordinary correlation analysis: ordinary correlation probability roa r_d erc dp crc roa 1.0000 r_d -0.0996 1.0000 0.1068 ---- erc -0.0822 0.1869 1.0000 0.1838 0.0000 ---- dp 0.0828 -0.0572 -0.0462 1.0000 0.1806 0.3532 0.4550 ---- crc -0.0859 0.1764 0.1915 -0.0415 1.0000 0.1648 0.0000 0.0000 0.5024 ---- source: researcher’s computation, 2021 the correlation results in table 3 showed that rd cost of the firms do exhibit weak statistical correlation with erc (r=-0.1869,p<0.05) and crc of the firms(r= 0.1764,p<0.05).. crc exhibit weak correlation with other explanatory variables such as erc(r=0.1915,p<0.05) and rd(r=0.17644, p<0.05).. it can be deduced from the correlation analysis that low level of correlation was observed among the explanatory variables. this implies the less likelihood of encountering multicollinearity problem which may understate or overstate the standard errors and thereby lead to wrong inference about the behaviour of the variable. multicollinearity problem occurs when independent variables in a regression model are correlated. this correlation is a problem because independent variables should be independent. if the degree of correlation between variables is high enough, it can cause problems when fitting the model and interpreting the results. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 59 table 4: variance inflation factor vif 1/vif erd 2.02 0.495 crd 3.06 0.326 rd 3.13 0.319 drd 1.01 0.991 source: researchers computation 2021 multicollinearity test the correlation results in table 4 report the variance inflation factors of the study. the centred vif should be less than 4 in order to be free from multicollinearity. from the table all the variables report vif less than 4. this implies that there is less likelihood of encountering multicollinearity problem which may understate or overstate the standard errors and thereby lead to wrong inference about the behaviour of the variable. multicollinearity problem occurs when independent variables in a regression model are correlated. this correlation is a problem because explanatory variables should be independent. if the degree of correlation between variables is high enough, it can cause problems when fitting the model and interpreting the results. table 5 correlated random effects hausman test (test cross-section random effects). test summary chi-sq. statistic chi-sq. d.f. prob. cross-section random 9.6151 4 0.0474 source: researcher’s computation, 2021 the section reports the influence of sustainability reporting on the financial performance of listed manufacturing firms in nigeria. in line with the diagnostics result earlier reported in table 3 and 4, it was obvious that the assumption of homoscedasticity and no serial correlation were not violated using fixed effect model. the f-statistics statistics of the model captures the joint significance of the variables. it shows whether the variables are significantly different from zero. if the test statistics of the f-value is statistically significant, the model is established and all the variables jointly different from zero. the outcome of the fstatistics of the model (74.2600, p<0.05) shows that the model is statistically significant and the coefficients are different from zero. the independent variables explained about 67.4% variation in performance of the firms, however, he after adjusting for the gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 60 loss in degree of freedom, the model explain about 62.22% variation in the gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 61 dependent variable. table 6 regression and hausman test fixed effect model random effect model variable coefficient t statistic prob. coefficient t statistic prob. r_d 0.1631 7.3384 0.0000 0.1585 7.8024 0.0000 erc 0.0132 4.5959 0.0000 0.0129 4.3099 0.0000 dp 0.4979 1.7802 0.0763 0.3645 1.4263 0.1550 crc -0.9074 -2.2713 0.0240 -0.9268 -2.3419 0.0199 c 0.0561 2.6701 0.0081 0.0621 2.7082 0.0072 r squared 0.6745 0.6273 adjusted r squared 0.6222 0.5722 f-statistic 74.2600 64.8176 prob(f statistic) 0.0000 0.0000 hausman 9.6151(p=0.0474) test source: researcher’s computation, 2021 fixed effect model. the first hypothesis reported that dp statistical significant positive relationship with financial performance of firms with p-value less than 0.10 and coefficient of 0.4979(t=1.7802, p<0.05). this imply that rise in dividend payout of the sampled firms will aid the performance of the firms. 0.10 was taken because dp is an important variable. this result is in tandem with the studies of ajibada, amuda and olurin (2019), idewere & murad (2019), amankwah and agyemang (2020), porini (2020). the second hypothesis reported that community relation cost of the firm exhibited negative relationship with the financial performance of the firm. the coefficient of the variable (-0.9074) and t-value of -2.2713 shows that in average across the period and within the firm, financial performance decline when the community relation cost increases. this result is in tandem with the results of taib and ameer (2012), singh (2014), umobong and agburuga (2018), hashim, ries and huai (2019), gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 62 kayode, adeyinka and abiodun (2019). gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 63 the third hypothesis discussed employee relations cost with coefficient of 0.0132(t=4.5959, p<0.05). thus, the coefficient of 0.0132 implied that an increase in the employee relations cost will induce the likelihood of rise in financial performance of firms. this result is in tandem with the studies of agba, mboto and micheal (2013), abose, eze and sowunmi (2018), adhikari, (2020). the 4th hypothesis reported the r&d cost had significant relationship with the firm’s performance. the coefficient of 0.1631(t=7.3384, p<0.05) showed that research and development contributed positively to the rise in firm performance. this result is in tandem with the results of heggeseth and moen (2016), abdel and raed (2017), jian, feng and chen (2019), 5. conclusion and recommendation based on the findings, the study therefore concludes that dp, r&d, erc of listed manufacturing firms in nigeria affect financial performance while crs does not affect financial performance positively. base on this conclusion, the study therefore recommends that listed manufacturing firms in nigeria should make dividend payment timely and regular, community cost should be moderately done and reported real-time as it occur, training, health, promotion and other benefits should be done and investment in r&d should be made compulsory for listed manufacturing firms in nigeria as this will increase performance and will help climate change. government and regulatory authorities such as financial reporting council of nigeria should encourage firms to report more of their sustainability performance and the report should be done on real-time basis. this is because the reporting rate on the part of manufacturing firms in nigeria is very low as it compliance is voluntary. therefore, to achieve maximum compliance government should make sustainability reporting compliance compulsory for companies listed in the nigerian exchange limited. references abdel, r.r & raed, k. (2017). impact of research and development expenditure on financial performance: jordanian evidence. european journal of business and management 9(32), 73-83. abosede, a.j., eze, b.u., & sowunmi, m.f. (2018). human resource management and banks' performance in nigeria. journal of varna university of economics, 62(2). gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 64 adhikari, n. r. (2020). training and development costs, staff costs and operational profitability in nepalese commercial banks. management dynamics, 23(2), 109–118. aditi, s & madhumita, c. (2021). does csr disclosure influence financial performance of firms? evidence from an emerging economy. sustainability accounting management and policy journal, 12(4), 2018-0042 agba, a. m. o, mboto, w. a. & agba, m. s. (2013) wages or other conditions: a critical assessment of factors in workers performance in nigeria. international journal of academic research in business and social sciences, 3(7), 489-505. alshbili, i.a & elaner, a.a (2019). the influence of institutional context on corporate social responsibility disclosure: a case of a developing country. journal of sustainability finance & investment 10(1), 1-19. ajibade, a.t; amuda, m,b; & olurin, o.t (2019). dividend policy and financial performancea study of quoted manufacturing firms in nigeria and kenya.south. asian journal of social studies and economics, 1-6. alchian, a., & demsetz, h. (1972). production, information costs, and economic organization. the american economic review, 62(5), 777–795. amabipi, a.k (2016). understanding host community distrust and violence against oil companiesin nigeria. walden university. amankwah, d.o & agyemang, o.o (2020).the relationship between policy dividends and firms’ performance on ghana stock exchange. 6(4), 378-397. atanu, f.h. & olorundare, j. (2007). rural development and sustainable development in nigeria. ankpa journal of arts and social sciences, 2(4),14-26. asaju, k & arome. s (2015). environmental degradation and sustainability in nigeria: the need for environmental education. journal of social sciences. 3(3), 56-61. awadzie, d.m., soku, m.g, & botchwey, e.a.(2022). sustainability reporting and the financial performance of banks in africa. journal of business, economics & finance, 11(1), 43-57. barber, b (1983). rulgers university press 190 (219) bassey, i (2019). environmental degradation and sustainable development in nigeria: a study of the south-south region in nigeria. international journal of humanities, social sciences and education, 6(8)33-42. cahaya, f.r., porter, s., tower, g. and brown, a. (2015). the indonesian government’s coercive pressure on labour disclosures: conflicting interests or government ambivalence, sustainability accounting, management and policy journal. 6(4), 475-497. camelia, o.s; et al (2020). impact of sustainability reporting and inadequate management of esg factors on corporate performance and sustainable https://www.emerald.com/insight/search?q=fitra%20roman%20cahaya https://www.emerald.com/insight/search?q=stacey%20porter https://www.emerald.com/insight/search?q=greg%20tower https://www.emerald.com/insight/search?q=alistair%20brown https://www.emerald.com/insight/publication/issn/2040-8021 https://www.emerald.com/insight/publication/issn/2040-8021 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 65 growth. sustainability journal 12(20), 8536. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 66 carter, r.c., & easton, l.p. (2016) sustainable supply chain management: evolution and future directions. international journal of physical distribution and logistics management, 41(1), 46-62. clarissa, s.v & rasmini, n.r (2018). the effect of sustainability report on financial performance with good corporate governance quality as a moderating variable. international journal of sciences: basic and applied research, 139-149. cleverline, b (2021). combating environmental degradation in nigeria through the recognition of the rights of nature. doi.org/10/2139/ssrn.3843333. dalida, m.a.e (2020). the impact of research and development intensity on financial performanceof pharmaceutical companies listed on egyptian stock exchange. alexandria journal of accounting research, 4(3), 1-55. delannon, n; raufflet, e. and baba, s. (2016). corporate community engagement strategies and organisational arrangements: a multi case study in canada. journal of cleaner production. 129(15), 714-723. dharmadasa, p., gamage, p., & herath, s.k. (2014). corporate governance, board characteristics and firm performance: evidence from sri lanka. south asian journal of management, 21(1), 7-31. dibia, n.o & nwaigwe, n.g. (2017). corporate sustainability reporting and firm profitability: a survey of selected quoted companies in nigeria. journal of finance, banking and investment. 4(2), 136-147. dowling, j. & pfeffer, j. (1975). organisational legitimacy: social values and organisational behaviour. pacific sociological review, 18(1), 122-136. elkington, j. (1998)(2004). cannibals with forks: the triple bottom line of 21st century business. stony creek: news society publications. enekwe, c. i., nweze, a. u. & agu, c. i. (2015). the effect of dividend payout on performance evaluation: evidence of quoted cement companies in nigeria. european journal of accounting, auditing and finance research 3(11): 40-59. falk, j. (2012). comparing wages in the federal government and the private sector. working paper. 3.1-26. fernandez-feijoo, b., romero, s., & ruiz, s. (2012). does board gender composition affect corporate social responsibility reporting? international journal of business and social science, 3. financial accounting standard board (fasb) 1974 for research and development costs. freeman, r. e. (1984). strategic management: a stakeholder approach. m.a. pitman gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 67 freihat, a.r.f & kanakriyah, r (2017). impact of research and development expenditure on financial performance: jordan experience. european journal of business and management, 9(12), 73-83. fodio, m.i. abu-abdissamad, a.m., & oba, v.c. (2013). corporate social responsibility and firm value in quoted nigerian financial services. international journal of finance and accounting. (7) 8, 331340. gaba, n., & madhumathi, r. (2022). does corporate social responsibility add value to the indian banking sector? indian journal of finance and banking, 9(1), 140-158. garg, p. (2015). impact of sustainability reporting on firm performance of companies in india. international journal of marketing and business communication, 4(3), 38-45. gitman, c; & zutter, j. (2012). principles of managerial finance. edinburgh, england: pearson. global reporting initiative. (2000-2013). global reporting initiative g3, g3.1, g4. global reporting initiative organization. hashim, f., ries, e. a., & huai, n. t. (2019). corporate social responsibility and financial performance: the case of asean telecommunications companies. fgic 2nd conference on governance and integrity 892–913. hongming, x; ahmed, b & hussan, a (2020). sustainability reporting and firm performance: the demonstaration of pakistani firms. sage journals, doi.org/10.1177/2158244020953180 henri, j.f & journeault, m. (2010). eco-control the influence of management control systems on environmental and economic performance. accounting organisation and society, 35(1), 63-80. institute of chartered accountants of nigeria (2014). corporate reporting, paper 2. united kingdom: emile wolf. igbekoyi, o. e., ogungbade, o. i., & olaleye, a. g. (2021). financial performance and environmental sustainability reporting practices of listed manufacturing firms in nigeria. global journal of accounting, 7(1), 15 24. idemudia, u., & ite, u. e. (2006), corporate–community relations in nigeria‘s oil industry: challenges and imperatives. journal of corporate social responsibility and environmental management, 13(4), 194–206. idewele, i.o & murad, b.a (2019). dividend policy and financial performance: a study of selected deposit money banks in nigeria. african journal of business management, 13(7), 239-266. jian, x; feng, l & you-hua, c. (2019). r&d, advertising and firm’s financial performance in south korea: does firm size matter? mdpi. 11(14), 1-16. https://doi.org/10.1177%2f2158244020953180 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 68 jian, x; feng, l and you-hua, c. (2019). r&d, advertising and firm’s financial performance in south korea: does firm size matter? mdpi. 11(14), 1-16. krkač, k. (2007) introduction to business ethics and corporate social responsibility, mate, zagreb. kpmg (2011). global sustainability service and sustainability ltd: count me in: the readers take on sustainability reporting, amstelveen. kpmg (2013). kpmg international: the kpmg survey of corporate responsibility reporting. mahmood, z., kouser, r. & masud, m.k. (2019). an emerging economy perspective on corporate sustainability reporting – main actors’ views on the current state of affairs in pakistan. asian journal of sustainability and social responsibility 4(8), 2-31. margolis, joshua d. and elfenbein, h, a & walsh, j. p (2009). does it pay to be good...and does it matter? a meta-analysis of the relationship between corporate social and financial performance.ssrn doi.org/10.2139/ssrn.1866371. makori, d.m. & jagongo, a. (2013) environmental accounting and firm profitability: an empirical analysis of selected firms listed in bombay stock exchange, india. international journal of humanities and social sciences, 3(8), 167-179. murray, a. (2010). do markets value companies’ social and environmental activity? an inquiry into associations among social disclosure, social performance and financial performance http://theses.gla.ac.uk/1770/ nnamani, j.n; onyekwelu, u.l., & ugwu, o.k. (2017).effect of sustainability accounting on the financial performance of firms in the nigerian brewery sector. european journal of business and innovation research, 5(1), 1-15. nwambeke, g.c; et al (2019).impact of environmental accounting disclosure on financial performance of cement companies in nigeria firms. journal of arts and humanities.4 (1), 63-76. nzekwe, o. g., okoye, p. v. c., & amahalu, n. n. (2021). effect of sustainability reporting on financial performance of quoted industrial goods companies in nigeria. international journal of management studies and social science research, 3(5), 265-280. ogbemi, o.b (2020). attitude of host communities towards deploying corporate social responsibility to manage conflicts in the niger delta nigeria. global journals of arts, humanities and social sciences, 8(10), 122-141. okegbe, t.o and egbunike, f.c (2016).corporate social responsibility and financial performance of selected quoted companies in nigeria. journal of social development, 5(4), 168-189. onoja, a. a., okoye, e. i., & nwoye, u. j. (2021). global reporting initiative and sustainability reporting practices: a study of nigeria and south africa oil and gas firms. research journal of management practice| issn, 2782, 7674. https://dx.doi.org/10.2139/ssrn.1866371 http://theses.gla.ac.uk/1770/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 69 ordu, p. a & amah, c. o (2021). sustainability accounting and financial performance of oil and gas companies in nigeria. international journal of innovative finance and economics research 9(1),182-197. owolabi s.a & okulenu, s.a (2020). sustainability reporting as a catalyst to performance of insurance company in nigeria. international journal of research publications, 31-44. porini, r (2020). dividend payout ratio and financial performance: a case of firms listed on dar es salaam stock exchange. digital research repository, 10(1), 1-11. qamrizzaman, m.d; jahan, i & karim, s (2021).the impact of voluntary disclosure on firm’s value: evidence from manufacturing firms in bangladesh. journal of asian finance, economics and business 8 (6), 0671–0685. seraina.c. (2013).randd expenses and firm valuation: a literature review, international journal of accounting and information management. 16(1), 5-24. singh, s. (2014), impact of corporate social responsibility and financial performance of firms in uk. available from: http://www.essay. utwente.nl/65014/1/singh_ma_mb.pdf. spence, m. (2002). signaling in retrospect and the informational structure of markets. the american economic review, 92(3), 434–459. sinha, a., & mondal, k. (2020). the impact of lagged r&d expenses on firm performance: empirical evidence from the bse healthcare index. colombo business journal, 11(2),114-141. taib, e.m & ameer, r. (2012). relationship between corporate sustainability practices and practices and financial performance: evidence from gri reporting companies. doi.org/10.2139/ssrn.2152124. tapang, t.a; bassey b.e; & bessong, p.k (2012).environmental activities and its implications on the profitability of oil companies in nigeria. international journal of physical and social sciences. 2(3), 285-302. thayaraj, m.s & karunarathne, w.v.a.d (2021). the impact of sustainability reporting on firms’ financial performance. journal of business and technology, 5(2), 51-73. umobong, a.a & agburuga, u.t (2018). financial performance and corporate social responsibility of quoted firms in nigeria. international journal of innovative social sciences and humanities research. 6(1), 14-30. uyagu, d. b., joshua, o., terzungwe, n. & muhammad, l. m. (2017). effect of firm characteristics on environmental reporting practices of listed manufacturing firms in nigeria. nigerian journal of management sciences, 6(1). https://dx.doi.org/10.2139/ssrn.2152124 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 70 wachira, m & bendt, t (2019). exploring the content of sustainability reporting (sr) disclosures among public companies in south africa, mauritius and kenya. conference paper, june wasara, t.m & ganda, f. (2019). the relationship between corporate sustainability disclosure and firm financial performance in johannesburg stock exchange (jse) listed mining companies. 11(16), 1-23. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 71 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 i gusau journal of accounting and finance (gujaf) vol. 3 issue 3, october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria © department of accounting and finance vol. 3 issue 3 october, 2022 issn: 2756-665x gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ii a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com mailto:abupress2020@yahoo.com http://www.abupress.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos stat gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. muhammad aminu isa department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. prof. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 v department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeiza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vi advisory board members prof. kabiru isah dandago, bayero university kano,kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng mailto:elfarouk105@gmail.com http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng mailto:elfarouk105@gmail.com mailto:05@gmail.com http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ix contents capital structure and firm financial performance of listed deposit money banks in nigeria: moderating effect of board financial literacy anas idris abdulwahab, hussaini bala ph.d, mansur lubabah kwambo ph.d, & abubakar adamu 1 influence of socialization on msme compliance by mediating understanding and moderating knowledge of tax visits yayuk ngesti rahayu 17 does international financial reporting standard narrows audit expectation gap? musa ibrahim dauda, ibrahim adagye dauda, phd 35 sustainability reporting and financial performance of listed manufacturing firms in nigeria aiyesan, olabode olutola ph.d 49 firm attributes and financial reporting timeliness of listed consumer goods firms in nigeria akume james terkende, dele ikese karim 67 value relevance of accounting information for listed financial service firms in nigeria kassim busari, ishaya luka chechet ph.d, aliyu ahmed abdullahi ph.d, & ibrahim mohammed ph.d 87 nigeria economic growth and capital market development: does contributory pension scheme matter? akinwumi ayorinde olutimi, toluwa celestine oladele ph.d, &adeboye emmanuel sanmi 101 audit committee and financial reporting quality: the moderating effect of board independence of listed deposit money banks in nigeria kassim yusha’u shika, mark david kantiyok 117 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 x determinants of financial performance of listed deposit money banks in nigeria mary seansu lazarus, nurradden usman miko ph.d, & saifulahi abdullahi mazadu ph.d 140 human resource accounting and profitability of listed depositmoney banks in nigeria ahmad adamu ibrahim, ahmad rufa’i adamu, fatihu mahmud alhassan &muhammad iliyas abdulsalam 158 board independence, audit effectiveness and the quality of reported earnings in the nigerian consumer goods firms isah shittu ph.d, misbahu, abubakar muhammad 175 impact of capital structure on financial performance of listed agricultural companies in nigeria ahmad muhammad ahmad, shehu usman hassan ph.d., &abubakar abubakar 192 trade oriented money laundering and era of cybersecurity tax evasion in nigeria oluwayemi joseph kayode, adewole joseph adeyinka ph.d, adewale abass adekunle & kadiri kayode ph.d 205 effect of females in the boardroom on corporate sustainability reporting salami suleiman ph. d, olanrewaju atanda aliu ph.d 224 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 17 influence of socialization on msme compliance by mediating understanding and moderating knowledge of tax visits yayuk ngesti rahayu faculty of economics and business wisnuwardhna university malang yayukngesti@wisnuwardhana.ac.id abstract this study aims to determine the role of tax knowledge in being able to strengthen the relationship between tax socialization and understanding of taxpayers and understanding of taxpayers being able to mediate the relationship of socialization of tax visits or picktime to 151 msmes in the "selecta" destination, batu city east java indonesia. this research is included in survey research, but from a number of msmes that are eligible for data analysis, there are 148 because 3 respondents are considered unfit for processing. testing mediation and moderation using warppls in order to determine the mediating role of the taxpayer understanding variable and the moderating role of the taxpayer knowledge variable. warppls is also used to test the fit of external models which include convergent validity tests and composite reliability, compositer realiability, model fit and quality indices. the results show that understanding taxpayers is able to mediate the impact of "picktime" socialization on taxpayer compliance, while knowledge of tax visits can strengthen the relationship of tax visit socialization to taxpayer compliance, especially knowledge related to providing ease of use of the picktime application and being able to increase the influence of socialization on taxpayer understanding tax to get a queue number make a face-to-face appointment with the tax officer keywords: knowledge, understanding, socialization, compliance and tax visits doi.org/10.57233/gujaf. v3i3.178 1. introduction the reason we convey the covid-19 pandemic as an opening sentence in this study is: starting with the covid-19 pandemic, to prevent transmission of the virus, the government has limited community activities including government and private institutions that provide face-to-face services. services that were originally carried out face-to-face (work from office) have now become work from home, including limiting the number of visitors. face-to-face services must be carried out by making face-to-face appointments, you must first enter the tax visit application called "picktime", but during the covid-19 pandemic, socialization regarding tax visits was still limited to making brochures placed at the door of the tax service office, so that many taxpayers when they want to report their taxes are constrained because they do not know the procedure for filling out a tax visit application. mailto:yayukngesti@wisnuwardhana.ac.id gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 18 coronavirus disease 2019 referred to as covid-19 has spread to a variety of parts of the country in the world. the world health organization (who) has declared a covid-19 pandemic since march 11, 2020. the covid-19 is not solely dangerous in terms of fitness, it additionally has an effect on the financial system in various nations as well as in indonesia, due to the fact the production of items is disrupted, and investment is additionally hampered. the influences of the covid-19 virus pandemic in indonesia include: some items end up costly and rare to find, indonesian pilgrims cancel their umrah trips, reduce in foreign traveler visits to indonesia, injury the financial shape in indonesia and abate imports of goods. a variety of firm steps have been taken by the authorities to restrict people's mobility in order to minimize the unfold of covid-19 with the aid of enforcing micro-scale community activity restrictions (ppkm) and accelerating vaccinations. micro ppkm is carried out to foster public compliance with the covid-19 prevention health protocol. in micro-scale ppkm, authorities administration and public services ought to continue to run with changes to the work system: those who work in the non-essential quarter in the emergency ppkm vicinity are required to lift out legit responsibilities at home (work from home / wfh) in full or 100%. for authorities companies whose offerings are related to essential sectors, working in the office is a maximum of 50%. meanwhile, for authorities’ services related to integral sectors, government companies can assign their personnel to work from office (wfo) a maximum of 100%. the integral sectors in question encompass finance, banking, capital markets, payment systems, information and verbal exchange technology, non-covid-19 quarantine handling hotels, as well as export and import industries. meanwhile, critical sectors encompass energy, health, security, logistics and transportation, meals and beverage industry, petrochemicals, cement, countrywide imperative objects, disaster management, national strategic projects, construction, fundamental utilities, as well as industries that fulfill basic wants of the community. the directorate general of taxes is covered in the working vicinity of the ministry of finance of the republic of indonesia is to be the predominant driver of inclusive economic growth in the 21st century, the directorate general of taxes has the project of formulating and enforcing policies and technical standardization in the field of taxation, the tax service office is an operational workplace unit tasked with carrying out counseling, service, and supervision of taxpayers in the fields of income tax, value added tax, sales tax on luxury goods, other oblique taxes, land and building tax and duty on acquisition of rights on land and buildings gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 19 in accordance with their jurisdiction. the covid-19 pandemic has dampened the wheels of the national economy, the impact of which has made tax repayments drop dramatically throughout the first 1/2 of 2020. however, this does now not imply that reporting things to do and tax services have stopped. a range of efforts have been made so that tax services continue to be informative according to the country's target however stay safe, comfy in accordance to the covid-19 prevention fitness protocol. since september 1, 2020, humans who desire to get face-to-face services at the tax workplace are required to take a queue ticket variety on-line via the "kunjung.pajak.go.id" or "picktime" page through filling in their identity, destination office, date and time of visit. several research on taxpayer compliance during the covid-19 pandemic, (amah et al., 2021) discovered that msme actors prioritized retaining enterprise continuity and ignoring tax compliance. (kilo et al., 2022) found empirical evidence at some point of the covid-19 pandemic there was once a decline in taxpayer compliance due to government policies related to the implementation of psbb and ppkm, decreased consumption, financial slowdown and incentive policies tax. (listiyowati et al., 2021) the outcomes of her lookup show that socialization of taxation and tax services has no effect on msme taxpayer compliance, however the self-assessment device does have an effect on msme compliance. the implementation of the ppkm and psbb insurance policies need to be adhered to with the aid of the established public and commercial enterprise actors, the effect of this implementation effects in a decrease in sales turnover for commercial enterprise actors, termination of employment with personnel to business closures and face-to-face restrictions for public service institutions. the tax service office throughout the covid-19 pandemic as a public provider will continue to elevate out reporting things to do and tax services, even even though the quantity of face-to face conferences is confined with the aid of using the tax visit software or "picktime" for taxpayers who will use its service facilities. a tax go to is an statistics science software used by means of the tax service office which targets to decrease crowds in the tax workplace and make it less complicated for taxpayers to habits tax consultations, starting from consulting generic tax information, consulting requests, and others. (hamza et al., 2021) printed that records science in on-line tax filing, online tax registration and online tax delivery has a high quality affect on environment friendly tax management. (clement et al., 2017) observed the high-quality influence of records technology in tax administration in nigeria gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 20 which has an influence on productiveness and the relationship between the application of data technology. chandra et al., (2021) published that records technology is needed for tax administration activities in organizations, has reduced the time period between when taxes are generated and when they are paid. (muti’ah, 2018) determined that the use of facts technology, know-how of taxation and account representatives had no impact on person taxpayer compliance, whilst tax socialization and community financial stage had a massive impact on person taxpayer compliance. (chamalinda & kusumawati, 2021) published that the preparation for the implementation of the annual tax return reporting service thru e-filing at some stage in the covid-19 pandemic nonetheless faces various obstacles, various efforts have been made, so that the virtual integrated service center can run optimally. visiting taxes as an application of records and communication technology as a skill of providing comfort and avoiding crowds of taxpayers actually wants to be tested for its effectiveness due to the fact this software is regarded positive if the public receives handy service, methods are no longer complicated, fast, precise, satisfying taxpayers so that many use these facilities. but so far, this utility is now not acquainted to msmes due to the fact the lack of socialization and the contents of the socialization are not able to increase public knowledge and understanding about the picktime application. several research of taxpayer information (hardana et al., 2018) in their study exhibit that the use of the e-system taxation and internet understanding impacts the compliance of character msme taxpayers in the city of makassar. (hidup & terencana, 2020) in his learn about determined proof that worker tax information at "pt life makmur planned", the effectiveness of the tax system, provider great affect tax compliance. research on the grasp of statistics technology was carried out (chandra et al., 2021), discovering that a cutting-edge tax administration system in terms of an integrated tax system, changes to the tax facts system will make it simpler to furnish tax offerings and make it easier for taxpayers in the taxpayer compliance process. (sutrisno, 2020), (jarwa, 2021) in his empirical learn about located that there is an effect of taxpayer characteristics on attention and willingness to pay taxes and the higher facts technology, the higher the willingness of taxpayers to lift out tax responsibilities due to the fact science is used to facilitate tax reporting and to increase tax compliance. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 21 tax services to be more fine and efficient. (purba et al., 2020) the implementation of the e-filing device has a high-quality and massive have an impact on on taxpayer compliance; 2) internet expertise is established to average the relationship between the implementation of the e-filing device and the degree of taxpayer compliance. however (mascagni et al., 2021) the consequences of his research in ethiopia located distinctive results, particularly data and verbal exchange technological know-how had no effect on tax compliance but, the adoption of machines multiplied the accuracy of the taxpayer's records and decreased the discrepancy. tax visit (picktime) is a website or internet site of the directorate general of taxes that functions to make it less complicated for taxpayers to fulfill their rights and tasks in tax matters. tax visits have been launched since the covid-19 pandemic, specifically when you consider that september 1, 2020, with this service, it is hoped that taxpayers can make tax collections. ticket queue earlier than coming to the vacation spot tax office. however, the efforts of the directorate general of taxes to make changes to the implementation of tax offerings and the challenges received a response that got here from internally the integrated service center counter officers and taxpayers throughout the covid-19 pandemic (firdaus, 2021), while (muti’ah, 2018) observed empirical proof that the software of the online tax system has a tremendous and huge effect on tax compliance. chamalinda & kusumawati (2021) discovered that more than a few preparations for the implementation of the notification letter reporting carrier had been carried out clearly but still encountered a variety of barriers even even though they had been carried out optimally.(sukesi & yunaidah, 2020) discovered that the effectiveness of socialization, foremost service products and carrier nice had an effect on taxpayer pride and compliance. (listiyowati et al., 2021). the results show that the socialization of taxation and tax services has no impact on taxpayer compliance, whilst the implementation of the self-assessment system has a considerable fine impact on taxpayer compliance for the duration of the covid-19 pandemic. the findings of this learn about are predicted to add to empirical evidence of the significance of making provider adjustments to enhance provider quality that leads to the development of statistics and verbal exchange science and its socialization so that taxpayers feel the ease of use, velocity of get entry to and accuracy in carrying out tax functions. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 22 2. literature review theory of compliance compliance idea has been broadly studied in the discipline of social sciences, namely the fields of psychology and sociology, which emphasize the importance of the socialization method in an effort to impact person compliance behavior. compliance concept is a principle that explains a condition in which a man or woman obeys the orders or policies given. a character as an man or woman tends to obey the regulation that is considered splendid and steady with his internal norms. according to (rahayu et al., 2017) in the tax law that the public as taxpayers need to be conscious and active to be aware of the content and motive of the provisions of tax legal guidelines and regulations. taxpayer compliance can be recognized from taxpayer compliance starting from registering, compliance in reporting tax returns (spt), compliance in calculating and compliance with paying taxes owed before maturity. theory of knowledge (chandra et al., 2021) states that knowledge is information that an individual knows, understands, and is familiar with as information won thru the procedure of learning and experience. the understanding of the tax go to utility "picktime" is an facts science software used with the aid of the directorate general of taxes for queue numbers for taxpayers who will meet face-to-face with tax officials, tax visits have the purpose of making human beings apprehend more deeply, if human beings understand how to use the application. tax visits will be in a position to assist make bigger public pastime as taxpayers in reporting their taxes (silvia utami, 2018). visit tax itself is a website or web page from the directorate general of taxes that serves to facilitate taxpayers to fulfill their rights and obligations in tax matters, this service objective to facilitate the public in phrases of tax management. in this site, there are a number of selections of carrier menus and queuing tickets for the public before coming to the tax office, people no longer need to queue which can motive crowds to decrease the chance of contracting the covid-19 disorder which is very effortless to spread. various benefits and facilities that can be accessed with the aid of the community include: a). take care of the reporting of the annual tax return, b). ease of conducting consultations related to e-spt, e-faktur, e-bupot, and others, c) assisting the public to make appointments with tax officers and d) facilitating the public to behavior consultations with associated things such as established statistics consultations, software consultations and so forth. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 23 theory of tax visit some of the know-how that have to be recognized through the public when the use of the "picktime" tax go to application include: 1) opening the "http://kunjung.pajak.go.id" page; 2) then there are options: a) list; b) search for tickets and c) listing of work units. on the "register" menu, you should fill in: identity; health assessment; carrier & time and booking. the “picktime” menu is used to retrieve the queue variety that has been created, while the “list of work units” menu contains facts on: a) the address of the head workplace work unit, regional office and the address of the operational work unit; b) tackle of the tax service office and kp2kp; c) tax office communication channel. the records contained in this tax visit web page is less known by means of taxpayers because of the lack of socialization of this application. understanding of “picktime” visiting taxes. (hidup & terencana, 2020) grasp is the process of making ways of understanding. so far, many humans have only been taught to use technology, besides ever being given an grasp of the nature of the technology, as a result, people stutter when confronted with an software of this records technology. in relation to imposing the taxation rights and duties of the public or taxpayers who do now not understand facts technology, they tend to end up disobedient taxpayers. the significance of supplying an understanding of records and communication technology to the public due to the fact information technological know-how is a science that has a function in processing data, processing data, obtaining, compiling, storing, altering facts in all sorts of ways to gain useful or excellent information, because data technology makes it less complicated work executed by way of humans, the time used is greater environment friendly in obtaining information, the data bought is additionally accurate.(purba et al., 2020) the outcomes of his research exhibit that grasp the internet is perception the fact about what the web is and knowing how to use the internet. theory of socialitation "picktime" tax go to socialization is an effort made with the aid of the directorate general of taxes to supply knowledge to taxpayers so that they know everything about the technique for getting a queue wide variety thru the tax go to web page earlier than the taxpayer comes to the tax office. tax socialization is an effort made by using the director general of taxes to supply knowledge to the public and mainly taxpayers to understand about all matters regarding taxation, each rules and taxation procedures via the right techniques (hardana et al., 2018). (muti’ah, 2018) in their lookup observed that the outcomes of tax socialization have an effect on http://kunjung.pajak.go.id/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 24 taxpayer compliance, this capacity that offering grasp to taxpayers through tax socialization is essential thinking about the growing prevalence of tax evasion or tax evasion which will result in lowering the entry of tax funds into country treasury, or even no funds go to the kingdom treasury. this end result contradicts research conducted with the aid of (azizah, 2019) concluding that tax socialization, tax provider offerings and tax sanctions have no effect on character taxpayer compliance at kpp pratama manado and kpp pratama bitung. this shows the efforts of kpp pratama manado and kpp pratama bitung to extend public attention in these two cities on the significance of taxes for development, so as to increase character taxpayer compliance. taxpayer compliance is very interesting to find out about and research to find the root reasons of taxpayer non-compliance because low taxpayer compliance effects in now not accomplishing tax targets in indonesia, particularly for the duration of the covid-19 pandemic. high taxpayer compliance can extend state revenue due to the fact taxes are a supply of nation revenue that has a very essential position to finance all government expenditures besides taxes are used to modify the inflation rate, encourage export activities, furnish protection or safety for domestically produced goods and entice investment (clement et al., 2017). taxes additionally characteristic to distribute social welfare. taxes additionally serve to stabilize monetary conditions. the have an effect on of non compliant taxpayers during the covid-19 pandemic resulted in a drastic drop in tax payments, improvement did now not go well due to the fact the kingdom money was not enough to pay the state's wishes and the nation debt. conceptual framework this research was conducted within the framework of the theory of reasoned action which was updated with theory of planned behavior by (ajzen, 1991), the theory of reasoned action assumes that behavior is determined by an individual's desire to perform or not perform a certain behavior or vice versa, desire is determined by attitudes and subjective norms. ajzen's theory of attitudes towards behavior refers to the degree to which a person has favorable or unfavorable evaluation judgmc, micro, small and medium enterprises must comply with government policies by following health protocols to temporarily stop business activities for several reasons related to decreased purchasing power, low market share, and other constraints. others in the process of production and distribution. the behavior of micro, small and medium enterprises in complying with government recommendations believes they can support government programs to suppress the spread of covid-19. this study follows the attribution theory approach, namely the theory of taxpayer compliance related to the attitude of gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 25 taxpayers in assessing the tax itself and to analyze taxpayer compliance by utilizing the "pick time" tax visit application which is expected to be able to help and provide convenience for taxpayers who will carry out activities face to face with the tax official. schematic framework for think ingents while subjective norms refer to normative ones relating to individual perceptions of how the group sees behavior and evaluations which are generally expressed as individual motivations to adhere to reference groups. behavioral theory is planned as the development of a theory of reasoned action by developing perceived control behavior that a person's attitude influences behavior through a process of reasoned decision making, behavior is also influenced by subjective norms (beliefs), attitudes and beliefs towards certain behaviors will lead to certain behavioral intentions. this means that in response to the outbreak of the covid-19 pandemic. the conceptual framework is presented in figure 1: 3. research method and data the unit of analysis in this study is msme actors around the "selecta" tourist destination, batu city, east java, a total of 151 micro, small and medium enterprises engaged in the food and beverage business and the creative product industry, a total of 148 samples that are eligible for analysis. this research was conducted by combining experimental and survey methods using a questionnaire about knowledge and understanding of information technology, socialization and compliance. the questionnaire was grouped into: 1. respondent demographics including name, gender, income, age, education, line of business, have used the tax visit application; 2. instruments: a) knowledge and understanding of technology and information; b) socialization of tax visit applications and d) taxpayer compliance in carrying out tax obligations. respondents were asked to rate the instrument presented using a likert scale with 1 for the level that strongly disagrees gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 26 to 5 for answers that strongly agree. data analysis and testing using the warppls and spss applications are used to identify and estimate the relationship between latent variables whether they are linear or non-linear. at this stage it is carried out to test the goodness of fit outer model involves testing validity and reliability, the inner model includes model fit tests: model fit, path coefficient, and r² (hair et al., 2014) the unit of analysis in this study is msme actors around tourist destination "selecta" batu city, east java, a total of 181 micro, small and medium enterprises engaged in the food and beverage business and the creative product industry, a total of 148 samples that are eligible for analysis. this research was conducted by combining experimental and survey methods using a questionnaire about knowledge and understanding of information technology, socialization and compliance. the questionnaire was grouped into: 1. respondent demographics including name, gender, income, age, education, line of business, have used the tax visit application; 2. instruments: a) knowledge and understanding of technology and information; b) socialization of tax visit applications and d) taxpayer compliance in carrying out tax obligations. respondents were asked to rate the instrument presented using a likert scale with 1 for the level that strongly disagrees to 5 for answers that strongly agree. data analysis and testing using the warppls and spss applications are used to identify and estimate the relationship between latent variables whether they are linear or non-linear. at this stage it is carried out to test the goodness of fit outer model concerns validity and reliability testing, the inner model includes model compatibility tests: model fit, path coefficient, and r² (hair et al., 2014) 4. result and findings the findings of this study are distinguished: (1) respondent profiles of 151 msmes in the selecta tourism destination as respondents who filled out the questionnaire, but only 148 respondents who were representative engaged in the food and beverage business totaling 73 and creative product industries totalling 75 can be analysed data consisting of 89 men and 59 women, background is high school graduates 114 respondents, the majority of business owners aged between 36-55 years a total of 64 respondents. respondents' responses regarding knowledge of information technology were 63.6% with fairly good criteria, understanding of information technology showed an actual score of 78.02% including good criteria, socialization of the tax visit application showed a score of 59.84% including fairly good criteria, and tax compliance indicated the actual score of 77.74% is quite good. the summary of the results of data analysis is presented as follows gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 27 i. evaluation of measurement model a. convergent validity the convergent validity of the size mannequin uses reflective indications based on the aspect loading strategy of the indications that measure the latent variables. the summary of the loading takes a look at outcomes is presented in table 1. table 1: loading and cross loading test results no variable indicator cross loading p value type 1 picktime x1.1 soc_1 0.890 <0.001 reflective outreach x1.2 soc_2 0.938 <0.001 reflective x1.3 soc_3 0,899 <0.001 reflective 2 picktime x2.1 knw-1 0.921 <0.001 reflective knowledge x2.2 knw-2 0.894 <0.001 reflective x2.3 knw-3 0.904 <0.001 reflective x2.4 knw_4 0.699 <0.001 reflective 3 picktime understanding x3.1 und_1 x3.2 und_2 0.873 0.895 <0.001 <0.001 reflective reflective x3.3 und_3 0.863 <0.001 reflective x3.4 und_4 0.617 <0.001 reflective x3.5 und_5 0.750 <0.001 reflective 4 taxpayer compliance y1.1 comp_1 y1.2 comp_2 0.894 0.938 <0.001 <0.001 reflective reflective y1.3 comp_3 0.817 <0.001 reflective y1.4 comp_4 0.900 <0.001 reflective y1.6 comp_5 0.848 <0.001 reflective source: result of data analysis (2021) based on table 1. the symptoms of each socialization variable, information and appreciation of "picktime" tax visits and taxpayer compliance have mirrored the dimension of each socialization variable, know-how and perception of "picktime" tax visits and taxpayer compliance, particularly the loading issue the loading issue value > 0.4 b. composite reliability the precis of the composite reliability take a look at results is presented in table 2: gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 28 table 2: composite reliability variable composite reliability picktime outrech – (soc) 0.935 picktime knowledge – (knw) 0.918 picktime understanding – (und) 0.901 taxpayer compliance – (comp) 0.945 mediation knw*soc 1.000 source: result of data analysis (2021) based on table 2, the variables of picktime information (knw), picktime socialization (soc), picktime understanding (und), taxpayer compliance (comp) have a composite reliability price of 0.7 this indicates that all indicators of each variable have excessive reliability. properly for the latent variable. c. model fit and quality indices table 3: model fit and quality indices model fit and quality indices fit criteria analysis result evaluation model adjusted r2 r2 0.627 , model kuat ≥ 0.70 moderat ≤ 0.45 lemah ≤ 0.25 strong average path coefficient apc = 0.538 , p < 0.001 good average r squared ars = 0.613 , p < 0.001 good average block vif avif = 2.342 ; accepted if <= 5, ideal<= 3.3 ideal average adjusted r-square aars = 0.627 , p < 0.001 good average full collinearity vif afvif = 3.268 ; accepted if<=5 ideal<=3.3 ideal tenenhaus gof gof = 0.710 ; 0.1 – 0.24 = small 0.25 – 0.35 = medium gof > 0.36 = large large simpson’s paradox ratio spr = 1.000 ; accepted if >= 0.7 ideal = 1.00 ideal r-squared contribution ratio rscr = 1.000 ; accepted if >=0.9 ideal = 1.00 ideal gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 29 statistical suppression ratio ssr = 1.000 ; accepted if >= 0.7 ideal nonlinier bivariate causality direction ratio nlbcdr = 0.833 ; accepted if>=0.7 ideal source: result of data analysis (2021) based on table 3, shows the goodness of fit inner model. the results of the analysis show the value of the average path coefficient (apc) or the average path coefficient of 0.538 with a significance level of p-value <0.00, which means that the coefficient on each the path has a massive have an impact on on the know-how of taxpayers about tax visits on the appreciation variable and additionally the moderating model of the socialization relationship on appreciation the application of tax visits. average r-squared (ars) value is 0.613 with p-value p < 0.001 and average adjusted r-squared is 0.627 p-value p < 0.001 potential that the socialization, knowledge and understanding of tax visits suggests a enormous 62.7% impact on taxpayer compliance and additionally the moderation mannequin on taxpayer compliance. while the last 37.3% is influenced by way of different variables that are no longer used in this study. the average block price of vif (avif) is 2,342 < 3,300 < 5,000 including the perfect class and the average full collinearity vif (afvif) value of 3,268 < 3,300 < 5,000 is protected in the commonplace position. this potential that the consequences of this analysis show that the socialization, know-how and perception of tax visits in this find out about are free from multicollinearity or the three variables in question, particularly socialization, know-how and understanding of tax visits "picktime” is now not related or has no relationship. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 30 analysis of hypothesis test figure 2: output results of mediation and moderation test fashions based on figure 2, it can be summarized in table 4: table 4: direct and indirect effect relationship between variabels path coefficient p-value evaluation direct effect : soc – und 0.71 < 0.01 significant direct effect : soc – comp 0.64 <0.01 higly significant direct effect : und – comp 0.28 <0.01 higly significant indirect effect : soc – und – comp 0.71 x 0.28 = 0.198 total effect 0.64 + 0.198 = 0.838 effect of moderation : knw  soc – und -0.13 =0.05 significant source: result of data analysis (2021) table 4 suggests the effects of the moderation analysis that it is discovered that taxpayer information about "picktime" tax visits can support the relationship between picktime socialization and taxpayer perception of tax visits applications by using 13% and p 0.05 means that some taxpayer understanding is related to the use of picktime applications. what taxpayers be aware of for their appreciation is nonetheless restricted to journeying taxes as a skill to take queue numbers, the usage of internet facilities, saving time and easy to do anywhere, because incomplete statistics dissemination reasons taxpayers to lack perception when having access to the tax go to page. figure 1 additionally shows the results of the gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 31 mediating evaluation of the impact of picktime socialization on taxpayer compliance via appreciation the utility of tax visits, the direct impact of socialization on tax compliance is 0.64 with p <0.01 meaning that socialization of tax visits has a great and good sized impact on taxpayer compliance via 64%, whilst the oblique effect of socialization on compliance thru understanding of the tax go to application is 0.71 x 0.28 = 0.198, so the complete effect is 0.64 + 0.198 = 0.838. based on the calculation of variance accounted for (vaf) = 0.198: 0.838 = 0.2362 or 23.62%, it can be concluded that the appreciation of taxpayers about the "picktime" tax visit utility has no mediating effect (hair et al, 2013) if it follows the criteria: a) if the vaf fee > 80% is covered in full mediation; b) if the vaf is between 20% and 80%, it is in the category of partial mediation and c) if the vaf is much less than 20%, it is classified as no mediation effect. 5. conclusion based on the results of the discussion, it was concluded: 1) the application of the "picktime" tax visit application during the covid-19 pandemic that the knowledge of taxpayers about tax visits strengthens the influence of socialization on taxpayer understanding in creating taxpayer compliance. these results support research conducted by (chandra et al. al., 2021) and (chamalinda & kusumawati, 2021) that tax knowledge can affect compliance and willingness of taxpayers to carry out tax obligations and service efforts at virtual integrated service places run optimally; 2) understanding of information technology related to the tax visit application shows that it can explain and be able to mediate the effect of socialization on taxpayer compliance which is full mediation, meaning that the socialization of tax visits is not able to influence taxpayer compliance without going through an understanding of this information technology. however, with the taxpayer's knowledge as a variable that can strengthen the socialization relationship of the tax visit application in the convenience of being carried out by the taxpayer when going to take a queue number, not too long when going to make a tax visit make taxpayer compliance increase, this research supports research conducted by (clement, ph & ayodele, 2017) and (sutrisno, 2020). reference ajzen, i. (1991). the theory of planned behavior. organizational behavior and human decision processes, 50(2), 179–211. https://doi.org/10.1016/0749-5978(91)90020-t amah, n., rustiarini, n. w., & hatmawan, a. a. (2021). tax compliance option during the pandemic: moral, sanction, and tax relaxation (case study gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 32 of indonesian msmes taxpayers). review of applied socio-economic research, 22(2), 21–36. https://doi.org/10.54609/reaser.v22i2.108 azizah, f. (2019). pengaruh sanksi pajak dan sosialisasi perpajakan terhadap kepatuhan wajib pajak orang pribadi yang melakukan usaha ( studi kasus kpp pratama pare) pendahuluan pajak merupakan wujud dari peran serta masyarakat dalam mendukung pembangunan maupun perekonomi. 1, 33–45. chamalinda, k. n. l., & kusumawati, f. (2021). potret pelaporan spt tahunan melalui e-filing pada masa pandemi covid-19. infestasi, 17(2), inpres. https://doi.org/10.21107/infestasi.v17i2.11517 chandra, n., halwi, m. d., masdar, r., tampang, din, m., mapparessa, n., & meldawati, l. (2021). the effect of tax payer awareness, taxation knowledge and the implementation of modern tax administration system on taxpayer compliance. proceedings of the international conference on strategic issues of economics, business and, education (icosiebe 2020), 163 (icosiebe 2020), 159–162. https://doi.org/10.2991/aebmr.k.210220.028 clement, o., ph, o., & ayodele, k. b. (2017). impact of information technology on tax administration in southwest, nigeria. 17(2). firdaus, r. a. (2021). pelayanan perpajakan di masa pandemi covid-19: apa yang berubah dan bagaimana respons pegawai garis depan ? jurnal pajak indonesia, 5(2), 224–240. hair, j. f., sarstedt, m., hopkins, l., & kuppelwieser, v. g. (2014). partial least squares structural equation modeling (pls-sem): an emerging tool in business research. european business review, 26(2), 106–121. https://doi.org/10.1108/ebr-10-2013-0128 hamza, p. a., qader, k. s., gardi, b., hamad, h. a., & anwar, d. g. (2021). analysis the impact of information technology on efficient tax management. international journal of advanced engineering, management and science, 7(9), 31–41. https://doi.org/10.22161/ijaems.79.5 hardana, t., wijayanti, a., & chomsatu, y. (2018). effect of use esystem taxation and understanding of the internet on personal compliance of umkm personal taxpayers. the 2nd international conference on technology, education, and social science 2018 (the 2nd ictess 2018), 2018, 477–488. hidup, p. t., & terencana, m. (2020). factors that affect the level of taxpayer compliance empirical study of taxpayer on employees of. 1–17. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 33 jarwa, t. (2021). the influence of individual characteristics and information technology on taxpayer awareness, willingness, ability to pay and taxpayer compliance in paying land turkish journal of computer and mathematics, 12(9), 1527–1537. https://turcomat.org/index.php/turkbilmat/article/view/3545 kilo, a. s., amaliah, t. h., & husain, s. p. (2022). potensi peningkatan kepatuhan wajib pajak umkm di masa pandemi covid-19 setelah diterbitkan insentif pph 21 final umkm ditanggung pemerintah. jurnal pajak, 4, 44–52. https://doi.org/10.20885/ncaf.vol4.art8 listiyowati, l., indarti, i., setiawan, f. a., wijayanti, f., & setiawan, f. a. (2021). kepatuhan wajibpajak umkm di masa pandemi covid-19. jurnal akuntansi indonesia, 10(1), 41. https://doi.org/10.30659/jai.10.1.41-59 mascagni, g., mengistu, a. t., & woldeyes, f. b. (2021). can icts increase tax compliance? evidence on taxpayer responses to technological innovation in ethiopia. journal of economic behavior and organization, 189, 172–193. https://doi.org/10.1016/j.jebo.2021.06.007 muti’ah, m. (2018). influence of information technology utilization, tax socialization, tax knowledge, community economic levels and the role of account representative on personal tax compliance (in the tax service office kembangan , west jakarta). european journal of business and management, 10(21), 57–64. www.iiste.org purba, h., sarpingah, s., & nugroho, l. (2020). the effect of implementing e filing systems on personal tax compliance with internet knowledge as moderated variables (case study on personal taxpayers at kpp pratama jakarta kramatjati). international journal of commerce and finance, 6(1), 166–180. rahayu, y. n., setiawan, m., & troena, e. a. (2017). the role of taxpayer awareness , tax regulation and understanding in taxpayer compliance. 9(november), 139–146. https://doi.org/10.5897/jat2017.0267 silvia utami. (2018). pengaruh sosialisasi, pengetahuan pajak, dan kualitas pelayanan terhadap kepatuhan dengan kesadaran sebagai variabel. sukesi, s., & yunaidah, i. (2020). the effect of tax socialization, superior service, and service quality on taxpayers’ satisfaction and compliance. journal of economics, business, & accountancy ventura, 22(3), 347–359. https://doi.org/10.14414/jebav.v22i3.1698. sutrisno. (2020). the effect of perception of ease and satisfed of the taxpayers http://www.iiste.org/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 34 to use e-filing with information technology readiness as a moderation variabels (case study in individual taxpayers in the tax office pratama depok cimanggis indonesia). international journal of economics, commerce and management, viii(12), 326–341. http://ijecm.co.uk/%0athe http://ijecm.co.uk/%0athe gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 35 i gusau journal of accounting and finance (gujaf) vol. 3 issue 2, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria 1 ownership attributes and stocks return of quoted consumers goods companies in nigeria mbatuegwu christopher david phd center for finance and accounting research (cefar) nigerian college of accountancy kwall, plateau state +2348032946967, mbatuegwuchidi@gmail.com joseph femi adebisi phd professor of accounting and finance anan university kwall, plateau state +2348037044599, adebisijf@yahoo.com egberi oyinemi elvis nigerian college of accountancy kwall, plateau state +2348030587976, elvisegberi@gmail.com abstract the significance of ensuring a consistent return on stocks for publicly traded companies cannot be overstated. this is due to the fact that returns inform investors about managerial and market performance and enable them to forecast the company's future earnings. however, global corporate scandals at the turn of the century, as well as the global financial crisis, eroded investor confidence. seven firms were dropped from the study, which included all 23 consumer goods firms, during the filtration process. data was extracted from the annual reports of the sampled companies (2010 to 2019) as well as the nigerian stock exchange as of 2020. the ex-post facto approach with agency theory was chosen because the event under consideration has already occurred. stock returns are the profits or gains made by investors in the stock market. managers may view the payment of investor returns as a positive indicator of the company's market prospects. the significance of ensuring a consistent return on stocks for publicly traded companies cannot be overstated. the purpose of this research is to look into the effects of three corporate properties on the stock returns of publicly traded consumer goods firms in nigeria. it was discovered that concentration of ownership, institutional ownership, and ownership all have a significant impact on nigerian stock returns. it also implies that the sec should provide an incentive to firms that disclose accounting information in the form of a commendation. keywords; ownerships attributes, stock return, nigeria 1. introduction in order to make investment decisions, capital market participants must seek information about capital market conditions. the company's return distribution mailto:mbatuegwuchidi@gmail.com mailto:adebisijf@yahoo.com mailto:elvisegberi@gmail.com 2 policy is one of the pieces of information required in the capital market. announcements about investor returns include information about future company profits. managers may view the payment of investor returns as a positive indicator of the company's market prospects. stock returns are a great way for investors to forecast volatility and expected return rates over time (mbatuegwu & ogoh, 2021, ali, 2017). stock market returns refer to the profits or gains made by investors in the stock market. secondary market trading is the most common way to generate a stock market return. an investor can earn stock market returns in the secondary market by purchasing a stock at a lower price and selling it at a higher price. furthermore, when it comes to stock investing, all investors, whether institutional or individual, have the same goal in mind: to maximize expected return while maintaining a certain level of risk. using various types of information, researchers on firm value economic and financial factors, for example, have been widely used to explain the behavior of various stock markets worldwide. the stock price, according to signaling theory, should reflect the expectation of corporate performance. due to these changes in stock prices brought on by a variety of factors, equity investment stock returns may fluctuate. these effects may be both positive and negative. these elements may be internal to the business (firmspecific) or external (macro). internal factors such as ownership structures are subject to the same constraints as external factors such as interest rates, global oil prices, foreign reserves, inflation rate, money supply, gdp, and output production. stakeholders are likely to gain when internal factors are managed, improved, and controlled by the business. it is believed that a company's ownership composition has a strong ontology with stock returns. for instance, institutional ownership affects stock returns because a company has more external control with the more institutional ownership it has. because there is no need for an incentive system to motivate management, managerial ownership lowers a firm's agency costs (mbatuegwu and musa, 2021; kazeem, 2015). nigeria, a developing market, differs structurally and institutionally from developed stock markets. it is crucial to ascertain whether firm-level characteristics have a different impact on nigerian stock returns. the ownership traits and stock returns of publicly traded consumer goods companies in nigeria are examined in this study. it is impossible to overstate how crucial it is for publicly traded companies to guarantee a steady return on their stocks. this is so that investors can forecast the company's future earnings and learn more about managerial and market performance from stock returns. however, at the turn of the century, both the global 3 financial crisis and corporate scandals around the world reduced investor confidence. another significant difference between this study and previous domestic studies is variable selection, with bawa and isa (2014) using the proportion of management interest in firm equity and hajara (2015) using the ratio of equity share of the firm held by an institution. many nigerian studies have not thoroughly addressed the factors influencing the level of stock returns. to the best of researchers' knowledge and as far as literature reveals, the macroeconomic factors such as ownership attributes are investigated to investigate their combined individual impacts on stock returns. most studies in nigeria have ignored governance and ownership structures. meanwhile, research has revealed that governance and ownership structures are critical in determining a company's success. additionally, the time periods covered by earlier studies in nigeria leave a gap in the area of study's coverage. for instance, sayumwe and amroune (2017), adedoyin (2011) covered the period from 2004 to 2009; uwubanmwen and obayagbona (2012), the period from 1996 to 2010; bala and idris (2015), the period from 2007 to 2013; kazeem (2015), the period from 2006 to 2013; and akwe, garba, and dang, the period from 2006 to 2013. 2018 research by akwe, garba, and dang examined the years 2007 to 2016. the researchers mentioned above used relatively recent study periods. additionally, the time periods covered by earlier studies in nigeria leave a gap in the area of study's coverage. for instance, adedoyin (2011) covered the period from 2004 to 2009; uwubanmwen and obayagbona (2012), the period from 1996 to 2010; bala and idris (2015), the period from 2007 to 2013; kazeem (2015), the period from 2006 to 2013; and akwe, garba, and dang, the period from 2006 to 2013. 2018 research by akwe, garba, and dang examined the years 2007 to 2016. the researchers mentioned above used relatively recent study periods. h01 ownership attributes has no significant impact on the stock returns of quoted consumer goods companies in nigeria. 2. literature review according to mbatuegwu and ogoh (2021), johnson, daily, and ellstrand (2000), ownership serves as a check on management. due to a lack of monitoring expertise, inadequate shareholder protection, and the free-rider issue brought on by expensive monitoring, individual shareholders lack strong incentives to oversee management 4 in atomistic markets. in the case of large, concentrated ownership, the issue of free riding brought about by diffuse shareholders might be less severe. large shareholders are also more likely to vote wisely and be well-informed. controlling shareholders may use their personal benefits of control to divert assets and profits away from the company, depending on the regulatory and legal environment. firm ownership is highly concentrated in some countries, especially in continental europe (becht & roell, 1999). in comparison to european financial firms, us firms have more institutional ownership and fewer large shareholders. however, institutional ownership of banks in the united states is significantly lower than in non-financial firms, according to adams and mehran (2003). managerial ownership the agency theory, which contends that a manager's equity holdings motivate them to act in a way that maximizes the firm's value, is the basis for the rise of this corporate governance variable (mbatuegwu, uwaleke, and aza, 2019). according to warfield (1995), the interests of shareholders and management start to align when management owns a portion of the company's equity. (jensen & meckling, 1976; healy, 1985; houlthausen, 1995; warfield, 1995; and mbatuegwu, 2021). the contracting agency website depicts those shareholders as having to make a decision. managers' incentives become more aligned with those of shareholders as their stake in the company grows. owners benefit from increased managerial ownership because incentives are better aligned, but they incur additional costs because they must pay managers more. according to the theory, managers make decisions within the constraints imposed by shareholders. ownership concentration the amount of time spent on the existence of large block holders in a firm is referred to as ownership concentration (thomsen & pedersan, 2000). a major stockholder is typically defined as someone who owns 5% or more of the company's equity. an owner's shareholding should be substantial enough to allow for oversight of management actions. an individual, a domestic or foreign corporation, an institutional investor, or the state can be the majority shareholder. large block holders have a stronger incentive to monitor management because the costs of monitoring are less than the benefits of large equity stakes in the company. according to ramsey and blair (1993), increased ownership concentration provides large block holders with enough incentives to monitor managers. demsetz and lehn (1983) and stiglitz (1985) discovered that large block holders have an incentive to bear the fixed cost of gathering information and participating in monitoring mechanisms. ownership concentration refers to the distribution of 5 shares held by a particular number of people or institutions; ownership mix, on the other hand, refers to the presence of particular institutions or groups among shareholders, such as governments, private companies, or foreign partners (claessens & djankov, 1998). the ownership structure's function in the context of concentrated ownership is to assess the cash flow contents in relation to the block holder's function. institutional ownership institutional ownership refers to the ownership of shares by other businesses or institutions like banks, insurance companies, investment firms, and other formally organized owners. in monitoring management, institutional ownership is crucial because it promotes more effective supervision. as a mechanism to safeguard the interests of institutional investors, institutional investors' participation has so far become a significant force in corporate monitoring. (bange& de bondt, 1998; bushee, 1998; chung et al., 2002; cornett et al., 2008; ebrahim, 2007; koh, 2003). given the importance of corporate governance in the management of an organization, shareholders' active involvement in overseeing management activities is essential to ensuring good corporate governance practices. as a mechanism to safeguard the interests of institutional investors, institutional investors' participation has so far become a significant force in corporate monitoring. a sizable and influential constituency with the potential to play a significant role in corporate governance has been formed as a result of the significant increase in institutional investor shareholdings. accounting data, which includes earnings data, gives investors pertinent information to help them with asset pricing and investment decisions (yuan &jaing, 2008). institutional investors are long-term investors with strong incentives and motivations to closely monitor management action, according to the active monitoring hypothesis (jung &kown, 2002). the same arguments imply that institutional investors may not restrict managers' discretion over how to manage earnings, but rather may increase managerial incentives to do so and project confidence. stock returns the term "return" refers to the financial benefits that come from an investment. for instance, a business that makes investments in fixed assets and operations expects to see increased cash flows as well as profits. an investor's ownership of shares is represented by a stock certificate. when buying common stock, an investor expects dividends and capital gains (share price increases). the profits made by investors on the stock market are known as stock market returns. this return may come in the form of trading gains or sporadic dividend payments made to shareholders by 6 the company. companies' dividend declarations can be used to increase stock market returns. a profitable business typically distributes a portion of its profits to its shareholders at the end of each quarter. this is one of the potential sources of stock market return for an investor. the most typical method of producing returns on the stock market is trading in the secondary market. by buying a stock on the secondary market at a discount and then selling it at a premium, an investor can benefit from the stock market return. investors and investors interact in a setting known as the capital market. corporate firm characteristics determine the share price at which it is sold, which usually influence the amount of capital a company can raise from the stock market. the stock market connects the need for firms to raise funds for business continuity or expansion with the desire of investors to invest their excess resources. as a result, it is a place to buy and sell shares, and share prices are determined by demand and supply, which are typically influenced by firm-specific factors and/or macroeconomic variables (adedoyin, 2011). ownership characteristics and stock returns mbatuegwu and ogoh (2021) examine the effect of firm characteristics on the stock returns of publicly traded consumer goods companies in nigeria. they use ex-post facto and descriptive research techniques, as well as a positivist research philosophy, to address the research problem. the study's findings suggest that a firm's size contributes positively to stock returns because firm size has a positive but marginal statistical impact on stock returns in the listed consumer goods sector. according to the results, this factor has no impact on the rate of stock returns for consumer goods companies in nigeria. the results show that the level of stock returns is not always influenced by a company's size. while the current work is on firm attributes, this work was done on firm attributes. afriyani (2018) looked into how managerial ownership structure, institutional ownership, and investment opportunities affected the performance of stocks in manufacturing companies listed on the indonesia stock exchange. application of managerial ownership analysis, institutional ownership analysis, analysis of investment opportunities and stock performance, multiple linear regression analysis, the traditional assumption test (normality test, multicolinearity test, autocorrelation test, and test heterokesdastisitas), and hypothesis testing are used for this purpose. the results showed that institutional ownership has a positive but not statistically significant impact on stock performance, whereas stock ownership structure has a significant positive impact on stock performance. while the discovery significantly improves the performance of the stock on the indonesian stock exchange. the test results obtained by discovering that managerial 7 ownership, institutional and investment opportunities all affect the performance of the company's shares are listed on the manufacturing indonesia stock exchange. because of the differences in legal and governance requirements between these countries, the findings of the studies cannot be used to make decisions in nigeria. amal and ahmed (2017) looked into how institutional ownership and ownership concentration affected the performance of firm stock returns using a panel data model. our main measures of ownership are the institutional ownership split by type of institution and the proportion of a company's outstanding stock held by the top three block holders. ex post and ex ante returns show no discernible correlation with institutional ownership or concentration. it was also found that institutional ownership represented by some institutions and ex post risk have a negative and significant relationship, but only with ex ante risk does institutional ownership represented by employee associations have this relationship. to make the current study more robust for decision-making, ownership attributes and stock return were used. in canada, sayumwe and amroune (2017) investigated the relationship between board ownership and the market price per share. the study used a sample of 50 toronto stock exchange-listed canadian companies. data was gathered from the annual report over a five-year period, from 2009 to 2013. the effect of board ownership on the market price per share was investigated using a regression analysis technique. the findings provided substantial and positive support for the effect of board ownership and directors on the market price per share. this study was conducted in canada, which has a different investment climate than nigeria; thus, a domestic study was required. an agency relationship develops as a result of the division of owners and managers. an agency relationship exists when one or more people (the principal or principals) hire another person or people (the agent or agents) to perform a service. hoskisson, ireland, and hitt (2011) top managers are hired guns who prioritize their own interests over those of the shareholders more than anything else (berle & means, 1932). when management prioritizes measures to increase firm ownership or diversify the company into unrelated businesses at the expense of shareholders, which lowers dividends and stock price, an agency problem occurs. in dealing with relationships between principals and shareholders and their agents (boards of directors), agency theory aims to investigate and resolve two problems: corporate governance research places a lot of emphasis on the "control" role, or the functioning of the board (boyd, 1990; johnson, daily, and ellastrand, 1996). 8 (hillman & dalziel, 2003). the agency theory, which asserts that ownership and control separation can lead to conflicts of interest in organizations, is the main theoretical framework that links this monitoring function to firm performance, which explained the philosophy of the study. 3. methodology and model specifcation the ex-post facto approach was chosen because the event under consideration has already occurred. this study is based on historical data. the study will use the multiple regression technique to determine the impact of independent variables on the dependent variable because it is the most appropriate technique for determining the extent of the impact of independent variables on the dependent variable. the stata statistical package was used because it allows for determining the impact of independent variables on the dependent variable as well as testing for robustness using tests like the heteroscedasticity test, fixed and random effect test, and multicollinearity test. in this instance, the study looked into how ownership structure affected stock returns following the occurrence of the relevant event. in order to address the research problem, this study used a descriptive ex-post facto research methodology and a positivist philosophy. all 23 consumer goods companies that were listed on the nigerian stock exchange as of 2020 made up the study's sample. purposive sampling was used in the study to create a sample size of sixteen (16), and seven (7) consumer goods companies marked with an asterisk (**) were removed from the list. this number results from the demand that a company have complete data for the number of years being taken into account. additionally, information was gathered from the sampled companies' annual reports (2010 to 2019). on the nigerian stock exchange, these firms are listed as public limited companies. the study's data is based on a panel of participants (i.e., cross-sectional time series data). variable measurement a model was created to look into the variables affecting the ownership characteristics and stock returns of publicly traded consumer goods companies in nigeria. to predict stock returns, the factors influencing ownership structure will be taken into account. as a result, the statistical analysis for this study will be based on the arbitrage pricing theory (apt), which asserts that a number of economic factors determine stock returns. the factors influencing stock returns in consumer goods companies were looked into by the researchers. below are images of the models. 9 srit = b+1ocit+2ioit+3moit+it.....................................................................................(i) where: oc = ownership concentration, io = institutional ownership, mo = managerial ownership, b0 = (constant) intercept, i denotes cross-sectional time.t = time series, = error phrase measurement of variables s/n variables definitions type measurement construct validity source 1 sr stock returns dependent annual allshare index (asi)) tripathi and seth (2014), ntshangase, mingiri and palesa (2016), khalid and khan (2017). 2. oc ownership concentration independent the proportion of shares held by a certain number of block holders greater than 5%? iqbal, siddiq and gul (2016); erivelto and fernando (2016); foroughi and fooladi (2012). 3. mo managerial ownership independent measured as the proportion of management interest in the firm's equity shareholding ezazi, sadeghi and amjadi (2011); bawa and isa (2014); teshima and shuto (2008); wafa and younes, (2014). 4. io institutional ownership independent measured by the ratio of equity shares of the firm held by institutional investors to iqbal, siddiq and gul (2016); hajara, (2015); yang, chun and ramadili (2009). 10 the total shares outstanding. source: compiled from prior literature by the researchers, 2022. 4. results and discussions descriptive statistics this section describes the variables' properties, encompassing each variable's mean as well as its minimum, maximum, and standard deviation. the descriptive statistics for the variables are listed in the table. table 4.1 descriptive statistics variables obs mean std dev min max sr 160 84.73062 264.197 17 1485 oc 160 .5958285 .1879737 .01 .861 mo 160 .0559345 .0400227 .001 .168 io 160 .1894311 .0703284 .092 .392 source: stata output, 2022. the data in the table demonstrates that the share return (sr) measure, which is the opposite of how share prices behave for consumer goods companies, has an average value of 84.73062 and a standard deviation of 264.197. this suggests that there are significant differences in the deviation between companies over the period. in addition, the values ranged from 17 to 1485, respectively. the returns on the companies' stocks vary greatly from year to year. the descriptive statistics in the table show that ownership concentration has a mean value of.5958285 and a standard deviation of.1879737 on average. the value of the standard deviation confirms that an average of 59 percent of the firms under study have concentrated owners in their ownership structure. the lowest percentage is 1%, while the highest percentage is 86%. the table also shows that during the study period, the average managerial ownership of the sampled consumer goods firms was.0559345 with a standard deviation of.0400227. this means that an average of 5% of consumer goods firms in nigeria have top-level executives who are also shareholders. the standard deviation confirms this assertion, indicating that the data is distributed around the mean. the lowest and highest values are.01 and 0.168, respectively. the highest figure implies that only 16% of companies have managerial shareholders. the table's descriptive statistics show a mean value of.1894311 and a standard deviation 11 of 0.073284. this means that, on average, 19% of companies had institutional investors during the study period. however, the standard deviation value, which is far from the mean, indicates that there are significant differences in the level of institutional ownership among the sampled firms. the minimum and maximum institutional ownership values are 0 and 0.33333, respectively. this means that the highest proportion of institutional owners is 39%. the table also shows that during the study period, the sampled consumer goods firms in nigeria had an average of.1337542 independent directors on their boards of directors, with a standard deviation of.069604. this suggests that an average of 13% of directors are independent. this is supported by the fact that the standard deviation is close to the mean. meanwhile, the minimum and maximum values stood at 0% and 33%, respectively. matrix of correlation the pearson correlation analysis matrix depicts the relationship between the explanatory and explained variables, as well as the relationship between each pair of independent variables. it is useful in determining the degree or extent of relationship between all independent variables, because excessive correlation can lead to multicollinearity, which can lead to misleading findings and conclusions. although the correlation matrix does not allow for statistical inference, it is useful in determining the direction and extent of association between the variables. the correlation matrix for all variables is shown in table 2. table 4.2: correlation matrix variable sr fz fa prof oc mo io sr 1.0000 oc 0.2344 0.0662 -0.2215 0.1245 1.0000 mo -0.1972 0.3509 0.0424 0.3717 0.0044 1.0000 io 0.2695 0.1183 0.3172 -0.0485 0.2259 -0.1536 1.0000 source: stata output, 2022 on the one hand, the table displays the correlation between the independent variables themselves as well as the correlation between the dependent variable, sr, and the independent variables, oc, mo, and io. in general, it is anticipated that there will be a high correlation between the dependent and independent variables and a low correlation between the independent variables. gujarati (2004) asserts that a correlation coefficient of 0.80 or higher between two independent variables is excessive, and as a result, specific actions are needed to fix that data anomaly. 12 the correlation coefficients between the independent variables are all less than 0.80, as shown in the table. this suggests that multicollinearity is not a possibility, but the assumption still needs to be verified using the variance inflation factor (vif) and tolerance value (tv) tests. the ownership concentration and institutional ownership explanatory variables, which move in the same direction as stock returns, are correlated positively with the dependent variable stock returns in the table. however, the table demonstrates a -0.1972-coefficient negative correlation between managerial ownership and real stock returns. in other words, the outcome variable is moving in the opposite direction of the explanatory variable. test for multicollinearity lack of multicollinearity is a fundamental premise of linear regression analysis. multicollinearity happens when the explanatory variables are not unrelated to one another. to test for multicollinearity, tolerance and variance inflation factor (vif) values are used. the table below displays the results of the multicollinearity test. tolerance and vif values variable vif 1/vif oc 1.40 0.714286 mo 1.77 0.564972 io 1.76 0.568182 mean vif 1.63 source: stata output, 2022. it is possible to draw the conclusion that there is no multicollinearity issue based on the data in the table. this is due to the fact that all of the variables' tolerance values and vif values are both greater than 0.10 and less than 10, respectively. (generally speaking.) test for heteroscedasticity this test was designed to determine whether the error terms' variability is constant. inferences about the study's beta coefficient, coefficient of determination (r2), and f-statistic can be affected by heteroskedasticity, which is the term used to describe the fact that the variation of the residuals or term error is not constant. the breusch and pagan's tests were used to determine the heteroscetism. the table below lists the outcomes. table test for heteroscedasticity variable chi2 prob>chi2 ownership structure 0.59 0.0910 13 source: stata output, 2020 the table displays the heteroscedasticity results for the study's aggregated variables. the goodness of fit test, a statistical hypothesis test used to determine how well sample data fits a distribution from a population with a normal distribution, yields a pearson chi2 value of 0.59 and a probability of 0.0910. this indicates that the model's adjustment of the observed problems is working properly and that no errors exist, highlighting the model's overall fitness. hausman specification test the hausman test can assist in determining which of two fixed effects models or random effects models is appropriate for interpretation in panel data analysis. the tests essentially look to see if there is a relationship between the unique errors and the regressors in the model. the preferred model has random effects, according to the null hypothesis; the model has fixed effects, according to the alternate hypothesis. variable chi2 prob>chi2 ownership attributes 0.01 0.08900 source: stata output, 2020 the hausman speciation test is utilized to select between the fixed and random effect models. the outcome of the hausman test indicated that the chi2 value for ownership attributes is 0.01. the prob> chi2 for ownership butes is currently 0.08900. the hausman test favors the random effect model, as indicated by the likelihood that chi2 will report an insignificant value. furthermore, the breusch and pagan lagrangian multiplier test for random impact was carried out to ascertain which result, random impact or pooled ols regression, is more appropriate in order to meet the requirement that one or more equations must be satisfied precisely by the chosen variable values. the outcome showed that 0.0000 is indicated by the prob> chi2 for variables. from this result, the best model to be interpreted is the pooled ols regression model since the prob> chi2 is less than 0.05 for all variables. data analysis and results the impact of institutional and managerial ownership as well as ownership structures on stock returns were all examined using two regression models. the outcomes of the breusch and pagan lagrangian multiplier test were used to specify the models for random impacts that used pooled ols regression. 14 the h01 ownership structure has no significant impact on the stock returns of quoted consumer goods companies in nigeria. pooled ols regression result sr coefficient t p-value oc 4.282942 3.85 0.000 mo -36.9705 -1.79 0.076 io 964.9211 3.26 0.001 r-square 0.1854 adjusted r-square 0.1678 f-statistics 54.86 prob> f 0.0029 source: output from stata, 2022. as shown in the table, the r-square is 0.1854, indicating that the ownership structure variables in the study were responsible for 18% of the stock returns. the f-statistic is 54.86 with a probability of chi2 = 0.002. the chi2 probability is significant at 1%, indicating that the model is fit. this demonstrates that the ownership structure variables chosen for the study are appropriate and can be used to explain the stock return behavior of nigerian consumer goods firms. ownership concentration has a positive and significant impact on the stock returns of nigerian publicly traded consumer goods companies. this is demonstrated by the coefficient of 4.282942 and the p-value of 0.0001, both of which are significant at a 5% level of confidence. given this result, the study has strong evidence to reject the hypothesis that ownership concentration has no effect on stock returns. managerial ownership has a negligible negative relationship with the stock returns of nigerian listed consumer goods firms. the 5% significance level reveals that managerial ownership has no statistically significant influence on stock returns. the study accepts the null hypothesis, which states that managerial ownership has no significant impact on the stocks of nigerian consumer goods companies. in the study's sample, institutional ownership has a statistically significant positive impact on stock returns. this claim is supported by the coefficient and p-value values of 964.9211 and 0.001, respectively. this suggests that institutional owners can be used to predict the level of stock returns for investors in the consumer goods sector. the combined ols regression results demonstrate that ownership structure can be used to forecast stock return behavior in the areas under investigation. this study aims to investigate the effects of institutional ownership, managerial ownership, and ownership concentration on stock returns (as determined by market price per share) in nigerian consumer goods companies. the likelihood that ownership 15 concentration affects stock returns is high. as a result, stock returns in the study's coverage area will increase as concentrated ownership increases by units. large block holders have a stronger incentive to monitor management because the costs are less than the advantages of large equity holdings. lehn and demetz (1985), show empirically, however, that high stock price volatility is correlated with high ownership concentrations. outside investors have little information and there is a high chance of insider trading because of the closed corporate governance system and high ownership concentration. the incentive to oversee management is weak in a variety of situations where shareholders hold less stock in a company because the costs outweigh the benefits. and is consistent with the findings of shindu, hashmi, haq, and ntim (2016), as well as faten, adel, and mohammad (2017), amal and ahmed (2017), and (2016). (2015). the impact of managerial ownership on the stock returns of nigerian consumer goods companies is also examined in this study. the study's findings demonstrate that managerial ownership in the study's focus area has no statistically significant effect on stock returns. as a result, holding managerial stock has no impact on stock returns. changes in the management's shareholding have no impact on shareholder returns as a result. a change in managerial shareholding has no effect on shareholder returns as a result. this finding challenges the conventional wisdom that managerial ownership enhances firm performance because directors are expected to act wisely because they hold stock in the company and have an interest in the results. as a result, with more shares held by directors, the stock price should rise. according to the literature. this finding is in line with that of boubaker (2018) and contradicts those of afriyani (2018), otieno (2016), and oyerogba, olaleye, and zaccheaus (2014). this study also explores how institutional ownership impacts the stock returns of consumer goods companies listed on the nigerian stock exchange as a monitoring mechanism. the results demonstrate that institutional investors significantly influence how stocks of companies in the study's area return. this finding suggests that institutional ownership affects stock returns. this conclusion might be accurate given the evidence from numerous studies that institutional ownership influences stock returns. stronger external control over the company may encourage managers to raise dividend payments as institutional ownership increases. due to the fact that institutional ownership encourages more efficient supervision, it is crucial to management monitoring. 16 however, a number of arguments contend that institutional investors may not restrict managers' ability to decide how to allocate their profits and may even increase their incentives to do so. this is based on the justification that institutional investors are unable to oversee management because they are overly focused on short-term financial results. the agency theory, which aims to resolve the conflict of interest between management and owners, is supported by this finding. the findings of amal and ahmed (2017) are at odds with those of the present study, whereas those of mbatuegwu, uche, and azah (2019), boubaker (2018), and afriyani (2018) are in agreement. 5. conclusion and recommendations in the literature on accounting and finance, stock returns and how they affect business operations have gained a lot of attention. this study made an effort to look into how three corporate properties affected publicly traded consumer goods companies in nigeria's stock returns. when the factors are taken into account separately, the effect is diminished. in particular, the study concludes that managerial ownership has no discernible effect on stock returns. the study finds that ownership concentration, institutional ownership, and ownership all have a significant impact on stock returns in consumer goods companies listed on the nigerian stock exchange, despite the lack of statistical evidence to support the conclusion that these variables are determinants of stock returns of nigerian publicly traded consumer goods companies. with this outcome, there is statistical evidence to conclude that these characteristics are determinants of stock returns in the study area. additionally, this study offers statistical support for the conclusion that, among the corporate assets examined, ownership structure is a more significant factor in determining stock returns in the study's coverage area. this conclusion is supported by the 18 percent r-squared result. based on interviews with a variety of people and organizations involved directly or indirectly with ownership attributes, other corporate properties, and stock return processes in nigeria, the study makes the following recommendations: i. to start, the study offered statistical and empirical proof in support of the idea that ownership characteristics significantly affect stock returns among nigerian publicly traded consumer goods firms. therefore, in order to safeguard investors and potential investors from potential scams, it is advised that the securities and exchange commission (sec) subject 17 consumer sector ownership to regular stress quality tests. according to the study, consumer goods companies should promote greater institutional ownership. this is based on the idea that institutional ownership has an effect on stock returns because it strengthens the company's external control, which can incentivize managers to raise dividend payments, as institutional ownership increases. ii. the sec should provide an incentive in the form of a commendation to firms that disclose accounting information necessary for assessing the quality of their profitability and earnings, as well as a penalty through rebuttal to firms that do not disclose fully. this is because fraudulent reporting misinforms the market, causing stock prices to rise based on false representations this paper's significant contributions will include the following: first, it will add to the existing body of knowledge and expand the literature on the various factors that determine stock returns of companies listed on the nigerian stock exchange (nse), specifically consumer goods firms. second, the study will go further in providing additional knowledge on the factors that rank as the most efficient in predicting and explaining the behavior and variations of stock returns in nigeria, which will be extremely useful in adjusting their operations to that impact. third, second, it will provide policy guidance to regulators and/or policymakers, including the securities and exchange commission (sec) and the central bank of nigeria. this will be with respect to regulating the composition of variables to achieve better management, governance, and performance standards. limitations of the study: only publicly traded consumer goods companies in nigeria are included in the study; the conclusions and suggestions only apply to consumer goods firms; other studies may take into account other properties that were not considered in this study. references acikalin, s., aktas, r., &unal, s. (2008). relationships between stock markets and macroeconomic variables: an empirical analysis of the istanbul stock exchange. investment management and financial innovations, 5(1), 7-16. adams r. b., & mehran, h., (2003) bank board structure and performance: evidence for large bank holding companies. journal finance intermed 21(2):243–267 adedoyin, a. o. (2011). share price determinants and corporate characteristics. dissertation, department of accounting, college of development studies, covenant university, ogun, nigeria. 18 ahmed, a. (2019). auditors ‟perceptions of audit firm rotation impact on audit quality in egypt. journal of accounting and taxation, 6 (1),105120. akwe, j., ayuba, i., & dang, g. h., (2018). effects of firm level attributes on stock returns in nigeria.doctor of philosophy dissertation, university of dhaka. al-shami, h. a. a., & ibrahim, y. (2013). the effects of macro-economic indicators on stock returns: evidence from kuwait stock market. american journal of economics, (3)5c, 5766. amtiran, p. y., indiastuti, r., nidar, s. r., &masyita, d., (2017). macroeconomic factors and stockreturns in apt framework. international journal of economics and management,11(s1), 97-206. bala, h., & idris, i. (2015). firm’s specific characteristics and stock market returns (evidence from listed food and beverages firms in nigeria). research journal of finance and accounting, 6(16),188-200. becht, m, & röell. p., (1999), corporate governance and control‖. european corporate governance institute. finance working paper. berle, a.a., & means, g.c. (1932). the modern corporation and private property. transaction publishers, new york. black, f. (1976), “the dividend puzzle”, the journal of portfolio management, 2(2), 5-8. boyd, b. k., (1990), board control and ceo compensation. strategic management journal, 15(5), 335 4. bushee, b. (1998). do institutional investors prefer near-term earnings over long-run value? contemporary accounting research18(2): 207-246. carver, k., & oliver, m., (2002). board composition and firm performance variance: australian evidence. accounting research journal. 22(2), 196-212. chung, r., firth, m., & kim, j.-b. (2002). institutional monitoring and opportunistic earnings management. journal of corporate finance, 8(1), 29–48. claessens, s, & djankov, s. (1998). ownership concentration and corporate performance in the czech republic. journal of comparative economics, 27, 498-513. clarkson, p. m. (1994), conservatism, disclosure and the cost of equity capital. australian journal of management, 39(2), 293-314. cornett, m., marcus, a., &tehranian, h. (2008). corporate governance and pay-for performance: the impact of earnings management. journal of financial economics, 87(1), 357-373. daily, c. m., & dalton, d. r. (1993). board of directors’ leadership and structure: control and performance implications. entrepreneurship theory and practice, 17,65–81. 19 donaldson, t. & preston, l. (1995). the stakeholder theory of the corporation: concepts, evidence, and implications. academy management review, 20 (1), 65-91. demsetz, h. (1983). the structure of ownership and the theory of the firm. journal of law and economics, 26(2), 375-390. demsetz, h. & lehn, k., (1985), ownership structure and corporate performance, journal of corporate finance 209–233. drew, m. e. (2003). beta, firm size, book-to-market equity and stock returns. journal of the asia pacific economy, 8 (3), 354-379 ebrahim, a. (2007). auditing quality, auditor tenure, client importance, and earnings management: an additional evidence, unpublished, rutgers university. eisenhardt, k. m. (1989). agency theory: an assessment and review. academy of management review,14(1), 57–74. erivelto, f. & fernando, c. (2016). the relationship between equity ownership concentrationandearnings quality. management journal. (43). ezazi m., sadeghi s. &amjadi h., (2011), "the effect of ownership structure on share price volatility of listed companies in tehran stock exchange: an empirical evidence of iran"international journal of business and social science 2(5). fama, e.f. & jensen, m.c. (1983), “separation of ownership and control”, the journal of law and economics, 26 (2), 301-325. freeman, r. e. (1984). strategic management: a stakeholder approach. boston ma. pitman publishing. freeman, r. e., andrew, d., wicks, q., bidhan, h., &parmar, a., (1991). stakeholder theory and “the corporate objective revisited.” organization science, 15, 364-369. foroughi, m. &fooladi, m. (2012). concentration of ownership in iranian listed firms. international journal of social science and humanity, (2) 2. gatuhi, s., gekara, m., &muturi, d. (2015). effect of macroeconomic environment on stock returns of firms in the agricultural sector in kenya. international journal of management & business studies, 5(3), 9-23. hajara, m.b. (2015). ownership structure and earnings quality of listed insurance companies in nigeria. published ms.c dissertation, ahmadu bello university zaria. healy, p. (1985), the impact of bonus schemes on the selection of accounting principles, journal of accounting and economics, 7: 85-107. ibrahim, m., & musah, a. (2014). an econometric analysis of the impact of macroeconomic fundamentals on stock market returns in ghana. research in applied economics, 6(2), 47-72. 20 iqbal, m. j., siddiq, a., gul, h, & gul, h., (2016). institutional ownership and discretionary accruals: empirical evidences from pakistani listed nonfinancial companies. journal of information management and business review.4(4), 217-222. jensen, m.c. &meckling, wh. (1976). theory of the firm: managerial behavior, agency costs, and ownership structure. journal of financial economics, 3, 305–360. jensen, m. (1986), ‘‘agency costs of free cash flows, corporate finance and takeovers’’. american economic review, 26, 323. jensen, m.c. (1993), “the modern industrial revolution, exit, and the failure of internal control systems”, the journal of finance, (48)3, 831-880. johnson, j. l., daily, c. m., &ellstrand, a. e., (1996), “boards of directors: a review and research agenda”, journal of management, 22(3), 409-438. jung, k., & kwon, s. y. (2002),” ownership structure and earnings informativeness evidence from korea”, the international journal of accounting, pp. 301-325. kazeem, h.s. (2015). firm specific characteristics and financial performance of listed insurance firms in nigeria: unpublished m.sc dissertation. khalid, w., & khan, s. (2017). effects of macroeconomic variables on the stock market volatility: the pakistan experience. global journal of management and business research: b economics and commerce, 17(4), 68-91. kiel, h., & nicholson, g. j., (2003). board composition and corporate performance: how the australian experience informs contrasting theories of corporate governance. corporate governance: an international review, 11(3), 189-205. kirui, e., wawire, n. h. w., & onono, p. o. (2014). macroeconomic variables, volatility and stock market returns: a case of nairobi securities exchange, kenya. international journal of economics and finance,6(8), 214-228. koh, p. s. (2003). on the association between institutional ownership and aggressive corporate earnings management in australia. the british accounting review, 35(2), 105–128. kyereboah-coleman, a, &biekpe, n. (2005). “the link between corporate governance and performance of the non-traditional export sector: evidence from ghana”. corporate governance: the international journal of business in the society, 6(5), 609-623. lintner, j. (1965). the valuation of risk assets and the selection of risky investment in stock portfolios and capital budgets. review of economic statistics, 47, 1337. mbatuegwu, d.c., uwaleke, j. u., and aza, s.m. (2019) effect of institutional shareholding and ownership concentration on audit quality of listed oil 21 and gas companies in nigeria. journal of accounting (joa) vol.8 issue 1. mbatuegwu c.d. ogoh t. (2021) effect of firm attributes on stock return of quoted consumers goods in nigeria. bingham university journal of accounting and business (bujab)vol. 6, no.2. mbatuegwu, d.c., musa, a.m., (2021) strategic implications of institutional shareholding and non-executive directors on audit quality of listedoil and gas companies in nigeria international journal of sustainable development vol.one no 7 mizruchi, m. s., (1983), “a longitudinal study of the formation of interlocking directorates,” administrative science quarterly 33, 194-210. mossin, a. (1966). capital market and security valuation. econometric, 17, 867-887. ntshangase, k., mingiri, k.f., &palesa, m.m. (2016). the interaction between the stock market and macroeconomic policy variables in south africa. journal economics, 7(1), 1-10. otieno, m. (2016). total debt servicing and macroeconomic performance in kenya. kenyatta oyerogba, e. o., olaleye, o. m., & zaccheaus, a. z., (2014). the effect of ownership concentration on firm value of listed companies. iosr journal of humanities and social science (iosr-jhss), 19, 90-96. ramsey, h. & blair. m. (1995). ownership and control: rethinking corporate governance for the twenty first century, brookings institution, washington, dc. ross, s.a. (1976). the arbitrage theory of capital asset pricing. the journal of economic theory, 13, 341–360. sharpe, w., f., (1964). “capital asset prices: a theory of market equilibrium under conditions of risk.” journal of finance 19 (3), 425-442. stiglitz, j. e. (1985). “credit rationing in markets with imperfect information.” american economic review 77:1 (march): 228-31. teshima, n., &shuto, a. (2008). managerial ownership and earnings management: theory and empirical evidence from japan. journal of international financial management & accounting, 19(2), thomsen s. & pedersen. t. (2000). ownership structure and economic performance in the largest european companies. the strategic management journal 21: 689-705. tripathi, v., & seth, r. (2014). stock market performance. international journal of finance and accounting. 7(4): 122-131. wafa, m. a., &younes, b., (2014). the relationship between ownership structure and earnings quality in the french contex. international journal of accounting and economics studies, 2 (2) (2014) 80. 22 warfield, t., wild, j. & wild, k. (1995). managerial ownership, accounting choices and informativeness of earnings. journal of accounting and economics, 20, 61–91. uwubanmwen, a. e., &obayagbona, j., (2012). company fundamentals and returns in the nigerian stock exchange. jorind, 10(2). yang, c. y., chun, h. n., &ramadili, b. l., (2009). managerial ownership structure and earnings management, journal. ttyre (234). yuan, j. & jiang, y. (2008), “accounting information quality, free cash flow and overinvestment: a chinese study”, the business review, cambridge, 11 (1), 159-166. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 i gusau journal of accounting and finance (gujaf) vol. 3 issue 3, october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ii © department of accounting and finance vol. 3 issue 3 october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com mailto:abupress2020@yahoo.com http://www.abupress.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos stat gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. muhammad aminu isa department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. prof. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeiza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vi advisory board members prof. kabiru isah dandago, bayero university kano,kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng mailto:elfarouk105@gmail.com http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng mailto:elfarouk105@gmail.com mailto:05@gmail.com http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ix contents capital structure and firm financial performance of listed deposit money banks in nigeria: moderating effect of board financial literacy anas idris abdulwahab, hussaini bala ph.d, mansur lubabah kwambo ph.d, & abubakar adamu 1 influence of socialization on msme compliance by mediating understanding and moderating knowledge of tax visits yayuk ngesti rahayu 17 does international financial reporting standard narrows audit expectation gap? musa ibrahim dauda, ibrahim adagye dauda, phd 35 sustainability reporting and financial performance of listed manufacturing firms in nigeria aiyesan, olabode olutola ph.d 49 firm attributes and financial reporting timeliness of listed consumer goods firms in nigeria akume james terkende, dele ikese karim 67 value relevance of accounting information for listed financial service firms in nigeria kassim busari, ishaya luka chechet ph.d, aliyu ahmed abdullahi ph.d, & ibrahim mohammed ph.d 87 nigeria economic growth and capital market development: does contributory pension scheme matter? akinwumi ayorinde olutimi, toluwa celestine oladele ph.d, &adeboye emmanuel sanmi 101 audit committee and financial reporting quality: the moderating effect of board independence of listed deposit money banks in nigeria kassim yusha’u shika, mark david kantiyok 117 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 x determinants of financial performance of listed deposit money banks in nigeria mary seansu lazarus, nurradden usman miko ph.d, & saifulahi abdullahi mazadu ph.d 140 human resource accounting and profitability of listed depositmoney banks in nigeria ahmad adamu ibrahim, ahmad rufa’i adamu, fatihu mahmud alhassan &muhammad iliyas abdulsalam 158 board independence, audit effectiveness and the quality of reported earnings in the nigerian consumer goods firms isah shittu ph.d, misbahu, abubakar muhammad 175 impact of capital structure on financial performance of listed agricultural companies in nigeria ahmad muhammad ahmad, shehu usman hassan ph.d., &abubakar abubakar 192 trade oriented money laundering and era of cybersecurity tax evasion in nigeria oluwayemi joseph kayode, adewole joseph adeyinka ph.d, adewale abass adekunle & kadiri kayode ph.d 205 effect of females in the boardroom on corporate sustainability reporting salami suleiman ph. d, olanrewaju atanda aliu ph.d 224 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 67 firm attributes and financial reporting timeliness of listed consumer goods firms in nigeria akume james terkende department of accounting faculty of management sciences bayero university, kano-nigeria +2348132274577, akume5655@gmail.com dele ikese karim department of accounting abu business school ahmadu bello university, zaria-nigeria +2347030214537, karimdele5232@gmail.com abstract this study examines the effect of firm attributes on financial reporting timeliness of listed consumer goods companies in nigeria within the period of 2017-2021. the sample size of the study is the entire consumer goods firms listed on the nigeria group exchange (ngx) from 2017-2021. the study used secondary data extracted from the annual reports of the various sampled firms, the generalized least square (gls) regression technique was used to analyze the data used in testing the hypothesis. the outcome of the regression analysis showed that firm size and financial leverage had a negative and significant effect on financial reporting timeliness. based on the findings, the study recommends that listed consumer goods firms should increase their size as this will lead to the reduction in the time taking to publish their financial reports. the firms should also restructure their capital structure with a reasonable increase in debt equity as more debts equity will lead to a reduction in the reporting timeliness of the firms’ financial information and in turns helps to promote value relevance of accounting information. keywords: firm size, leverage, liquidity, profitability, financial reporting timeliness. doi: https://doi.org/10.57233/gujaf. v3i3.181 1. introduction nigerian businesses are increasingly exposed to international capital markets, the quest for quality and well-timed economic data has turn out to be even more significant. as a result, businesses must meet up the information needs of overseas investors and make available more timely accounting information. acknowledging the significance of timely disclosure of accounting reports, different regulatory authorities in nigeria have put in place a time limits in which quoted firms are mandated to disclose their audited financial reports to the various stakeholders as mailto:akume5655@gmail.com mailto:karimdele5232@gmail.com https://doi.org/10.57233/gujaf.%20v3i3.181 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 68 well as file such reports with pertinent regulatory authorities. all public limited liability companies must submit their accounting statements to the corporate affairs commission within forty-two days of the yearly general meeting, as well as all public limited liability firms must publish audited financial statements in at least one nationwide every day newspaper (muideen & isiaka, 2019). investments and securities act of 1999 also stipulates that audited financial statements have to be filed with the securities and exchange commission, the nigerian stock exchange, and the corporate affairs commission, within three months of the year's end, and must be accepted by the stock exchange previous to its publication in newspapers. what constitutes timely financial information varies by country and is a product of a country's legal and regulatory system (paul & waidi, 2016). in nigeria, for example, the nigeria stock exchange (nse) mandates quoted firms to present their audited financial statement in ninety days of the financial year end; this means that audited financial statements must be published within three months. although, companies in well regulated environment like banks have some other reporting requirements that may be shorter precede the publication of audited financial statements. it was experiential that within nigeria, companies in the banking division need about eighty-two days, insurance sector one hundred and fifty-three, food/tobacco and beverage sector one hundred and forty-four, petroleum sector one hundred and thirty-seven, health sector hundred and forty-five, agriculture ninety six days and conglomerates one hundred nineteen days (iyoha, 2012). there have recurring cases of listed companies failing to make public their financial statements as at when due, for instance, in 2016, about 15 companies were sanctioned by the securities and exchange commission (sec) for failing to publish their audited financial statements three months after financial year end, as against three companies in 2015 financial year (awojulugbe, 2018; nigeria stock exchange (nse), 2019; salako, 2018). furthermore, in 2018 nse sanctioned thirty-one quoted companies for not meeting time limit for filing their audited financial reports for the year ended december 31, 2017. nse’s regulatory filing schedule shows march 31, 2018 is the time boundary for falling of annual reports for companies with gregorian calendar business year ended december 31, 2017(salako, 2018; awojulugbe, 201/8). the above mentioned financial implication has so much to do with the state of uncertainty that stakeholders are in, which often results in public speculation about specific bad gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 69 news in the affected companies, casting doubt on the accurateness and importance of financial information made available by these companies. there is no doubt that research on financial reporting timeliness has been conducted in nigeria and beyond. however, existing literatures, show that financial reporting timeliness of firms is effected by corporate mechanisms (i.e. as corporate governance and corporate attributes). based on the reviewed literatures and to the best of the researchers’ knowledge, many studies have been conducted on the effect of corporate governance mechanisms on financial reporting timeliness (ilaboya and iyafekhe, 2014; odjaremu and jeroh, 2019). with little research on the effect of corporate attributes and financial reporting timeliness of listed firms in nigeria (akhalumeh, izevbekhai and ohenhen, 2017; siyanbola, sanyaolu, ogbebor and adegbie, 2020). similarly, most of the studies conducted focus on other sectors, as can be seen from the study of siyanbola, et al, (2020) who examined the effect of firm attributes on audit reporting lag of listed deposit money banks in nigeria, efobi and okougbo (2015) investigated the effect of firm characteristics on financial timeliness of financial institutions in nigeria and the study of… with little studies covering the consumer goods sector in nigeria. furthermore, in nigeria, the period covered by some of the prior studies leave a gap. the work of efobi and okougbo (2015) for example, covered the period of 2005-2008; siyanbola, et al, (2020), covered the period of 2008-2017; arowoshegbe, uniamikogbo and adeusi (2017), covered the period of 2012-2015; akingunola, soyemi and okunuga (2018), covered period of 2010-2015; adebayo and adebiyi (2016), covered the period of 2005-2013. these studies were not carried out to examine the effect of corporate attributes on financial reporting timeliness of listed consumer goods firms in nigeria. however, this current study aims to assess the effect of firm attributes on the financial reporting timeliness of listed consumer goods companies in nigeria. the specific objective of the study is to examine the extent to which firm size, profitability, liquidity and financial leverage influence financial reporting timeliness of listed consumer goods firms in nigeria. the study raised research questions for each of the independent variables to determine the extent to which the variables affect the dependent variable. the study also hypothesized that each of the independent variables does not have significant effect on the dependent variable. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 70 2. literature review this section of the study provides evaluation of relevant and related literatures in the following categories: conceptual review, empirical review, and theoretical framework. 2.1 conceptual review this section reviewed basic concepts that are relevant to this study which include: financial reporting, timeliness and firm attributes (firm size, profitability, liquidity and leverage). financial reporting financial statements are designed to provide high-quality financial data for evaluating a company's performance. they aid well-informed decisions because what they contain is tremendously valuable to statement users. company yearly reports might be used to influence investors' perceptions on the company's success (ilaboya & iyafheke, 2013). as a result, financial data is extremely important to shareholders and other consumers of the reports because it provide the foundation for financial decisions. financial reporting is the most effective way of meeting information needs of accounting data users. it correctly explains the financial dealings that influenced of business activities over the course of a year. it also aids in financial forecasting and planning, which is regarded as a warning to each and every consumer, been it outside or inside the company or firm, in order to keep away from future insolvency. financial reporting is described as any deliberate disclosure of financial information to enlighten stakeholders, whether this information is mandatory or chosen. this financial data can come in the form of quantitative or qualitative data and can be given through formal or informal means (adediran et al., 2013) timeliness financial disclosure timeliness is defined from several angles. mcgee (2007, cited in paul & waidi, 2016) defined it as the time from the conclusion of the financial year and the publishing of the financial statements to the public. according to karim et al. (2006, as cited in muideen & isiaka, 2019) financial reporting timeliness includes audit lag, which is the duration of time in between income statement date and the date the external auditor's report was signed. financial statement release lag, which is the duration of time in between the income statement date and the date of announcing yearly general meeting and the agm lag, which is the duration of time in-between the end of the financial year and the yearly general gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 71 meeting. financial reports are delivered on different schedules in different countries. financial reports in the russian oil sector take from 81 to 181 days (on average 148.7 days) to be released. chinese enterprises, on average, take 92 days to complete a project, with at least 24 days and at most of 181 days the average delay time for listed bangladesh businesses is 192 days. (mcgee & yuan, 2011). according to mahboub (2017) the american accounting association considers timeliness to be among the qualitative attributes of valuable information, and the international accounting standards board identify timeliness as one of the attributes that establish the significance of financial information in its conceptual framework of financial reporting. users require timely information in order to make an informed decision about whether or not to carry on or terminate their investment. preparers' delay in sharing information would result in increased market inefficiencies (omar & ahmed, 2016). firm attributes that impact on financial reporting timeliness several attributes that may influence financial reporting timeliness have been identified in previous studies. despite the fact that such attributes may differ systematically among groups of companies and over time, the attributes chosen are more perceptive to or exact in terms of financial reporting timeliness. this study focuses on the following attributes reported in earlier literatures and considered appropriate to the nigerian setting firm size, profitability, liquidity, and leverage to assess their effects on financial disclosure timeliness of quoted conglomerate companies in nigeria. firm size the size of a firm has been proven to affect timely financial disclosure. numbers of things have been advanced to establish the link between financial reporting timeliness and firm size. to begin with, large corporations have strong internal control systems in place, have more resources to implement them, and can afford ongoing audits (arifuddin & asri, 2017). according to lwaminah (2017), larger organizations have more resources than smaller ones, such as more complex accounting information systems and more technical advancement. larger companies should benefit from these characteristics as they should be able to provide more timely information. profitability another crucial firm attributes that influences reporting timeliness is profitability. profit news has positive impact on the stock value and other indicators, company gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 72 executives would want to disclose profit sooner rather than later. this assertion is backed up by previous research, which shows that when it comes to good news (profit), managers are more punctual than when it comes to bad news (loss). disseminating good information can attract new investors and keep current ones, whereas disseminating negative information might cause potential and present investors to lose interest in their investments (adebayo & adebiyi, 2016). liquidity a company's liquidity can be described as its capacity to meet up its immediate monetary commitments. it is current asset to current liability ratio (pandey, 2005). liquidity has been viewed in the past as a significant factor influencing a firm's capital structure decision. because of a variety of expenses to be fulfilled during the preparation and disclosure of accounting information, liquidity was acknowledged as important element affecting annual report timeliness. it is logical to conclude that, a financially buoyant company is able to meet all these costs and therefore likely to publish its annual reports timelier than companies with liquidity problem (wu, 2007 as cited in paul & waidi, 2016). financial leverage lastly, one of these attributes is leverage, which is also known as gearing. it is a practice in which borrowed money are utilized to purchase a property with the belief that the property after-tax income and asset value realization will exceed the borrowing price. low leveraged firms reported more timely interims while high leveraged firms published their reports later (ku-ismail & chandler 2014). 2.2 review of empirical studies in this section, relevant and related literatures are reviewed as shown below: ebaid (2022) in his work investigated the relationship between financial reporting timeliness and corporate attributes of nonfinancial companies listed in the saudi market during the period 2015-2018. using a sample size of 67 nonfinancial firm on the saudi arabian stock market. multivariate regression analysis was used to analyze the data used in the study. the findings revealed that financial reporting timeliness has significant relationship with three of the corporate characteristics, which include firm size, profitability and leverage. aigienohuwa and ezejiofor (2021) examined the relationship between leverage and timeliness of financial reports in nigerian quoted companies within 2010-2019. with the population of the study consists of 145 quoted companies in nigeria. and gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 73 using ols regression model the study established that firm leverage has no significant relationship with timeliness of financial reports in nigerian quoted companies. machmuddah, iriani and utomo (2020) investigated the effect of firm size, profitability, solvability, and size of the public accounting firm on audit report lag of listed mining firms on the indonesian stock exchange (idx) within the period of 2015-2018. using a purposive sampling techniques, 96 mining firms were chosen, the study used secondary data that were analyzed using multiple regression techniques. the outcome of the study revealed that solvability and size of public accounting firms influence the audit reporting lag. however, firms' size and profitability don't influence on audit report lag. siyanbola, et al, (2020) the effect of firms’ attributes on auditors’ reporting lag in nigerian deposit money banks listed on the nigeria stock exchange from 2008 2017. ten sampled banks were selected using the purposive sampling techniques, using a secondary data the research adopted the multiple regression techniques to analyze the data collected from the ten sampled firms. the result of the regression shows that firm age has positive significant effect on the audit report lag of deposit banks in nigeria. while firm size has no significant positive effect on audit reporting lag. however, profitability was discovered to have negative and insignificant effect on audit reporting lag. akingunola, et al. (2018) examined the effect of firm characteristics on the audit report lag of listed firms in nigeria during the period 2010 – 2015. secondary data were collected from the 27 sampled firms listed on the nigeria stock exchange within 2010-2015. ordinary least square regression techniques was adopted in the study. the outcome of the analysis indicates that firm size, company age and profitability have a significant impact on the audit report lag, while audit type remained insignificant. akhalumeh, et al. (2017) in their work assessed the relationship between some firmspecific characteristics and audit report delay of listed firms in nigeria. using a sample size of 22 listed firms on the nigeria stock exchange. data were obtained from the annual reports and accounts of the sampled firms from 2012 to 2016. using regression techniques of data analysis. the authors established that firm size, firm complexity and firm performance have a negative but insignificant effect on audit report lag. while financial leverage turns out to have a positive and gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 74 insignificant effect on audit report lag. whereas external auditor type has positive but significant effect on audit report lag. arowoshegbe, et al. (2017) examined factors that have relationship with timeliness of audit report in nigeria. with a sample of 42 financial and non-financial companies quoted on the nigerian stock exchange (nse) within 2012-2015. using ordinary least square (ols) regression technique of data analysis. the author discovered that audit firm type, size of the company, and age of the company are factors that affect timeliness of audit report in nigeria. the study revealed that the age and size of the company have a negative significant influence on timeliness of audit report whereas audit firm type has a positive significant effect on audit report timeliness. also, audit firm switch was discovered to have no relationship on timeliness of an audit report. ömer (2017) used panel data methodology to investigate the effects of firm and audit-specific characteristics on the timeliness of financial reporting processes of firms listed on borsa istanbul. according to descriptive analysis, the average reporting period for the entire sample is 69days, with individual and consolidated financial statements taking 62 and 74days, respectively. firm size, dividend per share, auditor type, and good news (income) all had a significant negative relationship on sample firms' timeliness behavior, which is consistent with previous research. in addition, the kind of financial statement (individual vs. consolidated) has a considerable impact on reporting time. adebayo and adebiyi (2016) investigate timeliness of financial statements reporting among nigerian deposit money banks. they chose 15 deposit money banks that were listed on the nigeria stock exchange between 2005 and 2013 for the study. ordinary least square (ols) regression was used to evaluate the data and estimate the outcomes, which was supplemented by the panel data estimation technique. the research looked into the relationship between bank size, leverage, profitability, audit firm size, and financial statement timeliness. except for leverage, all of the variables studied were determined to be statistically significant. according to the data, the majority of banks currently follow standards that ensure timely financial statement reporting in nigeria. this study was on money deposit banks listed on nse from 2005 to 2013 unlike the current study which is based on listed conglomerates and covering most recent years, hence the need for this current study. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 75 al-tahat (2015) looked at timeliness of semi-yearly financial information disclosed by companies quoted on amman stock exchange with the period covering 9 years. no important relationship was established between size, leverage, and audit firm size and timeliness. the research present proofs that there is an important relationship between profitability, growth, age, and market quoting status with the timeliness of reports of companies listed on amman stock exchange. al-shwiyat (2013) evaluated amman stock exchange, looking at age, return on assets, and return on equities, dividends, and earnings per share, among other things. it was found that the average reporting time is 111 days, which is a lengthy time when compared to less developed countries. whilst debt and company size have a beneficial influence on timely reporting, the pay per share ratio has a considerable unfavorable impact. this study looks at firms quoted on amman stock exchange. 2.3 theoretical framework the study was underpinned by agency theory. agency theory according to agency theory, due to separation of ownership and management, investors want protection since organization (or its manager) may have main concern that differ from the founders' aims and objective. as a result, the agent might not be performing in the interest of the principal. three sorts of agency problems, according to madaschi (2010) influence the interests and connections of the subjects linked to the firms: between shareholders and management, majority and minority shareholders, and investors and stakeholders. it ought to be well known that the main clash of wellbeing arises between investors (principals) and administrators (agents) (jensen & meckling, 1976). agency theory hinge on how to resolve evils that comes from agency conflicts, such as asymmetric information. to keep path of these issues, both the agent and the owners require to advance their control device and information scheme to decrease information lop-sidedness (jensen & meckling, 1976, cited in muideen & isiaka, 2019). one of the apparatus anticipated by agency theory to tackle these agency disagreements is to employ an autonomous external auditor. this approach allows the corporation to supply quality data that assists the principal in monitoring the manager and reducing irregularity, as such reducing organization issues (kent et al., 2010). the mechanism of hiring independent external auditor is applicable to this study as conglomerates employ the services of an independent external auditor by extension gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 76 agency theory applies to this study since the owners (shareholders) are different from management. 3. methodology descriptive and correlational research design was employed for the study. this is deemed suitable as the study aims at determining the connection between one variable and another in which the variables are not manipulated. the population of the study consists of all the consumer goods companies listed on nigeria stock exchange (nse). the sample of the study comprised of 19 companies listed on the floor of nse while other firms in this sector are filtered out due to the inability of the researchers to access the financial reports of these firms. also, as at the time of the study, secondary data were obtained from the annual reports of the sampled companies for the period of five (5) years (20172021) were used. the study used both descriptive and inferential statistical methods of data analysis. table 1: variables, definition and measurement this section of the study provides the definition and measurement of variables used in this study. variable type definition measurement source timeliness (tims) dependent audit reporting lag the total days between the financial disclosure date and the date of audit report (iyaho, 2012) firm size independent total assets logarithm of entire assets (adebayo & adebiyi, 2016) profitability independent return on assets (roa) net profit after tax÷ total assets (tunji et al., 2020) liquidity independent ratio of current assets to current liabilities current assets ÷ current liabilities (bengii &burcu, 2013) leverage independent gearing non-current liabilities÷ shareholders equity +non current assets (muideen & isiaka, 2019). source: researchers compilation, 2022. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 77 model specification to estimate the impact of firm attributes on financial reporting timeliness of listed conglomerate companies in nigeria, the study builds on the model of adebayo & adebiyi (2016) which was modified by introducing additional test variables(liquidity and profitability) that bear theoretical importance to the event of interest. the modified version is as follows: timsit = β0 + β1fsizesit + β2roait + β3liqit + β4flevit + εit …………………………. (i) where; tims= timeliness calculated by total days between the financial disclosure date and the date of audit report fsize= firm size calculated by logarithm of entire assets flev= leverage calculated by gearing ratio roa= profitability and is calculated by return on assets liq= liquidity it’s measured by the current asset to current liability ε = error β1-β4= parameters being investigated/ regression coefficients 4. results and discussions under this section the result discovered by the study were presented and discussed, from which conclusion were drown. it began with the presentation of the descriptive statistics, correlation matrix, multicollinearity test using vif, hausman test for fixed and random effect estimates and finally the generalized least square regression result: descriptive statistics the descriptive statistics highlight the basic features of the data collected for the purpose of this study in relation to both the dependent and explanatory variables as reported in the table below: table 2: descriptive statistics variables mean std. dev. min. max. tims 88.756 39.623 42.000 261.000 fsize 10.794 1.045 7.758 12.698 roa 0.034 0.810 -4.206 6.174 liq 1.113 1.024 0.000 8.202 flev 0.152 0.136 0.000 0.731 source: stata output, 2022 table 2 shows the descriptive statistics of the dependent variable and all the gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 78 explanatory variables of the study. the number of observations for the study is 90. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 79 audit time lag (tims) reflects a mean of approximately 89 with a deviation of 40 approximately. this means that on average, listed consumer goods companies in nigeria published their financial reports within 89 days during the period under study. this result however shows a high dispersion from the mean value of tims recorded within the period of the study. the high dispersion is further reflected in the minimum value of 42 and maximum value 261 respectively. by implication the minimum value of 42 implies that the lowest number of days it took the listed consumer goods firms to publish their financial statements from the day of disclosure is 42 days and the highest number of days it took before publication is 261 days. this indicates that some firms published their financial report late while others published theirs much earlier. furthermore, the mean in respect to the size of listed consumer goods firms which is proxy by the natural log of total assets stood at n10.794 with a standard deviation of n1.045. this means that on average, the total size of the firm under study during the period is n62, 230,028, 516. (i.e. taking the natural anti log of 10.794). from this figure it could be inferred that the firms under study are large once. this result also indicates that there is a low deviation from the mean value recorded within the period of the study. the low level of deviation is further revealed by the minimum and maximum values which stood at n7.758 and n12.698 respectively. also, profitability which is proxy by the return on assets (roa) reflect a mean of n0.034 with a standard deviation of n0.810. this means that on average roa which measures the level of return on investments made by listed consumer goods firms stood at n0.034. this indicates that for every naira investment made by listed consumer goods companies, there is an average of n0.034 returns on the investment during the period under study. the results indicate a low level dispersion from the mean value of roa recorded within the period under review. and also the minimum and maximum values stood at –n4.206 and n6.174 respectively. additionally, the mean value in respect to the liquidity of listed consumer goods firms in nigeria stood at n1.113 with a standard deviation of n1.024. this result indicates a low level of deviation from the mean value of liquidity recorded within the period of the study, while the minimum and maximum values stood at n0.000 and n8.202 respectively. finally, the mean in respect to financial leverage of listed consumer goods firm stood at n0.152 and a deviation of n0.136. this result indicates a low level of gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 80 dispersion from the mean value of financial leverage recorded within the period of study, while the minimum and maximum values of financial leverage stood at n0.000 and n0.731 respectively. correlation matrix the correlation matrix table presents the relationship that exist between the independent variables and the dependent variable and the relationship that exist between the independent variables themselves. table 3: correlation matrix variables tims fsize roa liq flev tims 1.000 fsize -0.351 1.000 roa 0.063 0.026 1.000 liq 0.055 0.087 0.022 1.000 flev -0.187 0.054 0.035 0.056 1.000 source: stata output, 2022 the correlation matrix table 3 above, indicates that the tims has a negative relationship with firm size and financial leverage of the firms, with the coefficients of -0.351 and -0.187 respectively. this implies that the above variables move in opposite direction with financial reporting timeliness, as the increase in both the size and financial leverage of the firms under consideration, will lead to a decrease in the financial reporting timeliness of the companies. however, tims has a positive relationship with return on assets (roa) and liquidity as these variables move in the same direction with financial reporting timeliness. this further implies that with the coefficients of 0.063 and 0.055 respectively, the increase in both roa and liquidity will lead to a corresponding increase in the financial reporting timeliness of the firms under study. table 3 also depicts the association of the independent variables themselves. as stated by gujarati (2004) correlation coefficient within two independent variables must not be above 0.80 which is considered excessive. thus, from the table above, it could be seen that the correlation coefficients between the explanatory variables are all below 0.80 which shows that no multicollinearity exist between the independent variables. multicollinearity test to test for multicollinearity, the study conducted the variance inflation factor (vif) and tolerance test to find out the presence of any harmful variables in the study. the result is presented as thus. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 81 table 4: variance inflation factor and tolerance vif 1/vif fsize 1.01 0.990 roa 1.00 0.998 liq 1.01 0.990 flev 1.01 0.993 mean vif 1.01 source: stata output, 2022 from table 4, the tolerance and vif were used as an advance measure to confirm the possible presence of multicollinearity among the independent variables of a study, in this study the variables were found to be concurrently less than 1 and 10 respectively which by implication signifies absence of harmful multicollinearity among the independent variables used (gujarati, 2004). fixed and random effect tests were carried out and the result is shown in appendice. hausman test was carried out to find out the differences between the individual units. p-value that is significant is an evidence that at desire significance level, the models are different enough to allow rejection of null hypothesis and hence reject the random effect model so as to pick the fixed effect model. in this study, the hausman test result was insignificant which give room for the use of random effect instead of fixed effect model. table 5: summary of random effect estimation variables coefficient z p>z fsize -13.317 -3.63 0.000 roa 3.723 0.79 0.430 liq flev constant 3.627 -51.481 236.153 0.97 -1.82 5.95 0.333 0.068 0.000 r2 0.166 f-stat 17.92 p-value>f-stat. 0.001 hausman chi2 4.09 p-value>chi2. 0.394 lmtre chibar2 38.0 p-value>chibar2 0.000 source: stata output, 2022 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 82 ***p<0.01, **p<0.05and *p<0.1 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 83 table 5 illustrate the coefficients, z-statistics and probability values of random effects generalized least square (gls) regression outcome. the outcome reflects a value of 0.166 in respect to the coefficient of determination otherwise known as the r². the r² measures the total percentage change in the dependent variable (tims) which will only be explained by the independent variables (fsize, roa, liq and flev). thus, an r² value of 16.60% indicates that the independent variables of the study accounts for 16.60% of the total variation in the dependent variable (tims) while the remaining 83.40% (i.e. 100-16.60) of the variation could be explained by other factors not considered in the model. moreover, wald chi² is 17.92 and its associated p-value is 0.001 and by implication is statistically significant 1%. this small p-value less than 0.05 is small enough and also confirmed the fitness of the model for this study. it was also revealed from the table 4.3 that the heteroskedasticity problem in the panel random model and the autocorrelation are corrected with gls estimates. timsit = 236.153 -13.317fsizeit + 3.722roait + 3.627liqit -51.481flevit the regression result shows that firm size has a coefficient of -13.317, z value of 3.63 and a p-value of 0.000 which is statistically significant at 1%. by implication this signifies that there is a sufficient evidence beyond reasonable doubt that firm size has a relationship with financial reporting timeliness of consumer goods firms in nigeria. this further means that if firm size increase by n1 it will lead to a decrease in the financial reporting timeliness of consumer goods firms in nigeria by approximately 13 days every other thing being equal. this result is in line with the study of ebaid (2022) and ömer (2017) as these studies revealed that firm size has a significant and negative relationship with financial reporting timeliness of firms. however, the findings of this study contradicts the work of al-tahat (2015) who discovered no relationship between firm size and financial reporting timeliness of listed companies. hence, on the basis of the above regression result the study reject the null hypothesis which states that firm size has no significant relationship with financial reporting timeliness of listed consumer goods firms in nigeria. also, the regression result revealed that profitability has a positive but insignificant relationship with financial reporting timeliness of consumer goods firms as shown by the coefficient of 3.627, z value of 0.79 and a p-value of 0.430 which is statistically insignificant. this shows that profitability is not a determinant of financial reporting timeliness by consumer goods firms in nigeria. the study is in line with the findings of akhalumeh, et al. (2017); machmuddah, et al. (2020); siyanbola, et al (2020) which revealed that profitability has no significant gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 84 relationship with financial reporting timeliness of listed firms. however the study gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 85 is inconsistence with the study of akingunola, et al. (2018) and ebaid (2022) which discovered that profitability has a significant effect on the financial reporting timeliness of listed companies. thus, on the basis of the above gls result, the study fails to reject the null hypothesis which states that there is no significant relationship between profitability and financial reporting timeliness of listed consumer goods firms in nigeria. furthermore, the regression result shows that liquidity has a coefficient of 3.627, a z value of 0.97 and p-value of 0.333 which is statistically insignificant. this shows that liquidity is not a determinant of financial reporting timeliness of listed consumer goods firms in nigeria. the finding is in line with the study of sufiyati, (2017) who found no significant relationship between liquidity and financial reporting timeliness of companies. to this end, the study fails to reject the null hypothesis which states that liquidity has no significant relationship with financial reporting timeliness of consumer goods firms in nigeria. finally, the regression result shows that financial leverage has a negative but significant relationship with financial reporting timeliness as shown by the coefficient of -51.481, z value of -1.82 and a p-value of 0.068 which is statistically significant at 10%. by implication this implies that there is sufficient evidence beyond reasonable doubt that financial leverage has a relationship with financial reporting timeliness of listed consumer goods firms in nigeria. this further indicates that, if financial leverage increase by n1 it will lead to the decrease of financial reporting timeliness of listed consumer goods firms in nigeria by 51 days all things being equal. this result is in line with the study of al-shwiyat (2013) and ebaid (2022) who discovered that financial leverage has a significant relationship with financial reporting timeliness of listed firms. whereas, the finding of this research contradict the studies of adebayo and adebiyi (2016); aigienohuwa and ezejiofor (2021); al-tahat (2015) and sufiyati (2017) as these studies found no relationship between financial leverage and financial reporting timeliness of listed companies. however, on the basis of the above regression result, the study reject the null hypothesis which states that financial leverage has no significant relationship with financial reporting timeliness of listed consumer goods firms in nigeria. 5. conclusion and recommendations the study focused on how some firm characteristics affect financial reporting timeliness of listed consumer goods firms in nigeria. to this end, the study used gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 86 available data from the annual reports of the studied companies. the data collected were analyzed using the generalized least square (gls) regression technique. the study used financial reporting timeliness as the dependent variable and firm size, profitability, liquidity and financial leverage as the independent variables of the study. based on the findings, the study concluded that firm size and financial leverage have a negative and significant effect on the financial reporting timeliness of listed consumer goods firms in nigeria. which means that increase in these variables will lead to a decrease in the financial reporting timeliness of consumer goods firms in nigeria. while profitability and liquidity have positive but insignificant effect on the financial reporting timeliness of listed consumer goods firms in nigeria. based on the above conclusion, the study recommends that listed consumer goods firms should increase their size as this will help reduce the time it takes to publish their financial reports to the general public as this well help the various stakeholder access timely the necessary information which will enable them take an informed economic decision. similarly, listed consumer goods firms should increase the level of their financial leverage (debt equity) to a reasonable level as this according to the findings, will lead to a reduction in the time it takes for these firms to publish their annual financial reports to enable quick decision making by various stakeholders. references abdillah, m.r., mardijuwono, a.w., & habiburrochman, h. (2019). the effect of company characteristics and auditor characteristics to audit report lag. asian journal of accounting research, 4(1), 129-144. adebayo, p.a., adebiyi, w.k. (2016). effect of firm characteristics on the timeliness of corporate financial reporting: evidence from nigerian deposit money banks.international journal of economics, commerce and management, united kingdom. 6(3), 370-378. adediran, s.a., alade, s.o., oshode, a.a. (2013). reliability of financial reporting and companies attribute: the nigerian experience. research journal of finance and accounting, 4(16). aigienohuwa, o. o., & ezejiofor, r. a. (2021). leverage and timeliness of financial reports in nigerian quoted companies. international journal of advanced academic research, issn: 2488-9849, 7(10), doi: 10.46654. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 87 akhalumeh, p. b., izevbekhai, m. o., & ohenhen, p. e. (2017). firm characteristics and audit report delay in nigeria: evidence from the post ifrs adoption era. international accounting and taxation research group, faculty of management sciences, university of benin, benin city, nigeria. akingunola, r. o., akingunola, k. a., & okunuga, r. (2018). client attributes and the audit report lag in nigeria. college of management science, 13(1), al-tahat, s.s.y. (2015). company attributes and the timeliness of interim financial reporting in jordan. international journal of application or innovation in engineering & management. 4(3), 24-28. apadore, k. & noor, m. m. (2013). determinants of audit report lag and corporate governance in malaysia. international journal of business and management, 8(15), 151-163. arifuddin, k.h., & asri, u. (2017). company size, profitability, and auditor opinion influence to audit report lag on registered manufacturing companies in indonesia stock exchange. international journal of applied business and economic research, 15(19), 353-367. arowoshegbe, a. o., uniamikogbo, e. & adeusi, a. s. (2017). factors affecting timeliness of an audit report in nigeria. funai journal of accounting, business and finance, 1(1), 26-38. bengii, v., & burcu, a.(2013). is timeliness of corporate financial reporting related to accounting variables? evidence from instanbul stock exchange. international journal of business and social science, 4(6), 5-6. clarke, t. (2004). the philosophical foundations of corporate governance. routledge taylor & francis group: london. theories of corporate governance. efobi, u. & okougbo, p. (2015). timeliness of financial reporting in nigeria. https://www.researchgate.net/publication/280719297 accessed on 24th august, 2021. ebaid, i. e. (2022). nexus between corporate characteristics and financial reporting timelines: evidence from the saudi stock exchange. issn: 2634-2596. journal of money and business, 2(1), 43-56. https://doi.10.1108/jmb-08 2021-0033. enofe, a.o., okunega, n.c., & ediae, o.o. (2013). audit quality and auditor’s independence in nigeria: an empirical evaluation. research journal of finance and accounting, 4(11), 131-138. gujarati, d. n. (2004). basic econometrics (4th ed.). new york: mcgraw-hill companies. https://www.researchgate.net/publication/280719297 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 88 ilaboya, o. j. & iyafekhe, c. (2014). corporate governance and audit report lag in nigeria. international journal of humanities and social science, 4(13), 172-180. iyoha, f. o. (2012). company attributes and the timeliness of financial reporting in nigeria. business intelligence journal, 5 (1). 41-49. kiel, g.c., & nicholson, g.j. (2003). board composition and corporate performance: how the australian experience informs contrasting theories of corporate governance: an international review, vol. 11(3), 189-205. lwaminah, f. a., (2017). the effect of firm specific factors on financial performance of commercial banks in nigeria. machmuddah, z., iriani, a. f., & utomo, s. d. (2020). influencing factors of audit report lag: evidence from indonesia. academic journal of interdisciplinary studies, 9(6). madaschi, a. (2010). ownership concentration and firm performance in italy (unpublished master’s thesis), copenhagen business school. mahboub, r., (2017). main determinants of financial reporting quality in the lebanese banking sector. european research studies journal, 4(b), 706 726. milgram, s. (1963). behavioural study of obedience. journal of abnormal and social psychology, 67(2), 371-378. muideen a. & isiaka k.(2019) .company attributes and financial reporting timeliness of listed conglomerate companies in nigeria: fuw journal of accounting and finance 1(1), june 2019 edition. 10-14. mcgee, r., & yuan, x. (2011). corporate governance and the timeliness of financial reporting: a comparative study of the people's republic of china, the usa and the european union. journal of asia business studies, 6 (1),32-38. mustafa, z., & al-shwiyat, m. (2013). affecting factors on the timing of the issuance of annual financial reports empirical study on the jordanian public shareholding companies. european scientific journal 9(22), 1857 7431. nor ku, i. s. i. & chandler, r. (2014). the timeliness of quarterly financial reports of companies in malaysia. asian review of accounting 12(1):1-18. odjaremu, g. o., & jeroh, e. (2019). audit committee attributes and the reporting timeliness of listed nigerian firms. trends economics and management, 34(2), doi: http://dx.doi.org/10.13164/trends.2019.34.69. http://dx.doi.org/10.13164/trends.2019.34.69 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 89 ohaka, j., & akani, f. n. (2017). timeliness and relevance of financial reporting in nigerian quoted firms. management and organizational studies, 4(2), 50-55. august 2021. doi:10.5430/mos.v4n2p55 oladipupo a.o., izedomi f. (2013). global demand for timely financial reporting: how prepared are nigerian companies? research journal of finance and accounting, 4(8), 34-36. oluseyi awojulugbe, april, 2018 10 companies fail to meet nse’s deadline for filing audited reports, retrieved from https://www.thecable.ng/10 companies-fail-meet-nses-march-31-deadline-filing-audited reports,august 22, 2021. omar, a. & ahmed a. m. a. (2016).the factors affecting timeliness of corporate financial reporting: empirical evidence from the palestinian and amman stock exchange. international journal of management sciences and business research, oct-2016 issn (2226-8235) 5(10). ömer, f. g. (2017). timeliness of corporate reporting in developing economies: evidence from turkey accounting and management information systems 16(3), 219-239. siyanbola, t. t., sanyaolu, w. a., ogbebor, p. i., & adegbie, f. f. (2020). firms’ attributes and auditors’ reporting lag in nigerian deposit money banks. academy of accounting and financial studies journal, 24(3) sundaram, a. k., & inkpen, a. c. (2004). stakeholder theory and the corporate objective revisited: a reply. organization science, 15(3), 370–371. taofik salako, september 2018; nse to sanction seven banks, 21 firms for poor governance, retrieved from https://thenationonlineng.net/nse-to-sanction seven-banks-21-firms-for-poor-governance accessed august 20, 2021. tunji,s.,wasiu, a. s., & peter, o. (2020). firms attributes and auditors reporting lag in nigerian deposit money banks. academy of accounting and financial studies journal,24(3), 6-7. uwuigbe, u., damilola felix, e., ranti uwuigbe, o., teddy, o., & irene, f. (2018). corporate governance and quality of financial statements: a study of listed nigerian banks. banks and bank systems, 13(3), 12-23. https://www.thecable.ng/10-companies-fail-meet-nses-march-31-deadline-filing-audited-reports%2caugust https://www.thecable.ng/10-companies-fail-meet-nses-march-31-deadline-filing-audited-reports%2caugust https://www.thecable.ng/10-companies-fail-meet-nses-march-31-deadline-filing-audited-reports%2caugust https://thenationonlineng.net/nse-to-sanction-seven-banks-21-firms-for-poor-governance https://thenationonlineng.net/nse-to-sanction-seven-banks-21-firms-for-poor-governance gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 90 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 1 audit quality, governance mechanisms and earnings management of quoted deposit money banks in nigeria adamu magaji, umar farouk abdulkarim & aliyu abubakar department of accounting & finance, federal university gusau, zamfara state +2347066544311, +2348069393824 +2348066434558 adamszinatu@gmail.com elfarouk105@gmail.com aliyunbuba@gmail.com monday samuel okolo control assurance and risk management tropical general investment group of companies, apapa, lagos state +2348068432185, mondaysamuelokolo@gmail.com lawal ibrahim bursery department, finance federal university gusau, zamfara state nigeria +2348038485754, lawal649@yahoo.com abstract corporate failures across the globe have become an issue of concern for stakeholders and regulators. financial reporting scandals that occurred in oceanic bank, intercontinental bank and the recent bank crises of skye bank in 2016 really motivated the need for this study. the study examines audit quality, governance mechanism and earnings management of listed deposit money banks in nigeria for the period of eleven years from 2009-2019. the population of the study consists of all the 14 listed deposit money banks in nigeria as at 31st december, 2019. the study adopted expo-factor and correlation research designs, and multiple regression was employed as technique of data analysis. the findings of the study revealed that audit independence, managerial ownership and board independent have significant negative impact on earnings management of quoted nigerian banks while auditor size and audit tenure have insignificant influence on earnings management of listed deposit money banks in nigeria. in line with the findings, the study therefore concluded that audit independence, managerial ownership and board independence have significant negative impact on earnings management of banks in nigeria while audit firm size and audit tenure have no significant impact on earnings management of listed deposit money banks in nigeria. it is therefore recommended that nigeria listed deposit money banks should maintain the audit fees they are paying to the audit firm or increase it as any attempt to reduce the audit fees can increase earnings management. however managerial shareholding should be increase as it will reduce earnings management and also board independent directors on the board should be increased from minimum of two as it will reduce earnings management of listed deposit money banks in nigeria on the other hand there is no significant impact between audit firm tenure and audit firm size on earnings management of listed deposit money banks in nigeria. for audit firm size the study recommended that local audit firms should be used instead of the big 4 as the size mailto:adamszinatu@gmail.com mailto:elfarouk105@gmail.com mailto:aliyunbuba@gmail.com mailto:mondaysamuelokolo@gmail.com gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 2 have no effect on earnings management. also the study recommended that for audit tenure the bank should maintain its audit tenure as it does not have any influence on earnings management. keywords: audit quality, governance mechanisms, earnings management, deposit money banks 1. introduction with the increase and growth in business and commercial activities across the globe, it becomes necessary for owners of businesses to entrust their investments into the hands of managers who manage the business on their behalf and in their best interest. this contractual relationship between owners and managers has given rise to discretionary behavior of management (earnings management). nigeria has experience corporate failures in 2009, where banks such as oceanic bank, intercontinental among others were in distress despite reporting high profit and statutory audit by big audit firms. recently, what motivated this study was actually what happened in skye bank nigeria plc in 2016 where the central bank of nigeria (cbn) ordered for the change of directors and top management of skye bank nig plc, and it is believed that the central bank of nigeria (cbn) as a regulatory body will not for no reason ordered for the change of directors and top management of a bank. though the central bank of nigeria publicly declare that sky bank is not in distress. this depicted that skye bank was in a serious crisis before the central bank of nigeria have to intervene. this caught my attention and also considering what happen to oceanic bank and others in 2009, before the central bank of nigeria intervened. managers discretionary behavior known as earnings management; income smoothening, creative accounting or window dressing may lead to conflict of interest and consequently earnings management to cause erosion in earnings quality thereby rendering financial reporting quality to illusion (levitt, 1998). earnings management is a purposeful intervention in the external financial reporting process with the intent of obtaining some private gain (schipper, 1989). hussainey (2009) claimed that earnings management means managers manipulating financial reports in order to produce a good image of themselves and the firms they manage. in order to curtail management discretionary behavior, there is need for the principal to engage a monitoring mechanism that will monitor and checkmate earnings management. one of such monitoring mechanism is audit quality. the banking sector in nigeria play a major role in growth and development of nigeria economy, it is a sector that serves as an intermediary between lenders and gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 3 borrowers of funds. any economy that must grow and develop must encourage investment across the country and the only way to achieve this, is by bringing two players together. the two players are those who are willing to part with funds and those who are willing to utilize these funds for investment and standing at the middle is the public quoted deposit money banks in nigeria. considering the present administration drive to revamp nigeria economy, it is necessary to tackle earnings management in listed dmbs in nigeria before economic growth and development can be achieved. the adverse effect of earnings management is a global issue and that is why different countries have their codes of corporate governance, in order to prevent corporate failures. nigeria listed dmbs is a critical and sensitive sector not only to owners, investors and stakeholders but the nation at large. the nature and peculiar role play by dmbs in nigeria economy make the government have a regulatory body that supervise and monitor the funds under the custody of all dmbs in nigeria. the failure of dmbs in nigeria is the failure of the economy as a whole because the economy will be adversely affected. financial scandals and collapse of some multi-national corporations are continuously experienced. therefore, is it a week corporate governance or non-quality audit? these are critical questions to be answered at the end of this research work. however, it could be one or both of them resulting into unethical accounting practices also known as earnings management. considering the case of skye bank nig p.l.c as reported in vanguard dailies (2016), where the central bank of nigeria ordered for the change of directors and management of skye bank plc due to liquidity crises despite audit by big audit firms, central bank of nigeria have to take this measure in order to ensure that depositors funds are safe for viable economy. though the central bank of nigeria publicly declare that skye bank is not in distress, as a regulatory body of course central bank have to come out to publicly declare in order to calm panic and tension for skye bank customers across nigeria but the major cause for this change of directors and top management is liquidity crises. despite the yearly audit why then was the liquidity crises not reflected in the yearly audit report by the so call big audit firms. as researchers we must continue to research on reliable financial reporting in order to salvage investors and other stakeholders from opportunists’ managers’, this motivates the study of audit quality, governance mechanism and earnings management of public quoted dmbs in nigeria. the study chooses variables that can monitor and can align management/ owners interest in order to reduce earnings management so as to avoid further bank crises among nigeria quoted dmbs unlike other studies that examined audit quality, managerial gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 4 ownership or board independent directors on earnings management separately and in other sectors, such studies are; tijjani (2015), shayanfar (2016), houque, ahmed and zijl (2015), solima and ragab (2014), nuryama (2013), okolie, izendonmi and enofe (2013), inaan, khmoussi and fatima (2012). lin and hwang (2010), jordan, clark and hames (2010), yasar (2013), memis and cetenak (2012), okolie (2014), adeyemi and okpala (2011), rad, salehi and pour (2016), ebrahim (2001), reichelt and wang (2010), jenkins and velury (2008), alves (2012), ali, salleh and hassan (2008), shen (2016), spino (2012), isenmila and elijah (2012), ogbonnaya, ekwe and ihendinihu (2016), farouk and hassan ( 2014), alfayoumi, abuzayed and alexander (2010), khalil and ozkan (2016), chen, cheng and wang (2011), nahandi, baghbani and bolouri(2011), roodposhti and chashmi (2010), hassan and ibrahim (2014), abdullahi and ismail (2009), oba (2014), nugroho and eko (2011), yang, chun and ramadili (2009) and saleh, iskandar and ramat (2005). this study is different from previous studies because it considered audit quality variables (audit size, audit tenure, audit independence) as well as corporate governance variables (managerial ownership and independent director) altogether on earnings management of dmbs in nigeria. another gap this study is set to fill is that of methodology, earnings management measurements, most previous studies used accrual measurements whereas in banking sector the components of the accruals measurement are not found. previous studies that adopted accrual measurement to measure earnings management are; tijjani (2015), houqe, ahmed and zijl (2015), solima and regard (2014), nuryaman (2013), okolie izendonmi and enofe (2013), innam, khmoussi and fatima (2012), lin and hwang (2018), jordan and clark (2010), yasar (2013), mamis and ncetenak (2012), adeyemi and okpala (2011), rad, salehi and pour (2016), ebrahim (2001), alves (2012), spino (2013), isenmila and elijah (2012), farouk and hassan (2014) among others. some components of the model are not obtainable in bank financial statement of listed deposit money bank in nigeria. this study therefore adopted loan loss provision (llp) model of change, shen and fang (2008) considering the domain of the study. the main objective of this study is to examine the effect of audit quality and governance mechanisms on earnings management of quoted dmbs in nigeria, other specific objectives are; i. to determine the impact of audit firm size on earnings management of quoted dmbs in nigeria. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 5 ii. to examine the effect of audit independence on earnings management of quoted dmbs in nigeria. iii. to identify the extent to which audit firm tenure influences earnings management of quoted dmbs in nigeria. iv. to investigate the impact of managerial ownership on earnings management of quoted dmbs in nigeria v. to evaluate the influence of board independence on earnings management of quoted dmbs in nigeria in line with the objectives of the study, the following hypotheses were formulated in null form: h01: audit firm size has no significant impact on earnings management of quoted dmbs in nigeria. h02: audit firm independence has no significant effect on earnings management of quoted dmbs in nigeria. h03: audit firm tenure has no significant influence on earnings management of quoted dmbs in nigeria. h04: managerial ownership has no significant impact on earnings management of quoted dmbs in nigeria h05: board independence has no significant influence on earnings management of quoted dmbs in nigeria this research gains its weight from the increasingly strategic business activities in the financial sector, which allows banks to be more strategic in their business approach, and enables them to play its financial intermediation role in an efficient and profitable manner. 2. literature review and theoretical framework audit firm size and earnings management shayanfar (2016) investigated the impact of audit quality on earnings response coefficient of the listed companies in tehran stock exchange in iran for the period of five years (2009-2013) by taken 83 firms using cochrane method as the sample size of the study. the independent variable of the study was proxied by audit firm size while the dependent variable was proxied by earnings response coefficient measure by car= a+b (sue) +e, where; cari: modified return of the firm i for a 12-month period t, suei: annual dividend of the firm i in the year t, ei: residual gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 6 term. secondary data was collected using the annual reports and accounts of the selected companies; the study adopted regression technique as a technique of data analysis and found that audit firm size negatively and significantly impacted on earnings response coefficient of the listed firms in iran. the study fails to validate any theory as such the conclusion is questionable. furthermore, tijjani (2015) examined the relationship between audit quality and earnings management of listed building material firms in nigeria over a period of seven years 2007-2013, the study used the whole population of listed building material firms in nigeria as the sample size of the study. audit quality as an independent variable of the study was proxy by audit firm size while earnings management as the dependent variable of the study was proxy by discretionary accruals and modified jones model of 1995 was adopted. the study was hinge on agency theory to validate the result of the study. secondary data was collected from the annual reports and accounts of the selected building material firms and analyze with generalize least square regression technique. the study found a negative and significant relationship between audit firm size and earnings management of listed building material firms in nigeria. this conclusion may not be applicable in other sector such as, quoted banks in nigeria as such its need to conduct a similar study in such sector. conversely, houqe, ahmed and zijl (2015) examined the effect of audit quality on earnings quality and cost of equity capital evidence from india for the period of 1998-2009. the study adopted filter to arrive at the sample size of 7,308 firms after removing oil and gas companies, utilities companies and financial service companies. the regressor was audit quality proxied by auditor size while the dependent variable of the study earnings management was proxied by discretionary accruals of modified jones 1991 model. secondary data was collected from the annual report and accounts of the sampled firms and analysed with multiple regression as a technique of data analysis. the study found that audit firm size negatively influences earnings management. the study did not validate any theory as such the conclusion may not hold water. in addition, soliman and ragab (2014) examined audit committee effectiveness; audit quality and earnings management of 40 egyptian listed companies for the period 2007 – 2010 by taken 40 companies as the sampling size by filter sampling excluding banks, insurance companies and leasing companies. the audit quality was proxied by big 4 and nonbig 4 audit firms, on the other hand the dependent gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 7 variable of the study was proxied by earnings management modified model of jones (1991) after controlling for firm size, leverage and cash flow for operating activities. secondary data was collected from the annual reports and accounts of the listed companies and analyzed with multiple regression technique of data analysis. the study found that audit firm size has significant negative association with discretionary accruals. the study failed to hinge on theory and excludes financial service firms is a shortcoming of the study. audit firm independence and earnings management okolie (2014) examined auditor tenure, auditor independence and accrual-based earnings management of quoted companies in nigeria for the period of 2006 to 2011 using a sample 57 firms. audit tenure and audit independence as the independent variable of the study was proxied by audit tenure and audit fees while the earnings management as the dependent variable of the study was proxy by discretionary accrual of modified jones (1991) model of dechow, sloan and sweeney (1995). theory of inspired confidence was adopted to underpin the findings of the study. secondary data was collected from the annual reports and accounts of the selected firms and analysed using regression as a statistical technique of data analysis, the study found a significant and negative relationship between audit independent and earnings management. the study did not adopt any scientific sampling technique to arrive at the sample size of the study and the study excludes financial service firms. again, okolie,et al (2013) examined audit quality and accrual – based earnings management of quoted companies in nigeria for the period of 2006 to 2011 by taken a sample of 57 firms as the sample size of the study. audit quality as the independent variable of the study was proxied by audit firm size, audit firm tenure and audit fees while earnings management as the dependent variable of the study was proxies by discretionary accrual of reformed jones (1991) by dechow, sloan and sweeney (1995). the study underpinned by theory of inspired confidence to support the findings of the study. secondary data was collected from annual reports and accounts of the selected firms and analyzed using regression as a statistical technique of data analysis and found that audit tenure has negative but insignificant impact on earnings management. the study failed to adopt any sampling technique as such the conclusion of the study may not represent the population of the study. audit firm tenure and earnings management gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 8 rad, salehi and pour (2016) examined the impact of audit quality and ownership structure on earnings management of listed firms on tehran stock exchange for the period of 2009-2013 by taken a sample of 100 firms. audit quality and ownership structure as an independent variable of the study was proxied by auditor reputation, audit tenure and ownership structure while earnings management as the dependent variable of the study was proxied by modified jones model, secondary data was collected from the annual reports and accounts of the selected firms and analyzed using multiple regression as a statistical tool of data analysis and found that audit tenure has a significant negative impact on earnings management. the study failed to validate its claim with a theory and did not adopt a sampling technique to arrive at the sample size of the study. furthermore, okolie (2014) the study found a significant and negative relationship between audit tenure and earnings management. the study did not adopt any scientific sampling technique to arrive at the sample size of the study and the study excludes financial service firms. again, okolie et al, (2013) examined audit quality and accrual – based earnings management of quoted companies in nigeria for the period of 2006 to 2011 by taken a sample of 57 firms as the sample size of the study. audit quality as the independent variable of the study was proxied by audit firm size, audit firm tenure and audit fees while earnings management as the dependent variable of the study was proxies by discretionary accrual of modified jones (1991) by dechow, sloan and sweeney (1995). the study was underpinned by theory of inspired confidence to support the findings of the study. data was collected from annual reports and accounts of the selected firms and analyzed using regression as a statistical technique of data analysis and found that audit tenure have negative significant impact on earnings management. the study failed to adopt any sampling technique as such the conclusion of the study may not represent the population of the study. managerial ownership and earnings management previous studies revealed that ownership by management is directly related with earnings power for incomes. the ownership by management is either negative or positive effect on earnings management (warfield & wild 1995). it is expected that ownership by management should reduce the conflict of interest between management and owners as such aligning the interest of both the owners and management which will go a long way in curtailing management discretionary behavior. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 9 alves (2012) examined the relationship between corporate ownership structure and earnings management evidence from portugal for the period of 2002 to 2007 using a sample of 34 non-financial firms as sample size of the study by filter. the earnings management as the dependent variable of the study was measured by discretionary accruals of modified jones model of dechow et al (1995). agency theory was adopted to underpin the findings of the study. data was collected from secondary source via annual reports and accounts of the sample companies and analyzed using ordinary least square regression as a statistical tool of analysis and the study found that earnings management is negatively related to managerial ownership. the findings may not be applicable in financial service firms due to their peculiarity. again, ali, salleh, and hassan (2008) examined ownership structure and earnings management in malaysian listed companies: the size effect for the period of 2002 to 2003 by taken a sample of 1,001 firms as the sample size of the study using filter criteria to arrive at the sample of the study. ownership structure as the independent variable of the study was measured by managerial ownership while earnings management as the dependent variable of the study was proxied by discretionary accruals of cross-sectional modified jones (1991) model as suggested by defond and jiambalvo (1994). agency theory was adopted to underpin the findings of the study. data was collected from secondary source via annual reports and accounts of the sampled firms and analysed using ordinary least square regression as the statistical tool of analysis and found a negative association between managerial ownership and earnings management. the study excluded financial service firms. in addition, shen (2016) examined industry competition, ownership structures and earnings management: empirical analysis based on listed banks in china for the period of 2005 to 2014 by taking a sample of 16 banks out of the total 200 banks that disclose their annual operating condition. industry competition and ownership structure as the independent variable of the study was measured by managerial ownership while earnings management as the dependent variable of the study was measured by discretionary accrual of risk adjusted loan loss provision rate. agency theory was adopted to underpin the findings of the study. data was collected from secondary source via annual reports and accounts of the sampled banks and analysed using ols and found a negative relationship between managerial ownership and earnings management. the study did not back up the earnings management adopted with an argument or as used by prior scholars. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 10 furthermore, spinos (2013) who investigated the managerial ownership and earnings management in times of financial crisis: evidence from usa for the period of 2004 to 2009 by taken a sample of 235 u.s firms as the sample size of the study. managerial ownership as an explanatory variable of the study was represented by share of managerial ownership to total shareholding while earnings management as the explained variable of the study was proxied by discretionary accrual of modified jones model of dechow et al (1995). agency theory was adopted to underpin the findings of the study. secondary source of data was collected from the annual reports and accounts of the sample firms and analysed using ordinary least square regression as a tool statistical tool of analysis and found no significant relationship between managerial ownership and earnings management. the study failed to adopt a sampling technique to arrive at the sample size of the study. conversely, isenmila and elijah (2012) after they examined the impact of ownership structure on earnings management of listed for the period of 2006 to 2010 by taken a sample size of 10 commercial banks out of 24 banks in nigeria using simple random sampling technique. ownership structure as the explanatory variable of the study was represented by insider ownership, institutional ownership and external block ownership while earnings management as the explained variable of the study was measured by discretionary accruals. agency theory was adopted to underpin the findings of the study. data was collected from secondary source via annual reports and accounts of the listed commercial banks and cbn statistical bulletin of the sampled banks and analysed using multivariate regression technique as a statistical tool of analysis and found that managerial ownership is positive and statistically significant in influencing earnings management. considering the domain of the study loan loss provision should have been used to measure the discretionary accruals instead of the modified jones model. ogbonnaya, ekwe, and ihendinihu (2016) investigated corporate governance and ownership structure on earnings management of brewery industry in nigeria for the period of 2004 to 2013 by taken 2 companies as the sample size of the study because only these two companies have complete data. corporate governance and ownership structure as the independent variable of the study was proxy by ceo duality, managerial ownership, net asset present value, price earnings ratio while earnings management as the dependent variable of the study was proxy by earnings profit. agency theory was adopted to underpin the findings of the study. data was collected from secondary source via annual reports and accounts of the sampled companies and analyzed using ordinary least square regression as a statistical gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 11 technique of analysis and found that ownership by management has significant positive influence on earnings management. the study used earnings in terms of profit instead of earnings management models and also the study sampled just two companies which may not represent the whole brewery industries listed in nigeria stock exchange. consequently, farouk and hassan (2014) examined the influence of possession formation on earnings management of quoted chemical and paints firms in nigeria for the period of 2007-2011 by taken a sample of 8 companies using a filter criteria to arrive at the sample size of the study. possession formation as the explanatory variable of the study was measured by managerial ownership, institutional ownership and block-holder ownership contrarily earnings management as the explained variable of the study was measured discretionary accruals of modified jones model of dechow et al (1995). agency theory was adopted to validate the findings of the study. secondary data was collected from audited annual reports of the sampled companies and analysed using ordinary least square regression as statistical technique of analysis with spss 15 as a tool of analysis and found direct significant association amid managerial ownership on earnings management. board independence and earnings management khalil & ozkan, (2016) examined board independence, audit quality and earnings management: evidence from egypt for the period of 2005 to 2012 by taken a sample of 125 firm using filter criteria. board independence and audit quality as the independent variable of the study was represented by proportion of nonexecutive directors and the big-4 audit firms while earnings management as the dependent variable of the study was proxied by accruals of kothari et al (2005) model. data was collected from secondary source via annual reports and accounts of the sample firms and analysed using the ordinary least square regression technique as a statistical tool of analysis and the study found that their results cast doubt on the notion that a higher ratio of non-executive board members is associated with lower earnings management. the study also found that the effect of board independence on earnings management practices is contingent on the levels of ownership held by executive directors and large shareholders as well as the composition of audit committee composed. the study failed to validate any theory and excluded financial service firms. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 12 again, chen, cheng, and wang, (2011) examined whether increase in board independence reduce earnings management? evidenced from recent regulatory reforms for the pre-regulation period of 1999-2001 to the post-regulation period 2004-2006 by taken a sample of 1205 as the sample size of the study using filter criteria. noncompliance as the independent variable of the study was proxy by 1 for firms that did not have a majority independent board in 2000 and 0 otherwise while earnings management as the dependent variable was proxied by discretionary accrual of modified jones (1995) cross-sectional model. data was collected from annual reports and accounts of the sampled firms and analyzed using regression as a statistical technique of data analysis and found that the coefficient on the noncompliance indicator is negative but is not significantly different from zero at conventional levels. that is, compared to compliance firms, non-compliance firms do not experience any incremental decrease in earnings management. considering differences in regulatory environment among countries, this conclusion cannot be generalized and no theory was used to underpin the study. in addition, nahandi, baghbani, and bolouri, (2011) examined board combination and earnings management: evidence from iran for the period of 2001-2008 by taken a sample of 480 firm year observation using filter criteria to arrive at the sample size of the study. board combination as the independent variable of the study was represented by board size, board combination and ceo duality while earnings management as the dependent variable of the study was measured by accrual of modified jones model of dechow et al (1995). agency theory was adopted to underpin the findings of the study. secondary data was collected from annual reports and accounts of the sample firms and analysed using ordinary least square regression as a statistical tool of analysis and found that board independence has a negative but insignificant relationship with earnings. furthermore, roodposhti and chashmi (2010) examined the effect of board composition and ownership concentration on earnings management: evidence from iran for the period of 2004-2008 by taken a sample of 196 firms using a filter criteria to eliminate financial service firms and firms without complete data. board composition as the independent variable of the study was proxied by board independence, ceo duality and percentage of block ownership while the dependent variable of the study earnings management was proxied by modified jones (1995) model. secondary data was collected from annual reports and accounts of the sample firms and analysed using the regression as a statistical tool of analysis and found a negative and significant association between board independence and gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 13 earnings management. the study did not validate any theory and it excluded financial service firms. in addition, hassan and ibrahim (2014) examined the governance attributes and real activities manipulation of listed manufacturing firms in nigeria for the period of 2007-2012 by taken a sample of 20 firms using filter criteria. governance attributes as the independent variable of the study was measured by inside directors, outside directors, gray directors, women directors, audit committee independence, audit committee financial literacy, audit committee meeting, audit committee size while real activities manipulation as the dependent variable of the study was proxied by roychowdhury (2006) model of abnormal cash flow. the study adopted opportunistic theory to underpin the findings of the study. the study adopted correlation and expo-factor research design and secondary data was collected from the annual reports and accounts of the sample firms and analysed using ordinary least square regression as a statistical technique of analysis with spss as a tool of analysis. the study found that outside directors and gray directors are negatively associated with earnings management, which implies that, managers’ opportunistic manipulative accounting can be constrained or deter by them. the study does not include financial service firms. addressing the preposition of agency theory, the concept of agency theory was early used by jensen and mecklin (1976). they apply the concept of agency to elaborate the issues associated with the separation of principal and agent in a large corporation, in line with berle and means (1932) propositions. the issue in agency theory is conflicts of interest that arise between principal and agent. the shareholders delegate decision making power to the managers who execute duties on their behalf (jensen & meckling, 1976). conflicts of interest give birth to information asymmetry between the principal and the agent. an agent is expected to act in the best interest of the principal through their actions and decisions. therefore, monitoring and agency theory was used to anchored audit quality proxied by audit firm size, audit firm independence audit firm tenure, managerial ownership and board independence against earnings management of quoted deposit money banks in nigeria. 3. methodology and variable measurement this study examines impact of audit quality, governance mechanism on earnings management of quoted deposit money banks in nigeria for the periods of eleven (11) years from 2009-2019, the base of choosing this period is in line for the world gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 14 financial predicament in 2009 and numerous financial predicaments in nigeria between this period which has coxswained to the noise for the quality of earnings amongst listed dmbs in nigeria. the correlational and ex-post factor approach was employed, the approach is suitable because it aids in explaining the effect of audit quality, governance mechanisms on earnings management of the sampled banks. the data is from secondary source through audited reports and accounts as a method of data collection. a total of fourteen (14) banks out of the fifteen (15) quoted was used as a result of unavailability. the panel multiple regression technique was used as techniques of data analysis as it was found suitable for the analysis. llpit = αit + β1lcoit + β2bbdit+ β3δnplit +µ tait tait tait tait where: llp = loan loss provision lco = beginning balance of bad and doubtful debt + additional provision of bad and doubtful debt – bad debt written off bbd = beginning balance of bad and doubtful debt δnpl = change in nonperforming loan ta = total assets α = constant term it = firm i at time t β1, β2, β3, = the parameters for estimation µ = error term therefore, the study’s parsimonious model is presented as follows: emgit = β0+ β1afsit+β2afiit+β3aftit+ β4moit+ β5bindit +β6fsizit +εit where: emg = earnings management afs = audit firm size afi = audit firm independence aft = audit firm tenure mo = managerial ownership bind = board independence gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 15 fsiz = firm size β0 =constant β1β6 =coefficient of the parameters it = firm and year ɛ = error term the variables of the study consist of dependent variable which is earnings management measured by discretionary loan loss provision change et al (2008) model. earnings management (dependent variable) earnings management: measured by absolute values of the residuals (discretionary accruals) using chang et al (2008) model of loan loss provision. audit firm size (independent variable) is dichotomy of 1 for big4 and0 for nonbig 4 (okolie, izedonmi and enofe, 2013) audit firm tenure (independent variable) is measured by dichotomy of 1 for 3years and above and 0 otherwise (okolie 2014) audit firm independence (independent variable) is measured by the audit fees (lin & hwang, 2010) managerial ownership (independent variable) is defined as the % of managerial share-holding to total shares farouk and hassan (2014) board independent (independent variable) is measured using measured by the proportion of independent directors on the board, expressed in percentage che haat (2006); shehu (2011). 4. the results and discussions this section presents the results of the empirical study. interested in the presentation, analysis and interpretation of data collected from secondary sources. the section provides a conclusion and recommendations of the study results. multiple regression analysis; specifically, the fixed regression model (fem) was used to test the mentioned hypotheses. descriptive statistics for each of the variables were identified to indicate minimum, maximum, average, standard deviation. it helps readers understand the measures of central tendency associated with the study variables. table 1: descriptive statistics variable mean minimum maximum std. dev emg .0247 .0110 .1852 .0220 aft .8116 0 1 .3922 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 16 afi 18.3458 16.213 19.68 .7983 afs .9285 0 1 .2583 mo .0685 0 0.19 .0466 bind .1122 0.05 .21 .0306 fsize 17.774 12.509 21.604 2.896 source: stata output, 2020 table 1 reports the descriptive statistics for the dependent and independent variables respectively (emg= earnings management, aft=audit firm tenure, afi=audit firm independence, afs= audit firm size, mo= managerial ownership and bind= board independence). the results show that the mean earnings management, audit firm, audit firm independence, managerial ownership, audit firm size and board independence are 0.0247, 0.8116, 18.346, 0.9285, 0.0685 and 0.1122 respectively. a similarity of the mean values with the maximum values for each of the variables shows the banks managed earnings up to 2.47%. the mean value indicates that 81% of listed deposit money banks in nigeria rotate audit firm after 5 years in office. the average mean of audit independence (measured by audit fees) paid by quoted deposit money banks in nigeria is ₦18.3 million, meaning on average each of the listed deposit money banks in nigeria paid ₦18.3 million naira as audit fees. the average value of audit firm size is (0.92) which means on average 92% of the listed deposit money banks in nigeria were audited by one of the big 4 globally recognized audit firms while (0.08) 8% on average were audited by the non-big 4 audit firm, the average mean is (0.06) which means that on average 6% of the total equity ownership of listed deposit money banks in nigeria is owned by management while the remaining 94% average is owned by other shareholders. however, the average mean revealed a value of (0.11) which means on average 11% of board size of listed deposit money banks in nigeria are independent directors. table 2: correlation matrix variable emg aft afi afs mo bind fsize emg 1.0000 aft -0.0615 1.0000 afi -0.2488 -0.0784 1.0000 afs 0.0283 -0.1336 0.5343 1.0000 mo 0.0193 0.0159 0.0605 0.0888 1.0000 bind 0.0384 -0.0185 0.1314 0.289 0.0429 1.0000 fsize 0.0638 0.1806 -0.0972 -0.1841 0.0374 0.1236 1.0000 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 17 source: stata output, 2020 table 2 shows that earnings management is negatively associated with audit firm tenure at 6%. this signifies that higher audit tenure gives auditors better insight for quality audit. it also indicates that audit firm independence is associated with earnings management at 24% indicating that higher audit fees can influence the quality of audit which will constrain earnings management of quoted deposit money banks in nigeria. the table also shows that there is positive association between emg of listed banks and audit firm size, from the correlation coefficient of 0.0283. this relationship implies the possible consideration of the financial reporting scandals even after been audited by the big audit firms. moreover, the table indicates a correlation between earnings management and managerial ownership from the correlation coefficient of 1%. this is possible due to entrenchment hypothesis which support that too much managerial ownership can encourage earnings management at the expense of minority shareholders. the table also indicates a positive relationship between earnings management and board independence from the correlation coefficient of 3.8%. summary of regression results the summary of the regression results obtained from the parsimonious model of the study is presented as follows: table 3: regression results variables coefficients t-values p-values tolerance values/vif aft -.0064 -1.55 0.124 0.95/1.05 afi -.0083 -3.24 0.002 0.70/1.43 afs .0099 1.10 0.270 0.68/1.46 mo -.1179 -1.86 0.006 0.98/1.01 bind -.1521 -2.41 0.001 0.96/1.04 fsize .0009 0.80 0.428 0.92/1.08 r2 0.3312 f-stat 3.78 f-sig 0.0000 source: stata output, 2020 the cumulative explanatory power which is r2 (0.3312) which is the multiple coefficient of determination gives the proportion or percentage of the total variation in the explained variable by the explanatory variables jointly. hence, it signifies gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 18 33.12% of total variation in earnings management of listed banks is caused by the collective effort of audit firm tenure, audit independence, audit firm size, managerial ownership and board independence. this further indicates that the model is good, adequately and well fitted in the model and indeed the explanatory variable are properly selected, combined and used. this can be confirmed by the fstat coefficient of 3.78 and f-sig of 0.0000 which is statistically significant at 1% level of significance. therefore, this result can be relied upon. tolerance values and variance-inflation factors are two further steps to assess multi collinearity between independent variables. using stata, the variance inflation factors and tolerance values are computed and found to be consistently smaller than ten and one respectively indicating absence of multi collinearity (neter, kutner, nachtasheim, & wasserman, 1996) and (cassey & anderson, 1999). in addition, the tolerance values are consistently smaller than 1.00 thus further substantiates the fact that there is no multicllinearity between independent variables (tobachnick & fidell, 1996). audit firm tenure and earnings management again, the regression result revealed a negative and insignificant relationship (coefficient = -.006 and p=.12%) between audit firm tenure and earnings management of listed deposit money banks in nigeria. the result signifies that the higher the number years of audit by a particular audit firm among the listed deposit money banks in nigeria, the lower the earnings management. that is, audit firm tenure has no power to influence earnings management of public quoted deposit money banks in nigeria but rather only an inverse relationship exists. the result implies that for every increase in the number of years of audit firm tenure of listed deposit money banks in nigeria, there is possibility that earnings management will reduce but audit tenure does not have the power to determine earnings management of listed deposit money banks in nigeria. the result is in line with priory expectation because it is expected that audit tenure of auditors of public quoted deposit money banks in nigeria should have the power to constrain earnings management, because it is believed that higher audit firms tenure will give better insight to the auditors about the client operation as such quality audit should be achieve with higher audit tenure capable of constraining earnings management. the result of the study revealed an inverse though insignificant of audit firm tenure on earnings smoothing of quoted deposit money banks in nigeria. the finding of the study is in line with previous studies of; lin and hwang (2010). contrary to the findings of; rad et al (2016), okolie (2014), ebrahim (2001), reichelt and wang (2010) and okolie et al (2013). gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 19 audit independence and earnings management the regression result in table revealed a negative and significant relationship (coefficient = -.0083 and p=1%) of audit fees and earnings management of banks in nigeria. this result signifies that the higher the fees paid to auditors of listed deposit money banks in nigeria the lower the level of earnings management. that is, audit fees have the power to constrain earnings management of listed deposit money banks in nigeria. the result implies that for every one percent or ₦1increase in audit fees paid to audit firms of listed deposit money banks in nigeria, earnings management will reduce by 0.8%. the result is in line with priory expectation because it is expected that audit fees paid to the audit firms of public quoted deposit money banks in nigeria should constrain earnings management as high audit fees will make audit firms deploy their best audit staff in order to achieve a quality audit capable of constraining earnings management. the finding of the study is in line with studies of; murya (2010), okolie (2014) and okolie et al (2013). audit firm size and earnings management. table 3 also revealed that there is a positive and insignificant relationship (coefficient = 0.009 and p= 27%) between audit firm size and earnings management of listed deposit money banks in nigeria. the result signifies that that the big-4 audit firms have a direct positive relationship with earnings management of public quoted deposit money banks in nigeria. that is, audit by the big-4 audit firms do not have the power to determine earnings management of listed deposit money banks in nigeria but only direct relationship exist. the result implies that the more nigeria listed deposit money banks are being audited by any of the big-4 audit firms, the higher the earnings management in the sector. the result is not in line with priory expectation because it is expected that audit firm size should constrain earnings management, whereas, in this study a positive and insignificant relationship exist as revealed by the finding of the study. the result is true despite contrary to priory expectation and a good example is the enron scandal of (2001), pamalat in italy (2003) oceanic bank (2009). chi (2011), kim (2003), and cohen and zarowin (2010) also found that the presence of the big-4 audit firms is associated with greater earnings management; this can also be possible due to entrenchment hypothesis.the finding of the study is in line with previous studies of; chi (2011), cohen and zarowin (2010), mamis and cetnac (2012) khalil & ozkan (2016) in egypt, hassan & ibrahim (2014) in nigeria, roodposshti & chashmi (2010) that audit firm size has positive relationship with earnings management and contrary to the findings of; tijjani ( 2015) in nigeria, houqe et gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 20 al (2015) in india, solima and ragab (2014) in egypt, nuryaman (2013) in indonesian, okoli et al (2013), inaam et al (2012) in tunisain, lin and hwang (2010). managerial ownership and earnings management in addition, the regression result revealed a negative and significant relationship (coefficient = -.117 and p=10%) between managerial ownership and earnings management of public quoted deposit money banks in nigeria. the result signifies that as share ownership by management of public quoted deposit money banks in nigeria increases then earnings management practices by management will decreases, which mean managerial ownership has the power to influence earnings management of public quoted deposit money banks in nigeria negatively. the result implies that for every one percent increase in ownership of shares by management of public quoted deposit money banks in nigeria earnings management will reduce by 11%. the result is in line with priory expectation because it is expected that managerial ownership should reduce earnings management of public quoted deposit money banks in nigeria, because interest will be aligning between owners and management as management become co-owners conflict of interest is expected to reduce. it is expected that managerial ownership should have the power to constrain earnings management of public quoted deposit money banks in nigeria because of alignment of interest hypothesis. the finding of the study is in line with previous studies of; murya (2010), alves (2012), ali et al (2008), shen (2016), warfield and wild (1995), jensen and mecklin (1976). however, other studies found no relationship such as spinos (2013), abd al nassar (2012) and hafiza and susela (2005). board independent and earnings management the regression result revealed that there is a negative and significant relationship (coefficient = -.152 and p=1%) between board independence and earnings management of public quoted deposit money banks in nigeria. the result signifies that as the number of board independent director’s increases on the board, earnings management of public quoted deposit money banks in nigeria decreases. that is, board independent director has the power to influence earnings management of public quoted deposit money banks in nigeria negatively. the result implies that for every one percent increase in the number of independent directors on the board of public quoted deposit money banks in nigeria, earnings management will reduce by 15%. the result is in line with priory expectation because it is expected that gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 21 independent directors on the board of public quoted deposit money banks in nigeria should have the power to constrain earnings management due to their monitoring role. the result is in line with reality because independent directors have no special interest in the bank with the management, which will enable them to monitor management to act in the best interest of the owners. the presence of independent directors on the board will reduce earnings management of listed deposit money banks in nigeria. the finding of the study is in line with previous studies of; khalil & ozkan (2016), hassan & ibrahim (2014), roodposshti & chashmi (2010), , murya (2010), lin and wang (2011) and oba (2014). contrary to other findings such as; nahandi, baghbani & bolouri (2011), abdullahi & ismail (2009), nugroho and eko (2011), yan et al (2009), saleh et al (2005). 5. conclusion the study concluded that audit independence, managerial ownership and board independence have significant negative impact on earnings management of listed deposit money banks in nigeria while audit firm size and audit tenure are insignificant effect on earnings management of banks. it is therefore recommended that nigeria listed deposit money banks should maintain the audit fees they are paying to the audit firm or increase it as any attempt to reduce the audit fees can increase earnings management. however managerial shareholding should be increase as it will reduce earnings management and also board independent directors on the board should be increased from minimum of two as it will reduce earnings management of listed deposit money banks in nigeria on the other hand there is no significant impact between audit firm tenure and audit firm size on earnings management of listed deposit money banks in nigeria. audit firm size is recommended that local audit firms should be used instead of the big 4 as the size have no any effect. also, for audit tenure the bank should maintain its audit tenure as it does not have any influence on earnings management. references abdullah, s., & ismail, k. (2009). do women directors constraint accrual management ? malaysian evidence. adeyemi, s. b., & okpala, o. (2011). the impact of audit independence on financial reporting: evidence from nigeria. business and management review, gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 22 1(4), 9–25. retrieved from http://wwww.businessjournalz.org/bmr al-fayoumi, n., abuzayed, b., & alexander, d. (2010). ownership structure and earnings management in emerging markets : the case of jordan ownership structure and earnings management in emerging markets : the case of jordan. international journal of finance and economics, (38), 29–47. retrieved from http://www.eurojournals.com/finance.htm ali, s. m., salleh, n. m., & hassan, m. s. (2008). ownership structure and earnings management in malaysian listed companies : the size effect. asian journal of business and accounting, 1(2), 89–116. bala, h., & kumai, b. (2015). audit committee characteristics and earnings quality of listed food and beverages firms in nigeria. international journal of accounting, auditing and taxation, 2(8), 216–227. bhagat, s., & bolton, b. (2009). sarbanes-oxley, governance and performance. retrieved from http://ssrn.com/abstract=1361815 bugshan, t. (2005). “corporate governance, earnings management, and the information content of accounting earnings: theoretical model and empirical tests”. p.hd thesis, bond university queensland 4229, australia. arnea,. bond university queensland 4229, australia. barnea,. cama. (1990). company and allied matters act. chen, x., cheng, q., & wang, x. (2011). does increased board independence reduce earnings management ? evidence from recent regulatory reforms deangelo, l. e. (1981). auditor size and audit quality. journal of accounting and economics, 3(may), 183–199. dechow, p. m., & skinner, d. j. (2000). earnings management : reconciling the views of accounting academics , practitioners , and regulators. accounting horizon, 14(2), 235–250. demaki, g. (2011). proliferation of codes of corperate governance in and economic. business and management review, 1(6), 1–7. retrieved from http://www.businessjournalz.org/bmr dhaliwal, d., salamon, g., & smith, e. (1982). the effect of owner versus management control on the choice of accounting method. journal of accounting and economics, 4, 41–53. ebrahim, a. (2001). auditing quality, auditor tenure, client importance, and earnings management: an additional evidence. retrieved from https://64.156.29.76/audit/midyear/02midyear/papers/auditing conference paper.pdf farouk, m., & hassan, s. (2014). influence of possession formation on earnings management of quoted chemical and paints firms in nigeria. iournal of gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 23 management policies and practice, 2(2), 167–186. hassan, s., & ibrahim, g. (2014). manufacturing firms in nigeria. international journal of accounting and taxation, 2(1), 37–62. retrieved from www.aripd.org/ijat%0agovernance hassan, s. u. (2013). financial reporting quality , does monitoring characteristics matter ? an empirical analysis of nigerian manufacturing sector . the business & management review, 3(2), 147–161. hassan, s. u., & ahmed, a. (2012). ownership structure and oppurtunistic accounting: a case of listed food and beverage firms in nigeria issn : 22495894. international journal of physical and social sciences, 2(7), 236–256. retrieved from http://www.ijmra.us healy, p. m., & wahlen, j. m. (1999). a review of the earnings management literature and its implications for standard setting. accounting horizons, 13(4), 365–383. https://doi.org/10.2308/acch.1999.13.4.365 houqe, n., ahmed, k., & zijl, t. (2015). quality and cost of equity capital : centre for accounting governance and taxation research victoria university of wellington. hussainey, k. (2009). the impact of audit quality on earnings predictability. idornigie, p. o. (2010). enhancing corporate value through the harmonization of corporate value through the harmonization of corporate codes.”. in a paper presented at the 34th annual conference of icsan. sheraton hotels and towers. september 22nd and 23. inaam, z., khmoussi, h., & fatma, z. (2012). audit quality and earnings management in the tunisian context. international journal of fccounting and financial reporting, 2(2), 17–33. https://doi.org/10.5296/ijafr.v2i2.2065 isenmila, p., & elijah, a. (2012). earnings management and ownership structure : evidence from. research journal of finance and accounting, 3(7), 24–36. retrieved from www.iiste.org jensen, c., & meckling, h. (1976). thory of the firm : managerial behaviour agency cost and ownership structure. journal of financial economics, 3, 305– 360. jordan, c. e., clark, s. j., & hames, c. c. (2010). the impact of audit quality on earnings anagement to achieve user reference point in eps. the journal of applied business research, 26(1), 19–30. https://doi.org/10.19030/jabr.v26i1.273 kanagaretnam, k., lim, c. y., & loba, g. j. (2010). auditor reputation and earnings management: international evidence from the banking industry. http://ssrn.com/abstract-1568866. retrieved from gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 24 http://ssrn.com/abstract=1568866 khalil, m., & ozkan, a. (2016). board independence, audit quality and earnings management: evidence from egypt. journal of emerging market finance, 15(1), 1–35. https://doi.org/10.1177/0972652715623701 levitt levitt, a. (1998). the numbers game: speech. new yourk university center for law and business, new yourk. retrieved from http://www.sec.gbov/news lin, f., & wang, s. (2011). characteristics of the board of directors and earnings management in taiwan – application of panel smooth transition regression model. lin, j. w., & hwang, m. (2010). audit quality, corporate governance, and earnings management: a meta-analysis. international journal of auditing, 14(1), 57–77. https://doi.org/10.1111/j.1099-1123.2009.00403.x memiş, m. ü., & çetenak, e. h. (2012). earnings management, audit quality and legal environment: an international comparison. international journal of economics and financial issues, 2(4), 460–469. retrieved from www.econjournals.com nahandi, y. b., baghbani, s., & bolouri, a. (2011). board combination and earnings management : evidence from iran. journal of basic and applied science research, 1(12), 3116–3126. retrieved from www.textroad.com nugroho, b., & eko, u. (2011). board characteristics and earning management. journal of administrative science and organization, 18(1), 1–10. nuryaman. (2013). the influence of earnings management on stock return and the role of audit quality as a moderating variable. international journal of trade, economics and finance, 4(2), 73–78. https://doi.org/10.7763/ijtef.2013.v4.263 oba, v. c. (2014). board dynamics and financial reporting quality in nigeria. review of international comparative management, 15(2), 226–236. ogbonnaya, a., ekwe, m., & ihendinihu, j. (2016). the effect of corporate governance, ownership structure of breweries industries in nigeria. european journal of accounting, auditing and finance research, 4(7), 35–45. retrieved from www.eajournals.org). okolie, a. o. (2014). audit quality and earnings response coefficients of quoted companies in nigeria. journal of applied finance & banking, 4(2), 139–161. okolie, a. o., izendonmi, f. o., & enofe, a. . (2013). audit quality and accrual – based earnings management of quoted companies in nigeria. iosr journal of economics and finance, 2(2), 07–16. retrieved from www.iosrjournals.org peasnell, k., pope, p., & young, s. (2005). board monitoring and earnings management : do outside directors influence abnormal accruals ? board gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 25 monitoring & earnings management. journal of business finance & accounting, (october). https://doi.org/10.2139/ssrn.249557 rad, s. e., salehi, h., & pour, h. v. (2016). the impact of audit quality and ownership struture on earnings management of listed firms on tehran stock exchange. international business management, 10(10), 1827–1832. rahman, m., moniruzzaman, m., & sharif, j. (2013). techniques , motives and controls of earnings management. international journal of information technology and business management, 11(1), 22–34. retrieved from www.jitbm.com roodposhti, f. r., & chashmi, s. a. n. (2010). the effect of board composition and ownership concentration on earnings management : evidence from iran. international journal of social, behavioral, educational, economic, business and industrial engineering, 4(6), 673–679. https://doi.org/org/1999.10/12634 saleh, n. m., iskandar, t. m., & rahmat, m. m. (2005). earnings management and board characteristics : evidence from malaysia. journal pengurusan, 24(1), 77–103. sandra, a. (2012). ownership structure and earnings management : evidence from portugal ownership structure and earnings management : evidence from portugal. australasian accounting, business and finance journal, 6(1), 57–74. retrieved from http://ro.uow.edu.au/aabf schipper, k. (1989): (1989). commentary on earnings management’. accounting horizon, 3, 91–102. shayanfar, k. (2016). the effect of audit quality on earnings response coefficient of listed companies in tehran stock exchange. specialty journal of accounting and economics, 2(2), 19–23. https://doi.org/10.18052/www.scipress.com/ilsh.21.36 shen, l. (2016). research on industry competition , ownership structure and earnings management : empirical analysis based on bisted bank. international journal of smart home, 10(3), 221–230. https://doi.org/org/10.14257/ijsh.2016.10.3.31 soliman, m. m., & ragab, a. a. (2014). audit committee effectiveness , audit quality and earnings management : an empirical study of the listed companies in egypt. stolowy, h., & breton, g. (2000). a review of research on accounts manipulation. in a review of research on accounting manipulation (pp. 1–65). jijjani m (2015) audit firm size and earnings mangement of listed building material firms in nigeria. accounting frontire trueman, b. (1986). why do managers voluntorily forcast? relaese earnings. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 26 journal of accounting and economics, 8, 53–71. https://doi.org/01654101/86/$3.5 vanstraelen, ann & tendelo, b. (2005). no title. wallace, w. a. (1980). the economic role of the audit in free and regulated markets. college of williams and mary w &m publish. retrieved from http://publish.wm.edu/oer wang, w. (2014) independent directors in corporate governance : a comparative study between us, new zea land and china. retrieved from http://researchspace.auckland.ac.nz warfield, t. d., wild, j. j., & wild, k. l. (1995). managerial ownership, accounting choices, and informativeness of earnings. journal of accounting and economics, 20(1), 61–91. yang, w. s. h. i., chun, l. o. o. s. i. n., & ramadili, m. (2009). the effect of board structure and institutional ownership structure on earnings management. international journal of economics and management, 3(2), 332–353. yaşar, a. (2013). big four auditors’ audit quality and earnings management: evidence from turkish stock market. international journal of business and social science, 4(17), 153–163. retrieved from www.ijbssnet.com gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 i gusau journal of accounting and finance (gujaf) vol. 3 issue 3, october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ii © department of accounting and finance vol. 3 issue 3 october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com mailto:abupress2020@yahoo.com http://www.abupress.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos stat gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. muhammad aminu isa department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. prof. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeiza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vi advisory board members prof. kabiru isah dandago, bayero university kano,kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng mailto:elfarouk105@gmail.com http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng mailto:elfarouk105@gmail.com mailto:05@gmail.com http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ix contents capital structure and firm financial performance of listed deposit money banks in nigeria: moderating effect of board financial literacy anas idris abdulwahab, hussaini bala ph.d, mansur lubabah kwambo ph.d, & abubakar adamu 1 influence of socialization on msme compliance by mediating understanding and moderating knowledge of tax visits yayuk ngesti rahayu 17 does international financial reporting standard narrows audit expectation gap? musa ibrahim dauda, ibrahim adagye dauda, phd 35 sustainability reporting and financial performance of listed manufacturing firms in nigeria aiyesan, olabode olutola ph.d 49 firm attributes and financial reporting timeliness of listed consumer goods firms in nigeria akume james terkende, dele ikese karim 67 value relevance of accounting information for listed financial service firms in nigeria kassim busari, ishaya luka chechet ph.d, aliyu ahmed abdullahi ph.d, & ibrahim mohammed ph.d 87 nigeria economic growth and capital market development: does contributory pension scheme matter? akinwumi ayorinde olutimi, toluwa celestine oladele ph.d, &adeboye emmanuel sanmi 101 audit committee and financial reporting quality: the moderating effect of board independence of listed deposit money banks in nigeria kassim yusha’u shika, mark david kantiyok 117 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 x determinants of financial performance of listed deposit money banks in nigeria mary seansu lazarus, nurradden usman miko ph.d, & saifulahi abdullahi mazadu ph.d 140 human resource accounting and profitability of listed depositmoney banks in nigeria ahmad adamu ibrahim, ahmad rufa’i adamu, fatihu mahmud alhassan &muhammad iliyas abdulsalam 158 board independence, audit effectiveness and the quality of reported earnings in the nigerian consumer goods firms isah shittu ph.d, misbahu, abubakar muhammad 175 impact of capital structure on financial performance of listed agricultural companies in nigeria ahmad muhammad ahmad, shehu usman hassan ph.d., &abubakar abubakar 192 trade oriented money laundering and era of cybersecurity tax evasion in nigeria oluwayemi joseph kayode, adewole joseph adeyinka ph.d, adewale abass adekunle & kadiri kayode ph.d 205 effect of females in the boardroom on corporate sustainability reporting salami suleiman ph. d, olanrewaju atanda aliu ph.d 224 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 117 audit committee and financial reporting quality: the moderating effect of board independence of listed deposit money banks in nigeria kassim yusha’u shika department of accounting, nuhu bamalli polytechnic, zaria +2348035971815; kassimyushau@gmail.com mark david kantiyok department of accounting, nuhu bamalli polytechnic, zaria +2347030149975; markkantiyok@gmail.com abstract the widely publicized corporate accounting scandals perpetrated under the watchful eye of audit committee despite their roles and function-ns in financial reporting processes, casts doubt in the minds of users on its relevance and credibility. this study examines the moderating role of board independence on the relationship between audit committee and financial reporting quality of listed nigerian deposit money banks from 2012 to 2021. the study utilized correlation research design, extracted secondary data and ols multiple regression for analysis. the finding reveals that board independence has a significant negative moderating effect on audit committee characteristics and financial reporting quality represented by discretionary loan loss provision, thereby strengthen the nexus. based on the findings, the study recommends the appointment of more outside directors, holding strategic regular meeting and appointment of members with financial expertise into the audit committee to guarantee independence, assure discussion and handling of complex financial issues which would improve the financial reporting quality. keywords: discretionary loan loss provision, financial reporting quality, audit committee attributes, deposit money banks. doi: https://doi.org/10.57233/gujaf. v3i3.184 1. introduction provision of financial reports is one of the prime responsibilities of management which enables them give report of their stewardship. financial reports provide the needed information to stakeholders on the operational and financial activities of the firm. it therefore, becomes imperative for users of financial reports not to disregard its quality for better resources allocation, economic and investment decisions (aifuwa, embele & saidu, 2018). shareholders freely entrusted their resources to managers on the pledge that the self-serving managers will apply their discretionary mailto:kassimyushau@gmail.com mailto:markkantiyok@gmail.com https://doi.org/10.57233/gujaf.%20v3i3.184 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 118 rights suitably to achieve shareholders’ wealth maximization objective (junaidu & saheed, 2014). the preparation and presentation of annual reports in line with pertinent laws is the responsibility of the managers of an entity in each financial year. the accounting standards guiding the preparation and presentation of financial reports and accounts accorded the managers the room to make independent valuation. however, sometimes managers capitalize on these flexibilities inherent in the standards and general principles to apply personal discretion and make some accounting valuation that may be harmful to the quality of financial statements (mehdi, yasser and ahmad, 2021). this is mostly motivated either to save their career or for compensation reasons (ekanayake, 2021). the acts altered the true financial position and misguide the interested users while making relevant decision (aifuwa et al, 2018). the consequence resulted to the fall down of several renowned corporations such as; enron corporation, tyco, xerox and worldcom in the u.s and cardbury plc and oceanic bank plc in nigeria. hence, several measures were taken to prevent occurrences such as establishment of the audit attributes (audit committee independence, meetings, size, financial expertise, etc). nevertheless, the trend nervously continues. other newly widely broadcast accounting scandals, such as the case of wirecard (germany) in 2020, patisserie holdings in 2018, british telecommunications in 2017, tesco and banco espirito (portugal) in 2014, wema bank plc in 2021 and spring bank (nigeria) in 2013 were also exposed. as a result, investors lost billions of dollars and employees lost their means of livelihood/jobs, government lost taxes and generally affected the economic stability (uk essays, 2018). the continuing reported scandals confirmed that there was a hidden cloudiness surrounding the financial reporting process that had not been resolved yet. the reasons behind the collapse of these entities included but were not limited to the involvement of their managers in manipulative accounting practices through the use of discretionary accruals concealed in the financial reports (otunsanya & uadiale, 2014). thus, the trend suggests the strengthening of the audit attributes to discharge their primary functions effectively to protect all relevant stakeholders. it is believed that audit committee independence guides professional conduct, provides avenue for neutrality and professional examination of accounting information to ascertain its truthfulness, correctness and relevance which improve it quality (mehdi et al 2021; aifu, musa & gold 2020 & kibiya, ahmad & amran 2016). also, regular meeting of the audit committee assures smooth financial reporting process and regular checks of manager’s unwanted discretion (mohammed and dauda, 2019). in gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 119 addition, audit committee composition with members that has vast financial knowledge and experience would achieve better and logical scrutiny of the information contained in the financial reports for completeness, relevance and error free report that meet stakeholders’ expectation (chikwuani & ugwoke, 2019). accordingly, the most common trend in nearly all of the studies on audit attributes and financial reporting quality were conducted on direct relationship (bajra & cadez 2017, kantudu & samaila 2015, hussaini & gugong 2015, shehu 2015, shehu 2013, abdulkadir & noor 2013, shehu & ahmad 2013, shehu & abubakar 2012 and shehu 2011). virtually, all these studies reported different and inconsistent findings. this suggests the introduction of board independence as a moderator variable, as the non-executive and independent board member are appointed base on their track record of independent mind, integrity, experience, among others (shehu & ahmad, 2013 and shehu, 2013). as a result, stand better chance to help audit committee achieve their oversight monitoring functions for better financial reporting quality. thus, the outcome of this study helps informed those parties that pay more emphasis on the financial reporting quality and in particular, the conclusion enlightens policymakers and regulators of the likely weight of financial reporting on audit committee independence, audit committee meetings, audit committee financial expertise and audit committee size. the next part of the study develops hypotheses base on the empirical review, this is followed by the research methodology in section three; section four and five present and analyses the results obtained from the statistical analysis which is followed by the conclusions and recommendations respectively. 2. empirical review and hypotheses development 2.1 audit committee characteristics and financial reporting quality audit committee independence and financial reporting quality considerable literatures have examined how the audit attributes (audit committee independence, meetings, financial expertise and size) impact financial reporting quality. the results of these studies show significant positive or significant negative effects of audit attributes and financial reporting quality. it is expected that functions perform by independent audit committee member would restrain manager’s accounting manipulation, which will in turn enhance the quality of financial reporting, thereby shows significant negative (inverse) relationship and vice-versa (almagtari, farhan, al-homaidi & mishra 2020, kibiya, ahmad & amran 2016; paul & simon 2014). as a result, audit committee independence is gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 120 showing to be a vital instrument available by the principals in monitoring manager’s unwanted discretionary behavior. literatures have established the vital role audit committee independence plays as a constituent of corporate governance in ensuring quality financial reporting (akeju & babatunde, 2017; akinleye & aduwo, 2019). the studies cited above established a negative and significance association between audit committee independence and discretionary accruals. the result from the study of alzoubi (2014) who examined the effect of board characteristics sampled audit committee independence and financial reporting quality of jordanian firms revealed that audit committee independence mitigates manager’s unwanted discretion and improve financial reporting quality. this finding was countered by bajra and cadez (2017) who emphasize that audit committee independence does not guarantees better and quality financial reporting. bradbury, mak and tan (2006) investigated the effect of board characteristics, audit committee independence and abnormal accruals. the study found that independence audit committee member is associated with less quality financial reporting. audit committee meetings and financial reporting quality buallay and al-ajmi, (2019) studied the effect of audit committee attributes on corporate sustainability reporting in gulf and found that regular meetings by audit committee help improve adequate sustainability reporting which improve financial reporting transparency and disclosure thereby improving it overall quality. davidson, goodwin-stewart, and kent (2005) in their study of internal governance and earning management found that as audit committee hold regular meetings within a particular financial year, earning management reduces thereby enhancing financial reporting quality. this was supported by a study of jordanian firms by deaa, raneem, and mohammad, (2019) for ten years and employed logistic regression model found a significance negative association between audit committee meetings and cosmetic accounting. it is evident by this that, regular audit committee meetings help reduces window dressing accounting and improve financial reporting quality of jordanian firms. ibrahim, alkasim, udoh and onipe (2019) and odjaremu and jeroh (2019) and also reported this conclusion. in contrast, dhaliwal, naiker, and navissi (2008) conducted an empirical study on audit committee and accrual quality within the period of seven years. their empirical results after employing multiple regression technique for data analysis discovered that regular audit committee meetings reduce accrual quality within the scope of their study. in another study of vietnam companies by diem, and anh, (2021) the findings confirm the result of dhaliwal et al (2008) by establishing a gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 121 positive association between audit committee meetings and financial reporting quality. in that way, it is deduced that where the audit committee meetings increase, earnings manipulation increases. ekanayake, (2021), enofe, iyafekhe and eniola (2017), moses, ofurum and egbe (2016) and moses (2016) also support this finding. audit committee size and financial reporting quality enofe, mgbame, okolie and ezedonmi (2014) studied the audit firm characteristics and audit quality; the nigerian experience. they selected audit committee size among the proxy of audit firm characteristics. the study reported that audit size helps in improving audit quality which invariably increases firm’s financial reporting quality. eyenubo, mohammed and ali (2017) in their study of audit committee effectiveness and financial reporting quality of listed companies in nigeria stock exchange within the period of ten years. the study employed multiple regressions as the technique of data analysis found significant negative association of audit committee size and financial reporting quality, thereby portraying inverse relation with discretionary accruals. this was supported by a study of quoted companies in the nigerian stock exchange by eze and nkak (2020) the study utilized logistic regression model and document significant negative effect of audit committee size and financial reporting. amina, hassouna, moez (2018) also document thus finding. contrarily, faozi, abdulwahid, mohd and waleed (2020) in their study exploring indian data and the empirical results shows that audit committee size have no significant impact on financial reporting quality. in another study by firnanti and karmudiandri (2020) the findings confirm the result of faozi et al (2020), as it establishes a positive association of audit committee size and financial reporting quality. these findings were supported by the studies of firth, fung and rui (2007) and hamdan and abdalmuttaleb (2013) who also found significant positive of audit committee size, which reduces financial reporting quality. audit committee financial expertise and financial reporting quality several studies argued on the fact that audit committee financial expertise enhances agency relationship and reduce conflicting interest between managers and shareholders caused by manager’s excessive use of discretion in financial reporting. this position has been confirmed by the studies (adeleke 2021, diem & anh 2021, eze & nkak, 2020, eyenubo et al 2017,). they established significant negative of audit committee financial expertise, which reduces abnormal accruals and improves financial reporting quality. more so, xie, wallace and peter (2003) and zaitul and https://www.sciencedirect.com/science/article/abs/pii/s0929119902000068#! https://www.sciencedirect.com/science/article/abs/pii/s0929119902000068#! https://www.sciencedirect.com/science/article/abs/pii/s0929119902000068#! gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 122 ilona (2019) believe that audit committee with financial experts as members reduces financial reporting timeliness. on the other hand, another stream of studies argued to the contrary suggesting that audit committee financial expertise increases managers earning manipulation and reduces financial reporting disclosure (mehdi et al 2021, umobong & ibanichuka 2017, thomas, marjorie & frances 2019, tran, hassan & houston 2020, spathis 2002, sharma & kuang 2013). these studies supporting the likely hood that a dominant financially experts audit committee increases unwanted discretionary accruals by managers which may be a consequences of related party transaction as suggested by saftiana, mukhtaruddin, putri and ferina (2017). they stressed that potential related party transaction and or manager’s influence in appointing audit committee members could jeopardize the objective of the committee, hence, reduces the quality of financial reporting. robinson and owens-jackson (2009) and piot and janin (2007) also, affirmed this view. 2.2 audit committee, board independence and financial reporting quality sufficient number of studies confirmed the worthiness of audit committee in exercising oversight monitoring functions in financial reporting processes (eze & nkak 2020; zandi & abdullahi 2019; mohammed & dauda 2019). this was supported by bajra and cadez (2017), kantudu and samaila (2015), hussaini and gugong (2015) who argued that existence of non-executive and independent directors on the board is a strong monitoring mechanism and it helps in improving financial reporting quality. also, this position was supported by a study on the effect of earnings response coefficient exploring pakistanian data, wahid, anjum and shahid (2018) confirms that non-executive and independent directors serving on the board and audit committee of business corporations are preventing misuse of tendency by managers. they also, advanced that the more the outside directors on the board and other statutory committees of the firms, the better and it brings solace to each business entity. in addition, mohammed, yousef and mahmoud (2020) supported this assertion. these conclusions advocate for more examinations of audit committee and financial reporting quality as the association could be indirect. this therefore, informs the necessity of exploring what is actually the extent of audit committee role while moderated by board independence on the financial reporting quality of a firm. relying on the above position, it can be presumed that board independence could moderate the associations between audit committee attributes and financial gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 123 reporting quality. this could be informed by the independent monitoring power of the outside directors. they have an independent objective judgement for better monitoring of manager’s opportunistic tendency and this improves financial reporting quality. based on the above contradicting views, the study thereby hypothesized as follows: ho1: audit committee independence has no significance influence on financial reporting quality ho2: audit committee meetings has no significance influence on financial reporting quality ho3: audit committee size has no significance influence on financial reporting quality ho4: audit committee member’s financial expertise has no significance influence on financial reporting quality ho5: board independence has no moderating effect on audit committee attributes and financial reporting quality ho6: board independence has no moderating effect on audit committee independence and financial reporting quality ho7: board independence has no moderating effect on audit committee meetings and financial reporting quality ho8: board independence has no moderating effect on audit committee member’s financial expertise and financial reporting quality ho9: board independence has no moderating effect on audit committee size and financial reporting quality. 3. methodology consistent with shehu and farouk (2014) and shehu (2015) the study adopted correlation research design. the correlation design allows for testing the extent of causal association between two or more variables. in addition, the study paradigm; which is positivist with quantitative approach and quantifiable observations that require statistical experiments to test the study hypotheses. the population for this study consists of all the fourteen deposit money banks (dmbs) listed on the nigerian exchange group (ngx) as at 31st december 2021 for the period of ten years (2012-2021). further, all the listed banks with the exception of jaiz bank plc which is quoted in 2017 were utilized using censored sampling technique making the adjusted population to thirteen dmbs. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 124 following baron and kenny (1986) this study has three sets of variables: the explain, explanatory and the moderating variables. the financial reporting quality is the dependent variable proxy by discretionary loan loss provision (dllp) which was first originated as the bad debt estimation model by (mcnicholas and wilson, 1988). the discretionary loan loss provision was attained using the absolute values of the residuals advanced by chang, shen and fang (2008) model. the model is suitable as the study domain is nigerian deposit money banks, where their operations warrant the use of accruals and it allows for the required degree of freedom for estimating residuals. the absolute value of the discretionary loan loss provision derived from the residual of the model is used as the dependent variable (financial reporting quality) tested against the explanatory variables. the model is reviewed below: dllpi = llpit/tat-1 {β0 1/tat-1 + β1lcoi + β2bbali/tat 1}……………………….. (1) where: dllp = discretionary loan loss provision llp = loan loss provision lco = loan charge-off bbal = beginning balance of loan loss tat-1 = lagged total assets β0 = constant the audit committee attribute is the independent variable represented by internal audit attributes (audit committee independence, meetings, financial expertise and size). the variables selected in the study covered the strategic points of loan loss provisions. the internal audit attributes of audit committee independence ensure unbiased and all-inclusive interests of stakeholders toward reliable and fair presented financial information. also, the audit committee meeting serves as the avenue for deliberation, scrutiny and consideration of all financial information presented by managers. in addition, financial expertise of audit committee members plays a greater role of reviewing complex and technical issues presented in the financial statements. further, audit committee size accommodates the different, cross sectional and unique expertise and experience of members in taking decision on the observations highlighted in the financial reports. board independence is the moderating variable represented the ratio of outside directors (non-executive plus independent directors) to the total number of board gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 125 size. it is widely believed that higher number of non-executive and independent directors serving in the board of directors, audit and other statutory board committee ensure equitable and interest balance between the managers and other stakeholders. therefore, in affirmation of this theoretical supported assertion, board independence was selected and used as moderator on the established relationship between the audit attributes and financial reporting quality. table i below contains the summary of variables definitions and measurements. table i summary of variable measurement and definition variables definition and measurement source financial reporting quality (frq) (dependent variable) measured by the absolute values of discretionary loan loss provisions, derived from the residuals of chang et al. (2008) model. chang et al (2008) board independence (bdind) (moderator variable) the ratio of outside directors (non executive plus independent directors) to the total number of board members (size). mohammed et al (2020) audit attributes (independent variable) audit committee independence (aci) audit committee meetings (acm) audit committee member’s financial expertise (acfe) audit committee size (acs) audit attributes was derived from the four commonly used audit committee attributes: the ratio of outside directors (non executive and independent directors) to the total number of audit committee members. the number of meetings held by the audit committee in the year. the ratio of audit committee members with financial and, or accounting expertise to the total number of audit committee size. the total number of audit committee members (size). wahid et al (2018) diem and anh (2021) ibrahim et al (2019) adeleke (2021) amina et al (2018) source: compiled by author, 2022 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 126 model specification the model of the study that tested the hypotheses postulated in section one above was presented below as used by ekanayake (2021), amina et al (2018) and asokan, cornelia and iftekhar (2007). frqit = 0 + β1aciit + β2acmit + β3acfeit +β4acsit + β5bdindit ɛit ...................................................... (2) frqit = 0 + β1aciit + β2acmit + β3acfeitt +β4acsit + β5bdindit + β6aciit*bdindit + β7acmit*bdindit + β8acfeit*bdindit +β9acs*bdindit + ɛit ................................................................ (3) where: αo= constant β1 – β6 = coefficients of the parameters ε= stochastic disturbance term 4. results and discussions descriptive statistics table ii: descriptive statistics variables mean std. dev min max dllp 0.690 0.575 0.004 1.908 aci 0.538 0.106 0.500 0.920 acm 4.385 0.761 3.000 6.000 acfe 0.279 0.114 0.130 0.500 acs 6.054 0.503 4.000 8.000 bind 0.679 0.138 0.500 0.970 note: dllp= discretionary loan loss, aci= audit committee independence, acm= audit committee meetings, acfe= audit committee member’s financial expertise, acs= audit committee size source: stata output, 2022. the result in table ii above reveals that discretionary loan loss provision (dllp) as measurement of financial reporting quality has an average of 0.690. the average of 69% of dllp across the listed sampled banks signifies average involvement in earnings manipulations through the period of the study. standard deviation of 0.575 indicates average variation of the data across listed deposit money banks in nigeria. the minimum and maximum values of discretionary loan loss provision throughout the period covered by the study are 0.004 and 1.908 respectively. the gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 127 minimum values implied that a number of sampled banks were involved insignificantly in earnings manipulations throughout the study period, while the gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 128 utmost manipulation of earnings by the sampled banks through the study period stood at 1.908. also, from table ii audit committee independence has a mean value of 0.538, with a minimum value of 0.500 and maximum values of 0.920. this shows that the average ratio of outside directors in the audit committee of the selected banks is approximately 54%. this complied with the applicable laws that require the banks to appoint at least 3 independent non-executive directors into the 6-member audit committee as required. the minimum and maximum value of 92% implies that majority of the committee members are independent non-executive directors. the standard deviation of 0.106 denotes minimal variation in the data of audit committee members across the sampled banks. in addition, the average of frequent meetings held by the audit committee is approximately 4 times with the corresponding standard deviation of 0.761. the minimum and maximum numbers of meetings held are 3 to 6 times in a year. the minimum of 3 times implies that some banks are yet to comply with the applicable provision for holding meeting at least four times annually and may hold emergency or extra ordinary meetings when necessary. furthermore, from the table ii above shows on average 28% of the audit committee members have financial expertise and the committee has 50% maximum members with financial expertise. the standard deviation of 0.114 signifies close variation across the sampled banks as it clustered around the mean. accordingly, audit committee size on average has approximately six (6) members with corresponding standard deviation of 0.503. this confirmed the small dispersion of audit committee size in the sampled banks. the minimum and maximum members are four (4) and eight (8) members respectively. the result shows compliance with the provision of nigeria stock exchange 2011, cama (2020) as amended for minimum of two (2) and maximum of six (6) members of equivalent representation of non-executive and independent directors (representing the board) and shareholders in the statutory audit committee. correlation matrix correlation matrix provides insight in to the extent, strength and direction of the association between two or more variables (gujarati, 2004). the direction of the relationship and the density of the value show the extent of the relationship as presented in table iii below: gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 129 table iii: correlation matrix variables dllp aci acm acfe acs bind aci*bind acm*bind acfe*bind acs*bind dllp 1.000 aci 0.028 1.000 acm -0.076 -0.043 1.000 acfe 0.008 -0.162 0.119 1.000 acs 0.063 0.009 0.006 -0.068 1.000 bind 0.169 0.097 -0.194 -0.127 -0.160 1.000 aci*bind 0.255 0.157 -0.296 -0.216 -0.117 0.770 1.000 acm*bind 0.170 0.095 0.526 -0.098 -0.095 0.544 0.645 1.000 acfe*bind 0.175 0.189 -0.277 -0.230 0.157 0.683 0.926 0.596 1.000 acs*bind 0.119 -0.113 -0.013 0.879 -0.139 0.236 0.249 0.213 0.195 1.000 note: dllp= discretionary loan loss, aci= audit committee independence, acm= audit committee meetings, acfe= audit committee member’s financial expertise, acs= audit committee size, bind= board independence source: stata output, 2022. from table iii, it shows that audit committee independence, audit committee member’s financial expertise, audit committee size and board independence are having positive association with financial reporting quality (frq) proxy by discretionary loan loss provision (dllp) as indicates by their correlation coefficient 0.028, 0.008, 0.063 and 0.169, respectively. this implies that, these variables are moving in same direction in relation to financial reporting quality (frq). the relationship between the independent variables themselves, the results suggest less implication of multicollinearity, as such multicollinearity is not a problem to the study estimation model (gujarati, 2004). however, this is confirmed by the variance inflation factor (vif) test carried out confirmed the absence of multicollinearity as the all the individual mean of vif is less than 4 (ghasemi & zahediasi, 2012). gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 129 estimation result the estimation result of the regression model (models ii and iii) which test hypotheses is presented and discuss below: table iv: regression model results model ii model iii variables co-efficients z-values p-values co-efficicents t-values p-values constant -2.441 -3.670 0.000*** 2.618 0.460 0.649 aci -0.752 -0.570 0.569 8.427 3.480 0.001** acm 0.056 0.760 0.450 1.277 2.430 0.017* acfe 2.497 4.380 0.000*** 0.177 0.050 0.963 acs 0.339 4.440 0.000*** 4.844 0.820 0.414 bind 44.443 1.770 0.079* aci*bind -106.943 -2.110 0.037* acm*bind -1.945 -2.370 0.019* acfe*bind -1.945 -2.160 0.033* acs*bind 2.505 2.390 0.180 r-square 0.348 0.321 mean vif 1.050 f-statistics 60.720 0.000*** 6.310 0.000*** het-test 8.250 0.004** hausman 1.220 0.874 lm test 46.400 0.000*** note: dllp= discretionary loan loss, aci= audit committee independence, acm= audit committee meetings, acfe= audit committee member’s financial expertise, acs= audit committee size, bind= board independence; *p < 0.1, **p < 0.05, ***p < 0.001 source: stata output, 2022. the table iv presents the results of the robust ordinary least square regression (ols) for both direct and interaction effect model. as presented in table iv above it shows a cumulative coefficient of determination (r-square) of 0.348 and wald chi2 is significant at 1% (p<0.01), signifying the overall model is fit in explaining the empirical association between audit committee attributes and financial reporting quality (frq) in model i. thus, the model suggests that 34.8% of the total variant in frq is explained by combinations of the independent variables selected in the study. for model ii it demonstrates that the r-square improves from 32.1% as reflected in table iv. moreover, to authenticate the accuracy of panel data regression estimate, the study check for multicollinearity using tolerance values (tv) and variance inflation factor (vif). the result from the test indicated that all the tolerance values (vif) are consistently below 1 and variance inflation factor (vif) consistently below 10. this result from the diagnostic test signifies that multicollinearity will not be a predicament to the inferences of the regression result. on the other hand, the result of the heteroscedasticity test for model i indicated that the panel elements are not homoscedastic, meanwhile they are heteroscedastic, this can be deduced from the gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 130 p-value of 0.000 in model i as can be seen in table iv above. the study went ahead to conduct a hausman specification test. the results of the hausman specification test as presented in table iv above indicated a chi2-value of 1.220 with a significance p-value of 0.874. this informs the preference of the random effect model (re) over the fixed effect (fe) model as presented above. multi-faceted models as presented in table iv audit committee independence (aci) is negative and significantly linked to discretionary loan loss provision (β -0.752, p< 0.569). the results imply that the predicted value of dllp decrease with an increase in those audit committee independence (aci). thus; signified improved quality of reported earnings. conversely, audit committee meeting (acm) is positively and statistically significant to dllp (β 0.0562, p< 0.450). this implies that an increase in the number of meetings held by the statutory audit committee does not guarantee quality earnings significantly by the deposit money banks listed in nigeria. on the other hand, audit committee member’s financial expertise (acfe) was found to have significant positive impact on the dllp of deposit money banks (β 2.497; p< 0.000). this indicated that higher number of members with financial expertise within the mix of audit committee members would not influence or improve the quality of earnings, but increase the managers tendency to manipulate dllp, thereby indicating lesser quality financial reporting. furthermore, the results reveal that audit committee size (acs) has a positive and significant influence on the financial reporting quality (dllp) of listed deposit money in nigeria (β 0.339, p <0.000). this implies that the quality of reported earnings of deposit money banks in nigeria is not influenced by the size of the banks audit committee. as mentioned earlier, the relationship between audit attribute and financial reporting quality is still mixed and inconclusive. in regard, the study postulates that this link can be moderated by the intensity of board independence. table iv above demonstrates that the overall r-square of model iii stood at 32.1% as a result of the interface effect. this signifies that board independence moderates the link between the audit attribute and financial reporting quality of deposit money banks listed in nigeria. the result therefore, failed to support the hypothesis five (h05) postulated in section one. the regression estimates in table iv shows that the contact effect of board independent on the relationship between audit committee independent and discretionary loan loss provision (dllp) is negative and statistically significant (β 106.943, p <0.037) and positively linked with financial reporting quality (frq) of the dmbs. this suggests that the positive and significant effect of audit committee independence in encouraging earning management in model i was overturned in model iii. this finding established that the presence of board independent moderate gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 131 the link amid the audit committee independence and financial reporting quality proxied by discretionary loan loss provision (dllp). this suggests an inverse link of audit committee independence with manipulative tendencies of manager to distort earnings, thereby improving the financial reporting quality. the result is in stripe with prior expectation that the more the independent of the audit committee is, the less managerial opportunistic behavior to manipulate earnings. also, the results sustain the agency theory proposition. thus, hypothesis six (h06) postulated in section one is not supported. this finding agreed with the position of diem and anh (2021), almaqtari et al (2020), amina et al (2018), bajra and cadez (2017) and kibiya et al (2016). however, it contradicts that of mohammed and dauda (2019), akinyele and aduwo (2019) and eyenubo et al (2017). the regression estimates in table iv also, reveals that the direct effect of audit committee meetings on dllp was found to be insignificant and positive while it was found to be negative and insignificant with frq of dmbs. however, with the introduction of board independent as moderating variable, the direction of the result completely changes. the regression results of the interaction effect model indicated that the association of audit committee meetings with dllp was negative, meanwhile, it is positively connected with financial reporting quality significantly at 5% (-1.945, p<0.05). this suggests that board independence moderates the connection between audit committee meetings and financial reporting quality of the dmbs. this may be owing to reality that audit committee meetings could control information flow, take advantage of diverse experience and professionalism of the committee members and regular brainstorming as a result of regular meetings. the result confirmed the compliance of the sampled banks with the requirement of the law for holding regular meetings with relevant stakeholders for better financial reporting quality. this finding coincided with that of odjaremu and jeroh (2019), amina et al (2018) and sharma and kung (2013). however, it contradicts the results of moses et al (2016) and moses (2016). therefore, the study found enough evidence for rejecting hypothesis seven (h07). in addition, the regression results presented in table iv shows the moderating effect of board independence on the affiliation between audit committee member’s financial expertise and dllp is negative and significant (-1.945, p>0.05) as against the direct relationship where audit committee member’s financial expertise has positive and significant influence on financial reporting quality in model ii. the result of the direct relationship in model ii implies that appointment of more outside directors with financial expertise into the audit committee has no significant gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 132 influence on financial reporting quality. also, the model ii result contradicts theoretical assumption that more numbers of outside directors with financial expertise enhance financial reporting quality. but the moderator was able to change the direction of the result when interacted with board independence. the moderation result may not be surprising considering the fact that financial expert members can handle technical and complex financial information, resolves all observations and reject manipulation of financial information, specifically loan loss provision. the hypothesis eight (ho8) is therefore not supported. the finding supports the position of adeleke (2021), diem and ahn (2021) and eze and nkak (2020). however, it contradicts the results of mehdi et al (2021), tran et al (2020), thomas et al (2019) and umobong and ibanichuka (2017). furthermore, the regression results in table iv support the argument that board independence can strengthen or weaken the affiliation between the audit committee size and financial reporting quality. the results show the moderating effect is positive and significant to financial reporting quality ( 2.505, p>0.180). this result confirmed the results in model i and indicated that board independence does not moderate the nexus between audit committee size and financial reporting quality. the result implies that any increase in number of audit committee size, will not significantly enhance financial reporting quality. thus, hypothesis nine (h09) postulated in chapter one is supported and is in line with that of faozi et al (2020) and firnanti and karmudiandri (2020) and go against amina et al (2018), eyenubo et al (2017) and enofe et al (2014). accordingly, the conclusions of this study have ramifications in terms of practice, theory, and regulation. the contributions to literature are intended to benefit executive, regulators (sec), policymakers (cbn) and other researchers, as indicated by these implications. one of the most imperative policy implications is the variables considered propose that the cbn should continue to urge banks to fully implement corporate governance regulations. this, on the other hand, allows for effective and efficient monitoring of financial reporting, particularly quality of reported earnings of nigeria's deposit money banks; particularly those with a well compose audit committee. in nigeria, most publicly traded companies are required to compose audit committee, most notably the dmbs with non-executive and independent directors as members. based on this, policymakers; securities and exchange commission should apply the findings of this study to other sectors or persuade parallel efforts in other sectors, particularly non-financial service institutions, as this will be gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 133 beneficial in improving the reliability and transparency of reported earnings in order to portray the firms' true economic reality. 5. conclusion and recommendations in line with the findings of the study, it is concluded that board independence has moderating role on the nexus between audit committee attributes and financial reporting quality of deposit money banks in nigeria. consequently, in line with the findings and conclusion herein, the study recommends as follows: i. to the board of director, the appointment of more non-executive and independent directors into the audit committee. this guarantees their independence to discharge their oversight functions effectively. the banks will on implementation of this recommendation gain from the empirical findings of this study that appointment of every additional outside director improves the quality of financial reporting. ii. that sec and cbn should enforce the strict implementation of the minimum number of audit committee meetings and sanctions the erring banks and the board of directors should certify that audit committee hold meetings regularly as provided by code of corporate governance, 2018. iii. that cbn should strictly enforce mandatorily appointment of outside directors with financial expertise into the board and statutory audit committee of nigerian banks. this as per the provision of the revised cama (2020) mandating the corporations to only appoint members of audit committee with financial expertise, of which one of them must be a member of any recognized nigerian certified accounting body. iv. the regulatory bodies of sec and cbn to review the requirement which will allow the banks to increase the number of statutory audit committee membership from six (6) to ten (10) or any larger flexible number. this is to allow the variance among the banks who wish to appoint more in consideration of the needs or volume of transactions. references abdulkadir, m & noor, a. a. (2013). audit committees: how they affect financial reporting in nigerian companies. journal of modern accounting and auditing, 9 (8), pp 1070-1080. issn 1548-6583. adeleke, d. b. (2021). audit committee characteristics and the quality of financial reports of listed financial institutions in nigeria. journal of business and management, 23 (6), pp 59-73, e-issn: 2278-487x, p-issn: 2319-7668. www.iosrjournals.org. doi: 10.9790/487x-2306075973. http://www.iosrjournals.org/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 134 aifuwa, h. o., embele, k. & saidu, m (2018). ethical accounting practices and financial reporting quality. epra international journal of multidisciplinary research, 4 (12), 31-44. aifuwa, h.o., musa, s & gold, n.o (2020). audit committee attributes and timeliness of corporate financial reporting in nigeria. audit, analysis and control, accounting and finance, 2 (88), 114-124. https://doi.org/10.33146/2307-9878-2020-29880-114-124. akeju, j. b. & babatunde, a. a. (2017). corporate government and financial reporting quality in nigeria. international journal of information research and review. 4 (2) 3749-3753. akinleye, g. t. & aduwo, o. o (2019). effect of audit committee characteristics on the timeliness of financial reporting in nigeria. journal of economics, management and trade, 24 (3), 1-10. almaqtari, f. a., farhan, n. h., al-homaidi, e. a & mishra, n. (2020). an empirical evaluation of financial reporting quality of the indian gaap and indian accounting standards. international journal of accounting, auditing and performance evaluation. alzoubi, e. s. s. (2014). board characteristics and financial reporting quality: evidence from jordan. corporate ownership and control, 11 (3), pp 8-29. amina, z., hassouna, f. & moez, e. (2018). audit committee and discretionary loan loss provisions in tunisian commercial banks. international journal of economics and financial issues, 8 (2), 85-93 asokan., a. cornelia., m & iftekhar, h (2007). the use of loan loss provisions for capital management, earnings management and signaling by australian banks. ssrn electronic journal. doi: 10.2139/ssrn.1019949 bajra, u & cadez, s (2017). audit committees and financial reporting quality: the 8th eu company law directive perspective. economic systems. https://doi.org/10.1016/j.ecosys.2012.03.002. baron, r. and kenny, d. (1986) the moderator-mediator variable distinction in social psychological research: conceptual, strategic, and statistical considerations. journal of personality and social psychology, 51, 1173 1182. https://doi.org/10.1037/0022-3514.51.6.1173 bradbury, m., mak, y & tan, s (2006). board characteristics, audit committee characteristics and abnormal accruals. pacific accounting review, 18, 47 68. buallay, a & al-ajmi, j (2019). the role of audit committee attributes in corporate sustainability reporting: evidence from banks in the gulf cooperation council. journal of applied accounting research. https://doi.org/10.1108/jaar-06-2018-0085 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 135 cadbury committee (2002). the financial aspects of corporate governance compliance with the code of best practice. london: gee. cama (2020). companies and allied matters act, 2020 (amended). cbn (2010). central bank of nigeria prudential guidelines. chang, r., shen, w. & fang, c. (2008). discretionary loan loss provisions and earnings management for the banking industry. international business & economics research journal, 7 (3), pp 9 20. chikwuani, v.n & ugwoke, r.o. (2019). adequacy of financial reporting quality of nigerian quoted firms under ifrs adoption. international journal of mechanical engineering and technology (ijmet), 10 (8). davidson, r., goodwin-stewart, j. & kent, p. (2005). internal governance structures and earnings management. accounting and finance. 1-27. deaa, a. s., raneem, m. s. & mohammad, h. a. (2019). cosmetic accounting practices among jordanian firms: the role of ownership concentration and political influence, review of applied socioeconomic research 1 (1), 18 25. dhaliwal, d.s., naiker, v. & navissi, f. (2008). audit committee financial expertise, corporate governance and accruals quality: an empirical study. revise and resubmitted to contemporary accounting research diem, n. p. & anh t. h. (2021). relationship between the audit committee and earning management in listed companies in vietnam. journal of asian finance, economics and business, 8 (2), 135-142, ekanayake, n. (2021). do commercial banks use loan loss provisions to smooth their income? empirical evidence from sri lankan commercial banks. journal of finance and bank management. https://doi.org/10.15640/jfbm.v3n1a15 enofe, a. o., iyafekhe, c. & eniola, j. (2017). board ethnicity, gender diversity and earnings management: evidence from quoted firms in nigeria. international journal of economics, commerce and management, 6, 78– 90. enofe, o.a., mgbame, okolie, e. c. & ezedonmi, j. (2014). audit firm characteristics and auditing quality: the nigerian experience. research journal of finance and accounting, 5 (6), pp 12-19. eyenubo, s. a., mohammed, m. & ali, m. (2017). audit committee effectiveness of financial reporting quality in listed companies in nigeria stock exchange. international journal of academic research in business and social sciences, 7 (6), 487-505. https://doi.org/10.6007/ijarbss/v7-i6/3006. eze, p, g. & nkak, p. e (2020). corporate governance and timeliness of audited reports of quoted companies in nigeria. international journal of business and management invention, 9 (1), 38-46. https://doi.org/10.6007/ijarbss/v7-i6/3006 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 136 faozi, a.a., abdulwahid, a.h., mohd, s. & waleed m. a. (2020). impact of corporate governance mechanisms on financial reporting quality: a study of indian gaap and indian accounting standards. problems and perspectives in management, 18 (4), 1-13. firnanti, f. & karmudiandri, a. (2020). corporate governance and financial ratios effect on audit report lag. accounting and finance review, 5 (1), 15-21. firth, m., fung, p. & rui, o. (2007). ownership, two-tier board structure and the informativeness of earnings: evidence from china. journal of accounting and public policy, 26 (4), 463-496. ghasemi, a. & zahediasl, s. (2012). normality tests for statistical analysis: a guide for non-statisticians. international journal of endocrinology and metabolism, 10 (2), 486–489. gujarati, d. n. (2004). basic econometrics. basic econometrics: vol. 4. hamdan, m. a. & abdalmuttaleb, a. (2013). the audit committee characteristics and earnings quality: evidence from jordan. business and finance journal australasian accounting, https://doi.org/10.14453/aabfj.v7i4.5 hussaini, b. & gugong, k. b. (2015) audit committee characteristics and earnings quality of listed food and beverages firms in nigeria. international journal of accounting, auditing and taxation, 2 (8), 216-22. ibrahim, m. f., alkasim, a., udoh, e. m. & onipe, a. y. (2019). audit committee and earnings management of listed deposit money banks in nigeria. research journal of finance and accounting, 10 (16). junaidu k. & saheed a. (2014). corporate governance and earnings management: an empirical analysis of firms in petroleum and petroleum products distributors in nigeria. kantudu, a.s. & samaila, i. a. (2015). board characteristics, independent audit committee and financial reporting quality of oil marketing firms: evidence from nigeria. journal of finance, accounting and management, 6 (2), 34 50. kibiya, m. u., ahmad, c. a. & amran, n. a. (2016). audit committee independence, financial expertise, share ownership and financial reporting quality: further evidence from nigeria. international journal of economics and financial issues, 6 (7), 125-131. mcnichols, m. f. & wilson, g. f. (1988). evidence of earnings management from the provision for bad debts. journal of accounting research, 26, 131 mehdi, s. g., yasser, r. p. & ahmad, a. (2021). do audit committee characteristics improve financial reporting quality in emerging markets? evidence from iran. asian review of accounting, 29 (2), 251-267. https://www.emerald.com/insight/search?q=yasser%20rezaei%20pitenoei https://www.emerald.com/insight/search?q=ahmad%20abdollahi https://www.emerald.com/insight/publication/issn/1321-7348 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 137 mohammed, i. & dauda, a (2019). board attributes and financial reporting quality of listed deposit money banks in nigeria. international journal of economics and business administration, 5 (4), 185-192. mohammed, i., yousef, a. s. & mahmoud, n. (2020), board independence, earnings management and the moderating effect of family ownership in jordan. management & marketing. challenges for the knowledge society, 13 (2), 985-994 moses, t. (2016). audit committee number of meetings and earnings management in quoted nigerian banks. international journal of advanced academic research, 2 (6), 14-23. moses, t., ofurum, c. o. & egbe, s. (2016). audit committee characteristics and quality of financial reporting in quoted nigerian banks. international journal of advanced academic research, 2 (5), 1-8. odjaremu, g. o. & jeroh, e. (2019). audit committee attributes and the reporting timeliness of listed nigerian firms. trends economics and management, 34 (2), 69–81. otunsanya, o. & uadiale, o. (2014). creative accounting and financial scandals in nigeria: structures and actors analysis, international journal of economics and accounting, 5 (3). paul, a., a. & simon, k. m. (2014). the impact of corporate governance variables on non-perform loans of nigerian deposit money banks. asian economic and financial review, 4 (11), pp1531-1544. piot, c. & janin, r. (2007) external auditors, audit committees and earnings management in france. the european accounting review, 16, 429-454. robinson, d. & owens-jackson, l. a. (2009). the association between audit committee characteristics, the contracting process and fraudulent financial reporting. american journal of business, 24 (1), 57-66. saftiana, y., mukhtaruddin, k., putri, w. & ferina, i.s. (2017). corporate governance quality, firm size and earnings management: empirical study in indonesia stock exchange. investment, management and finance innovation, 14 (4), 105–120. sec (2011). securities and exchange commission code of corporate governance. retrieved from; https://sec.gov.ng/sec-corporate-governance-guideline and-revised-form-01/ sharma, v. d. & kuang, c. (2013). voluntary audit committee characteristics, incentives, aggressive and earnings management: evidence from new zealand. international journal of auditing, asian journal of finance & accounting, 5, 1, 183-196 https://www.researchgate.net/journal/international-journal-of-economics-and-accounting-2041-868x https://www.researchgate.net/journal/international-journal-of-economics-and-accounting-2041-868x https://sec.gov.ng/sec-corporate-governance-guideline-and-revised-form-01/ https://sec.gov.ng/sec-corporate-governance-guideline-and-revised-form-01/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 138 shehu, u h. & ahmad, b. (2013). firm characteristics and financial reporting quality of listed manufacturing firms in nigeria. international journal of accounting, banking and management, 1 (6), 47 – 63. shehu, u h. (2015) adoption of international financial reporting standards and earnings quality in listed deposit money banks in nigeria, 7th international conference on financial criminology, pp 13-14, wahlem college, oxford, united kingdom. shehu, u. h. & abubakar, a. (2012). corporate governance, earnings management and financial performance: a case of nigerian manufacturing firms. american international journal of contemporary research, 2 (7). shehu, u. h. (2011) corporate governance and financial reporting quality: a study of nigerian money deposit bank. international journal of research in computer application and management (u.s.a), 1 (6), pp 12-19. issn: 2231 1009 shehu, u. h. and farouk, m. a. (2014). firm attributes and earnings quality of listed oil and gas companies in nigeria. research journal of finance and accounting, 5 (17), 10-16. shehu, u.h. (2013). financial reporting quality: does monitoring characteristics matter? an empirical analysis of nigerian manufacturing sector. the business & management review, 3, 147-155. spathis, c.t. (2002). detecting false financial statements using published data: some evidence from greece. managerial auditing journal, 17 (4), pp 179– 191. thomas c. o., marjorie, k. s. & frances, m. t. (2019). do director networks matter for financial reporting quality? evidence from audit committee connectedness and restatements. institute of operations research and the management science, maryland, usa, pp 1-28. issn 1526-5501. tran, d.v., hassan, m.k. & houston, r. (2020). discretionary loan loss provision behavior in the us banking industry. review of quantitative finance and accounting, 55, pp 605–645. ukessays (2018). cadbury nigeria actions taken to overcome the scandal in accordance corporate governance. management. pp 1-9. retrieved from https://www.ukessays.com/ essays/management/cadbury-nigeria-actions taken-to-overcome-the-scandal-in-accordance-corporate-governance management-essay .php umobong, a. a. & ibanichuka, e.a.l (2017). audit committee attributes and financial reporting quality of food and beverages firms in nigeria. international journal of innovative social sciences and humanities research, 5 (2), 1-13. https://www.springer.com/journal/11156/ https://www.springer.com/journal/11156/ https://www.ukessays.com/%20essays/management/cadbury-nigeria-actions-taken-to-overcome-the-scandal-in-accordance-corporate-governance-management-essay%20.php https://www.ukessays.com/%20essays/management/cadbury-nigeria-actions-taken-to-overcome-the-scandal-in-accordance-corporate-governance-management-essay%20.php https://www.ukessays.com/%20essays/management/cadbury-nigeria-actions-taken-to-overcome-the-scandal-in-accordance-corporate-governance-management-essay%20.php gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 139 wahid, r., anjum i. & shahid, j. (2018). effect of board independence on earning response coefficient (erc): evidence from pakistan. review of economics and development studies, 4 (2), 153-164. xie, b., wallace, n. d. & peter, j. d. (2003). earnings management and corporate governance: the role of the board and the audit committee. journal of corporate finance, 9 (3), pp 295-316. doi:10.1016/s0929 1199(02)00006-8 zaitul, a. & ilona, d. (2019). gender in audit committee and financial reporting timeliness: the case of unique continental european model. international journal of recent technology and engineering, 8 (2), 864-871. zandi, g. r. & abdullah, n. a. (2019). financial statements timeliness: the case of malaysian listed industrial product companies. asian academy of management journal, 24 (2), 127–141. https://www.sciencedirect.com/science/article/abs/pii/s0929119902000068#! https://www.sciencedirect.com/science/article/abs/pii/s0929119902000068#! https://www.sciencedirect.com/science/article/abs/pii/s0929119902000068#! https://www.researchgate.net/journal/journal-of-corporate-finance-0929-1199 https://www.researchgate.net/journal/journal-of-corporate-finance-0929-1199 http://dx.doi.org/10.1016/s0929-1199(02)00006-8 http://dx.doi.org/10.1016/s0929-1199(02)00006-8 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 140 i gusau journal of accounting and finance (gujaf) vol. 3 issue 1, april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria ii © department of accounting and finance vol. 3 issue 1 april, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. iv prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. dr. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. v dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. vi call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7 th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ vii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ viii contents mediating effect of audit committee on board dynamic and creative accounting in nigerian firms abbas usman phd, shehu usman hassan phd 1 financial performance of banks in selected african countries: does institutional quality matter? toluwa celestine oladele phd, peters ade sanni 22 firm-specific characteristcs and financial performance of listed agricultural companies in nigeria abdulrazaq t. jimoh, john a. attah 33 effect of financial leverage on stock returns of listed companies in nigeria capital market abdulrahman abubakar, prof. ahmad bello, prof. s. a. abdullahi, dr. m. d. tahir 45 efficiency of deposit money banks in nigeria: data envelopment analysis approach mayowa gabriel ajao, phd, lucky charity omoregie, phd 57 credit appraisal, collection policy and loan performance of microfinance banks in kwara state, nigeria lukman a. o. abdulrauf 69 environmental sustainability disclosure and market value of listed oil and gas firms in nigeria munir aliyu saleh, sirajo bappah, prof. gbegi daniel orsaa, ibrahim adamu saleh phd 81 audit quality, tenure and real earnings management of listed nonfinancial firms in nigeria ahmed mohammed, ademu yahaya, musa zakariya 95 effect of ceo pay and ceo power on risk-taking of listed deposit money banks in nigeria ismaila yusuf, dr. salisu abubakar, dr. idris ahmed aliyu, dr. (mrs) aneitie charles dikki 104 nexus between taxation and foreign direct investment in nigeria daniel ayegbeni ulokoaga, esther ikavbo evbayiro-osagie (mrs), ph. d 115 working capital management and profitability of listed consumer and industrial goods companies in nigeria kwasau ntyak leah, samuel eniola agbi phd, lateef olumide mustapha phd 125 value relevance of earnings and book value: a comparative analysis between big4 and non-big4 audited listed firms in nigeria abdu abubakar, ishaya luka chechet phd, muazu saidu badara phd, yunusa nasiru phd 136 ix value relevance of international financial reporting standard 4 (ifrs 4) of listed nigerian insurance firms mariya mohammed hafiz, muhammad mustapha bagudo phd, salisu abubakar phd 145 determinants of audit fees of listed insurance companies in nigeria sagir lawal, phd, mohammed ibrahim, phd 158 taxation and social services: evidence from nigeria adegbite, tajudeen adejare, phd, abdussamad, olarinde 171 ownership structure and financial performance of quoted mortgage banks in nigeria awotundun, d. a., phd, jinadu, m. y. b., fakunmoju, s. k., phd. 183 capital structure and profitability of listed deposit money banks in nigeria rahji ohize ibrahim, kamaldeen ibraheem nageri, phd, abdullai agbaje salami, phd 194 1 mediating effect of audit committee on board dynamic and creative accounting in nigerian firms abbas usman phd department of accounting faculty of social and management sciences kaduna state university (kasu), kaduna-nigeria usmanabbas1991@gmail.com +234(0)8036061670, +234(0)8026917883 shehu usman hassan phd professor of accounting and finance department of accounting faculty of management sciences federal university of kashere shehu.hassanus.usman@gmail.com abstract several studies were conducted on corporate board dynamic and creative accounting and their findings were mixed. none to the researcher’s knowledge studied the mediating effect of audit committee on such relationship in an entire population of the listed non-financial companies in nigeria for a period of 10 years (2011-2020). secondary data was extracted from the annual reports and accounts, companies’ and directors’ profile of the firms. the data was analysed using structural equation model/partial least square regression. the study found among other things that corporate board dynamic and its proxies except board capability have significant impact on the creative accounting of listed firms in nigeria. moreover, audit committee has a mediating effect on the relationship between board gender diversity, board ethnicity, board reputation, board nationality, board risk and creative accounting of the firms. the audit committee has no mediating effect on the relationship between board capability and creative accounting. it is therefore, recommended that, the listed companies in nigeria should ensure the constitution of sound and robust audit committees. they should also ensure the presence of diverse gender, diverse ethnic groups, directors with national honour and foreign directors on the boards. the firms should ensure the establishment of risk management committee in all the firms. they should ensure the presence of highly skilled, experienced, and knowledgeable directors on the boards as these will help in mitigating the creative accounting with the support of audit committee. the implication of the results of this study to literature is that the findings of the study are to be used by researchers in validating tokenism/critical mass theory, social capital theory. also, to validate upper echelon theory, efficient contracting theory, resource dependency theory, signalling theory, human capital theory, behavioural theory of corporate boards and governance and agency theory. keywords: board dynamics, creative accounting, ethnicity, capability and audit committee 1. introduction the board of directors in an organization is a chosen cluster of persons that serve as shareholders representatives. it is a leading body that normally hold meetings at consistent intervals to established policies for firm management and oversight. all companies listed must have a board which is responsible for the employment and sacking of senior executives, executive compensation, supporting executive duties, dividend policies, option policies, setting wide goals and making sure that a firm has well managed and sufficient resources at mailto:usmanabbas1991@gmail.com mailto:shehu.hassanus.usman@gmail.com 2 its disposal. connection between corporate boards and creative accounting manifested through weak corporate governance (cg) after the foremost corporate failures and accounting scandals that occurred all over the world; enron, worldcom, pharmalat, transmile, megan media and satyam computers to mention but a few. cg epitomises a manner that firm is controlled and directed and this facet is relatively associated with earnings management practices, board structure, ownership formation and they can all depress or inspire unethical accounting practices. cg is a trending issue with high effect on bad cosmetic accounting. the occurrence of earnings manipulation is believed to be related to weakness of cg by board of companies. furthermore, the scandals that occurred all over the world throughout the past eras have smashed investors’ self-confidence and have raised up quite a few questions on the efficiency of an enterprise risk management, internal control system and governance structures, which are all under the watch of corporate boards. however, cg has swept into action so as to address aforementioned corporate disasters. one of fundamental perception of cg is agency conflict which existed for periods, and it was considered as old as trade. generally, cg system is the management of firm by the shareholders and board. it is now and then regarded as a commercial philosophy nurturing financial growth by strengthening investors’ confidence (hemathilake & meegaswatte, 2019; and robert, 2013). creative accounting, though is lawful, is seen unprincipled for the reason that it tads the integrity of firms & the capital market. it is unprincipled as the management’s purpose is to deceive various parties or to stimulate contractual results by varying the business’s books (healy & wahlen, 1999). the serious issue in numeral corporate collapses was the habit of creative and manipulative accounting practices to alter reported profitability and indebtedness. it has been a challenge for boards, companies, investors and regulatory bodies worldwide to addressed the issue of creative accounting through negative earnings management which led to inefficiencies, scandals and collapsed of many giant and upcoming companies such as xerox in 2000, enron in 2001 (us), worldcom in 2002 (us), parmalat in 2003 (italy), transmile group berhad, megan media berhad, adelphia, ahold royal, or equitable bankruptcy, tyco international, cadbury nigeria plc in 2006, african petroleum plc (now called forte oil plc), oceanic bank plc (now eco bank plc), lever brothers plc, one tel and hih in australia, nortel in canada, global crossing, fin bank, intercontinental bank plc, wema bank plc, savannah bank plc, and spring bank plccase of mismanagement of capital and many other ones. this has raised a serious concern as to whether the board of directors of firms saddled with responsibility of curtailing bad creative accounting are really discharging their duties and whether they are adequate enough to deal with the problem of accounting scandals? the board of an organization consists individuals of dissimilar gender saddled with the tasks of controlling and monitoring management and certifying reliable broadcasting of incomes in the interest of varied owners & other participants. once the board of an organization is not well established, the organization becomes unprotected to earnings abuse from the side of individuals burdened with responsibility of the management of the organization (enofe, iyafekhe & eniola, 2017). the existence of overseas members can help deliberations inside the boardroom and possibly contribute to improved monitoring efficiency (enofe, iyafekhe & eniola, 2017; srinidhi, gul, & tsu, 2011; oxelheim & randoy, 2003; and chiu, teoh & tian, 2013). 3 from the perspective of this study, board ethnicity was looked at from a different angle. the attention of researchers (such as almashaqbeh, shaari & abdul-jabbar, 2019; and wicaksana, yunjasih & handayani, 2017) had been on diversifying board ethnicity to reduce earnings management through the appointment of foreign directors. even though, their idea is a good one because the inclusion of foreign directors on boards can serve as a monitoring mechanism that could assist in declining earnings management to its barest minimum, there is need to look into the diverse ethnic groups in nigeria usually present on the boards as that may play a major role in controlling earnings manipulation. the diversity of ethnic groups from religious, cultural and political background is expected to serve as a good tendency of becoming a strong tool of monitoring mechanism to prevent creative accounting. therefore, this study looked at board ethnicity from the perspective of representation on the boards from different nigerian ethnic groups such as yoruba, hausa/fulani, igbo and others in order to find out whether they influence creative accounting especially with the mediating effect of audit committee in reducing earnings manipulation. based on the existing literature such as abbas (2020), triki (2018), shehu and garba (2014), osayantin and embele (2019), alqatan (2019) it was palpable and evident that a lot of controversies exist and the position of literature on corporate board dynamic, audit committee and creative accounting was inconclusive. even though, much research have been conducted on board dynamism and unethical accounting, it was clear that in nigeria insignificant amount only have been carried out and based on the study researchers’ knowledge none was conducted on the entire listed firms in nigeria especially the listed non-financial firms and this serves as one of the gaps of this study. the divergent views might be as a result of the diverse industries, periods, methods, variables that the studies used and also the nature of the economy of the nations in which the studies were conducted. even though, numerous studies exist on the relationship between corporate board dynamic and creative accounting worldwide (such as saona, muro & baier-fuentes, 2019; alden, ganis, roekhudin & andayani, 2019; fan, jiang, zhang & zhou, 2019) but to the study researchers’ best knowledge none of the studies studied ac mediating influence on the association between corporate board dynamic and creative accounting especially in nigeria and in the world at large. therefore, this study addresses the question “does audit committee mediate the relationship between board dynamic and creative accounting of firms in nigeria?” the leading aim of the study is therefore to evaluate the mediating effect of audit committee on the relationship between board gender diversity, ethnicity, reputation, nationality, risk and capability and creative accounting of listed firms in nigeria from 2010 to 2019. in order to achieve the aim, the study hypothesised that audit committee has no mediating effect on the connection between board dynamic and creative accounting of listed firms in nigeria. board of directors of the listed firms will greatly benefit from the study as the findings might help them efficiently in seeing the importance and mediating powers that audit committees possessed especially in dealing with creative accounting. it will also assist them in formulating policies that will block some loopholes which give room to earnings manipulation. 2. theory and practice saona, muro, martín and baier-fuentes (2019), alden, ganis, roekhudin and andayani (2019), fan, jiang, zhang and zhou (2019), triki (2018), kyaw, olugbode and petracci (2015), and gavious, segev and yosef (2012) examined the influence of bgd on managerial 4 opportunistic behaviour. the studies found among other things that, there are benefits attached to balancing gender on board. a sensible balanced board lean towards lessens em practices. on the other hand, enofe, iyafekhe and eniola (2017) and masliza, wasiuzzaman and mohamad (2016) evaluated the effect of board ethnicity on the earnings management of firms. the studies found be to be highly correlated with management opportunistic attitude towards craft accounting. it signals that, the appointment of different ethnic personnel may be due to their connection rather than their technical expertise. diermeier (2018) found that positive firm reputation takes a lengthy duration of time to establish. by setting strong guiding principle and stressing the necessity to protect the firm’s reputation, the board of directors can assist management dodge short-sighted errors. moreover, reputable inside directors can enhance the value of debtors’ financial reporting and decrease agency danger in loan contracting (lin, song & tiang, 2016). on the other hand, board reputation possessed a positive substantial relationship with management earnings forecasts (chan, faff, khan & mather, 2013). board nationality was found to have an adverse and substantial connection with real incomes management. a minimum of one foreign director should be present in the board for the reason that a foreign director has different experiences and qualifications that may assist to discourage real earning management practices (almashaqbeh, shaari & abdul-jabbar, 2019). wicaksana, yuniasih and handayani (2017) contend that, board nationality can be used as effective and efficient corporate governance supervising mechanism in declining the level of creative accounting in firms. risk management committee decreases the desire of the management to alter the reported earnings in a firm. setting up risk management committee lessens the real earnings sales via abnormal production. this is a signal that creating self-determining risk management committee will advance the excellence of reporting (alhaji, abdullatif & ahmed, 2018). neffati, ben and schalck (2011) contend that, the high risk rises, the further the manager would be moved to manage earnings, the manager wishes to display his skills by satisfying numerous views and charming fresh investors. almashaqbeh, shaari and abdul-jabbar (2019) found that board capability reduces manipulative accounting. the rise of board age assortment in the board of directors, lead toa rise in the supervising task of the board of directors, thereby lessening the practice of real earnings management. buniamin, johari, abdrahman and hanim (2012) contend that board competency does not affect the practice of discretionary accruals. audit committee possesses a negative connection with cosmetic accounting and the relationship is higher when a higher audit fee has been incurred by a company (bala, amran and shaari (2020). saleem (2019) found that the existence of audit committee declines earnings management and enhance the financial reporting quality of firms, also, the modern financial accounting breakdowns and disasters as well as enactment stress the rigorous role played by the audit committee in governance. if the quantity of female in audit committee is high, the degree of earnings manipulation will be low and the other way round (florencea & kurnia, 2018). albersmann and hohenfels (2017) found that the involvement of financial 5 experts in audit committees and the rise in audit committee meetings are related with lesser amount of earnings management and they seem to improve the efficacy of audit committees. the study was based on nine theoretical accounts that aligned corporate board dynamic, audit committee and creative accounting of listed firms in nigeria. the study was anchored with critical mass, social capital, upper echelon, efficient contracting, resource dependency, signalling, human capital, behavioural theory of corporate boards and governance and agency theories. 3. methods and techniques bearing in mind the fact that this study fits post -positivist paradigm which hint at it being quantitative in nature, the variables of the study can be measured using numbers and therefore, it uses quantitative approach. this study adopts causal research design due to the fact that it can be used to extract data from historical records, and it is among the most efficient designs used in finding the association between two or more variables and the impact of one variable on another. the study made use of all the 113 non-financial companies in nigeria publicly quoted on nse as at 31 st december, 2019 as its population. all the firms have been utilized as the sample by espousing census technique of sampling. the choice of the listed non-financial companies in nigeria as the population of t h i s study is in order to have a full representation of the firms and considering the study’s nature and also owing to the fact that the model of collins, pungaliya and vijh (2017) can only accommodate or detect creative accounting in non-financial firms because of its variables or components. only data from secondary source was utilized and it was extracted from the publicized yearly accounts and reports (financial statements), company and directors’ profile of the firms in nigeria quoted on the nse as at 31 st /12/2019 for a period of ten (10) years (2010-2019). the secondary source of data was used because the variables of the study can be measured quantitatively, and the information needed to measure these variables are available in the annual reports and acco unts, company, and directors’ profile of the listed firms in nigeria. the study used panel structural equation model/partial least square regression as technique of data analysis using stata as tool of analysis. sem-partial least square (pls) regression techniques was used because of its efficiency in estimating the causes and effects of the relationships among variables under study. it can capture the mediating influence of a variable on the connection concerning explanatory variable(s) and explained vari able. since the study adopted quantitative approach, therefore, a parametric tool is expected to be used. moreover, sempartial least square regression is not just one technique but a household of methods that can be used to explore the connection between one explained variable and several explanatory variables. sempartial least square regression is based on correlation that permits further complex examination of the interconnection amongst established variables. this is what promotes it to be frequently used for examination of many complex real-life rather than laboratory-based research objectives/hypotheses. furthermore, they were used because, the techniques can show how fit a set of variables is able to foresee a certain result. also, they are better in providing the researcher with information about the model in total with the role of individual variables that formed the model. the techniques are also efficient in evaluating if specific independent variable and mediating variable are capable of foreseeing an outcome when there is control for the influence of one more variable. 6 table 1: contains how the variables of this study are measured. table 1: variable measurement variable variables name variable measurement and source acronym dacc discretionary accruals measured by absolute values of the residuals of discretionary accruals using modified collins, pungaliya and vijh (2017) model. bd board diversity measured as the ratio of women over total board members (saona, muro, martín & baier-fuentes, 2019) be board ethnicity measured with ethnicity score br board reputation measured as the ratio of members with national honour over total board directors bn board nationality measured as quantity of foreign members over overall sum of directors on the board (musa & aminu, 2018) brk board risk measured as proportion of risk management committee directors over total board members (danial & abdulrahman, 2014) bc board capability measured with capability score auc audit committee measured with audit committee score fs firm size natural logarithm of total assets (ararat, aksu & tansel, 2015; bala & ibrahim, 2014) sgrw sales growth present sales-previous sales/previous sales (collins et al, 2017) source: compiled by authors, 2022 table 1: presents how the variables (explained variable, explanatory variables, mediating variable and control variable) are measured. the explained variable of the study which is creative accounting proxied with dacc was measured by the absolute values of the residuals of discretionary accruals using modified collins, pungaliya and vijh model of 2017. board diversity was measured by taking the percentage or proportion of females’ representation on board over the entire sum of members of the board. board ethnicity was measured using ethnicity score, that is, four proxies of ethnicity were used which are hausa/fulani, yoruba, igbo and minority tribes, for each year whichever ethnic group is present on the board was given value as 1 otherwise 0, the total was then divided by the whole sum of proxies which is four. board reputation was measured as the percentage of members of the board with national honor over the total board members. board nationality was measured as the proportion of foreign directors serving on the board of directors over the total sum of members serving on board. board risk was measured as the ratio of directors serving in the risk management committee within the board over the total sum of directors serving the board. board capability was measured using capability score with five (5) proxies (tenure, experience, multiple directorship, educational qualification and skills/competency), a value of 0 was given if all the directors are serving first tenure otherwise 1, the study used a threshold that a director must serve in the board or other boards for five (5) years and above in other to have experience, therefore, only members of the board with board experience of five years and above are considered as experienced directors. for 7 experience directors a value of 1 was given otherwise 0. the presence of director serving on 2 or more boards was given a value of 1 otherwise 0, the presence of director with educational qualification higher than first degree was given a value of 1 otherwise 0. for skills/competency, director with industry experience is scored 1 and otherwise 0. audit committee was measured using audit committee governance score where six proxies (audit committee meeting attendance, audit committee frequency of meeting, ac gender, ac independence, ac financial expertise and ac size) of ac were used. for each proxy, if the firm complied with the requirement of sec code of 2011 a value of 1 was given to that proxy for the year otherwise 0, a total was taken for all the six proxies and then the total was divided by six which gave the audit committee governance score for the year. company size was measured with nlog (natural logarithm) of total assets. a cross-sectional regression of the modified collins, pungaliya and vijh (2017) total accruals model was utilized in this study to estimate the discretionary accruals which represent the degree of creative accounting. this model was selected because it has been found to have higher explanatory power than their first model and is one of the most recent accrual models with few impregnable criticisms. the model without and with modifications are presented as follows: ta it /at-1 = β0 + β1∆revit /at-1 + β2∆nrecit /at-1 + β3ppeit t-1/at-1 + ε it ------------------i tait /at-1 =β0+β1∆revit /at-1+β2∆nrecit/at-1+β3ppeit t-1/at-1+β4intgit t-1/at-1 + it -----ii accr=β0it+β1∆revit+β2∆nrecit+β3invit+β4ppeit+β5intgit+β6clit+β7nclit+εit-iii tait/assetsit-1=β0 + β11/assetsit-1 + β2 (∆rev-∆ar)it / assetsit-1 + β3 ppeit / assetsit-1 + β4 niit1 / assetsit-1 + β5 salesit salesit-1 / salesit-1 + εit---------------------------------------------------iv where: ta= total accruals; t = total asset; a = constant; β1-β4= parameters; t-1 = previous year (lag1); rev = change in revenue;  rec = change in receivables;  ar= change in account receivable; ppe = property, plant & equipment; intg = intangible assets; inv= inventory cl= current liabilities; ncl= non-current liabilities; accr= discretionary accruals; t=time; i = firm; = is the residual the sem partial least square regression models are specified in order to evaluate the mediating influence of audit committee on the effect of corporate board dynamics on creative accounting of public firms in nigeria. the models are specified below: daccit=β0+β1bdit+β2beit+β3brit+β4bnit+β5brit+β6bcit+β7fsit+ β8sgrwit+µit -----(i) aucit =β0+β1bdit+β2beit+β3brit+β4bnit+β5brit+β6bcit+β7fsit+β8sgrwit+µit------------(ii) daccit=β0+β1bdit+β2beit+β3brit+β4bnit+β5brit+β6bcit+β7aucit+β8fsit+β9sgwit+µit-(iii) where: dacc= discretionary accrual; β0= constant; β1 –β8 = coefficient of the parameters; auc= audit committee; bd= board diversity; be= board ethnicity; br= board reputation; bn= board nationality; br= board risk; be= board capability; fs= firm size; sgrw= sales growth; µ = error term; i= firm; t= time 1. results and discussion table 2: sem: partial least square regression direct effects variable coeff. z-value p-value coeff. z-value p-value 8 auditcom dacc boardgd 0.276 8.51 0.000 -0.347 -4.97 0.000 boardeth 0.107 5.43 0.000 -0.212 -5.11 0.000 boardrep 0.681 26.7 0.000 -1.364 -19.92 0.000 boardnat 0.223 11.47 0.000 -0.468 -10.91 0.000 boardrisk 0.046 2.43 0.015 0.118 2.99 0.003 boardcap 0.042 0.6 0.549 -0.064 -0.44 0.663 firmsize 0.002 1.09 0.274 0.002 0.8 0.426 sgrw -0.057 -1.28 0.201 0.014 0.16 0.875 source: output from stata 13.1 bgd and audit committee the outcome in table 2 shows that board gender diversity possessed coefficient figure of 0.276 with a z-value of 8.51 and significance value of 0.000. this indicates that it is positively, powerfully and significantly effecting the audit committee of registered quoted firms in nigeria which indicates that appointing a female member on the board strengthen the responsibility of the firms’ audcom. the outcome denotes that for each 1 female director appointment on the board, the power of the audcom is further strengthen by 28% roughly. the outcome was not shocking because it was within the research's preceding anticipation. however, the outcome may be because of the women’s control ability and their seriousness towards discharging their responsibilities properly and therefore they might assist ensuring in compliance with standards, rules & regulations and policies governing the preparation of annual reports and accounts. the result is in line with tokenism/critical mass theory that assumes when critical mass of females in a cluster or a confident threshold is reached which is about 30% of the cluster/group or three (3) in quantity, their existence turns out to be normalized. the result is also in line with the reality that women are more serious when given a job to perform and therefore, their presence in the board helps in pushing the audcom to perform their job appropriately and exercise control mechanism. board ethnicity and audit committee from table 2, board ethnicity possessed coefficient figure of 0.107 with z-value of 5.43 and significant value of 0.000 (1%). this submits that the variable has robust, optimistic, and significant impact on the audit committee of registered public companies in nigeria. this reveals that for each 1 percent growth in the ethnic diversity of the board, the audit committee will be strengthened by 11% roughly. the outcome was not shocking as it was within the study's former expectancy that when there is presence of different ethnic groups in the bod of firms, the strength of aud increases towards discharging their responsibilities especially ensuring compliance with laid rules and regulations and standards and preventing frauds. the result is in line with reality and social capital theory. board reputation and audit committee the table 2 also shows board reputation has coefficient number of 0.68 and a z-digit of 26.7 that is significant at one percent. this indicates that it is powerfully, positively and significantly affecting the audit committee of quoted corporations in nigeria. this reveals 9 that the presence of directors with national honor strengthens the audit committee by 68%. this discovery is not astonishing as it is in agreement to this research study’s priori expectation that members of board with national honor will do all things possible to ensure that the right, strong and sound audit committee members are appointed and thus give them maximum support in discharging their responsibilities because they would not want a scenario whereby fraud and irregularities are committed under their watch as that will jeopardize their integrity and reputation. the finding is also in line with reality and efficient contracting theory. board nationality and audit committee the table 2 reveales that board nationality possessed beta coefficient figure of 0.223, z-value of 11.47 and significant value of 0.000. this discloses that, it possessed powerful and positive effect on the audit committee of quoted companies in nigeria at 1% level of significance. the result implies that a rise in the portion of foreign members strengthens the audcom by 22%. the finding is not surprising as it falls within the study’s prior expectation that the existence of foreign members within the board helps it and audit committee in discharging their duties more diligently. this is because they serve as monitoring mechanism and due to their skills, knowledge, experience, and connections they would ensure ethical standards and laid down rules are complied with. the finding is in line with reality and resource dependency theory. board risk and audit committee table 2 indicates that, board risk has coefficient digit of 0.046 and a z-number of 2.43 that is significant at 5%. this shows that it has positive & substantial influence on the audit committee of quoted companies in nigeria. this implies that the presence of risk management committee strengthens the power of audit committee in discharging their responsibilities by 5%. the outcome is not surprising as it is within the research study priori expectation that when a risk management committee is constituted it helps in complimenting the responsibilities of the audit committee and thereby reduce the too much burden vested on the audcom when the risk management committee is not constituted. therefore, the presence of the committee strengthens the audit committee. the discovery is in agreement with reality and signaling theory. board capability and audit committee from table 2, board capability has an insignificant effect on the audit committee of quoted firms in nigeria. this can be observed from the coefficient figure of 0.042 and z-figure of 0.6 that is insignificant at 55% approximately. this implies that directors that served two or more terms on boards, directors with more than five years’ experience serving on the board, directors with qualification higher than first degree, board members serving on higher than 1 board with industry experience do not contribute towards strengthening the power of audit committee. however, this finding is contrary to this research study prior expectation that the above attributes of board capability contribute positively to strengthening the audit committees to discharge their responsibilities more efficiently and ensure compliance with laid rules and standards. the finding is contrary to reality and human capital theory and behavioral theory of boards and governance. 10 board gender diversity and earnings management table 2 again displays that board gender diversity possessed beta coefficient of -0.347 and zdigit of -4.97 that is significant at 0.000. this suggests that the variable has negatively, strongly and significantly affected the earnings management of listed companies in nigeria. this reveals that for each female director addition on the board, their earnings management decreases by thirty-five percent approximately. the result is in agreement with the initial expectation of the study that, when a board is control by a combination of male and female directors the monitoring mechanism tendency of women helps to a greater extent in curtailing earnings management. however, the result may be as a result of the attitude of women towards compliance with organizational ethics, laid down rules & regulations and policies and with this they have great monitoring power to be able to minimize earnings manipulation. in reality, most organizations that are been headed by women do very well in terms of performance and reducing earnings management except in few cases where they committed frauds. the outcome is in line with tokenism/critical mass theory and also in line with the findings of fang, jiang, zhang and zhou (2019), saona, muro, martin and baier-fuentes (2019), triki (2018) and contrary to the findings of osayantin and embele (2019), nelson and ponsian (2018) and nahar and nor (2016). board ethnicity and earnings management from table 2, board ethnicity possessed strong negative influence on the em of listed organizations in nigeria. this can be deep-rooted from the coefficient digit of -0.212 and zfigure of -5.11 that is significant at one percent (0.000). this implies that, for each 1% intensification in the ethnic diversity of the board, their earnings management decreases by 21%. the effect was not astonishing as it was in agreement with research initial prediction that, ethnic diverse board decreases the level of earnings manipulation. in reality, when a board has members from different ethnic background that serves as monitoring mechanism because of their norms and values. some ethnic groups see the commitment of irregularities, fraud and earnings manipulation as a taboo. therefore, they do there possible best to ensure that earnings management is curtail or minimize to its barest minimum in the organization they serve. the result is also in line with social capital theory and upper echelons theory. social capital involves advantages that separate or joint parties have due to their location in the social link structure. therefore, the social capital theory suggests for diversity on boards assumed that an assorted board of directors is capable of bringing in diverse types of social capital from its members (alqatan, 2019). the upper echelons theory advocates that the manager’s demographic attributes are related with the manager’s sole cognitive values and style which influence on the decision making of management (hambrick & mason, 1984; and kim & sun, 2014; tianshu, 2018). when diverse ethnic groups exist in a board, it is believed that, with their different background and values they will be able to checkmate earnings manipulation. the result is in agreement with the discovery of enofe, iyafekhe and eniola (2017) and contrary to the findings of masliza, wasjuzzaman and mohamad (2016) and reggy, niels, oxelheim and rand (2015) where the studies discovered that board ethnicity has a positive effect on creative accounting. board reputation and earnings management table 2 reveals that board reputation has beta coefficient figure of -1.364 and a z-digit of 19.92 that is significant at 1% (0.000). this indicates that, it has an adverse robust effect on 11 the em of registered quoted corporations in nigeria. this denotes that, for each growth in board members with national reputation, the unethical accounting decreases by 136% percent approximately. the finding is in line with the priori expectation of the research study that, when members with national honor are serving on the board they serve as monitoring mechanism in curtailing earnings management. it is also in line with the efficient contracting theory which proposes that executive job markets resourcefully offer board members with implicit incentive contracts such as reputation, employment and remuneration (fama & jensen, 1983; lin, song & tiang, 2016). this research believed that, directors on board with national honour have high sense of integrity. therefore, they would not like a scenario whereby their reputation is destroyed when earnings manipulation takes place in a firm while they are serving in it. therefore, they would do their possible best in mitigating opportunistic actions of management. the discovery is in agreement with the outcome of diermeier (2018) that board reputation reduces earnings management. board nationality and earnings management from table 2, board nationality has coefficient number of -0.468 with a z-digit of -10.91 that is significant at one percent (0.000). this indicates that, the variable has negatively, strongly and significantly influenced the earnings management of listed companies in nigeria. this signifies that for each rise in overseas directors serving on the board, the em decreases by 47% approximately. the result is in line with the work's priori expectation that when foreign director(s) is serving on the board, that helps in minimizing earnings manipulation due to their experience, knowledge, adherence to ethics and monitoring power. the finding is in line with resource dependency theory. it is understood that foreign board members have many resources to share with the firm they are serving such as skill, experience, expertise, connections and many other resources. therefore, they could assist much in preventing creative accounting. the finding is in line with the findings of almashaqbeh, shaari and abdul-jabbar (2019), and musa and aminu (2018) and contrary to the findings of osayantin and embele (2019), and hooghiemstra, hermes, oxeilheim and randoy (2015). board risk and earnings management board risk has coefficient figure of 0.118 & z-figure of 2.99 that is substantial at one percent (0.003). this suggests that, it has a powerful positive effect on the em of quoted firms in nigeria. this denotes that, the presence of risk management committee increases earnings management by 12% approximately. however, the finding was not in line with prior expectation the study that when a risk management committee is constituted, it complements the effort of board in reducing earnings management. it is also contrary to signaling theory which advocates that the existence of rmc in a firm promises the stockholders that the board of directors is solid sufficient to device upright corporate governance that bring into line the interest of management with that of their interest (oluyemisi, che-ahmed & muse, 2017). the existence of an efficient risk management committee within the board of a firm is indicating that management’s earnings manipulative activities could be checkmate and curb. the finding is in agreement to revelation of neffati, ben and schalck (2011) and contrary to the outcome of alhaji, abdullatif and ahmed (2018). however, this finding may be as a result of the fact that many companies within the listed non-financial sector of nigeria have no risk management committee and therefore, the responsibility of the committee has been discharged by the audit committee of the firms. 12 board capability and earnings management board capability has a beta coefficient number of -0.064 and a z-figure of -0.44 that is insignificant at 66% (0.663). this shows that, board capability has no impact on the em of registered quoted corporations in nigeria. the prior expectation of the researcher was that board capability helps to a greater extent in dealing away with earnings management. this is because directors that served two or more terms on boards, directors with more than five years’ experience serving on the board, directors with qualification higher than first degree, members serving on higher than 1 board and directors with industry experience are expected to mitigate earnings management effectively and efficiently. the finding is also contrary to human capital theory and behavioral theory. the human capital theory is constructed on personal qualities such as experience and level of education of persons. based on this, becker (1964) claims that, experience, skills, productive capabilities, and level of education of labour force are beneficial for the firm. behavioural theory proposes that company’s board of directors’ decision making might not only be impacted by their skills, knowledge, and expertise but as well their values, experiences, and beliefs. the presence of experienced, skilled, knowledgeable, and competent directors on board could be capable of checkmating and curbing management’s opportunistic actions towards creative accounting in firms. this discovery is in agreement with the result of bunjamin, johari, abdrahman and hanim (2012) and contrary to the findings of almashaqbeh, shaari and abdul-jabbar (2019) and wicaksana, yuniasih and handayani (2017). table 4.2: sem: partial least square regression indirect effects variable coeff. z-value p-value boardgd -0.377 -7.91 0.000 boardeth -0.145 -5.26 0.000 boardrep -0.928 -16.71 0.000 boardnat -0.304 -10.12 0.000 boardrisk -0.063 -2.41 0.016 boardcap -0.057 -0.6 0.549 firmsize -0.002 -1.09 0.275 sgrw 0.077 1.28 0.201 model fitness 0.000 0.000 12645 0.000 overall fitness r 2 (dacc) 0.998 r 2 (auditcom) 0.996 r 2 (overall) 0.998 source: output from stata 13.1 ac as a mediator on the connection between board gd and em the indirect influence of ac on the connection concerning bgd and the em of registered quoted companies in nigeria has coefficient figure of -0.377 and a z-digit of -7.91 that was 13 significant at one percent (0.000). this signifies that, there is a strong, negative and significant mediating consequence of ac on the connection between bgd and em of public companies in nigeria. this implies that when audit committee mediates the relationship between board gender diversity and creative accounting, the em decreased by approximately 38% when the relationship between the variables passed through audit committee. this finding was not astonishing as it is within the researcher’s previous anticipation. board ethnicity and earnings management: ac mediating effect table 2 indicates that, ac has a strong negative significant mediating effect on the connection between board ethnicity and unethical accounting of public companies in nigeria. this position can be established from the coefficient figure of -0.145 and z-digit of -5.26 that is significant at 0.000. this implies that when audit committee mediates the relationship between board ethnicity and creative accounting, the creative accounting reduced by 15%. however, this finding was not shocking as it is within the research study initial expectation and it is in line with reality. board reputation and em: audit committee as mediator from table 2, the mediating outcome of ac on the connection between board reputation and the daccs of quoted firms in nigeria has coefficient digit of -0.928 and a z-figure of -16.71 that was significant at one percent (0.000). this reveals that, there is a robust, negative, and significant mediating impact of audit committee on the interaction between board reputation and earnings management. this implies that the earnings management reduces by approximately 93% when ac mediates the relationship between board reputation and creative accounting. the result is within the initial expectation of the research study. board nationality and creative accounting: ac as mediator table 2 indicates that, ac has a strong negative significant mediating effect on the connection between board nationality and em of quoted public organizations in nigeria. this position can be deep-rooted from the coefficient number of -0.304 and z-figure of -10.12 that was significant at one percent (0.000). this reveals that the level of creative accounting decreased by approximately 30% when ac mediates the association between board nationality and unethical accounting. the finding was not astonishing as it was in agreement with the initial belief of the study that when there are foreign members’ presence on the board and a strong audcom, when the monitoring mechanism of the foreign directors passed through the audit committee it will help to a greater extent in mitigating earnings manipulation. board risk and creative accounting: mediating effect of ac from table 2, the mediating impact of ac on the connection between board risk and the creative accounting of quoted registered companies in nigeria has coefficient figure of -0.063 and a z-digit of -2.41 that was significant at 5% (0.016). this indicates that, a negative significant mediating consequence of ac exists on the connection between board risk and creative accounting. this implies that when ac mediates the association between board risk and creative accounting, the em reduces by approximately 6%. the finding was not shocking as it was in agreement with study’s preceding belief and reality. 14 board capability and earnings management: ac mediating influence table 2 indicates that, audcom possessed negative and insignificant mediating influence on the association between board capability and creative accounting of quoted public companies in nigeria. this position can be rectified from the coefficient figure of -0.057 and z-digit of -0.6 that is insignificant at 55% (0.549) approximately. this implies that audit committee do not mediate the connection between board capability and creative accounting which means the association between board capability and creative accounting does not have to pass through audit committee before an efficient goal of minimizing earnings manipulation is achieved. however, this finding is surprising as it is contrary to the research priori expectation that when there are highly skilled, experience and knowledgeable board members and the effect of their monitoring power passes through the audit committee of an organization that will really assist in reducing the level of creative accounting especially in sectors other than financial companies quoted in nigeria. cumulatively, table 2 shows that, the r 2 value for the relationship between corporate board dynamic and creative accounting is 0.998 (99%) which signifies that, the independent variable (proxied with board gender diversity, board ethnicity, board reputation, board nationality, board risk and board capability) of the research study has clarified the whole difference in earnings management of quoted companies in nigeria to a degree 99% and the outstanding 1% is taken care by other variables not captured in the model. on the other hand, the r 2 value for the connection between corporate board dynamic and audit committee is 0.996 (99%) which signifies that, the explanatory variable (proxied with board gender diversity, board ethnicity, board reputation, board nationality, board risk and board capability) of the study has explicated the entire disparity in audit committee up to a level of 99% and the outstanding 1% is covered by other issues not captured in the model. overall, the r 2 value for the indirect influence of audit committee on the connection between corporate board dynamic and creative accounting is 0.998 (99%) which signifies that, the mediating variable (audit committee) of the research has explained the total variation in the relationship between board dynamic and creative accounting to a degree of 99% and the outstanding 1% is taken care by other variables not used in the model. with regards to model fitness, the baseline/model versus saturated chi2 statistics of 12645/0.000 which is significant at 1% (0.000) confirms that the models are well tailored, consequently, the variables of the study were robustly chosen, joint and appropriately employed. cumulatively, it was found that audit committee has mediated the influence of corporate board dynamic on the creative accounting of listed companies in nigeria negatively, strongly, and significantly. therefore, the hypothesis of the study has been rejected. 2. conclusion and recommendations based on the results and discussion in section four, the following conclusions are made. i. board gd has a negative and substantial contribution on the creative accounting of quoted companies in nigeria. this makes the research study to conclude that the level of creative accounting of the firms decreases with a rise in the number of female members on the board. ii. it was also concluded that board ethnicity played a negative role on the creative accounting of the listed firms in nigeria if there is presence of diverse nigerian 15 ethnic groups which serves as a strong monitoring mechanism because of their different norms and values and background environment. iii. the study also concluded that the higher the number of members with national honor on the board of companies of nigeria, the lower its earnings management would be as board reputation curtails the creative accounting statistically. iv. the board nationality of listed firms in nigeria diminishes their earnings management. this research study concluded that it played a negative role on their creative accounting through the presence of foreign directors that used their expertise, experience, knowledge, connections, and monitoring power to reduce earnings management. v. the board risk of listed companies in nigeria rises the degree of their em. the research study concluded that if all the companies will constitute a sound risk management committee, the direction of the finding might change to negative. this is because presently most of the firms did not establish the risk management committee, the function of the committee has been discharged by the audit committee of the firms. vi. the board capability of quoted public firms in nigeria does not contribute to the lessening of em in the firms. therefore, this research study concluded that, if the directors with high skills, experience, knowledge, and expertise are well monitored in discharging their duties, board capability may contribute significantly to the reduction of earnings management to its barest minimum. vii. audit committee of quoted firms in nigeria contributes to bgd in minimizing the em. this research study concluded that, audit committee plays a negative role on the interaction between bgd and creative accounting through the combined effect of female members, financial expertise, independent members, proper size, frequent meetings, and meeting attendance by members. therefore, board gender diversity plays role in minimizing earnings management with the support of audit committee. viii. audit committee of quoted firms in nigeria contributes to board ethnicity in minimizing the earnings management of the firms. this research study concluded that, audit committee plays a negative role on the relationship between board ethnicity and creative accounting through the combined effect of female members, financial expertise, independent members, proper size, frequent meetings, and meeting attendance by members. therefore, board ethnicity plays an important role in mitigating earnings management with audit committees’ support. ix. audit committee of quoted firms in nigeria contributes to board reputation in reducing the earnings manipulation of the companies. this study concluded that, audcom plays a negative role on the impact between board reputation and earnings management through the collective influence of female members, financial expertise, independent members, right committee size, frequent meetings, and meeting attendance by members. therefore, board reputation plays a vital role in decreasing the degree of creative accounting with the support of audit committee. x. the listed companies in nigeria audit committees supports board nationality in reducing the earnings management of the companies. this research concluded that, audit committee contributes negatively to board nationality in minimizing earnings management to its barest minimum through the joint impact of female members, financial expertise, independent members, proper size, frequent meetings, and 16 meeting attendance by members. therefore, board nationality plays a significant role in curtailing earnings management with audit committees’ support. xi. audit committee of listed firms in nigeria contributes to board risk in decreasing the earnings manipulation. before the mediation, board risk was found to be increasing the level of creative accounting in the companies. however, after the mediation the position changed to decreasing earnings management. therefore, this study concluded that, audit committee plays a negative role on the influence between board risk and the creative accounting of the companies through the collective influence of female members, financial expertise, independent members, proper size, frequent meetings, and meeting attendance by members. therefore, board risk plays a vital role in minimizing em with the support of audit committee. xii. the listed firms in nigeria audit committees did not contribute to board capability in reducing the earnings management of the firms. this research study concluded that, audit committee plays no negative role on the impact between board capability and creative accounting. therefore, board capability plays no role in minimizing earnings management even with the support of audit committee. in agreement with the overall finding of the study, this study concluded that, corporate board dynamic with the support of audcom plays an important role on the creative accounting of quoted firms in nigeria and contributes a lot to the reduction of earnings manipulation in the firms. therefore, a strong relationship/association exists between corporate board dynamic, audit committee and creative accounting. based on the outcomes of this research study, the subsequent general recommendations were made: i. researchers should use this research study in validating tokenism/critical mass, social capital, upper echelon, efficient contracting, resource dependency, signaling, human capital and behavioral theories. they should use the study as reference to literature. board ethnicity, board capability and audit committee should be used to conduct studies in different environment and periods especially by adopting ethnicity score, capability score and audit committee score as their measurement across the globe. ii. regulatory bodies such as sec should use the findings of this study and come up with policies that will improve the quality of the corporate governance codes and prevent bad creative accounting. iii. potential and existing investors should use the conclusions of the study in order to take wise investment choices especially by avoiding companies that were involved in bad em. moreover, based on the outcomes and conclusions of this study, it was specifically recommended that: i. the management of public quoted companies in nigeria should increase the presence of women directors on boards. the portion of female members on board should be 30% as proposed by the critical mass theory and that of male members should be 70% as this will promote gender balance on the board as advocated by sustainable development goals. the existence of more females on board will greatly assist in mitigating earnings management because of their monitoring mechanism and adherence to laid down rules, regulations, standards, policies and organization’s ethics. 17 ii. the listed companies in nigeria should try as much as possible to maintain the presence of at least four different nigerian ethnic groups on their board since the appointment of directors from different ethnic background has proven to curtail earnings management level. this is because of their different norms and values and religious background and that serves as monitoring mechanisms. iii. the quoted firms in nigeria should boost the appointment of directors with national honor as it has proven to reduce the earnings manipulation of the firms. this is because the reputable directors try as much as possible to ensure that fraud, irregularities, and earnings manipulation have not been committed under their watch because they have integrity to protect. at least 40% of the board members should be allocated to reputable directors. iv. board nationality cuts the degree of creative accounting of quoted firms in nigeria. therefore, the listed companies of nigeria should allocate at least 30% of their board membership to foreign directors especially those from advanced countries because foreign directors have proven to possess the ability of reducing earnings management through their connections, expertise, knowledge, experience, skills, and monitoring power. v. board risk increases the level of the creative accounting in quoted companies of nigeria based on the statistical outcome of this study. therefore, the boards should ensure that all boards establish sound risk management committees in their firms as this study discovered that most of the firms have not established the risk management committee but rather their function has been handled by audit committee. if the all the firms establish the committee, it’s possible the outcome of this research might differ. vi. board capability has no contribution to creative accounting of quoted firms in nigeria. if the outcome of this finding is to be differed, therefore, the companies should put in place control mechanisms that will ensure the highly skilled, knowledgeable, experienced directors on the boards are highly utilize and monitored to ensure that they display well of expertise and knowledge in reducing the degree of em in the firms. vii. audcom was found to be supporting board gender diversity in reducing the creative accounting of quoted firms in nigeria. therefore, the boards of the companies should ensure audit committees’ compliance with corporate governance codes especially by ensuring a gender diverse audit committees, having the right size, holding meetings frequently, attendance of meetings regularly by members, having financial expertise as members of the committee and having independent members when constituting a gender diverse board since the ability of the board gender diversity to reduce earnings manipulation passes through the audit committee. viii. board ethnicity reduces the em of quoted firms in nigeria through the support of audit committees. therefore, this research study recommended that, the companies should appoint members from different nigerian ethnic groups and ensure that a strong audit committee is in place to help curtail earnings manipulation in the firms. ix. the listed companies in nigeria board reputation decreases the level of creative accounting in them. therefore, the study recommended that, the firms should ensure 18 the appointment of members with national honor and sound audit committees to help mitigate the degree of earnings management in the companies. x. board nationality contributed immensely to the minimization of the level of creative accounting in the quoted firms of nigeria. therefore, this research study recommended that companies should give priority to the appointment of foreign members on their board of the directors since they have proven to cut the level of em and also, ensure a robust audit committee is in place to support the board nationality in reducing the earnings manipulation. xi. the public quoted firms in nigeria board risk minimizes the degree of creative accounting. therefore, this study recommended that, the companies should ensure that sound risk management committees are constituted in all the companies of nigeria and ensure that robust audit committees are in place to support the board risk in decreasing the level of the earnings management as it was clearly evident that audit committee mediated the impact of board risk on creative accounting because before the mediation the relationship was positive but after the mediation it becomes negative. xii. board capability does not contribute to the lessening of em of listed companies in nigeria even with the support of their audit committees. therefore, this research study recommended that, the companies should ensure that there are adequate mechanisms in place that will ensure directors with high level of experience, knowledge, expertise and skills acquired through serving on boards over years are sufficiently utilized to bring down the level of earnings management with audit committees’ support. it is believed by the research that if the directors are properly utilized the outcome of this study might change to a significant one. references abbas, u. (2020). the moderating effect of gender on audit committee attributes and earnings management. scholedge international journal of business policy and governance, 7 (3), 48-62. doi:10.19085/sijbpg070302 albersmann, b. t., & hohenfels, d. (2017). audit committees and earnings management – evidence from the german two-tier board system. schmalenbach bus rev,18, 147–178. alden, h. a. r., ganis, e. s., roekhudin., & andayani, w. (2019). the impact of board characteristics on earnings management in the international oil and gas corporations. academy of accounting and financial studies journal, 23(1), 126. alhaji, a. s., abdullatif, r., & ahmed, r. a. (2018). risk management committee and real earnings management through sales: evidence from nigeria. journal of advanced research in business and management studies 12(1), 62-69. almashaqbeh, a., shaari, h., & abdul-jabbar, h. (2019). the effect of board diversity on real earnings management: empirical evidence from jordan. international journal of financial research, 10(5), 495-508. alqatan, a. (2019). the association between board diversity, earnings management and firm performance in kuwait: a research agenda. corporate governance: search for the advanced practices, 254-274. ararat, m., aksu, m., & tansel, a. c. (2015). how board diversity affects firm performance in earnings markets: evidence on channels in controlled firms. corporate governance: an international review, 23(2), 83-103. 19 bala, h., amran, n. a., & shaari, h. (2020). audit committee attributes and cosmetic accounting in nigeria: the moderating effect of audit price. managerial auditing journal, 35 (2), 177-206. bala, h., & ibrahim, i. (2014). monitoring characteristics and financial reporting quality of listed conglomerates firms in nigeria. kasu journal of accounting research and practice, 3(2), 75-93. collins, d. w., pungaliya, r. s., & vijh, a. m. (2017. the effects of firm growth and model specification choices on tests of earnings management in quarterly settings. the accounting review: american accounting association, 92(2), 69-100. doi: 10.2308/accr-51551. danial, m. a. k. t., & abdulrahman, r. (2014). risk management and corporate governance characteristics in the malaysian islamic financial institutions. research journal of finance and accounting,5(12), 116-127. diermeier, d. (2018). reputation management and the board. the corporate board, 18-22. enofe, a. o., iyafekhe, c., & eniola, j. o. (2017). board ethnicity, gender diversity and earnings management: evidence from quoted firms in nigeria. international journal of economics, commerce and management, v (6), 78-90. fan, y., jiang, y., zhang, x., & zhou, y. (2019). women on boards and bank earnings management: from zero to hero. journal of banking and finance, 107, 1-21. florencea, n., & kurnia, y. s. (2018). audit committee: woman, experience, education on earnings management. advances in economics, business and management research, 73, 17-21. gavious, i., segev, e., & yosef, r. (2012). female directors and earnings management in high-technology firms. pacific accounting review, 24(1), 4-32. hemathilake, d. h. u. r., & meegaswatte, c. h. h. k. m. (2019). board characteristics and earnings management: a sri lankan perspective. ijariie, 5 (1), 326-338. hooghiemstra, r., hermes, c., oxelheim, l., & randoy, t. (2015). the impact of board internationalization on earnings management. som research reports, 15010 (i&o), university of groningen. kim, k., & sun, j. y. (2014). director tenure and financial reporting quality: evidence from korea. review of integrative business and economics research, 3(1), 237256. kyaw, k., olugbode, m., & petracci, b. (2015). does gender diverse board mean less earnings management? finance and research letters, 14, 135-141. lin, z., song, b. y., & tiang, z. (2016). does director-level reputation matter? evidence from bank loan contracting. journal of banking and finance, 70, 160-176. masliza, w. m., wasiuzzaman, s., & mohamad, n. z. s. (2016). board and audit committee effectiveness, ethnic diversification and earnings management: a study of the malaysian manufacturing sector. corporate governance international journal of business in society, 16 (4), 726-746. musa, f., & aminu, m. i. (2018). moderating effect of audit committee on board diversity and earnings management in nigerian banks. ndic quarterly, 33(3&4), 1932. nahar, s. a., & nor, k. i. k. i. (2016). women directors, family ownership and earnings management in malaysia. asian review of accounting, 24(4), 525-550. neffati, a., ben, i. f., & schalck, c. (2011). earnings management, risk and corporate governance in us companies. corporate ownership & control, 8(2), 170-176. nelson, m. w., & ponsian, n. p. (2018). corporate governance compliance and accrual earnings management in eastern africa: evidence from kenya and tanzania. managerial auditing journal, 33(2), 171-191. 20 oluyemisi, r. a., che-ahmed, a., & muse, o. j. p. (2017). effect of risk management committee on monitoring mechanisms. indian-pacific journal of accounting and finance, 1(2), 38-49. osayantin, h. a., & embele, k. (2019). board characteristics and financial reporting quality. journal of accounting and financial management, 5(1), 30-49. oxelheim, l., & randoy, t. (2003). the impact of foreign membership on firm valuation. journal of banking and finance, 27 (12), 2369-2392. reggy, h, niels, h., oxelheim, l and randoy, t. (2015). the impact of board internationalization on earnings management. research institute of industrial economics, 1096, 1-39. robert, s. (2013). corporate governance and accounting scandals. journal of law and economics, 48 (2), 371-406. saleem, e. s. a. (2019). audit committee, internal audit function and earnings management: evidence from jordan. meditari accountancy research, 27(1), 72-90. saona, p., muro, l., martín, p. s., & baier-fuentes, h. (2019). board of director’s gender diversity and its impact on earnings management: an empirical analysis for select european firms. technological and economic development of economy, 25 (4), 634-663. shehu, u. h., & garba, i. (2014). governance attributes and real activities manipulation of listed manufacturing firms in nigeria. international journal of accounting and taxation, 2(1), 37-62. srinidhi, b., gul, f.a., & tsu, j. (2011). female directors and earnings quality. contemporary accounting research, 28(5), 1610–1644. tianshu, q. c. (2018). board members with style: the effect of audit committee members and their personal styles on financial reporting choices. journal of accounting, auditing & finance, 1–28. triki, s. d. (2018). gender diverse board and earnings management: evidence from french listed companies. sustainability accounting, management and policy journal, 9 (3), 289-312. wicaksana, k. a. b., yuniasih, n. w., & handayani, l. n. c. (2017). board diversity and earnings management in companies listed in indonesian stock exchange. international journal of scientific and research publications, 7(12), 382-386. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 i gusau journal of accounting and finance (gujaf) vol. 3 issue 3, october, 2022 issn: 2756 665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state –nigeria gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ii © department of accounting and finance vol. 3 issue 3 october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, withoutprior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com mailto:abupress2020@yahoo.com http://www.abupress.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos stat gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology,enugu state. prof. muhammad aminu isa department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. prof. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeiza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vi advisory board members prof. kabiru isah dandago, bayero university kano,kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. thejournal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamicbanks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format,1.5-line spacing, 12 font size in times new roman. manuscript should be tested forplagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7thedition publication manual. finally, manuscript should be send to our emailaddress elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng mailto:elfarouk105@gmail.com http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceedingfee. at this point, the editorial board will take a decision on accepting, rejecting ormaking a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specifiedtime frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng mailto:elfarouk105@gmail.com mailto:elfarouk105@gmail.com http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ix contents capital structure and firm financial performance of listed deposit money banks in nigeria: moderating effect of board financial literacy anas idris abdulwahab, hussaini bala ph.d, mansur lubabah kwambo ph.d, abubakar adamu 1 influence of socialization on msme compliance by mediating understanding and moderating knowledge of tax visits yayuk ngesti rahayu 17 does international financial reporting standard narrows audit expectationgap? musa ibrahim dauda, ibrahim adagye dauda, phd 35 sustainability reporting and financial performance of listed manufacturing firms in nigeria aiyesan, olabode olutola ph.d 49 firm attributes and financial reporting timeliness of listed consumer goods firms in nigeria akume james terkende, dele ikese karim 67 value relevance of accounting information for listed financial service firms in nigeria kassim busari, ishaya luka chechet ph.d, aliyu ahmed abdullahi ph.d, ibrahim mohammed ph.d 87 nigeria economic growth and capital market development: does contributory pension scheme matter? akinwumi ayorinde olutimi, toluwa celestine oladele ph.d, adeboye emmanuel sanmi 101 audit committee and financial reporting quality: the moderating effect of board independence of listed deposit money banks in nigeria kassim yusha’u shika, mark david kantiyok 117 determinants of financial performance of listed deposit money banks in nigeria mary seansu lazarus, nurradden usman miko ph.d, saifulahi abdullahi mazadu ph.d 140 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 x human resource accounting and profitability of listed depositmoney banks in nigeria ahmad adamu ibrahim, ahmad rufa’i adamu, fatihu mahmud alhassan muhammad iliyas abdulsalam 158 board independence, audit effectiveness and the quality of reported earnings in the nigerian consumer goods firms isah shittu ph.d, misbahu, abubakar muhammad 175 impact of capital structure on financial performance of listed agricultural companies in nigeria 192 ahmad muhammad ahmad, shehu usman hassan ph.d., abubakar abubakar trade oriented money laundering and era of cybersecurity tax evasion in nigeria oluwayemi joseph kayode, adewole joseph adeyinka ph.d, adewale abass adekunle kadiri kayode ph.d 224 effect of females in the boardroom on corporate sustainability reporting salami suleiman ph. d, olanrewaju atanda aliu ph.d 239 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 224 effect of females in the boardroom on corporate sustainability reporting salami suleiman ph. d department of accounting, abu business school, ahmadu bello university, zaria suleimanbinsalami@gmail.com olanrewaju atanda aliu department of accounting, faculty of management sciences, university of ilorin, nigeria abstract increasing body of research overtime has focused on corporate sustainability reporting due to its global significance. however, there is still scarcity of studies, especially, on the role of women in improving corporate sustainability reporting. furthermore, this relationship is rarely investigated using african data. this studytakes advantage of this existing gap to explore the effect of female directorship andrepresentation in the audit committee on corporate sustainability reporting. this study utilized 120 firm year observations from sampled african firms that adopted for the period 2015 to 2020. using quantitative approach, regression analysis wasused to test the hypotheses. the results of the regression analysis indicate that both female directorship and female presence in the audit committee have a significant positive effect on corporate sustainability reporting. it is therefore recommended that women directorship should be mandated on the boards of african firms to improve corporate sustainability reporting. doi: https://doi.org/10.57233/gujaf.v3i3.186 1. introduction although normative, argument in favour of corporate sustainability reporting is gaining momentum. however, the extent of the female representation varies across companies. on the overall, while the proportion of women has increased in recent years, it is still not significantly above the thirty percent acceptable benchmark (alshaer & mailto:suleimanbinsalami@gmail.com https://doi.org/10.57233/gujaf.v3i3.190 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 225 zaman 2016). in this paper, the business case for female representation in the boardroom is put to test. therefore, this study attempts to make a case for morefemale representation in the boardroom by showing empirically its benefits towardscorporate sustainability reporting of companies in africa which has rarely been investigated. this study is unique because it is focused on a domain (africa) which is rarely examined in prior literature. we utilised a six-year panel data regression consistingof twenty firms. the increasing proportion of female directors on the board of african companies indicates that panel data is appropriate for this study. the evidence reported supports the business case for female representation in governance. we find that female directorship and female presence in the audit committee improves corporate sustainability reporting of firms. 2. literature review and hypothesis development studies on corporate governance are mostly viewed from agency relationship. agency conflict in firms is managed through application of corporate governance mechanisms. boards of directors are internal governance mechanisms employed to reduce this conflict. jensen and meckling (1976) posit that board represents a control mechanism responsible for aligning the interests of managers and shareholders in relation financial reporting. by extension, this responsibility also includes providing non-financial information as part of its reporting mandate. however, the distinct humanistic features of female from males may shape firms performance and reporting strategies differently. resource dependency theory addresses the impact of board gender diversity on corporate sustainability reporting. based on this, several studies on board diversity and organizational outcomes were premised on resource dependency theory rather than agency theory. for example, mallin and michelon, 2011; benamar et al., 2017 and hollindale et al., 2019 utilizedresource dependency theory to anchor the social and environmental performance in relation with corporate boards. therefore, this study builds on resource dependency theory to examine the effects of females in the boardroom on corporate sustainabilityreporting. vitolla, raimo and rubino (2019) examined the effect of board characteristics on integrated reporting quality. evidence provided supports the expectations regardingthe impact of some characteristics of the board on integrated reporting quality. it was found that board independence, gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 226 number of nonexecutive members on the boardof directors, board diversity and bard activity have a positive and significant relationship with integrated reporting quality. haque and jones (2020) investigatedhow board gender diversity is associated with biodiversity disclosures of a firm, and whether the global reporting initiative (gri) and the eu biodiversity strategyreinforce this relationship. they provided evidence which supports the notion thatfemale directors are more sensitive to the concerns of institutional pressures and respond to those concerns by increasing corporate biodiversity disclosures. the result showed that board gender diversity is positively associated with the dbi and bia of a firm, and that the gri framework and the eu biodiversity strategy positively moderate this relationship. gri framework and the eu strategic plan show positive relationship with the dbi, rather than bia. zaid, wang, adib, sahyoun and abuhijleh (2020) examined the effect of boardroom nationality and gender diversity on corporate sustainability performance. controlling for board size, board independence, firm age, leverage, firm size, profitability and audit quality, the result showed that corporate sustainability-related actions are positively and insignificantly affected by nationality and gender diversity. debosky, luo and wang, j. (2018) investigated the influence of board gender diversity on the transparency of corporate political disclosure (cpd). the result showed that higher proportions of female directors are associated with more transparent disclosure of political contributions. khan, khan and senturk (2019) investigated the relationship between board diversity and quality of corporate social responsibility (qcsr) disclosure. focusing on seven dimensions of board diversity including age, gender, nation, ethnicity, educational level, educational background and tenure, the regression results reveal that gender and national diversities are the firms’ valuable resources, having the potential to promote qcsr disclosure. similarly, in the study of issa and fang (2019), gender diversity was found to be positively associated with the level of csr reporting in two countries, namely, bahrain and kuwait gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 227 aribi, alqatamin and arun (2018) examined relationship between female representation on the board and forward-looking information disclosures (flids).it was found that gender diversity on boards positively affects the level of flids. also family firms were found to disclose more information than non-family firms.this is consistent with the work of ibrahim and hanefah (2016) who found that that independence, gender, age and nationality of directors have a positive effect in csrdisclosure. while alazzani, wan-hussin and jones (2018) found a moderate relationship between board gender diversity and csr disclosure using a sample of 133 firms listed in bursa malaysia, rao and tilt (2016) found that three of the board diversityattributes (gender, tenure and multiple directorships) and the overall diversity measure have the potential to influence csr reporting using 150 listed companiesin australia over a three-year period. this is consistent with the findings of hossain, al farooque, momin and almotairy (2017). they found that gender diversity (wob) positively influence carbon disclosure information. similarly, the result of gerwanski, kordsachia and velte (2019) showed that materiality disclosure quality(mdq) is positively associated with learning effects, gender diversity, and the assurance of nonfinancial information. flowing from the above review, is corporate sustainability reporting influenced byfemale representation on corporate boards? the main aim of this study is to examine the effect of female directors and representation in audit committee on corporate sustainability reporting of companies. the following hypothesis were tested h01: female directorship does not have significant effect on corporate sustainabilityreporting of companies in africa h02: female representation in audit committee does not have significant effect on corporate sustainability reporting of companies in africa gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 228 3. methodology 3.1 sample and data the study adopts a correlational research design given that the paradigm is positivism. this design is considered most appropriate because it describes the statistical association between two or more variables. it allows for testing of expected relationships between the variables and making predictions concerning their relationships. the data were collected from the individual website of sampled firms. the sample consists of twenty (20) african companies for six (6) years, from2015 to 2020, giving one hundred and twenty (120) firm year observations of a balanced panel data. 3.2 model specification in achieving objectives of this study, the study used panel regression technique. the following regression equations reflect the analysis models proposed by this study. in line with gerwanski, kordsachia and velte (2019), this study expresses corporate sustainability reporting as a function of women in the boardroom: csr = f (wb) ...................................................................................... (i) thus, csr = f ( wb )by expansion becomes: csr=f(femdir, femac) ............................................................. (ii) in line with prior studies, foreign directors, independent directors, board expertise and board meetings are included as exogenous determinants of corporate sustainability reporting: csr = f(femdir, femac, fordir, inddir, bexp, bmeet)… (iii) transforming iii above to linear relation we have: 𝐶𝑆𝑅𝑖𝑡 = ∅0 + ∅1𝐹𝐸𝑀_𝐷𝐼𝑅𝑖𝑡 + ∅2𝐹𝐸𝑀_𝐴𝐶𝑖𝑡 + ∅3𝐹𝑂𝑅_𝐷𝐼𝑅𝑖𝑡 + ∅4𝐼𝑁𝐷_𝐷𝐼𝑅𝑖𝑡 + ∅5𝐵𝐸𝑋𝑃𝑖𝑡 + ∅6𝐵𝑀𝐸𝐸𝑇𝑖𝑡 + 𝜀𝑖𝑡 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 229 3.3 variable measurement the data employed are secondary due to the quantitative nature of the study. thevariables are measured as given in the table below: table 1: variable definition and measurement variable proxy nature of variable measurement 𝐶𝑆𝑅 corporate sustainability reporting dependent 𝐶𝑆𝑅 = 𝑇𝐹𝐷⁄𝑀𝐷𝑂 corporate sustainability reporting is total firm’s disclosure (tfd) divided by the maximum disclosure obtainable (mdo). 𝐹𝐸𝑀_𝐷𝐼𝑅 female directorship independent number of female directorsdivided by the total number ofdirectors on the board 𝐹𝐸𝑀_𝐴𝐶 female representation in the audit committee independent number of female in the audit committee divided by the total numbers of the audit committee members 𝐹𝑂𝑅_𝐷𝐼𝑅 foreign directorship control number of foreign directors divided by the total number of directors on the board 𝐼𝑁𝐷_𝐷𝐼𝑅 independent directors control number of independent directors divided by the total number of directors on theboard 𝐵𝐸𝑋𝑃 board expertise control number of directors who have accounting, tax and auditing background divided by the total number of directors on the board 𝐵𝑀𝐸𝐸𝑇 board meetings control number of board meetings conducted divided by total number of meetings (5) expected to be conducted gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 230 4. empirical results and discussion the preliminary data analysis using descriptive statistics and correlation matrix arepresented in this section. this is followed by presentation, interpretation, analysis and discussion of results. the robustness tests were also examined and analysed. 4.1 descriptive analysis table 1 presents the result of the descriptive analysis. the study describes the variables using mean,standard deviation, minimum and maximum. the result is shown below. table 2: descriptive statistics variable mean std deviation minimum maximum 𝐶𝑆𝑅 0.8130 0.0699 0.6591 0.9545 𝐹𝐸𝑀_𝐷𝐼𝑅 0.2433 0.1426 0 0.6667 𝐹𝐸𝑀_𝐴𝐶 0.3452 0.1822 0 0.6667 𝐹𝑂𝑅_𝐷𝐼𝑅 0.4856 0.1509 0.0833 0.9 𝐼𝑁𝐷_𝐷𝐼𝑅 0.5720 0.1445 0.1429 0.9091 𝐵𝐸𝑋𝑃 0.7831 0.1882 0.375 1 𝐵𝑀𝐸𝐸𝑇 0.9791 0.0765 0.5 1 table 1 presents descriptive information for our sample of firms. corporate sustainability reporting has a mean value of 0.8130 indicating high disclosure rateof the different forms of capitals. the minimum value of 0.6571 implies most firmsreport above 50% (65.91%) of expected disclosure indicators. the maximum value of 0.9545 shows high compliance rate among firms. the standard deviation of 0.0699 suggests that, deviation from the mean 6.99%. female directorship varies widely across the sample with a minimum of zero and maximum of 66.67%. this is the same as that of female presence in the audit committee. the minimum value of zero (0) for female directorship and female presence in audit committee implies that some firms have no female directors on their board for some years. the maximum value of 0.6667 implies that the highestpercentage of females of females on corporate boards of the firms does not exceed66.67% . however, female directorship and female presence in audit committee have different mean values. the mean value for female directorship and female gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 231 presence in audit committee are 0.2433 and 0.3452 respectively. female directorship mean value of 24.33% implies female sitting on the board is still belowthe critical mass of 30% for african firms. on the contrary, we have female presence in the audit committee above the critical mass of 30% (34.52%). the reason could be because, members of the audit committee are also chosen from shareholders. the female sitting on audit committees could be female members from the shareholders. despite very low, all the firms under consideration have foreigners on their boardsgiven a minimum value of 0.0833. however, the maximum value is very high witha figure of 0.90. on the average, firms under study, have 48.56% of their board members as foreigners. independent directorship has a minimum value of 0.1429 and a maximum value of 0.9091. this shows that, at least, no firm has less than 10% of their board members as independent directors. on the average, 57.20% of the directors are independent. most of the firms have financial experts on their boards. board expertise has a minimum, maximum and mean value of 0.375, 1 and0.7831 respectively. board meetings are regularly conducted within the period of the study. this is clear given average minimum average mean value of 0.9791. at least, firms held 50% of the meeting expected to be conducted some conducted alltheir meeting for the year. 4.2 correlation analysis the correlation analysis is used to explain the relationship among the variables usedin the study. table 3 presents the result of the analysis. table 3: correlation matrix 𝐼𝑁𝑇_𝑅𝐸𝑃 𝐹𝐸𝑀_𝐷𝐼𝑅 𝐹𝐸𝑀_𝐴𝐶 𝐹𝑂𝑅_𝐷𝐼𝑅 𝐼𝑁𝐷_𝐷𝐼𝑅 𝐵𝐸𝑋𝑃 𝐵𝑀𝐸𝐸𝑇 𝐶𝑆𝑅 00 𝐹𝐸𝑀_𝐷𝐼𝑅 0.3000 𝐹𝐸𝑀_𝐴𝐶 4 0.5963 1.0000 𝐹𝑂𝑅_𝐷𝐼𝑅 -0.1709 1.0000 0.1190 0.0174 𝐼𝑁𝐷_𝐷𝐼𝑅 8 -0.1023 -0.0763 -0.3396 1.0000 𝐵𝐸𝑋𝑃 0.1326 0.3783 0.1977 -0.0855 -0.0413 1.0000 𝐵𝑀𝐸𝐸𝑇 -0.0467 -0.1445 0.0900 -0.4739 1.000 0.1442 0.132 0 7 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 232 the use of correlation matrix is to check for multicollinearity and to explore the relationship between each explanatory variable and the dependent variable. the correlation analysis shows that there exists positive relationship between our independent variables (female directorship and female presence in the audit committee) and corporate sustainability reporting. although, correlation analysis isnot a cause and effect tool, this provides a signal for our expected regression result. in relation to the control variables, both foreign directorship and board meetings have negative correlation while independent directorship and board expertise have positive correlation with corporate sustainability reporting. the result shows no excessive correlation among the variables which may suggest presence of multicollinearity as the highest correlation value is 0.5963. gujarati (2004) suggested existence of multicollinearity where correlation values exceed 0.80. additionally, the study explored the use of tolerance value and variance inflation factor to test for multicollinearity. the table is shown below. table 4: multicollinearity test variable variance inflation factor tolerance value 𝐹𝐸𝑀_𝐷𝐼𝑅 1.86 0.5367 𝐹𝐸𝑀_𝐴𝐶 1.58 0.6313 𝐹𝑂𝑅_𝐷𝐼𝑅 1.22 0.8166 𝐼𝑁𝐷_𝐷𝐼𝑅 1.58 0.6336 𝐵𝐸𝑋𝑃 1.41 0.8453 𝐵𝑀𝐸𝐸𝑇 1.58 0.7100 variance inflation factor (vif) and tolerance values should be less than 10 and 1 for the data to be free from multicollinearity issues (gujarati, 2004). from the multicollinearity test, the vif and tv values are < 10 and < 1. this suggests absence of multicollinearity as opined by gujarati (2004). 4.3. regression results table 4 present the regression results of our models of the study. the pooled regression, fixed effect and random effect models were run in tandem with balancespanel data analysis. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 233 table 4: ordinary least square results independent var. expected sign pooled ols fixed effect random effect 𝐹𝐸𝑀_𝐷𝐼𝑅 + 0.0785 (0.185) 0.1698 (0.001)*** 0.1591 (0.001)*** 𝐹𝐸𝑀_𝐴𝐶 + 0.7939 (0.065)* 0.0908 (0.003)*** 0.0868 (0.002)*** 𝐹𝑂𝑅_𝐷𝐼𝑅 + -0.0356 (0.432) 0.0248 (0.478) 0.0191 (0.559) 𝐼𝑁𝐷_𝐷𝐼𝑅 + 0.0163 (0.762) 0.1429 (0.002)*** 0.1260 (0.003)*** 𝐵𝐸𝑋𝑃 + 0.0112 (0.753) -0.0854 (0.792) -0.0056 (0.848) 𝐵𝑀𝐸𝐸𝑇 + 0.0303 (0.751) -0.0698 (0.352) -0.0487 (0.491) no. of observations 120 120 120 adj. r. sq,/r.sq 7.6% 27.53% 9.15% f. value 2.63** 5.95*** 35.80*** heteroskedasti city 0.50 hausman test 2.22 lang. test r.e. 162.55*** the pooled ols was run which did not suffer from heteroskedastcity problem. thehypothesis for the existence of constant variance could not be rejected given a chi2value of 0.50 and prob> ch2 of 0.4787 which is insignificant at all levels. the fixedeffect regression model was run alongside the random effect regression model. similarly, to the hettest, the results of the hausman specification test showed a chi2value of 2.22 and prob> ch2 of 08982 which is insignificant at all levels. the hypothesis for differences in coefficients not systematic could not be rejected. therefore, the random effect regression was taken for instead of fixed effect regression result. furthermore, the breusch and pagan langrangian multiplier test for random effect was carried out. the results showed a chi2 value of 162.55 and prob> ch2 of 0.000 which is significant at less than 1%. the hypothesis proposingrandom effect regression was rejected gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 234 in favor of random effect regression result for analysis. 4.4 discussion of findings the coefficient for female directorship is 0.1591 which is significant at 1% (0.000). this indicates that female directors favorcorporate sustainability reporting. this isin line with our aprior expectation. hypothesis one, which states that female directorship, does not have significant effect on corporate sustainability reporting of companies in africa is hereby rejected. our result corroborates the postulations of resource dependancy theory that diverse boards provide more valuable resources; hence, impact on corporate reporting outcomes. the coefficient for female presence in audit committee is 0.0868 which is significant at 1% (0.002). this indicates that female presence in audit committee improves firms corporate sustainability reporting. this is also in line with our apriorexpectation. hypothesis two, which states that female presence in audit committeedoes not have significant effect on corporate sustainability reporting of companies in africa is hereby rejected. similar to the first hypothesis, evidence provided corroborates the postulations of resource dependency theory which states that reporting outcomes are dependent on available human resources at the board level.evidence provided on hypotheses one and two is consistent with that of vitolla, raimo and rubino (2019), haque and jones (2020), khan, khan and senturk (2019), issa and fang (2019), debosky, luo and wang, j. (2018), aribi, alqataminand arun (2018), ibrahim and hanefah (2016), rao and tilt (2016), hossain, al farooque, momin and almotairy (2017), gerwanski, kordsachia and velte (2019). however, our results are contrary to that of zaid, wang, adib, sahyoun and abuhijleh (2020) who provided a positive but insignificant effect of gender diversity on corporate sustainability reporting. 5.0 conclusion drawing from resource dependency theory, this paper examined the effect of females in the boardroom on firms corporate sustainability reporting. using a sample of 120 firm year observations of firms in africa from 2015 to 2020, the analysis provided evidence supporting our hypotheses that the extent of corporate sustainability reporting by firms is affected by female directorship (h01) and femalepresence in audit committee (h02). overall, the results from this study provide coherent evidence supporting the claim that diversity in the boardroom is crucial inpreparing high-quality financial reports. that is, the more diverse the members of the board of directors, the better their decision gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 235 making process and reporting outcomes. thus, african companies are therefore encouraged to increase female representation in their boardroom and audit committee. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 236 references adams, r. b. & ferreira, d. (2009).women in the boardroom and their impact on governance and performance.journal of financial economics 94:2, 291309. alazzani, a., wan-hussin, w. n. & jones, m. (2018). muslim ceo, women on boards and corporate responsibility reporting: some evidence from malaysia. journal of islamic accounting and business research, vol, 10 no. 2, 2019pp. 274-296, doi10.1108/jiabr-01-2017-0002 anderson, r. c., david m. r., arund u. &wanli z. (2009).the economics of director heterogeneity.working paper, temple university. aribi, z. a., alqatamin, r. m. &arun, t. (2018). gender diversity on boards and forward-looking information disclosure: evidence from jordan. journal of accounting in emergingeconomies vol. 8 no. 2, 2018pp. 205222doi10.1108/jaee-05-2016-00394 al-shaer, h. & zaman, m. (2016). board gender diversity and sustainability reporting quality. journal of contemporary accounting and economics, vol. 12, pp. 210-222. ben-amar, w., chang, m., &mcilkenny, p. (2017). board gender diversity andcorporate response to sustainability initiatives: evidence from the carbon disclosure project. journal ofbusiness ethics, 142(2), 369– 383. carter, d. a., frank d., betty j., simkins, w. & gary s. (2008). the diversity of corporate board committees and financial performance.working paper,oklahoma state university. debosky, d. g., luo, y. & wang, j. (2018). does board gender diversity affect the transparency of corporate political disclosure? asian review of accountingvol. 26 no. 4, pp. 444-463. doi 10.1108/ ar a-09-2017-0141 gerwanski, j., kordsachia, o. &velte, p. (2019). determinants of materiality disclosure quality in integrated reporting: empirical evidence from aninternational setting. bus stratenv. 2019;1–21, wileyonlinelibrary.com/journal/bse. hollindale, j., kent, p., routledge, j. and chapple, l. (2019).women on boards and greenhouse gas emission disclosures.accounting & finance, 59(1), 277–308. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 237 haque, f., &jones, m.j. (2020). european firms’ corporate biodiversity disclosuresand board gender diversity from 2002 to 2016, the british accounting review, https:// doi. org /10.1016/j. bar. 2020.100893. hossain, m., al farooque, o., momin, m. a. &almotairy, o. (2017). women in the boardroom and their impact on climate change related disclosure. socialresponsibility journal, vol. 13 no. 4 2017, pp. 828-855, doi 10.1108/srj11 2016-0208 ibrahim, a. h. &hanefah, m. m. (2016).board diversity and corporate social responsibility in jordan.journal of financial reporting and accounting, vol. 14 no. 2, 2016pp. 279-298doi 10.1108/jfra-062015-0065 issa, a. & fang, h. (2019).the impact of board gender diversity on corporate social responsibility in the arabgulfstates.gender in management: an international journal vol. 34 no. 7, 2019pp. 577-605doi10.1108/gm-072018-0087 jarboui, a., saad, m. k. b. &riguen, r. (2019). tax avoidance: do board gender diversity and sustainability performance make a difference? journal of financial crime,doi10.1108/jfc-09-20190122 jensen, m. c., &meckling, w. h. (1976). theory of the firm: managerial behavior, agency costs and ownership structure. journal of financialeconomics, 3(4), 305–360. khan, i., khan, i. &senturk, i. (2019) board diversity and quality of csr disclosure: evidence from pakistan corporate governance vol. 19 no. 6, pp. 1187-1203, doi10.1108/cg-12-2018-0371 mallin, c.a. &michelon, g. (2011). board reputation attributes and corporate social performance: an empirical investigation of us best corporate citizens. accounting andbusiness research, 41(2), 119– 144. pistoni, a., songini, l., &bavagnoli, f. (2018). integrated reporting quality: an empirical analysis. corporate social responsibility and environmental management, 25(4), 489–507. rao, k. & tilt, c. (2016).board diversity and csr reporting: an australian study. meditari accountancy researchvol. 24 no. 2, 2016pp. 182-210, doi 10.1108/medar-08-2015-0052 vitolla f, raimo n, rubino m. (2019). board characteristics and gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 238 integratedreporting quality: an agency theory perspective. corp socrespenv ma.1– 12.doi.org/10.1002/csr.1879 zaid, m.a.a., wang m., adib, m., sahyoun,i a. &abuhijleh, s.t.f. (2020). boardroom nationality and gender diversity: implications for corporate sustainability performance. journal of cleaner production doi:https://doi.org/10.1016/j.jclepro.2019.119652. https://doi.org/10.1002/csr.1879 https://doi.org/10.1016/j.jclepro.2019.119652 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 i gusau journal of accounting and finance (gujaf) vol. 3 issue 3, october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ii © department of accounting and finance vol. 3 issue 3 october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com mailto:abupress2020@yahoo.com http://www.abupress.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos stat gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. muhammad aminu isa department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. prof. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeiza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vi advisory board members prof. kabiru isah dandago, bayero university kano,kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng mailto:elfarouk105@gmail.com http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng mailto:elfarouk105@gmail.com mailto:05@gmail.com http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ix contents capital structure and firm financial performance of listed deposit money banks in nigeria: moderating effect of board financial literacy anas idris abdulwahab, hussaini bala ph.d, mansur lubabah kwambo ph.d, & abubakar adamu 1 influence of socialization on msme compliance by mediating understanding and moderating knowledge of tax visits yayuk ngesti rahayu 17 does international financial reporting standard narrows audit expectation gap? musa ibrahim dauda, ibrahim adagye dauda, phd 35 sustainability reporting and financial performance of listed manufacturing firms in nigeria aiyesan, olabode olutola ph.d 49 firm attributes and financial reporting timeliness of listed consumer goods firms in nigeria akume james terkende, dele ikese karim 67 value relevance of accounting information for listed financial service firms in nigeria kassim busari, ishaya luka chechet ph.d, aliyu ahmed abdullahi ph.d, & ibrahim mohammed ph.d 87 nigeria economic growth and capital market development: does contributory pension scheme matter? akinwumi ayorinde olutimi, toluwa celestine oladele ph.d, &adeboye emmanuel sanmi 101 audit committee and financial reporting quality: the moderating effect of board independence of listed deposit money banks in nigeria kassim yusha’u shika, mark david kantiyok 117 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 x determinants of financial performance of listed deposit money banks in nigeria mary seansu lazarus, nurradden usman miko ph.d, & saifulahi abdullahi mazadu ph.d 140 human resource accounting and profitability of listed depositmoney banks in nigeria ahmad adamu ibrahim, ahmad rufa’i adamu, fatihu mahmud alhassan &muhammad iliyas abdulsalam 158 board independence, audit effectiveness and the quality of reported earnings in the nigerian consumer goods firms isah shittu ph.d, misbahu, abubakar muhammad 175 impact of capital structure on financial performance of listed agricultural companies in nigeria ahmad muhammad ahmad, shehu usman hassan ph.d., &abubakar abubakar 192 trade oriented money laundering and era of cybersecurity tax evasion in nigeria oluwayemi joseph kayode, adewole joseph adeyinka ph.d, adewale abass adekunle & kadiri kayode ph.d 205 effect of females in the boardroom on corporate sustainability reporting salami suleiman ph. d, olanrewaju atanda aliu ph.d 224 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 140 determinants of financial performance of listed deposit money banks in nigeria mary seansu lazarus department of accounting, kaduna state university, nigeria +234760974057; marylazarus28@yahoo.com nurradden usman miko ph.d department of procurement and supply chain management, kaduna state university, nigeria +2348036691170; nuramiko@kasu.edu.ng saifulahi abdullahi mazadu ph.d department of procurement and supply chain management, kaduna state university, nigeria +2348033581343; hanan4dad@gmail.com abstract this paper seeks to address some factors influencing the financial performance of listed dmbs in nigeria as the industry has a crucial role to the growth and development of the nation. the major goal of this study was to examine, using secondary data the determinants of financial performance of dmbs with international operating license between 2010 and 2020. analysis was carried on 8 listed banks using secondary data, correlation and ex-post factor research design. according to the study's findings, all of the indicators have a large impact on the financial performance of the listed financial banks, with the exception of liquidity risk, which has no significant effect. it is therefore recommended that the management of listed dmbs strictly concentrate on investing in lower risky projects, developing and adopting an effective internal control system with clear policies and procedures and to also adhere to cbn directives in maintaining a certain capital adequacy ratio and to checkmate some internal management factors that led to a significant but negative relationship between roa and lr as the relationship is expected to be significant and positive. this would assist them in achieving their objectives and prevent liquidation and bankruptcy. keywords; financial performance, deposit money banks (dmbs), capital adequacy (ca), cash flow (cf), operational efficiency oe), liquidity risk (lr) and returns on assets (roa). doi: https://doi.org/10.57233/gujaf. v3i3.185 1. introduction the overall health of the economies of developing nations depends on the efficiency of their dmbs; as a result, this is a significant area of concern because, in the absence of such efficiency, the entire economy will be illiquid, savings and investments will be lost, and this could lead to further economic stagnation. financial performance is an indicator of how well a company has performed over mailto:marylazarus28@yahoo.com mailto:nuramiko@kasu.edu.ng mailto:hanan4dad@gmail.com https://doi.org/10.57233/gujaf.%20v3i3.185 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 141 a specific time period in terms of collecting and allocating funds as well as capital sufficiency, liquidity, solvency, efficiency, leverage, and profitability. a healthy and sound banking sector enhances financial deepening, creates more employment opportunity and promotes financial stability which implies that banking sector should remain firm and continue to provide the needed financial intermediation services for the betterment of the economy. due to varied degrees of non compliance with proper operating norms and rules, such as sufficient capital ratios and the central bank of nigeria's inability to satisfy credit criteria, the nigerian banking sector has seen a number of banks fail. according to the financial stability report, nigerian banks' financial performance indicators have gotten worse when it comes to dealing with expenditures and other issues. as an illustration, the return on equity (roe) and return on assets (roa), which were respectively 14.90% and 2.67% in 2007, fell to 1.8% and 0.16%. imf (2017) states 2016; major choices may need to be revised as a result of these developments, which may damage public confidence and cause issues. bad debt is a common problem for nigerian banks, which frequently hinders their ability to function successfully financially. nigerian banks have been facing a lot due to non-performing loans (npl) which usually affects the liquidity available for efficient operation. according to national bureau of statistics (nbs) report in june 2019, banks had a non-performing loan of 1.4million, meanwhile the cbn prescribed 5% threshold for non-performing loan in the economy but the last time the banking sector met that was in the last quarter of 2015. since then the figure has only dropped below 10%. given that banks core business activity is giving out loans and earning interest on them, nigerian banks failure to do so is a worry and impacted profitability and performance. poor administration is another factor in certain bad debts (inefficiency). without adequate collateral, banks provide loans to family members and friends with no interest and no chance of repayment (the loan). according to umaru ibrahim, the president of ndic recently discussed the issue affecting the banking industry—specifically, the development of polaris sky bank of nigeria and also the instance of the merger between diamond bank of nigeria plc and access bank of nigeria plc —in the guardian magazine (2018) which has been attributed to corporate governance and internal controls. in that regards, this study seek to investigate the determinants of financial performance among the listed dmbs in nigeria, using operational efficiency as a variable to measure how internal controls and corporate governance influence the financial performance of dmbs. thereby the study concentrated on all listed dmbs with international and national operational license in nigeria respectively. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 142 in order to do this, this study intends to investigate the factors that affect listed investors' financial performance in nigeria by utilizing performance variables to evaluate the efficiency of internal controls and corporate governance. the study's findings offer solutions to some of the issues and difficulties experienced by investment organizations, as well as the knowledge required by the government to develop and enhance financial management in this nation. it also serves as a standard for additional study. the primary objective of the study is to investigate the elements that influence the financial performance of nigeria's listed dmbs from 2010 to 2020. the following objectives are specific as well: i. to investigate the impact of capital adequacy on the operating results of nigeria's listed deposit money banks. ii. to look at the impact of liquidity risk on the monetary performance of nigeria's listed deposit money institutions. iii. to look at how cash flows affect the financial health of nigeria's listed deposit money banks. iv. to assess how operational effectiveness affects the monetary performance of nigeria's listed deposit money institutions. 2. evidence and theory capital adequacy and financial performance: the effect of asset quality on the profitability of commercial banks in kenya is examined by cheruiyot (2016). according to the research, kenyan commercial banks' profitability and asset quality are positively correlated. in a thorough analysis of the factors affecting bank asset quality and profitability from 1997 to 2009, swamy (2017) discovers that asset quality has a favorable effect on a bank's financial performance. as a result, lawal and muturi (2018) looked at the effects of capital adequacy on the operational efficiency of banks in nigerian from 2007 to 2016 and found that ca has a positive significant effect on operational efficiency. the same effect was discovered by gadzo, and asayama (2019), who found that financial leverage had a favorable and substantial impact on financial performance. the financial performance of nigerian registered trust banks is positively and significantly impacted by their capital availability, oilwe, and sil (2019). resources and capital. if we examine the connection between the capital adequacy ratio and the efficiency of nigerian banks, we find that the two have existed for a very long period. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 143 when mutumira (2019) examined how kenyan insurance companies' capital ratios impacted their financial results from 2014 to 2018, she discovered that asset quality had both a positive and a negative impact on those results. between 2006 and 2013, ray and mohapatra (2019) investigated the impact of equity ratio on the financial performance of indian microcredit enterprises. they discovered that at this time, the equity ratio considerably dropped, which had a detrimental effect on the performance of the microcredit companies. hewaidy and alyousef (2018) investigate how private banks and macroeconomic factors affect kuwaiti banks' capital ratios and demonstrate how capital ratios can impact how effectively banks allocate capital and found that capital adequacy ratio is likely to be more influenced by how banks resources are efficiently utilized than by any other macroeconomic variable. variable capital adequacy ratios are tied to macroeconomic theory for the purposes of this study; the theoretical underpinnings are based on the trustworthiness and dependability of financial institutions and a constant capital ratio that permits long term planning. we feel that the equity ratio won't have a substantial impact on the financial performance of nigeria's listed commercial banks, based on the aforementioned evaluation. liquidity risk and financial performance; demirkune (2016) assessing liquidity risk management's impact on financial performance using data from the turkish retail sector yamin, farhan, and tabas' analysis of the relationship between liquidity risk and financial performance found a positive correlation (2019). results of company a: the profitability of pharmaceutical companies based on franchise performance is significantly impacted by the current price, according to an empirical study of pharmaceutical companies in india from 2008 to 2017. nina (2018) positive impact of liquidity and credit risk significant impact on bank profitability and return on capital. impact of liquidity risk management on financial performance of nigeria's ecb 2007-2016. juan (2015), on the other hand, looked at the performance of financial institutions traded on the nairobi stock exchange and discovered a deteriorating correlation between the latter's performance and that of listed financial institutions in kenyan stock exchange relating to the nairobi stock exchange. between 2007 and 2016, charler (2018) looked into how liquidity risk affected bank performance in ghana. the findings demonstrate a favorable correlation between liquidity and return on assets. in terms of return on capital, there is a negative correlation between the ratio of real estate to total assets (litk1). gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 144 according to the concept of liquidity volatility, liquidity risk fluctuates. this indicates that the investment bank has a sizable quantity of cash on hand that may be moved to another bank if necessary to generate profits without suffering significant losses. liquidity risk "has a major influence on the performance of commercial banks listed in nigeria," as stated in premise 2 of this article. money (cash) flows and financial performance the effects of liquidity management on the financial performance of mutual funds in kenya from 2011 to 2016 were investigated by soate and oluoch (2018). mohammed (2018) investigated the relationship between revenue, operational performance (asset turnover), and financial performance (roe) of firms listed on the nigerian stock exchange from 2005 to 2014. additionally, from 2007 to 2016, oieko (2018) looked on how liquidity management practices affected the performance, liquidity, cash flow, financial performance, and profitability of nairobi-listed construction firms. they all found that cash flow has a positive relationship with financial performance. when examining the effect of capital on the performance of insurance businesses from 2014 to 2018, motomira (2019) discovered a favorable influence on liquidity and financial performance in kenya. nwakaego, ikechukwu, and ifunania (2015) looked at how income affects entrepreneurship in the nigerian food and beverage sector. he discovered that finance and operating liquidity had a favorable effect on the productivity of businesses in nigeria's food sector. in their 2016 investigation of this topic in the nigerian banking industry, ogbunaia and ozuma discovered a negative correlation between company performance and liquidity. this suggests that the performance of nigerian banks is positively impacted by liquidity. bcom (2018) discovered a negative correlation between investment returns and bank financing in nigeria, and as a result, bcom (2018) analyzed how financial management practices affected the performance of listed manufacturing companies in nairobi. a statistically significant correlation was shown between equity firms' cash flow management practices and return on assets from 2007 to 2015 by joan (2015). studies have demonstrated that the application of monetary policy has a favorable impact on economic expansion. because there is no significant correlation between revenue and financial performance of listed manufacturing businesses and nairobi small business iwelo, ofor, and onora (2020) of oil and gas enterprises, the study demonstrates a negative association. within the same time frame, income, cash flows, and stock (2013-2018). the cash flow from operational operations is connected to performance, according to muraya (2018), who looked at the relationship between cash flow and financial performance of nairobi-listed investment businesses from 2012 to 2016. according to his study, a company's gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 145 profitability and sustainability are significantly impacted by the budget research firms choose to spend. use the capital reserve concept as a variable to support cash flow in this lesson. in this context, enough liquidity refers to the bank's liquidity. as a result of the discussion above, hypothesis number three reads, "liquidity flows do not influence financial performance of banks that have registered their reputation in a banking firm with a major financial impact nigeria”. efficiency in operations and financial performance lotto (2018) examines the influence of capital requirements regulation on bank operating efficiency in tanzania for the period ranging from 2009 to 2015. the study documents a positive and significant relationship between capital ratio and bank operating efficiency. additionally, the results show an inverse correlation involving non-performing loans (credit risk) and bank operating efficiency. aktan and celik (2018) investigated the impact of liquidity and profitability on the operational efficiency of scheduled commercial banks of bangladesh for the period of 2011 to 2016, and discovered that the there is significant positive correlation between liquidity and profitability commercial banks in bangladesh. asfao (2018) examined financial performance indicators of ethiopian private banks from 2011 to 2017 using certain banking metrics. results reveal that management efficiency, bank size and capital adequacy statistically and positively impact significantly on financial performance of the banks under study. however, liquidity management has influence financial performance negatively but significantly. el-masry and yousry (2019) investigate the determinants capital adequacy ratio between islamic and conventional banks in 10 mena countries for the period ranging from 2009 to 2013. the population is analysis is 38 islamic banks and 75 conventional banks. the dependent variable for the study is capital adequacy ratio measured by the basel framework while the independent variables are operational efficiency, profitability, liquidity risk, credit risk, deposits to assets, portfolio risk, bank size and two macro-economic variables (gdp growth rate and average world governance indicators for each country).findings suggest that capital adequacy ratio in both islamic banks and conventional banks significantly influence between gdp growth rate, operational efficiency, and bank size. furthermore, results in islamic banks indicate a significant relationship among capital adequacy ratio and deposits to assets ratio. conversely, conventional banks results indicate a positive relationship between capital adequacy ratio and portfolio risk, credit risk, and profitability. the study suggests application of the islamic financial services board (ifsb) proposal on islamic banks based in different jurisdictions which will gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 146 improve the islamic banks efficiency and stability. it will also help achieve standardization of calculation of capital adequacy ratio between islamic banks. okeke and onuora(2018) looked at operational risk management and compliance in banks operating in edo state. analyzing the effects of systemic risk was the aim of this study. human danger, external danger, systemic and technical risk to the organization's performance. the findings indicate that systemic risk had only a little detrimental effect on the organization's performance over the research period. regarding technological and systemic risk. the performance of the network during training is positively impacted by external influence in the final influence phase, however this effect is favorable but modest. according to the study's findings, operational risk management significantly but unfavorably affects the performance of the banks that were the subject of the investigation. according to ndolo (2015), who examined the link between the operating and financial performance of nairobi listed businesses between 2009 and 2013, performance is correlated with nse listed companies' return on assets. the performance of a few public and private commercial banks between 2012 and 2017 was examined by almaihu and bellet (2019). state banks are superior to private banks, as can be seen. five chosen public sector banks outperform private sector banks in terms of performance out of seven performance analysis indicators. this has an impact on how commercial banks operate. according to bhattarai (2019), who looked at how credit risk management affected the financial health of nepal's commercial banks between 2001 and 2016, management quality indicators, debt ratios, and capital sufficiency had an impact on financial health (return on assets).the influence of operational performance on the financial stability of listed construction businesses in nigeria from 2009 to 2016 is examined by ozazefua (2019). performance takes into account operational expenditure growth, revenue growth, inventory turnover, asset turnover, and long-term profitability. the return on assets and inventories (also known as product s) is the dependent variable in this phrase. the findings indicate that asset turnover has a positive relationship with k value but a negative relationship with labor costs. these outcomes are thus in line with the fluid stability concept. by allowing managers to store stocks held for trade, effective hedging techniques provide liquidity at low/low costs. as a result, study 4 makes the following assertion based on the aforementioned hypotheses: "the financial performance of a publicly listed commercial bank in nigeria is not significantly impacted by efficiency." gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 147 3. methodology a correlational study design was considered appropriate for this study. this sampling technique is suitable for this study because it covers all the population of the study (fifteen deposit money banks) even though the sample size of the study consists of eight depository institutions that have been granted an international banking license in accordance with the regulations. the study used secondary data from audited financial statements of registered banks in nigeria as a sample of companies over an 11-year period (2010-2020). data were analyzed using multiple regression methods. the following table describes the formula used to calculate the study variables. variables acronyms variables measurement sources dependent variable return on assets (roa) computed as profit before tax divided by total assets abata, m.a. (2014) independent variables capital adequacy (ca) tier 1 capital + tier 2 capital divided by risk weighted assets hewaidy&alyousef (2018) liquidity risk (lr) computed as current assets divided by current liabilities ajibike (2015) cash flows (cf) measured as cash flow from operating activities divided by total asset mutumira (2019) operating efficiency (oe) it is calculated by dividing operating expenses over operating income, el-ansary, el-masry, and yousry (2019) control variable firm’s size (fsz) natural log of total assets opoku, adu and anarfi (2013), rajha and alslehat (2014) source: compiled by authors from prior literature, 2022. the direct link between the independent variable and the dependent variable is summarized by this model. capital adequacy (ca), liquidity risk (lr), cash flow (cf), and the correlation between operational efficiency (oe) and return on assets gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 148 are the benchmark model's independent variables. the definition of dependent variables (roa) is as follows: roa it = β0 + β1cait + β2lrit + β3cf it + β4oe it + β5fsz it + ɐit where: roa = return on asset it= firm and time variant β0 = intercept β1β4 = coefficient of the explanatory variable ca = capital adequacy (independent variable) lr = liquidity risk (independent variable) cf= cash flows (independent variable) oe= operating efficiency (independent variable) fsz= firm size (control variable) ɐ = error term of the model 4. result and discussion the results of numerous tests conducted on the data obtained are presented, examined, and interpreted in this part. it also addresses the key findings of the study, the reliability of the findings, and their policy-related ramifications. table 4.1 summary of descriptive statistics variables mean std. dev. min max roa 0.464 0.126 0.23 0.68 car 0.254 0.089 0.14 0.57 lr 0.516 0.161 0.18 0.96 cf 0.096 0.080 0.01 0.33 oe 0.655 0.166 0.24 1.32 fsize 12.374 0.653 11.86 17.89 source: stata 13 output, 2022 table 4.1 provides a summary of the descriptive statistics of return rate measured by return on asset (roa) reveals an average of approximately 46%. the roa measures the contribution of net income per naira (local currency) invested by the firms’ stockholders; a measure of the efficiency of the owners’ invested capital. the maximum and minimum values of roa were 0.68 and 0.23respectively. that means the most profitable deposit money banks earned n0.68 of net income from a single n1 of asset investment and the minimum n0.23. the standard deviation of roa is .126, shows lower variability across deposit money banks. as indicated from table 4.2.1, the average of capital adequacy is approximately 25%. the standard deviation of 9% indicates wide variation across the sampled gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 149 banks. the minimum and maximum of car of 0.14 and 0.57 indicate that some of the selected banks for this study failed to meet the prudential guideline by central bank of nigeria that stipulated minimum of 15% car banks that possessed international banking operating license as a buffer to curb any unforeseen risk and uncertainties that may stem from loan extension. the average value of the liquidity measured by liquid risk is approximately 52%. the average value indicates that for each one naira current liability, there is n0.52 liquid asset to meet obligation. the minimum and maximum values are 18% and 96% respectively for the study period. it means that the most liquid listed banks has n0.96 naira to meet obligation which is more than the minimum standard rate of 30% stipulated by cbn in 2017. however, nigeria listed banks that have less liquid have 18 kobo to meet obligation which is less than the minimum rate. the average value of cash flow is approximately 10% with a correspond standard deviation of approximately 8%, which indicates lower variation across the sampled banks. the minimum and maximum of cash flows are .01 and .33 respectively. the result from table 4.1, shows that mean of operational efficiency is 0.655, with the standard deviation of 0.166, which indicates wider dispersion in the extent of operating expenses to operating income across the sampled banks. the minimum and maximum are values 0.24 and 1.32 respectively. bank size as control variable has the mean value of 12.37 indicating that on average; all the listed deposit money banks in nigeria have total assets of n12.37 trillion, while the standard deviation of approximately n0.65 trillion showing a lower deviation of the total assets of listed deposit money banks in nigeria. bank size has minimum and maximum values of n11.86 billion and n17.89billion respectively. table 4.2 pearson correlations roa car lr cf oe fsize variables roa 1.000 car 0.615 1.000 lr -0.897 -0.462 1.000 cf -0.123 0.244 0.190 1.000 oe 0.131 0.210 -0.060 -0.028 1.000 fsize -0.576 0.065 0.636 0.321 0.063 1.000 source: stata output, 2022 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 150 the result of pearson correlation in table 4.2 shows the correlation between explained and explanatory variables of the study. it reveals that there is positive relationship between capital adequacy and operating efficiency with return on asset. it means that these variables move in the same direction with return on asset. however, liquidity risk, cash flows and firm size have negative relationship with return on asset. it indicates that they have move in opposite direction with return on asset. the correlation matrix table shows that there is no presence of possible multicollinearity among the independent variables. this is because the highest relationship among the independent variables is approximately 64%, and this goes below the threshold of 80% as propounded by gujarati and porter (2009). therefore, there is no possible presence of multicollinearity among the independent variables. regression result the multiple regression results for the model using linear least squares (ols) regression are summarized in the regression result. with a value of 0.38 and a p value of 0.5383, the ols for the breuch pagan/cook-weisberg chi2 elastic inequality was calculated (additional information on the panel data sample versus baseline analysis appears to best fit the difference). table 4.3 summary of ols regression result roa coef. t value p-value constant 0.193 3.13 0.002 car 0.821 10.86 0.000 lr -0.140 -3.79 0.000 cf 0.163 2.64 0.010 oe 0.078 2.25 0.027 fsize 0.004 1.18 0.240 r-square 0.7269 adjeustedr-square 0.7102 f-statistics 3.64 prob> f 0.0000 hettestprob> chi2 0.5383 source: stata output, 2022. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 151 the findings indicate a compounding influence between the dependent and independent factors as well as the independent variables and the independent variables (financial position, liquidity risk, liquidity, and efficiency). the cumulative association between term deposits and financial performance is shown by combined r squared = 0.7102. it revealed a 71% overall connection, demonstrating the significant influence the study's adjustments had on financial success. other research design-related factors make up the remaining 29%. from 4.4.1. the t-value for the statistical findings is 0.8210, 10.86, and the p-value is 0.000, both of which are significant at the 1% level. the materiality ratio and financial success are positively and significantly correlated. the high capital adequacy ratio of nigeria's regulated investment banks has increased their financial profitability, according to this. the bank's performance improved as a consequence of higher-than-anticipated liquidity levels and the deployment of provisions to cover unforeseen losses, thus the results were not unexpected. banks are operational. the findings support those of lawal, olucha, swamy (2017), ogboro (2019), and muturi (2018). therefore, for bank auditors, understanding how money is spent and ensuring that money is utilized properly are crucial components of financial management. the money that is left over is invested profitably. in light of the facts discussed above, we may conclude from this study that the quantity of money received has no bearing on the interest rate at which it is repaid; hence, the hypothesis (hypothesis) was rejected. stocks that are traded on stock exchanges significantly improve financial returns. bank: a significance level of 0.000, which is regarded as statistically significant at 1%, supports this. financial assets and 1404 have a negative relationship with liquidity risk as evaluated by current debt and term debt ratio, with a t value of -3.79 (p = 0.000). 1% threshold of statistical significance. conservative means that when the capital stock decreases by n1, the financial performance of the sample firms decreases by n0.14. accordingly, a rise in the sum will have a negative impact on the return on investment. this is because when banks trade in short-term deposits for long-term loans, they are exposed to a higher credit risk. thus, liquidity risk has an impact on a bank's reputation in addition to its performance. if banks don't make payments on schedule, investors can lose faith in them. in this case, the bank's reputation may be in jeopardy. the findings support earlier studies like demirgun (2016), yamin, farhan, and tabash (2019). according to studies, this has a detrimental effect on the financial gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 152 performance of well-known worldwide investment firms, which can result in a loss of investor trust, a tarnished reputation, insolvency, bankruptcy, and financial collapse. the second null hypothesis that the bank's financial risk has a significant impact on the profitability of depository companies in nigeria is rejected by the study's findings, and the corresponding probability value is set at 0.000. 1% significance level. at a 5% level of significance, the regression results indicate a coefficient of 0.1638 and a t-value of 2.64 (p-value 0.010). this demonstrates that cash flow significantly and favorably affects the financial performance of nigeria's listed commercial banks. the findings demonstrate that banks listed on the nigerian stock exchange have better financial performance when their debt is higher. this outcome is not unexpected given that cash flows enable businesses to grow, transact in assets, seize market opportunities, and provide dividends to shareholders. users of financial statements may utilize cash flow as a benchmark in addition to accounting rules defined by management when making financial and investment choices. the results of mutumira (2019) and oiko (2018), who discovered a favorable association between cash flow and financial success, are consistent with this conclusion. the key takeaway is that income needs to be near to the minimal value in order to utilise cash flow properly and generate a steady profit. this study disproves the third theory, according to which cash flow influences the crucial elements of depository firms in nigeria. and it had a significant effect. effects of the nigerian registered investment bank's incorporation a probability value of 0.010 and a significance level of 5% both point to this. the performance information is shown in table 4.4.1. the coefficient, t-value, and p-value are 0.0780, 2.25, and 0.027, respectively. the p-value is significant at a 5% level of significance. this suggests a beneficial effect on the chosen organizations' financial performance. this indicates that a 5% growth rate results in a £0.08 improvement in the financial performance of nigerian banks with registration. the findings do not indicate that internal company issues are the primary cause of the disparate financial statements; rather, the organization has to adapt significantly in accordance with best practices to meet its objectives. effective resource management results in increased earnings for a corporation. additionally, businesses may boost efficiency while increasing profitability by minimizing recycling and trash. we employ the top personnel, tools, and company procedures. on the other side, good businesses maintain consistent and superior output. according to sporta, gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 153 ngugi, ngumi, and nanjala (2018), opr has a considerable influence on investment compared to duarte, brito, and serio. this conclusion is consistent with their findings (2011). only if it's excellent. enhancing economic results through effective use of natural resources and waste reduction. we employ the top personnel, tools, and company procedures. the fourth quasi-hypothesis, that quality has no discernible effect on the financial performance of listed banks in nigeria, is thus rejected by this study based on the aforementioned data. the amount is 0.027 and is equal to 5%. 5. conclusions and recommendations the study's findings indicate that while liquidity has a detrimental impact on the performance of the time deposit institution, the balance of assets, revenue, and profit do not. the study also recommended the following things: i. banks should focus their investments on low-risk initiatives, set up efficient internal procedures, and lay down precise rules. to assure security, banks should boost their reserves. the analysis of the bank's foreign revenue is particularly significant since it demonstrates the connection between the return on investment and the factors that affect the bank's overall income. in addition to doing financial management in other areas, we urge banks to seize all available financial possibilities. ii. in order to save expenses, banks must be aware of the requirements of each firm and maintain an adequate level. banks are urged to diversify their holdings, particularly by providing low-income customers with goods that big banks sometimes ignore. for businesses aiming to generate long-term earnings, banks have to take into account shifting more funds to banks. iii. therefore, in order to obtain money for ongoing obligations and aid banks in boosting their earnings, we advise banks to assess their financial systems. iv. participating public banks should prioritize performance enhancement in order to boost the industry's productivity and competitiveness. references abata, m. a. (2014). asset quality and bank performance: a study of commercial banks in nigeria. research journal of finance and accounting, 18(5), 39–44. aktan, b., turen, s., tvaronavičienė, m., celik, s., & a. a. h. (2018). corporate governance and performance of the financial firms in bahrain. polish journal of management studies., 17, 39–58. al-tamimi, m.a.k., & obeidat, f. s. (2013). determinants of capital adequacy in commercial banks of jordan an empirical study. international journal of academic research in economics and management sciences. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 154 alemayehu, a., belete, k. a. (2019). assessing the effect of operational efficiency on the performance of private and state owned commercial banks in ethiopia. open journal of economics and commerce, 2(4), 18– 27. asfaw m. s. (2018). determinants of financialperformance of privately owned commercial banks in ethiopia a research project submitted to the board of postgraduate studies in partial fulfilment of the requirements for msc, edo state university bcom, m. o. o. . (2018). an evaluation of the effect of cash flow management activities on financial performance of manufacturing firms listed at nairobi securities exchange. a research project submitted to the board of postgraduate studies in partial fulfilment of the requirements. kisii university. bhattarai m.l. (2019). the impact of credit risk managemant on the financial performance of nepalese commercial banks. journal of economics and finance management 4(3)87-111 cbn, (2016). financial stability reports. www.cenbank.gov.ng charmler, r., musah, a., akomeah, e & gakpetor, d. e. (n.d.). the impact of liquidity on performance of commercial banks in ghana. academic journal of economic studies, 4(4), 78–90. cheruiyot, k. r. (2016). the effect of asset quality on profitability of commercial banks in kenya. university of nairobi. demirgüne, k. (2016). the effect of liquidity on financial performance: evidence from turkish retail industry . international journal of economics and finance, 8(4), 971–9728. efeeloo, n., ofor, t. n. & onuorah, j. k. v. (2020). cash flow management and financial performance of quoted oil and gas firms in nigeria. journal of accounting and financial management, 6(4), 2695–2211. el-masry s. a, & yousry h. determinants of capital adeuacy raqtio qbetqween islamic and conventional banks. journal of political economy, 91(3), 401–419. guardian news paper may 2018, page 12.. statement by umaru ibrahim; managing director ndic. hewaidy, a. m. &alyousef, h. y. (2018). bank specific and macroeconomic determinants of capital adequacy ratio: evidence from kuwaiti banks. european journal of economics, finance and administrative sciences, 99(10), 172–189. i. m. f. (2017). global financial stability report, april. international monetary fund, washington. joan., n. o. (2015). effect of liquidity on financial performance of financial gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 155 institutions listed in the nairobi securities exchange. university of naqirobi. kokeno, s. o., & muturi, w. (2016). effects of chief executive officers' characteristics on the financial performanceof firms listed at the nairobi security exchange. international journal of economics, commerce and management, iv(7), 307–318. kumar, m.& yadav, c. g. (2013). liquidity risk management in bank: a conceptual framework. aima journal of management & research, 7(2/4), 0974 – 497. lawal, t.t ., oluoch, o & muturi, w. (2018). effect of asset quality on the operational efficiency of deposit money banks in nigeria. international journal of economics, commerce and management, 6(6). liu, h., wu, s., zhong, c & liu, y. (2020). the sustainable effect of operational performance on financial benefits: evidence from chinese quality awards winners. lotto, j. (2018). the empirical analysis of the impact of bank capital regulations on operating efficiency. international journal financial study, 34(6), 390–411. lucy, c. o, nnenna, c. & nnenna, o. (2018). effect of liquidity on financial performance of deposit money banks in nigeria. journal of economics and sustainable development, 9(4), 1700–2855. mutumira, m. a. (2019). effect of capital adequacy on the financial performance of insurance companies in kenya. international academic journal of economics and finance, 11(9), 251–266. muraya i. a. (2018). influence of cash flow on finacial perfromance of investment firms in nairaobi.evidence from nairobi banking industry.unpublished mba project, university of nairobi. ndolo, s. p. (2015). the relationship between operational efficiency and financial performance of firms listed at the nairobi securities exchange. a research project presented in partial fulfillment of the requirements for the award of the degree of master of science finance,. university of nairobi. nwakaego, a.d., ikechukwu, o and ifunanya, c. . (2015). effect of cashflow statement on company’s performance of food and beverages companies in nigeria. world applied sciences journal, 12(33). nwakaego, a.d., ikechukwu , o and ifunanya, c. l. (2015). effect of cash flow statement on company’s performance of food and beverages companies in nigeria. world applied sciences journal, 33(12), 1852–1857. ogbonnaya, k.a., ekwe, c, m and uzoma, j. i. (2016). relationship of cash flow ratios and financial performance of listed banks in emerging gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 156 economies – nigeria. european journal of accounting, auditing and finance research, 4(4), 89–97. ogboru, j. . (2019). asset quality and deposit money banks performance in nigeria. american international journal of business and management studies, 1(1). okeke c.e & anuorah a. (2018). operational risk management and organisational performance of banks operating in edo state, nigeria. journal of finance and auditing, 10(3) 93-99 osazefua, i. j. (2019). operational efficiency and financial sustainability of listed manufacturing companies in nigeria. journal of accounting and taxation, 11(1), 17–31. oyieko a. m. (2018). impact of cash flow management activities on the performance of manufacturing companies quoted at nairobi security and exchange. nairobi journal of economics and busines management.23(9), 45-55 peter r. t, lukaman o. & james d. j. managerial ownership , capital structure and firm value : osun state university accounting business & finance journal, 3(5), 73–92. ray, s., and mahapatra, k. s. (2019). departmentasset quality and performance: an empirical study of indian microfinance institutions. int. j. services, economics and management, 10(3). sile p.j. olweny k. & sakwa h. b. (2019). determinants of capital adequacy in the banking sub-sector of the nigerian economy: international journal of academic research in business and social sciences, 2278–6236. soet, m.a, muturi w. & oluoch, o. (2018). effect of operating cash flow management on financial performance of mutual funds in kenya. european journal of business, economics and accountancy, 5(6), 37–46. sporta n. ngumi o. & nanjala h. s. (2018).the impact of operational efficiency as a factor of commercial distress of financial performance in kenya commercial banks. international research journal of banking and finance, 61(4), 279–299. sufian, f. (2007). the efficiency of islamic banking industry: a non-parametric analysis with non-discretionary input variable. islamic economic studies, 14(1&2). swamy, v. (2017). determinants of bank asset quality and profitability: an empirical assessment. applied economics quarterly, 63(1). t.h., w. (2011). determinants of capital adequacy in the banking sub-sector of the nigerian economy: efficacy of camels (a model specification with co-integration analysis). international journal of academic research in business and social sciences, 2278–6236. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 157 udom, i., &eze, o. (2018). effect of capital adequacy requirements on the profitability of commercial banks in nigeria. (2018). international research journal of finance and economics, 65(6), 79–89. uremadu, s. . (2004). financial management: concepts, analysis and applications. enugu: precision publisher limited. vargha, a., bergman, l. r., & delaney, h. d. (2013). interpretation problems of the partial correlation with nonnormally distributed variables. quality and quantity, 47(6), 3391–3402. https://doi.org/10.1007/s11135-012 9727-y wadesango b. m, tinawo s. & machingambi j. d. (2019). impact of cash flow management on profitability and susutainabilty of small and medium scale enterprises in zimbabwe. westerlund, j., & narayan, p. k. (2012). does the choice of estimator matter when forecasting returns?. journal of banking and finance, 36(9), 2632– 2640. https://doi.org/10.1016/j.jbankfin.2012.06.005 wooldridge j.m. (2011). introductory econometrics. journal of contaminant hydrology, 120–121. https://doi.org/10.1016/j.jconhyd.2010.08.009 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 158 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 i gusau journal of accounting and finance (gujaf) vol. 3 issue 3, october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ii © department of accounting and finance vol. 3 issue 3 october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com mailto:abupress2020@yahoo.com http://www.abupress.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos stat gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. muhammad aminu isa department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. prof. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeiza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vi advisory board members prof. kabiru isah dandago, bayero university kano,kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng mailto:elfarouk105@gmail.com http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng mailto:elfarouk105@gmail.com mailto:05@gmail.com http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ix contents capital structure and firm financial performance of listed deposit money banks in nigeria: moderating effect of board financial literacy anas idris abdulwahab, hussaini bala ph.d, mansur lubabah kwambo ph.d, & abubakar adamu 1 influence of socialization on msme compliance by mediating understanding and moderating knowledge of tax visits yayuk ngesti rahayu 17 does international financial reporting standard narrows audit expectation gap? musa ibrahim dauda, ibrahim adagye dauda, phd 35 sustainability reporting and financial performance of listed manufacturing firms in nigeria aiyesan, olabode olutola ph.d 49 firm attributes and financial reporting timeliness of listed consumer goods firms in nigeria akume james terkende, dele ikese karim 67 value relevance of accounting information for listed financial service firms in nigeria kassim busari, ishaya luka chechet ph.d, aliyu ahmed abdullahi ph.d, & ibrahim mohammed ph.d 87 nigeria economic growth and capital market development: does contributory pension scheme matter? akinwumi ayorinde olutimi, toluwa celestine oladele ph.d, &adeboye emmanuel sanmi 101 audit committee and financial reporting quality: the moderating effect of board independence of listed deposit money banks in nigeria kassim yusha’u shika, mark david kantiyok 117 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 x determinants of financial performance of listed deposit money banks in nigeria mary seansu lazarus, nurradden usman miko ph.d, & saifulahi abdullahi mazadu ph.d 140 human resource accounting and profitability of listed depositmoney banks in nigeria ahmad adamu ibrahim, ahmad rufa’i adamu, fatihu mahmud alhassan &muhammad iliyas abdulsalam 158 board independence, audit effectiveness and the quality of reported earnings in the nigerian consumer goods firms isah shittu ph.d, misbahu, abubakar muhammad 175 impact of capital structure on financial performance of listed agricultural companies in nigeria ahmad muhammad ahmad, shehu usman hassan ph.d., &abubakar abubakar 192 trade oriented money laundering and era of cybersecurity tax evasion in nigeria oluwayemi joseph kayode, adewole joseph adeyinka ph.d, adewale abass adekunle & kadiri kayode ph.d 205 effect of females in the boardroom on corporate sustainability reporting salami suleiman ph. d, olanrewaju atanda aliu ph.d 224 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 192 impact of capital structure on financial performance of listed agricultural companies in nigeria ahmad muhammad ahmad department of accounting, nigerian army university biu. +2348060305681, shaktarmakarfimail@gmail.com shehu usman hassan ph.d. professor of accounting and finance department of accounting, federal university of kashere, gombe state. +2348067766435 shehuhassanusman@gmail.com abubakar abubakar department of accounting, federal university of kashere, gombe state. +2347030072314 abubakarabubakar2020@gmail.com abstract a company is usually faced with the challenge of financing investments; the management is to decide on the optimal mix of capital structure decision. this study sets to investigate the influence that capital structure of a firm has on financial performance of listed manufacturing firms in nigeria for period spanning from 2017-2021. the dependent variable of the study is financial performance proxy by return on asset (roa) while the independent variable of the study is capital structure proxy by long-term debt, short term debt, total debt ratio and total equity ratio. the population of the study consist of all the 5 listed manufacturing firms in nigeria and the sampling technique was the census arriving at a 25 firm year observations. the multiple regressions was employed for the data analysis and the study revealed that long-term debt ratio has a negative insignificant relationship with return on asset while short-term debt, total debt ratio and total equity ratio have positive significant influence on return on asset. the study recommends that the management of listed manufacturing firms in nigeria should pay attention in curtailing long-term debt and improving on short term debts in order to improve financial performance. keywords: long-term debt, short term debt, total debt ratio, total equity ratio and return on asset doi: https://doi.org/10.57233/gujaf. v3i3.189 1. introduction capital structure of a firm is the mix between debt and equity. capital structure of a firm is the way in which the assets of the firm are financed. the firm may finance operations either by equity only or may decide to finance by both equity and debt mailto:shaktarmakarfimail@gmail.com mailto:shehuhassanusman@gmail.com mailto:n@gmail.com mailto:abubakarabubakar2020@gmail.com https://doi.org/10.57233/gujaf.%20v3i3.189 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 193 financing. capital structure is concerned with the mix of the sources of funds available to the firm to fund business operations and fund capital investments. if a business is to survive and grow the firm must take strategies to effectively structure its capital to determine optimal capital mix because it will be difficult to compete in the industry and gain market strength without a good structure of capital. one of the important decisions taken by management of a firm in finances is capital mix. sources of capital are internal and external; the internal sources consist of retained profits and or reserves which are sourced by owners while external sources contains short term which are loans and long term external source is debt. an important germane to existence, growth and sustainability of a firm is its capital structure. in capital structure mix firms should ensure that proportion of debt to be higher than that of equity (hung and duc, 2020).the forms of mix of the debt-equity can be in various forms; unlevered firm (100% equity and 0% debt), levered firm (0% equity and 100% debt) and a percentage of debt which can be referred to as capital mix. the majority of the capital structure of a firm can be the component of debt, or the equity to be the majority or an even mix of equity financing and debt financing. each of the two finances has its own merits and demerits. the fundamental approach of capital structure is of net operating income approach, value of high leveraged firm is the same with low leveraged firm. the relationship between capital structure and financial performance continues to be attracted in finance literature. financial performance explains the ability of management of a company to use assets/capital to generate revenue which will be able to satisfy the running expenses to declare profits which is to be distributed to shareholders. since the main objective of every firm is earning profits to the providers of capital for which management has invest and sacrifices certain portion of capital of the business provided by shareholders (swain & das, 2017). erasmus (2008) contended that a valuable tool that aids stakeholders to evaluate the financial position of firm is financial performance. financial performance explains the financial strengths of firm, financial weakness, opportunities as well as financial threats to the firm (dogarawa & harun, 2016). the performance of a firm is reflected in how effectively the resources of the company are managed by the firm. vatavu (2015) contended that liquidity, fixed assets, business risk, annual ratio of inflation and taxation were discovered by scholars to be among the factors that are influential for finance decisions in firm. according to julius, barine and oluwatosin (2015), in order to improve earnings management of company’s make gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 194 use of equity and debt consistently to finance business operations. an important issue in economic entities is financial performance as such firms must pay attention to financial performance to get the best out of it. financial performance is affected by the factors which may be internal to the firm or external. hung and duc (2020) argue that financial performance is widely believed as the mobilising effect of managing and using capital in a firm. they further opined that performance of business enterprise is an indicator of aggregate economic reflection of the extent of usage of process of factors of production. the extent to which financial objectives are achieved is referred to financial performance and it is the means to measure result of policies, strategies and operations of firm in monetary terms (eshna, 2020). the primary motive of every firm is to make profit and maximize wealth of providers of capital. the inability of management to make profit to firm means the business cannot survive. profit is a measure of management performance and as such there are many ratios adopted to measure performance; return on asset (roa), return on equity (roe), net profit margin (npm), return on investment (roi), dividend per share (dps), earnings per share (eps) among others. in this study return on asset will be adopted as measure of performance which is the dependent variable because it is believed by several scholars such as chowdhury (2020) to be the most suitable measure of performance of a firm by management in terms of level of asset employed. the capital mix of firm and the way in which it impacts on the activities of the company has been a subject of debate among literatures of finance for long. due to the development of capital structure literature many variables that affect financial performance and financing decisions were found. it has been found that several studies have been undertaken in order to assess how financial performance of firm is impacted by capital structure such as the studies of julius, barine and oluwatosin (2015); hung and duc (2020); swain and das (2017); osuji and odita (2012); muhammad (2019); sanusi, stephen and vivi (2020); sorana (2015). some of these studies have been done in different sectors leaving many areas untouched one of this area is the agricultural sector which will allow this work to have specific finding in order to proffer a suitable recommendation to the sector alone considering the peculiarity in the international financial reporting standards in agriculture. again looking at the important role of how adequate capital mix plays to prevent firm’s failures in different occasions especially during the covid 19 pandemic and the aftermath of covid 19 negative impact on financial performance which many companies have not fully recovered from the consequences. furthermore, the scope of many among the previous studies in the agricultural sector were from 2019 and below, and to the best of the researcher’s knowledge this study will be among the first studies to use the current scope of 2021. these gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 195 reasons gave the opportunity to fill the time gap in order to update the literature to address how a firm’s financial performance is impacted by capital structure among listed agricultural companies in nigeria. therefore, the main objective of this research is to examine the impact of capital structure on financial performance of listed agricultural companies in nigeria in order to fill the vacuum. 2. literature review this section reviewed empirical studies that looked into capital structure (long-term debt, short term debt, total debt ratio, total equity ratio) and how they react to financial performance. 2.1 review of related empirical literatures dahiru, dogarawa and haruna (2016) made an attempt to examined the effect of capital structure on financial performance of manufacturing firms listed on the nse for a period of six years spanning from 2009-2014, capital structure was proxy total debt to total asset, total debt to total equity, short term debt to total asset and long term debt to total asset while financial performance was proxy by return on asset. the panel data was analysed using the generalised least square regression. results revealed that three variables (total debt, short term debt and long term debt) have positive significant impact while only debt to equity was not significant with return on asset. the study recommends that management should increase the components of short term debt of capital structure. goyal (2013) investigated the influence of capital structure on performance of public sector banks in india for five years spanning from 2008-2012. long term debt, short term debt and total debt were proxy for independent variable whereas the dependent variable was proxy by return on asset, return on equity and earnings per share. results showed that a positive relationship between short term debt and all financial performance measures while long term debt showed negative relationship with performance measures. lin, khai, anh, linh, ha and nga (2022) made an attempt to examined the impact of capital structure of performance of firm in listed processing and manufacturing industries in vietnam for a period of 6 years spanning from 2015-2020. tobin’s q and return on asset were proxy for the dependent variable whereas the independent variable was proxy by short term debt and long term debt. the fgls model was used to analyse the secondary data. the results revealed that short term debt and long term debt have negative effect on return on asset while with regards to tobin’s q short term debt had no significant effect on performance while long term debt had a negative effect with performance. swain and das (2017) examined the impact of capital structure on financial performance and its determinants for a ten-year period, capital structure was proxy by current ration, long term debt to asset, total debt to asset and debt equity ratio gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 196 while the financial performance was proxy by return on asset, return on equity, return on capital employed and earnings per share. top 50 manufacturing listed firms were selected to represent the population, the multiple regression technique was employed for the analysis and results revealed capital structure has a significant impact on financial performance. olayemi and fakayode (2021) examined the effect of capital structure on financial performance of quoted manufacturing companies in nigeria for a period of seven years spanning from 2013-2019, capital structure was proxy by short term debt to total asset, long term debt to total asset, total debt to total equity and total debt to total asset ratio while financial performance was proxy by return on equity and return on asset. panel regression analysis was employed and results revealed total debt to total equity has no significant impact on return on asset, total debt to total asset ratio has negative significant impact on return on asset and return on equity. osuji and odita (2012) examined the impact of capital structure on financial performance of nigerian firms for 6 six years from 2004-2010, 30 listed non-financial companies were selected for the study, the dependent variable was proxy by return on asset and return on equity while independent variable was proxy by debt ratio, asset turnover and asset tangibility. ordinary least square regression was employed for the data and results revealed that debt ratio had significant negative impact on return on asset and return on equity. dinh and pham (2020) attempted to investigate the impact of capital structure on financial performance of vietnamese listing pharmaceutical enterprises from 2015 2019 (5 years), all the 30 listed companies were selected for the study, dependent variable was proxy by return on equity while independent variable (capital structure) was proxy by long-term asset ratio, financial leverage ratio and debt to asset ratio. the ordinary least square was adopted for the analysis and results revealed all the independent variables have positive impact on return on equity. muhammad (2019) examined the impact of capital structure on financial performance of consumer goods industry in nigeria for 5 years (2012-2016), only 6 six companies were selected to represent the population of the study, return on asset was financial performance proxy while short term debt, long term debt and shareholders’ fund were independent variables proxy. multiple regression analysis was employed and results revealed that only shareholders’ fund has significant positive impact on financial performance. lewis (2016) examined the effects of capital structure on the financial performance of firms listed at nairobi securities exchange for 5 years (2011-2015), 47 companies listed non-financial firms were selected for the study, return was proxy for dependent variable while debt ratio, quick ratio and fixed assets to total asset were proxy for capital structure. multiple regression technique was employed for the analysis and results revealed negative gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 197 significant relationship between capital structure proxy and financial performance proxy. sanusi, stephen and vivi (2020) examined the impact of capital structure on financial performance of deposit money banks in nigeria for a period of 10 years (2009-2018), only 5 banks were selected for the study from the population, long term loan to asset, short term loan to asset and total debt to asset were proxy for capital structure while return on asset was proxy for financial performance, the multiple regression was employed for analysing the extracted data. findings revealed short term debt to asset and total debt to asset to have significant positive impact on return on asset. sorana (2015) examined capital structure impact on financial performance in romanian listed companies for a period of 8 years (2003 2010), cross-sectional regression analysis was carried on the data, total debt, long term debt, total equity and short term debt were indicators of capital structure whereas return on equity and return on asset indicated financial performance. findings revealed that total equity have significant positive impact on financial performance. 3. methodology the study used correlational and ex-post facto research designs. the population is made up of entirely five listed manufacturing companies in nigeria whose shares are traded in the nigerian stock exchange (nse). the census sampling techniques were used to arrive at sampled. data were extracted from the annual reports and accounts of listed manufacturing companies in nigeria for the period of two (2) years 2017 to 2018. statistical tools such as descriptive, correlation and regressions were employed to analyse the results of the study. 3.1 variable and their measurements variables proxies variables measurement source dependent financial performance proportion of profit after tax to total assets.. abubakar, sulaiman and haruna (2018). long-term debt to total asset (ltda) long term debt/total asset. sanusi, stephen and vivi (2020) short-term debt to total asset (stda) short term debt/total asset. sorana (2015). gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 198 independent total debt to total asset.( tdta) total debt/total asset muhammad (2019) total debt to total equity. total debt/ total equity sorana (2015). firm size (fsz) natural logarithm of total assets. abubakar, sulaiman and haruna (2018). source: author 2023 model specification: the model below is specified for the study roait = β0it + β1ltdait + β2stdait + β3tdtait + β4tdteit + β5sizeit + ε where: roa = return on asset ltda = long-term debt to total asset stda = short-term debt to total asset tdta = total debt to total asset tdte = total debt to total equity size = size of the firm 4. result and discussion this section of the study is concerned with empirical result, data will be described and summarised. table 2: descriptive statistics data was entered into stata software for the descriptive statistics and it is presented for analysis as follows: table 2: descriptive statistics variable mean std. dev min max skewness kurtosis roa .162388 .191761 -.077723 .607413 1.267298 3.984202 ltda .201259 .118316 .027958 .399508 .456295 3.087036 stda .332747 .220003 .019973 .650036 .077840 1.758310 tdta .462372 .201620 .07568 .700758 -.649877 2.44070 tdte .371252 .183906 .04564 .650076 -.126280 2.260321 source: stata output version 13 from the 2 above, the average roa of the companies of the statistics of the variable is 0.162388, the highest is 0.607413 and the lowest is -0.077723 with a standard deviation of 0.191761, the skewness value 1.267298 and the skewness is 3.984202. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 199 the result suggests a moderate dispersion of the data from the mean. ltda shows an average of 0.201259, with the highest of 0.399508 and the lowest of 0.027958 with a standard deviation of 0.118316, the skewness is 0.456295 and the skewness is 3.087036. the skewness value suggests a wide dispersion from the mean of the data. furthermore, table 2 shows stda of listed manufacturing companies in nigeria has a maximum value of 0.650036 and a minimum value of 0.019973 with an average value of 0.332747, the peak of the data is indicated by the kurtosis with a value of 1.758310 suggesting that most of the values are higher than the mean, the coefficient of skewness of 0.077840 implies that the data is positively skewed, thus, the data meet the symmetric distribution. tdta has a mean value of 0.462372 with standard deviation of 0.201620, and a maximum of 0.700758 and minimum of 0.7568 respectively. this suggests that the dispersion of the data from the mean is not wide because the standard deviation ids close to the mean. moreover, table 2 indicate a maximum tdte value of 0.650076 with minimum of 0.07568 and mean value of 0.371252 respectively. this suggests moderate dispersion of data from the mean. the skewness of the data as indicated by the kurtosis value of 2.260321 suggesting that most of the values are higher than the mean, the co-efficient skewness of -1.26280 implying that the data is negatively skewed. table 3: correlation matrix the pearson correlation coefficient is present in this section of the study variables, the individual relationships between the explanatory variables and the dependent variable, on the other hand, the relationship between the independent variables themselves is described also. table 3: correlation matrix variable roa ltda stda tdta tdte fsz roa 1.0000 ltda -0.2580 1.0000 stda -0.0548 -0.2627 1.0000 tdta -0.0078 0.2603 0.4272 1.0000 tdte 0.3288 0.1613 0.2579 0.279 1.0000 fsz 0.3473 0.0172 0.2023 0.3391 0.2836 1.0000 source: stata output, version 13 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 200 table 3 shows that the relationship between roa and ltda is negative with about 26%, this implies that the relationship between roa and ltda is not a direct relationship. stda and roa have a negative relationship with about 5%, this implies that the relationship between is not a direct relationship. tdta is found to have a negative correlation of about 0.7% with roa implying a non-directional relationship between the variables. tdte recorded a positive relationship with roa at a magnitude of 32%, this implies that the relationship between tdte and roa is direct. for the association between the explanatory variables themselves, ltda and stda recorded a negative value of about 26% implying non-directional relationship between the independent variables. for the relationship between ltda and tdta shows a positive value of about 26% implying a direct relationship between the variables. ltda show a positive relationship of about 16% with tdte implying that the relationship is direct. the table 3 also show that the correlation between stda and tdta is positive at about 43% implying that the relationship is direct. stda is found to have a positive correlation with tdte at about 26%, this implies a moderate direct relationship. between tdta and tdte there is a positive correlation of about 62%, implying a direct relationship between the subsisting variables. summary of regression result the regression result of the parsimonious model is presented in this section of the study. the interpretation, analysis and discussion will follow. the formulated hypothesis earlier will be tested, policy implications of findings to management and investors will end the section. table 4.3: summary of regression result variable coefficient t-value p-value ltda -0.064413 -1.21 0.242 stda 0.120043 2.99 0.009 tdta 0.270664 3.69 0.002 tdte 0.303615 7.97 0.000 adjusted r-sq. 0.7662 mean vif 2.67 f-statistics f-significant 32.72 0.0000 source: stata output, version 13. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 201 from the table 5, the co-efficient value for ltda is -0.064413 with an insignificant p-value of 0.242. this signifies that ltda has an insignificant negative effect on roa of listed manufacturing firms in nigeria. this implies that for every increase in ltda, the roa of listed manufacturing firms in nigeria will decrease insignificantly by the co-efficient value. the result is in-line with goyal (2013); lin et al. (2022); muhammad (2019) and contrary to dahiru et al. (2016); sanusi et al. (2020). the result does not support the revised m&m theory which is of the opinion that capital structure affects the performance of the firm however the result is in line with the traditional m&m theory which is of the opinion that the performance of the firm has no relation with capital structure. the regression result for stda has a co-efficient value of 0.120043 with a t-value of 2.99 from the table 5, which is significant at 0.009 level of confidence. this signifies that stda of listed manufacturing firms in nigeria is positively and significantly affecting roa of listed manufacturing firms in nigeria. this implies that for every increase in stda, roa of listed manufacturing firms in nigeria will increase by the co-efficient value. this result is in line with dahiru et al. (2016); goyal (2013); sanusi et al. (2020) and contrary with lin et al. (2022); muhammad (2019). the result is in support of the revised m&m theory that posits capital structure of the firm affects the financial performance of the firm. the table 5 recorded a co-efficient value of 0.270664 and a t-value of 3.69 which is significant at 0.002 for tdta of listed manufacturing firms in nigeria. this shows that tdta is positive and significantly influencing roa of listed manufacturing firms in nigeria, this implies that for every increase in tdta, roa of listed manufacturing firms will increase by the co-efficient value. this result is in line with dahiru et al. (2016); swain and das (2017); dinh and pham (2020) and contrary with olayemi and fakayode (2021). as shown in table 5 tdte has a co-efficient value of 0.303615 and a t-value of 7.97 with a significant p-value of 0.000. this signifies that tdte has a positive and significant impact on roa of listed manufacturing firms in nigeria. this implies that for every increase in tdte, roa of listed manufacturing firms in nigeria will increase by the co-efficient value. the result is in line with swain and das (2017) and contrary to dahiru et al. (2016); olayemi and fakayode (2021). the result also supports pecking order theory and validates the revised m&m theory arguing that the more the firm raises capital through debt the high possibility of profit to increase and that financial performance of the firm is affected by the decision taken by management on capital structure because of the effect of tax on profits. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 202 for the overall model of the study, r2 showed 0.7662 values implying that roa of listed manufacturing firms in nigeria is explained by ltda, stda, tdta and tdte to tune of about 77%. the f-statistics value of 32.72 with significant level of 99% indicates that the model is fit and the variables selected were properly selected. 5. conclusion and recommendation the main aim of conducting this study is to investigate the relation of capital structure on financial performance of listed manufacturing firms in nigeria; this is because of the mix in findings of several scholars in the area of capital structure of the firm. hypotheses have been formulated to be tested in order to achieve the stated objectives, the study focused on capital structure and financial performance of the firm for a period of 5years and finally the study is set to be important to a diverse group of individuals ranging from management, investors, academicians and students. various literatures have been reviewed for empirical evidence. the post positivism is the paradigm of this study, all the 5 listed manufacturing firms consisted of the population of the study and census sampling technique was adopted, the multiple regression technique is adopted for the regression of the secondary data. in conclusion, the regression result of this study concludes that; ltda has no significant influence on financial performance of listed manufacturing firms in nigeria. stda has a significantly positive influence on the financial performance of listed manufacturing firms in nigeria. tdta has a significantly positive influence on financial performance of listed manufacturing firms in nigeria. finally, tdte also has a positive and significant influence on the financial performance of listed manufacturing firms in nigeria. therefore, it is recommended that management of listed manufacturing firms in nigeria should try to reduce the amount of long-term debt because to the firm because the more capital is raised through long term debt, the more the equity shareholders will also demand increase in their returns and this will have a negative impact on profits. management should pay attention on short debts because of its ability to settle them when due and also because of the positive influence they have on profits of the firm. shareholders are advice to encourage management to increase the amount of short term debts. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 203 the management is advice to implore more efforts as to the ability of assets employed to increase profits. shareholders should encourage the amount of debt taken by management of listed manufacturing firms up to the optimal level of both long term debt and short term debt because of the positive influence on financial performance. reference abubakar, a. mazadu, s. a. & yusuf, a. m. (2020). audit quality and earnings management of listed insurance companies in nigeria. gusau journal of accounting and finance, 1(1), 1-14. abubakar, a. sulaiman, i. & haruna, u. (2018) effect of firm characteristic on financial performance of listed insurance companies in nigeria. african journal of history and archaeology, 3(1), 1-9. dinh h, and pham c. d. (2020). effect of capital structure on financial performance of vietnamese listing pharmaceutical enterprises. the journal of asian finance, economics and business, 7(9), 329-340. goya, m. (2013). impact of capital structure on performance of listed public sector banks in india. international journal of business and management invention, 2(10), 35-43. ibrahim d, dogarawa, a. b., and muhammad a. h. (2016). effect of capital structure on financial performance of listed manufacturing firms in nigeria. doi:10.2139/ssrn.3492011. julius, b. a, nwidobie, b. m. and oluwatosin a. (2015). capital structure and financial performance in nigeria. international journal of business and social research, 5(2), 21-31. linh, h. do, k, t., luong, a, n. h. mai, linh, a. dam, ha, t. l. pham and nga, t. nguyen (2022). the impact of capital structure on firm performance: case of listed firms in processing and manufacturing industry in vietnam. international journal of economics, business and management research, 6(3), 96-111. muhammad u. (2019). the impact of capital structure on financial performance of consumer goods industry in nigeria. open journal of accounting, 8(4). doi: 10.4236/ojacct.2019.84004 olayemi, o. o. and fakayode, o. p. (2021). effect of capital structure on financial performance of quoted manufacturing companies in nigeria. european journal of accounting, auditing and finance research, 9(5), 73-89. oyedokun, k. a. job, o. and sanyaoulu w. a. (2018). capital structure and financial performance. accounting and taxation review, 2(1), 56-71. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 204 osuji c. c. and odita a. (2012). impact of capital structure on financial performance of nigerian firms. arabian journal of business and management review, 1(12), 4361. rabindra k. s. and chandrika p. d. (2017). impact of capital structure on financial performance and its determinants. international journal of informative and futuristic research, 4(11), 8404-8413. vătavu, s. (2015). the impact of capital structure on financial performance in romanian listed companies. procedia economics and finance, 32, 13141322. sanusi b, stephen, p. and vivi p. v. (2020). impact of capital structure on financial performance of deposit money banks in nigeria. international journal of management, social sciences, peace and conflict studies, 3(4), 135-147. sorana v. (2015). the impact of capital structure on financial performance romanian listed companies. procedia economics and finance, 32, 1314-1322. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 1 moderating effect of foreign-domestic ownership ratio on firm attributes and environmental disclosure in nigerian oil and gas quoted companies christian iyafekhe phd, osamagbe annabel utomwen, imuetinyan eguavoen & nelson oke egware department of accounting university of benin, benin city, edo state-nigeria christian.iyafekhe@uniben.edu, kingmueti@yahoo.com nelsonegware@gmail.com abstract the focus of this study is on the assessment of environmental disclosure: the moderating effect of firm attributes and foreign-domestic ownership ratio with specific interest on the role of firm size, leverage and profitability. secondary data retrieved from the annual reports of oil and gas quoted companies on the stock exchange of nigeria was employed in the study. the study period spans from 2010-2018 and the generalized least squares (gls) regression was used for the estimation of the specified models. the findings of the study show that profitability has a significant impact on environmental reporting of oil and gas quoted companies in nigeria while leverage and company size have no significant impact on environmental reporting of oil and gas quoted companies in nigeria. the study further revealed a significant moderating effect of foreign-domestic ownership ratio on the relationship between firm size, leverage, profitability and environmental reporting. the study recommends that firms that are well to do financially should pay more attention to environmental reporting and firms should improve their environmental performance irrespective of their leverage. the study further recommends that both small and big firms need to improve their environmental performance and the presence of more foreign-domestic ownership should lead to more robust disclosures of environmental issues. keywords: company size, environmental disclosure, profitability, foreign-domestic ownership ratio, nigeria. jel classification: m490 1. introduction the environment is a vital concern in today ‘s ecological, social and economic set up and environmental accounting disclosure has emerged extensively in response to issues of global concern, such as gas flaring, greenhouse warming effects, water pollution and other negative environmental impacts. corporate activities are increasingly becoming a key threat to the environment and this has gone to a point where a lot of attention is now been directed to the roles of corporations and the initiatives put in place to tackle the growing environmental challenge (anderson, 2009). the way corporate entities have responded and are still responding to the environmental concerns are not the same across firms and among countries. the mailto:christian.iyafekhe@uniben.edu mailto:kingmueti@yahoo.com mailto:nelsonegware@gmail.com gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 2 concern for the environment has evolved to a mainstream issue. prior studies opined that the environmental threat that is being faced globally is coming as an opportunity cost to economic growth. there have been various initiatives and frameworks put in place to address environmental challenges at a global stage or level, the accounting profession on one end of the spectrum has evolved as a disclosing approach that can make organisation responsible for the environment in which they carry out their operations. consequently, a segment of accounting known as environmental accounting and disclosure has now emerged in order to capture the link between corporate impacts on the environment. in the views of howes (2002), environmental accounting is concerns with the identification, measurement and the monetization of information that is of environmental concerns and disclose such to achieve the broad goals of the organisation with focal interest on both environmental and financials. in environmental and social reporting, corporations are not expected to disclose just financial information, they are expected to also disclose the non-financial information about the effects of the way they operate on the immediate community as well. environmental reporting consists of information that relates with the operations of companies, aspirations and the image of public in the community (haider, 2010). the main aim of social reporting is to ensure that various stakeholders are communicated with what is being carried out in the environment. this can determine the relationship a company has with the stakeholders. a lot of advantages are involved in assisting companies to define their responsibility to the community and render assistant to management in carrying out proper assessment of environmental impact. with the risk of investors moving from fossil to green investments, environmental reporting aid to attract foreign investments. environmental reporting likewise face some challenges as well, and the obvious one is the lack of internationally acceptable reporting standards and guidelines. this coupled with the shortage of environmental professionals and experts to report on environmental issues making it expensive venture. now, it is evidence that the relatively nascent field of environmental disclosure has grown in prominence with data to test its influence on firm’s broad objectives. following a global trend, corporations are now paying more attention to environmental disclosures (halme, roome & dobers, 2009). however, one key issue is that environmental disclosing is a rather voluntary activity and this implies that companies are not compulsorily required to make environmental disclosures. this has created a scenario where environmental disclosure practices have evolved in a very much unstandardized context though several global institutions such as the global reporting institute gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 3 (gri) amongst others which are not necessarily accounting standard setters have tried to provide leads as to what companies should report. these guidelines and suggestions emanating from the drivers are not binding, companies may decide to follow or not these standards depending on their motives. investigating the factors that drive environmental reporting of firms has been a huge area of interest for accounting researchers given that such actions are voluntary particularly in developing countries though this is not the case for developed market due to the strong institutional frameworks that ensure that even though accounting standards in this area are not lucid and adequate, institutional pressures are sufficient to ensure compliance. consequently, firm’s attributes have been one of the perspectives to investigating the factors affecting environmental disclosures. unlike prior studies, this study moves further by adopting a moderating approach in estimating the impact of firm size, leverage, and profitability on environmental disclosure. the justification for this approach is largely because in most developing and emerging market, attracting foreign investment could be influenced by foreign practices. the skewness of oil and gas companies in nigeria towards foreign participation makes the incorporation of ownership nature as a moderating factor necessary. it is against this backdrop, the study addresses the following questions, i. what is the effect of firm size on environmental disclosures of oil and gas quoted companies in nigeria? ii. what is the impact of leverage on environmental disclosures of oil and gas quoted companies in nigeria? iii. to what extent does profitability influence environmental disclosures of oil and gas quoted companies in nigeria? iv. what is the moderating effect of foreign-domestic ownership ratio on the relationship between firm size, leverage, profitability and environmental disclosures of oil and gas quoted companies in nigeria? 2. literature review and hypotheses development there are a huge number of budding empirics on this discourse (ahmad, hassan & mohammad, 2003). in this respect, many of the studies in this area, focused on external attributes of the firm (monteiro & aibar-guzmán, 2010) by looking at the effect of factors such as the, financial leverage, firm size, financial performance amongst others. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 4 firm size we tend to generally believe that bigger firms will want to disclose more environmental information than what smaller firms will want to do. this is because big firms are more noticeable by the public and hence it is often more beneficial for them to do what is expected (watts & zimmerman, 1978). it is the case that bigger companies may be more inclined to be environmentally responsive than smaller ones because in most cases they have a higher stake and a broader spectrum of stakeholders (patten, 1991). again there is the view that bigger companies tend to be very visible even to regulatory bodies and hence come under scrutiny easily. previous works in this area, have examined how the firm size can influence environmental disclosure (nazari, herremans & warsame, 2015; shamil, herremans & warsame, 2014). in these studies, the legitimacy theory is often used (kolk & perego, 2010) and the perception is that bigger firms are more visible and hence need to maintain their legitimacy, they also have more resources (kansal, joshi & batra, 2014; lourenço & branco, 2013), and have reduced cost of reporting (jennifer, ho & taylor, 2007). therefore, there is a broad expectation that bigger firms will disclose more environment allowing to the need to maintain their legitimacy with society and stakeholders (purushothaman, 2000). reverte (2009), wang, song and yao (2013) have shown in their studies that the firm size has a strong effect on environmental disclosures. firm size can be considered to impact positively on environmental disclosures because the damage on their reputation and stakeholder relations will be higher for such firms than for smaller firms and also they also tend to face more pressures in this regards (fortanier, kolk & pinkse 2011; gallo, jones & christensen, 2011). finally, looking at marginal cost implications of reporting, it will be lower for bigger firms than small companies. ho1: firm size has no significant impact on environmental disclosures of oil and gas quoted companies in nigeria. leverage lenders are part of the groups having stakes in a company owing to the risk they face if companies do not fulfill their obligations to repay their debts (kuzey & uyar, 2016). companies are much concerned about this class of stakeholders and as such would do whatever is deemed necessary to allay their worries and address their interest. (artiach, et al., 2010). therefore, in the bid to manage these classes of stakeholders companies have been known to disclose more information in a bid to become more transparent. particularly, high leverage firms are disposed to disclosing much to show that they are willing and able to meet obligations (ho & gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 5 taylor, 2013). as it is already known, high level of debts can affect the ability of the firm to carry on the cost associated with environmental disclosures and thus also such firms may not be able to handle the damages that may result when information is disclosed that is not to their benefit (stanny & ely, 2008). again, there is the view that firms using more debts are also exposed to management and shareholder crisis or agency costs (alsaeed, 2006). to be able to deal with these, the line of action for firms with high leverage is to disclose more voluntarily. however, haniffa and cooke (2005) also noted that environmental reporting can be a way for highly levered firms to gain some level of trust and confidence from their creditors and indeed stakeholders at large and therefore, the firm leverage can serve as motivation for disclosure. examining the key points of the legitimacy theory, it can be inferred that companies may make disclosures with the aim in mind to inform stakeholders (magness, 2006), with particular attention on environmental impacts. the expectation may be that firms that are highly levered do not disclose any information regarding their impacts on the environment and their responsibility to disclose may face a threat. ho2. leverage has no significant impact on environmental disclosures of oil and gas quoted companies in nigeria. profitability the profitability of a firm could be a very crucial factor that can influence environmental disclosure of the firm. the basis for this is that companies that are profitable may feel the need to report on the environment to improve relationship with stakeholders (legendre & coderre, 2013). studies have revealed that when firms become profitable, it may be able to bear the costs of that outcome with environmental disclosure and to also handle the outcomes that could follow when a firm reports environmental information that is not to the benefit of the firm (kent & monem, 2008). nevertheless, the available studies investigating this issue have come out with mixed findings. some studies (akrout & othman, 2013; alarussi, reverte, 2009; setyorini & ishak, 2012; suttipun & standton, 2011) revealed that a positive relationship, exist, while others (barako, hancock & izan, 2006; smith, yahya & amiruddin, 2007) did not find such a relationship. ho3: profitability has no significant impact on environmental disclosures of oil and gas quoted companies in nigeria. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 6 foreign-domestic ownership ratio the firm ownership structure particularly in relation to the foreign-domestic ownership ratio is looked at in this study as a moderating factor in environmental disclosure. foreign investors are likely to have different values and knowledge due to their foreign exposure and the regulatory requirements in their home country when compared to domestic investors. in their views karim, lacina and rutledge (2006) argued that companies that have their businesses abroad especially in developed markets face more intense environmental regulation and hence in such environments there is a high attention to environmental matters leading to more robust disclosures of environmental issues. in companies where there is a high foreign ownership concentration, there is improved attention to voluntary environmental disclosures (muttakin & subramaniam, 2015). it is being identified that when a company has high foreign ownership, there will be more pressure on management to be environmentally responsive and hence engage in reporting (bradbury, 1991). foreign owners are also more knowledgeable and aware of the need for companies to be more socially responsive in the broader community, and thus may have to align with mimetic pressures through environmental disclosures similar to those in multinational firms. ownership structure in the views of delgado-garcia, quevedo-puente and fuentesabate (2010) is seen as the residual claims contribution as well as the control that have consequences on the behavior of a firm. generally, the terms ownership structure focus at shareholder’s interest in a corporation. ho4: there is no significant moderating effect of foreign-domestic ownership ratio on the relationship between firm size, leverage, profitability and environmental disclosures of oil and gas quoted companies in nigeria. in the context of the relations from organization to society, the organizations responsibilities and the social expectations of them are defined, discovered, examined and revised constantly. the theory of legitimacy, according to suchman (1995) provided a view that the link existing between an organization and that of related social expectations is simply a fact of social life. this theory posits that the presence and operations of firms is ensured by the forces of the market and community expectations and hence an awareness of the broader concerns of society shown in community expectations becomes a requirement that is essential for the survival of an organization (suchman, 1995). the assumption of the theory is that an organization need to maintain its social role by addressing the needs of the gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 7 society and giving what is wanted by the society. this assumption has received support from the early study of guthrie and parker (1989). legitimacy is a position that is an outcome of the joint opinion of society as regards the operation of the organization. it is a social evaluation of the behavior of company that is carefully acceptable, and appropriately and desired. therefore, it is expected that companies will assume acceptable behavior or at least to be seen in that manner with the intention that they are understood to be good company citizens. emphases has been laid by suchman (1995) that legitimacy is a generalized view that the entity actions are desirable, appropriate or proper within some socially constructed systems of values, norms, definitions and beliefs. the essential principle of the theory of legitimacy is that the view of the company by the community is derived from how that company has acted in line with the determined social expectations. within the social and environmental accounting literature, legitimacy theory provides insight to describe and likewise give explanation to the level of environmental changes that are responsive by an organization. 3. methodology and model specification this study uses a longitudinal research design. the population of the study comprises of all oil and gas quoted companies presently on the floor of the nigerian stock exchange (nse) as at december 2018. the data were sourced from the sampled company annual reports from 2010-2018. in extracting the information on the qualitative disclosure, content analysis was employed by the researcher. in computing the data for qualitative disclosures from annual reports, the disclosure index is generated using the cooks (1993) dichotomous method as cited in haniffa and cooke (2005). under the cooks method, if an item is disclosed, it is scored as 1, if not it is scored as 0 and items not applicable to every company is scored na (not applicable). the following model is developed for the study; envdisit = ∂0 + ∂1fsizeit*f/d-own + ∂2levit*f/d-own + ∂3profit*f/down + µit ------(i) where; envdis = environmental disclosures i = number of sampled cross-sectional firms t = time period of the sampled companies ∂0 = constant gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 8 fsize = firm size f/d-own = foreign-domestic ownership lev = leverage prof = profitability µ = stochastic term. the apriori signs are ∂1 > 0, ∂2 > 0 and ∂3 > 0. 4. presentation and analysis of results table 1: descriptive statistics envdis fsize lev prof f/d-own mean 0.43357 7.211272 1.823034 4.198609 2.74956 median 0.357143 7.077112 1.215395 3.462141 2.26031 maximum 1 9.637756 43.0102 232.6198 3.175454 minimum 0 4.937655 0.256443 -88.9854 0.31792 std.dev. 0.199556 0.909296 2.130501 13.40564 0.230858 skewness 0.797486 0.419118 9.628676 4.536814 2.289048 kurtosis 2.982601 2.867026 156.8396 94.59274 13.18274 jarque-bera 104.5259 29.59318 98.75393 34.8040 51.2092 probability 0.00 0.00 0.00 0.00 0.00 source: e-view output (8.0), 2020 the descriptive statistics of the data is shown in table 1 above. it is observed that envdis has a mean value of 0.43357 with respective maximum and minimum values of 1 and 0. the mean envdis suggest that on the average the level of attention given to envdis issues is still relatively low. the standard deviation which shows the dispersion of the data as regards the mean is quite low at 0.199 which further suggest clustering of the firm particular scores around the mean. hence there is need for the firm to improve on their reporting on envdis related issues. prof has a mean value of 4.198609 with respective maximum and minimum values of 232.6198 and -88.985. the standard deviation of 13.4056 reveals the dispersion of the firm precise values from the distribution mean. the average lev is 1.8230 with maximum and minimum values of 43.0102 and 0.256 respectively and standard deviation of 2.1305. the mean value for fsize stood at 7.2113 with maximum and minimum values of 9.6377 and 4.937 respectively with a standard deviation of 0.909. the mean for f/d-own is 2.74956 which implies that that on the average, the foreign ownership is more than twice the domestic gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 9 ownership presence and hence on the average oil and gas companies in nigeria tend to have a higher foreign ownership presence than domestic ownership with a maximum value of 3.175454 and minimum value of 0.31792 respectively. the standard deviation illustrating the dispersion of the data about the mean is relatively low at 0. 231.the jacque-bera statistics for all the variables reveals that the series are normally distributed given that the j.b values are all less than 0.05. this implies the absence of significant outliers in the data. table 2: pearson correlation matrix envdis fsize lev prof f/down envdis 1 fsize 0.384071 1 lev 0.032479 -0.04693 1 prof -0.36868 -0.0244 -0.03526 1 f/d-own -0.08706 0.109934 -0.02103 0.522008 1 source: e-view output (8.0), 2020 the coefficients of correlation are examined from table 2 above. however, study particular interest is the correlation between envdis and the independent variables. as ascertained, a positive correlation exists between envdis and the following variables; fsize (r = 0.384071), and lev (r = 0.032479) but negatively correlated with prof (r = 0.36868) and f/d-own (r = -0.08706). the positive coefficient suggests that an increase in these variables could be associated with increases in envdis and vice-versa. on the other hand, a negative correlation suggests that increase in these variables could be associated with decreases in envdis and vice versa. though the provision of some level of insight into the degree as well as direction of association between the variables, the analysis of the correlation is found to be limited in its inferential ability mainly because it does not entail functional dependence, hence, causality in a strict sense. the analysis of the regression is better suited forth is purpose. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 10 table 3: regression results apriori sign model 1 model 2 model 3 c + -1.3606 (1.3892) {0.3531} 5.715 (1.5043) {0.0126} -0.2169 (1.2975) {0.8738} fsize + 0.5865 (0.4367) {0.2122} fsize*f/d-own + 8.227* (4.7126) {0.0148} lev + -1.06653 (0.4141) {0.4497} lev*f/d-own + -0.1114 (0.2976) {0.723} prof + 0.5514 (0.2367) {0.0473} prof*f/d-own + 3.9482* (0.2333) {0.0456} r2 0.3735 0.455 0.534 adjusted r2 0.095 0.682 0.415 s.e. of regression 2.3055 2.894 1.7235 f-statistic 4.3418 4.933 21.302 p(f-stat) 0.016 0.040 0.00 d.w 2.09 2.10 1.94 source: e-view output (8.0), 2020 *significant at 5%. the regression results in table 3 shows the estimations conducted to study the impact of corporate attributes on environmental disclosures with the moderating effect of ownership structure. model 1 results shows r2 is 0.3735 which suggest that the model of the firm size explains about 37.4% of systematic variations in market value. the f-statistic 4.341 (p-value = 0.016) that is found to be significant at 5% suggest that the significant linear relationship hypothesis between the dependent and explanatory variables cannot be rejected. it is an indicative of the gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 11 joint statistical significance of the model. the d.w statistics of 2.09 shows unlikely presence of serial correlation in the residuals. firm size was found to exert a positive (0.5865) but not statistically significant (p = 0.4367) effect on envdis at 5% level but when interacted with the f/d-own, we observed an increase in the slope coefficient to 8.227 and is now statistically significant (p = 0.0148) at 5%. this implies that the increase in the foreign-domestic ratio has a significant moderating effect on the relationship existing between firm size and envdis. hence the result suggests that given the firm size level taken as a constant, the ownership structure pattern can determine the level of attention given to envdis. model 2 shows that the regression r2 is 0.455 which imply that the model gives an explanation of about 45.5% of the systematic variations in envdis. the f-statistic of 4.933 (p-value = 0.040) which is found to be significant at 5% suggest that the significant linear relationship hypothesis between the dependent and independent variables cannot be rejected. it is likewise an indicative of the joint statistical significance of the model. the d.w statistics of 2.10 shows unlikely presence of serial correlation in the residuals. lev was found to exert a negative (-1.0665) but not statistically significant (p = 0.4497) effect on envdis at 5% level. when the f/d-own is introduced, we observed that lev is still negative and also not statistically significant (p = 0.723) at 5%. this implies that the f/d-own does not significantly moderate the relationship between leverage and envdis. model 3 shows the regression r2 is 0.534 and this suggest that the model gives an explanation of about 53.4% of systematic variations in envdis. the f-statistic 21.302(p value = 0.00) which is significant at the level of 5% and suggest that the significant linear relationship hypothesis between the dependent and independent variables cannot be rejected. it is also indicative of the joint statistical significance of the model. the d.w statistics of 1.94 indicates the presence of serial correlation in the residuals is unlikely. prof was found to exert a positive (0.5514) and statistically significant (p = 0.0473) effect on envdis at 5% level. when the f/down dummy is introduced, we observed an increase in the slope coefficient to 3.9482 and is also statistically significant (p = 0.0473) at 5%. this implies that though prof was had a significant effect on envdis without the introduction of f/d-own, with the moderation of owns in the model, the effect is stronger that it was without and hence we can conclude that f/d-own has an enhancing effect on the relationship between prof and envdis. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 12 hypotheses testing and discussion of result ho1: firm size has no significant impact on environmental disclosures of oil and gas quoted companies in nigeria. the results shows that firm size was found to exert a positive (0.5865) but not statistically significant (p = 0.4367) effect on envdis at 5%. hence, we accept the hypothesis that firm size has no significant impact on environmental reporting of oil and gas quoted companies in nigeria. it is almost the case that generally we tend to believe that bigger firms will want to disclose more environmental information than what smaller firms will want to do. this is because big firms are more noticeable by the public and hence it is often more beneficial for them to do what is expected (kansaletal., 2014; lourenço and branco, 2013). in contrast to our findings, reverte, (2009) and wanget, et al. (2013) have all shown in their studies that the firm size has a strong effect on environmental disclosures. ho2: leverage has no significant impact on environmental reporting of oil and gas quoted companies in nigeria. lev was found to exert a negative (-1.0665) but not statistically significant (p = 0.4497) effect on envdis at 5% level. hence, we accept the hypothesis that leverage has no significant impact on environmental reporting of oil and gas quoted companies in nigeria. ho3: profitability has no significant impact on environmental reporting of oil and gas quoted companies in nigeria. model 1 shows the regression result for financial performance and envdis. prof was found to exert a positive (0.5514) and statistically significant (p = 0.0473) effect on envdis at 5% level. hence, we reject the hypothesis that profitability has no significant influence on environmental disclosures. studies have revealed that when firms become profitable, it tends to make them more able to bear the costs of that comes with environmental reporting and to also handle the outcomes that could follow when a firm reports environmental information that is not to the benefit of the firm (haniffa and cooke, 2005; kent and monem, 2008). nevertheless, the available studies investigating this issue have come out with mixed findings. some studies (akrout & othman, 2013; artiach et al., 2010; liu and anbumozhi, 2009; lourenço and branco, 2013; setyorini &ishak, 2012; gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 13 suttipun & standton, 2011) revealed that a positive relationship, exist, while others (barakoetal., 2006; smithet et al., 2007) did not find such a relationship. ho4: there is no significant moderating effect of foreign-domestic ownership ratio on the relationship between firm size, leverage, profitability and environmental reporting of oil and gas quoted companies in nigeria. from the regression result, it is observed that firm size was found to exert a positive (0.5865) but not statistically significant (p = 0.4367) effect on envdis at 5% level but when interacted with the foreign-domestic ratio, we observed an increase in the slope coefficient to 8.227 and is now statistically significant (p = 0.0148) at 5%. this implies that the increase in the foreign-domestic ratio has a significant moderating effect on the relationship between firm size and evdis. hence, the results suggest that given the firm size level taken as a constant, the ownership structure pattern can determine the level of attention given to envdis. when the foreign-domestic ratio is moderated with lev, it is still negative and also not statistically significant (p = 0.723) at 5%. this implies that the foreign-domestic ratio does not significantly moderate the relationship between leverage and envdis. when the foreign-domestic ratio dummy is introduced with prof, we observed an increase in the slope coefficient to 3.9482 and is also statistically significant (p = 0.0473) at 5%. this implies that though prof had a significant effect on envdis without the introduction of foreign-domestic ratio, with the moderation of foreign-domestic ratio in the model, the effect is stronger. in their views karim, lacina & rutledge (2006) argued that companies that have their businesses abroad especially in developed markets face more intense environmental regulation and hence in such environments there appears to be a high attention to environmental matters leading to more robust disclosures of environmental issues. in companies where there is a high foreign ownership concentration, there is improved attention to voluntary environmental disclosures (muttakin & subramaniam 2015). therefore, the nature of ownership especially the foreign-domestic ownership ratio can affect the relationship between the firm’s attributes and environmental reporting. 5. conclusion and recommendations this study has empirically examined the determinants of environmental disclosure with focal interest on the moderating role of foreign-domestic ownership ratio. based on the findings of this study, the following recommendations are suggested; gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 14 firstly, the results show that company size was found to exert a positive but not statistically significant effect on environmental performance. the role of firm size has been a very dominant variable in several studies investigating environmental performance. the study recommends that both small and big firms need to improve their environmental performance. secondly, leverage was found not to have a significant impact on environmental reporting of oil and gas quoted companies in nigeria and this suggest that debtequity ratios of companies is neutral in affecting environmental performance of companies. hence the study recommends that firms companies irrespective of their leverage levels should improve their environmental performance. thirdly, the result shows that profitability was found to exert a positive and statistically significant effect on environmental disclosure at 5% level. this suggest that as firms become profitable, it tends to make them more able to bear the costs of that comes with environmental reporting and to also handle the outcomes that could follow when a firm reports environmental information that is not to the benefit of the firm. the study recommends that firms doing well financially should pay more attention to environmental reporting. however, the study also notes that even firms experiencing losses must also not be excluded from taking responsibility for their environmental cost, risks and liabilities. hence though financial performance motives environmental performance, it should not be used as basis for selective environmental performance. finally, there is a significant moderating effect of foreign-domestic ownership ratio on the relationship between firm size, leverage, profitability and environmental reporting. the study thus recommends that the presence of more foreign-domestic ownership will lead to more robust disclosures of environmental issues. references ahmad, z., hassan, s. & mohammad, j. (2003). determinants of environmental reporting in malaysia. international journal of business studies, 11(1), 6990. akrout, m.m., & othman, h.b. (2013). a study of the determinants of corporate environmental disclosure in mena emerging markets. journal of reviews on global economics, 2(1), 46-59. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 15 alsaeed, k. (2006). the association between firm–specific characteristics and disclosure: the case of saudi arabia. managerial auditing journal, 21(5), 476-496. anderson, c.a. (2009). temperature and aggression: ubiquitous effects of heat on occurrence of human violence. psychological bulletin 106, 74-96. artiach, t., lee, d., nelson, d., & walker, j. (2010). the determinants of corporate sustainability performance. accounting & finance,50(1),31-51. barako, d.g., hancock, p., & izan, h.y. (2006). relationship between corporate governance attributes and voluntary disclosures in annual reports: the kenyan experience. financial reporting, regulation and governance, 5(1), 1-25. bennett, m., & james, p. (1997). environment-related management accounting: current practice and future trends. greener management international, 17, 32-52. cooke, t.e. (1993). disclosure in japanese corporate annual reports. journal of business finance & accounting, 20, 521-535. deegan, c. & rakin, a. (1999). determinant factors of corporate environmental information disclosure: an empirical study of chinese listed companies. journal of cleaner production. 17(6), 385-400. delgado-garcia, j.b., quevedo-puente, e., fuente-sabate, j.m. (2010), the impact of ownership structure on corporate reputation: evidence from spain. corporate governance: an international review, 18(6), 540-556. elkington, j. (1997). triple bottom line reporting: looking for balance, australian accountant, 69(2), 18-21. fortanier, f., kolk, a., & pinkse, j. (2011). harmonization in csr reporting: mnes and global csr standards. management international review, 51(1), 665–696. gallo, p., jones, j., & christensen, l. (2011). firm size matters: an empirical investigation of organizational size and ownership on sustainability-related behaviors. business & society, 50, 315–349. gray, r., kouhy, r & lavers, s. (1995). corporate social and environmental reporting, a review of the literature and a longitudinal study of uk. disclosures. accounting, auditing and accountability journal, 8(2), 1-15. guthrie, j.e. & parker, l.d. (1989). corporate social disclosure practice: a comparative international analysis, advances in public interest accounting, 3. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 16 haider, m.d. (2010). an overview of corporate social and environmental reporting (cser) in developing countries. issues in social and environmental accounting, 4(1), 3-17. haniffa, r., & cooke, t. e. (2005). the impact of culture and governance on corporate social reporting. journal of accounting and public policy, 24(1), 391–430. ho, p.h., & taylor, g. (2013). corporate governance and different types of voluntary disclosure. pacific accounting review, 25(1), 4-29. hooghiemstrat, a., & donovan, o. (2000). environmental management accounting (ema), project victoria australia. howes, r. (2002). environmental cost accounting: an introduction and practical guide, london. the chartered institute of management accountants. halme, m., roome, n., & dobers, p. (2009). corporate responsibility: reflections on context and consequences. scandinavian journal of management, 25(1), 1-9. international federation of accountants (1998). management accounting concepts. new york jennifer ho, l. c., & taylor, m. e. (2007). an empirical analysis of triple bottomline reporting and its determinants: evidence from the united states and japan. journal of international financial management and accounting. 18(2), 123-150. kansal, m., joshi, m., & batra, g. s. (2014). determinants of corporate social responsibility disclosures: evidence from india. advances in accounting, incorporating advances in international accounting. 30(1), 217-229. kent, p., & monem, r. (2008). what drives tbl reporting: good governance or threat to legitimacy? australian accounting review, 18(1), 297-309. kolk, a., & perego, p. (2010). determinants of the adoption of sustainability assurance statements: an international investigation. business strategy and the environment, 19(3), 182-198. kuzey, c., & uyar, a. (2016). determinants of sustainability reporting and its impact on firm value: evidence from the emerging market of turkey. journal of cleaner production, 143(1), 27-39. karim, ke., lacina, m.j., & rutledge, r.w. (2006). the association between firm characteristics and the level of environmental disclosure in financial statement footnotes. adv environ account manage 3(7), 77-109 legendre, s., & coderre, f. (2013). determinants of gri g3 application levels: the case of the fortune global 500. corporate social responsibility and environmental management. 20(3), 182-192. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 17 liu, x., & anbumozhi., v. (2009). determinant factors of corporate environmental information disclosure: an empirical study of chinese listed companies. journal of cleaner production. 17(6), 593-600. monteiro, s., & aibar-guzmán, b (2010). determinants of environmental disclosure in the annual reports of large companies operating in portugal. corporate social responsibility and environmental management, 17(4), 185 -204 lourenço, i.c., & branco, m.c. (2013). determinants of corporate sustainability performance in emerging markets: the brazilian case. journal of cleaner production, 57(1), 134-141. magness, v. (2006). strategic posture, financial performance and environmental disclosure: an empirical test of legitimacy theory. accounting, auditing & accountability journal, 19(4), 540-563. muttakin, m.b., & subramaniam, n. (2015). firm ownership and board characteristics: do they matter for corporate social responsibility disclosure of indian companies? sustainability accounting, management and policy journal6(2),138-165. nazari, j.a., herremans, i.m., & warsame, h.a. (2015). sustainability reporting: external motivators and internal facilitators. corporate governance, 15(3), 375-390. patten, d.m. (1991), exposure, legitimacy and social disclosure. journal of accounting and public policy, 10(1), 297-308. purushothaman, m., tower, g., hancock, r., & taplin, r. (2000). determinants of corporate social reporting practices of listed singapore companies. pacific accounting review, 12(2), 101-133. reverte, c. (2009). determinants of corporate social responsibility disclosure ratings by spanish listed firms. journal of business ethics, 88(1), 351-366. setyorini, c.t., & ishak, z. (2012). corporate social and environmental disclosure: a positive accounting theory view point. international journal of business and social science, 3(9), 152-164. shamil, m.m. shaikh, j., ho, p.l., & krishnan, a. (2014). the influence of board characteristics on sustainability reporting: empirical evidence from sri lankan firms. asian review of accounting, 22(2), 78-97. smith, m., yahya, k., & amiruddin, a.m. (2007). environmental disclosure and performance reporting in malaysia. asian review of accounting, 15(2), 185-199. https://www.researchgate.net/journal/1535-3966_corporate_social_responsibility_and_environmental_management https://www.researchgate.net/journal/2040-8021_sustainability_accounting_management_and_policy_journal gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 18 stanny, e., & ely, k. (2008). corporate environmental disclosures about the effects of climate change. corporate social responsibility and environmental management, 15(1), 338-348. suchman, m.c. (1995). managing legitimacy: strategic and institutional approaches, academy and of management review, 20(3), 1-15. suttipun, m., & stanton, p. (2011). determinates of environmental reporting in corporate annual reports of the stock exchange of thailand (set). international journal of accounting and financial reporting,2(1), 99-115. united nations expert working group (2000). environmental management accounting: procedures and principles. retrieved april 2015 fromhttp://www.une. wang, j., song, l., & yao, s. (2013). the determinants of corporate social responsibility disclosure: evidence from china. the journal of applied business research, 29(6), 1833-1847. watt, r.l., & zimmerman, j. (1978). towards a theory of the determination of accounting standards. the accounting review, 53, 112-134 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 i gusau journal of accounting and finance (gujaf) vol. 3 issue 3, october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ii © department of accounting and finance vol. 3 issue 3 october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com mailto:abupress2020@yahoo.com http://www.abupress.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos stat gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. muhammad aminu isa department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. prof. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeiza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vi advisory board members prof. kabiru isah dandago, bayero university kano,kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng mailto:elfarouk105@gmail.com http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng mailto:elfarouk105@gmail.com mailto:05@gmail.com http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ix contents capital structure and firm financial performance of listed deposit money banks in nigeria: moderating effect of board financial literacy anas idris abdulwahab, hussaini bala ph.d, mansur lubabah kwambo ph.d, & abubakar adamu 1 influence of socialization on msme compliance by mediating understanding and moderating knowledge of tax visits yayuk ngesti rahayu 17 does international financial reporting standard narrows audit expectation gap? musa ibrahim dauda, ibrahim adagye dauda, phd 35 sustainability reporting and financial performance of listed manufacturing firms in nigeria aiyesan, olabode olutola ph.d 49 firm attributes and financial reporting timeliness of listed consumer goods firms in nigeria akume james terkende, dele ikese karim 67 value relevance of accounting information for listed financial service firms in nigeria kassim busari, ishaya luka chechet ph.d, aliyu ahmed abdullahi ph.d, & ibrahim mohammed ph.d 87 nigeria economic growth and capital market development: does contributory pension scheme matter? akinwumi ayorinde olutimi, toluwa celestine oladele ph.d, &adeboye emmanuel sanmi 101 audit committee and financial reporting quality: the moderating effect of board independence of listed deposit money banks in nigeria kassim yusha’u shika, mark david kantiyok 117 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 x determinants of financial performance of listed deposit money banks in nigeria mary seansu lazarus, nurradden usman miko ph.d, & saifulahi abdullahi mazadu ph.d 140 human resource accounting and profitability of listed depositmoney banks in nigeria ahmad adamu ibrahim, ahmad rufa’i adamu, fatihu mahmud alhassan &muhammad iliyas abdulsalam 158 board independence, audit effectiveness and the quality of reported earnings in the nigerian consumer goods firms isah shittu ph.d, misbahu, abubakar muhammad 175 impact of capital structure on financial performance of listed agricultural companies in nigeria ahmad muhammad ahmad, shehu usman hassan ph.d., &abubakar abubakar 192 trade oriented money laundering and era of cybersecurity tax evasion in nigeria oluwayemi joseph kayode, adewole joseph adeyinka ph.d, adewale abass adekunle & kadiri kayode ph.d 205 effect of females in the boardroom on corporate sustainability reporting salami suleiman ph. d, olanrewaju atanda aliu ph.d 224 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 158 human resource accounting and profitability of listed depositmoney banks in nigeria ahmad adamu ibrahim school of preliminary studies sule lamido university, kafin hausa ahmad.aibrahim@slu.edu.ng; +2348035766622 ahmad rufa’i adamu school of preliminary studies, sule lamido university, kafin hausa fatihu mahmud alhassan department of management sciences business management unit kano state college of education and preliminary studies, kano. abstract muhammad iliyas abdulsalam sirconcept educational consult, kano nigeria sirconcept@gmail.com one of a company's most important intangible assets is its human capital. because a company’ssuccess or failure depends on how well its few physical resources are exploited by its human resources, a company’s failure to account for human resources and the changes that occur inside may present a misleading image of its performance. due to inconsistent in the literature, the study examine the relationship between human resource accounting and financial performance of deposit money banks in nigeria. the study used ex-postfacto research design as it entails the use of annual reports and accounts of listed deposit money banks in the nigerian exchange group. secondary data were sourced from the banks’ financial report for the period of seven (7) years from 2015 to 2021. the dependent variable is return on assets use as a proxy of profitability, the independent variables are: staff cost, directors’ remunerations use as the proxy of human resource accounting. the study control for age and size. the descriptive statistics, correlation and regression statistical method of analysis are employedto test the nature, relationship and effect among the variables using statistical software (stata v14). the result shows that hra has significant effect on the financial performance of listed deposit money banks in nigeria. thus, upon recommendation, workers should be retain to avoidunemployment, and company management should endeavor to send workers on training and development to accommodate the structural changes. keywords: directors’ remuneration, human resource accounting, staff cost. mailto:sirconcept@gmail.com gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 159 doi.org/10.57233/gujaf.v3i3.185 1. introduction one of a company’s most important intangible assets is its human capital. the usage of this asset is anticipated to result in a monetary advantage to the organization. human capital’s value extends well beyond its intrinsic contribution to better and more efficient use of available resources. a source of confidence for external resource providers, and particularly financial institutions, is provided by this. financial institutions in nigeria have adopted the practice of revealing the identity of the persons behind a company before extending loans to them (asein, et al., 2019). human resource accounting (hra) is the practice of calculating the value of a company’s humancapital in monetary terms (asien, et al., 2019). accurately allocating financial values to a company’s human resources is known as human capital accounting. as adebawojo, et al., (2015) have stated, the essence of human resource accounting is to determine a generally accepted model of valuation for human assets and to ensure that the worth that drivesan organization for desired performance is adequately represented and disclosed in financial statements as intangible assets. hence, those in need of information regarding human resources might get it via human resource accounting, which is the process of collecting and sharing such data. internal management decisions and long-term investment choices are both heavily influenced by human resource accounting. in human resource accounting, people are given a monetary valueaccording to their experience, education, skills, and, most crucially, their expected future contributions to the company in the form of revenue. because a company’s success or failure depends on how well its few physical resources are exploited by its human resources, a company’s failure to account for human resources and the changes that occur inside may present a misleading image of its performance (ofurum & adeola, 2018). an organization’s growth and progress can only be ensured by enhancing the efficiency ofits employees. human behavior characteristics, such as loyalty, skill, motivation, and ability for effective communication and decision-making are indicators of the genuine health of a firm. however, profitability refers to a company’s or individual’s capacity to generate a profit from its commercial endeavors. a company’s capacity to generate profits is examined in profitability analysis. a company’s operational outcomes are represented in its income statement, which shows the company’s profitability. according to its financial statement, an entity’s potential to generateprofits is also dependent on the assets it has available for use (warren, et al., 2014). the ability of a company to generate profits both now gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 160 and in the future is critical to its growth. stakeholders can use metrics like profitability to analyze a company’s historical financial performance and currentfinancial status, according to erasmus, (2008). it is also employed as a broad indicator of a company’s long-term financial health. measures of profitability include return on investment (roi), return on assets (roa), value added (var), and other financial measures of a company’sperformance. there are a variety of ratios that may be used to gauge a company’s profitability (hill, jones, & schilling, 2015). according to ebrahim, et al., (2014), profitability may be measured in terms ofroa, roe, profit margin (pm), earnings per share (eps), and return on investment (eps). return on investment (roi), return on capital employed (roce), growth in sales (gro), among others. thus, the importance of segment reporting in allowing users of financial reports toassess and make informed decisions on the true position and performance of business and geographic segments a diversified entity is operating, and thus affects the profitability on how efficiently a company uses its resources, is further demonstrated. as a result, several investigations on the link between human resource accounting and financial performance have been carried out. except for the study by ofurum and adeola (2018), which found no correlation between human resource accounting and financial performance, all studies (such as ijeoma and aronu (2013), ofe and david (2018), okpako, et al., (2014), oladele, et al.,(2018), and oladele, et al., (2018), prince, et al., (2013), and vohra and vipla (2014), that the researcher can review about human resource accounting and financial. nevertheless, the use of human resource assures management efficiency. however, based on the assertion by the president, chartered institute of bankers of nigeria the researchers’ found the available literature inconsistent and therefore seeks to re-examine the relationship between human resource accounting and financial performance of deposit money banks in nigeria. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 161 moreover, the choice of this domain is because, the banking business relies heavily on its humanresources, making hrm crucial. banks have significant difficulties in human resource management and risk management. in the banking industry, your performance is directly proportional to how well you manage both the people and the risks associated with running the firm. there may not be enough competent workers to make risk management effective. in the past, and in the future, banking will remain a “people business”. while cost is a major factor for manycustomers, it is not the only factor in choosing a bank. therefore, the specific objectives are to determine the effect of staff cost and directors’ remunerations on financial performance of listed deposit money banks in nigeria, also hypothesize that staff cost and directors’ remunerations hasno significant effect on the financial performance of listed deposit money banks in nigeria. thus,the section covers the literature review. 2. literature review concept of human resources accounting jasrotia (2004) defines human resource accounting (hra) as a way of calculating the value and cost of an organization’s human capital. hra is defined more precisely by rahaman, et al., (2013) as the process by which businesses and other organizations measure the costs associated with recruiting, selecting, hiring, training, and developing human assets. for the purposes of valuing and reporting on human resources, this definition outlines what should be considered an expense.in this study, the term hra is used to describe the economic worth of employees to a business. human resource accounting is a method for calculating the monetary and intangible benefits of an organization's workforce. it entails calculating how much it costs to find, interview, hire, train, and develop personnel, as well as estimating how much such workers are worth financially to the company. accounting for human resources allows businesses to better allocate funds and better utilize their most valuable asset: their employees. it's a boon to hiring and retaining competent staff. accounting for human resources is done so that management may learn how much their employees are costing them and how much they are worth (ofurum & adeola, 2018). benefits of human resource accounting hra valuation approaches have their advantages and limits, but accounting for human resourcesmay benefit an organization and the people who have an interest in it. oluwatoyin (2014), importance of human resources accounting as: (i) managers may use human resources accounting to make better decisions about how to hire and use employees. ii) it aids in personnel decisions such as gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 162 transfers, promotions, training, and layoffs. iii) it serves as a foundation for the allocation of financial resources in relation to human capital. iv) it aids in analyzing the costs of training and education for workers in relation to the benefits they receive from the company. v) it aids management in measuring an organization’s inherent strength and guiding the business successfully through adverse and unfavorable conditions. vi) it improves the performance and negotiating strength of the workforce. it enables each employee to see how his or her work contributes to the success of the company in comparison to the amount of money the company spends on him or her. challenges of human resources accounting the challenges to the introduction of human resources accounting is stated by oluwatoyin, (2014). among the qualities he listed were the following: there is no standard technique or guideline fordetermining the cost and value of an organization’s human resources. there are certain downsides to the systems now in use. valuing human resources in the future while their existence is unclear seems to be impractical. in order to support the notion that human resources accounting as a management tool promotes better and more effective human resource management, empirical data is still lacking. this is a dilemma for management since human resources are not like physical assets in that they are unable to be owned, held, and fully exploited. workers’ unions are wary ofputting a monetary value on their labor, for fear they may seek incentives and remuneration basedon that monetary value. human assets, however, have a service life that is extremely difficult to predict. free movement of personnel and recruits is to blame for this. he may leave his current work at any moment, knowing that he just has to pay back a few months’ wages to his previous employer. there is a great deal of uncertainty when it comes to estimating the contribution level of a new employee to the company. in contrast to a machine that has been installed by a corporation and has a known output capacity. this makes it simple and accurate to estimate and forecast. there is no doubt that an employee’s contribution level cannot be accurately measured or projected. his/her output varies and is affected by a variety of different circumstances. when it comes to valuing human resources, payments in terms of salary and wages have a significant role. when the government changes policy that affects the compensation system or the workers’ union takes action, the value of an employee who is highly regarded in terms of future salaries and pay will be affected. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 163 concept of profitability profitability is a measure of a company’s capacity to earn revenues from its key business assets. stakeholders can use profitability to analyse a company’s historical financial performance and current financial status, according to erasmus, (2008). it is also employed as a broad indicator ofa company’s long term financial health. as defined by the business dictionary (2013), profitability is measured in terms of monetary outcomes, and these results may be seen in the company’s return on investment, return on assets, and value added. profitability measurements, according to neely (2011), are used for three primary goals. as a financial management tool, as a business goal, andas a means of motivating employees inside a company, they all play a role in financial management. measures of profitability it is possible to utilize a variety of different profit ratios, each of which assesses a different component of the profitability of a business (hill, jones, & schilling, 2015). (the return on assets (roa) is a regularly utilized profit ratio, as well as the return on equity (roe) and the roi. in other words, if a company’s profitability ratio is larger than its competitors’, then its future shareprice should be similarly high. most companies’ annual reports include profitability measures, which are among the most widely used statistics in business. annual reports are designed to provide investors with information about the company’s performance and future prospects. the roa, roe, and roi are all included in this group of ratios (gibson, 2012). but the return on assets (roa), which divides net income by the company’s assets, is a basic measure of profitability that takes into consideration the company’s size. roa is a useful metric for evaluating a manager’s performance since it reveals how effectively assets are being utilized to create revenue (bloomsbury, 2009). unlike other profitability ratios, roa measures encompass all of a company’s assets, including those derived from liabilities to creditors and contributions from investors. therefore, roa has a lower profile among investors than certain other financial statistics due to its brevity. even more so, roa is a crucial internal measuring tool, particularly for analyzing the performance of different departments or division within a company. a decent internal management ratio, roa, compares profit against the total assets a division employs to generate that profit. in this method, the profitability and efficiency ofthe division may be assessed. for one thing, division managers seldom become engaged in fund raising or deciding on the optimum ratio of debt to equity. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 164 review of empirical studies using data from a panel of big enterprises that includes information on training length, direct expenses, and numerous other features of the organizations, almeida and carneiro (2008) estimate the rate of return to company investments in human capital in the form of formal job training. estimates of the financial benefit to training providers are rather high (8.6%). findings indicate that these businesses might benefit from investing in formal job training, with returns perhaps on par with those of expenditures in physical capital or in education. in order for businesses to get the most out of their investments in human resources, huang (2011) explores how return on investment (roi) can be used most effectively during the evaluation process to provide convincing data regarding the value of human resources and their contributions to the project. companies can see better revenues through the efficient utilization of human resources in the manufacturing process, and this influence can be quantified using a scientific and rational technique. perera's (2012) research corroborates the foregoing findings, showing that people are the key to an organization's success or failure. that means it's crucial for management to be able to steer the company in the right direction by making sound, well-considered decisions. according to pandurangarao, et al., (2013) research on human resource accounting methods and practices in india, intangible assets, and people in particular, make significant contributions to the creation of shareholder value in knowledge-based industries such as information technology (it), teleservices, and so on. their claim that intellectual capability of employees is the sole substantial contribution into these industries. using a regression model, saeed, et al., (2013) explored the connection between human resources and the value added efficiency of human capital, with return on equity (roe) serving as the measure of company performance. the study's findings demonstrate a favorable and statistically significant association between hr and the value-addedefficiency of human capital and return on equity. zenith bank plc’s financial performance was studied by ijeoma and aronu (2013), who looked at the impact of human resource accounting on the financial performance of nigerian banks. field survey was used to gather data, and questionnaires and interviews with zenith bank plc employees were part of the process. zenith bank plc’s financial position was improved by accounting for human resources, according to the findings. a study conducted in nigeria by izedonme, et al., (2013) examined the relationship between human resource accounting and company performance. an analysis of the nigerian securities gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 165 market fact book’s cross-sectional data was used in this study (2009). the data was analyzed using multivariate analysis. human capital was found to have a small but positive effect on organizational performance. survey data from 103 owners/managers in punjab state, india, were utilized by vohra and vipla (2014) to examine how human resource accounting methods affect business performance through employee retention. the data was analyzed with the use of statistical tests such as multivariate analysis and regression. firm performance is significantly impacted by human resources accounting methods, according to the research. according to okpako, et al., (2014) who conducted a mixed-methods research project involving the use of primary and secondary data, the study sampled seven (7) nigerian stock market listed firms and distributed 260 questionnaires to the relevant employees. human resource accounting’s value was quantified using principle component analysis (pca) and the return on equity (roe) from 2006 to 2010 as a measure of financial performance, which resulted in a series of data points. according to the findings, accounting for human resources has a positive effect on a company’s performance. omodero and ihendinihu (2017) studied the relationship between human resource accounting and the financial performance of nigerian enterprises. using personnel benefit cost (pbc) as a proxy for human resource accounting, the dependent variables were profit after tax, total revenue and net asset. spss software was used to do a multiple correlation analysis on the data. pbc had a largeand beneficial influence on profit after tax (pat), but a negative impact on online asset, according to the findings. a study conducted by oladele, et al., (2018) studied the influence of human resource accounting disclosure on the financial performance of selected listed corporations in nigeria. to measure the dependent variable, a financial report index of the selected businesses was utilized to measure the annual profitability, company size, financial leverage, and industry type of the human resources accounting disclosures. the research was conducted between 2011 and 2015. the data was examined using descriptive statistics, correlation, and regression. the study found acorrelation between financial success and human resource accounting. according to ofe and david (2018), human resource accounting has a significant impact on the performance of nigerian listed banks. from 2009 to 2017, the information was gleaned from theannual reports of 18 nigerian commercial banks that are publicly traded. staff costs, director compensation, employee count, and business size all played a role in human resource accounting.multivariate research found a strong correlation between employee gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 166 costs, employee strength, and the size of the company. the financial performance of directors was not significantly influenced by their compensation. despite this, ofurum and adeola (2018) conducted a study on the relationship between human resource accounting and also the profitability of quoted companiesin nigeria. human resource accounting was simulated by staff compensation, whereas profitability was simulated by net operating profit and return on capital utilized. from 2011 to 2015, the study was conducted. spss version 20 was used to analyze the gathered data using ols and pearson correlation. a correlation between human resource accounting and a company’s profitability was found to be weak. oladejo and ojokuku (2019) analyzed the impact of human resource accounting (hra) procedures on the bottom line of publicly traded nigerian manufacturing firms, both in the long and short term. thirty-seven (37) out of the sixty-three (63) listed manufacturing businesses on the nigerian stock exchange (nse) in 2015 were chosen using a simple random selection approach. secondary data collected from the firms' financial statements over a 16-year period wasused in the analysis. analysis of data in panels was utilized. the findings showed that hra practices are connected to the financial success of the companies in the long and short term. nevertheless, on the study gap identification which necessitate this current study; majority of thestudies reviewed revealed positive relationship between human resource accounting and financial performance (perera's (2012); pandurangarao, et al., (2013); saeed, et al., (2013); izedonme, et al., (2013); vohra and vipla (2014), okpako, et al., (2014), oladele, et al., (2018); ofe and david (2018), ofurum and adeola (2018), and oladejo and ojokuku (2019), other than the study of omodero and ihendinihu (2017) who established that there is no significant relationship betweenhuman resource accounting and the profitability of quoted firms in nigeria, although the study used only one bank, which not enough to make generalization. building on that, this paper consider using more bank and recent data for effective generalization to better understand the effect of human resource accounting in the banking industry. theoretical frameworkhuman capital theory human capital theory, first proposed by becker (1964), is widely accepted because of its emphasis on education and training as a source of wealth. asian countries’ strong growth in the 1970s and 1980s was largely due to a large investment in human capital (psacharopoulos & woodhall, 1997; robert, 1991;). gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 167 according to the human capital theory, training and development are no longer “costs that the company should aim to reduce,” but rather “returnable investments” that should beincluded in the firm’s overall financial planning. employees’ education, experience, and abilitieshave monetary value for both employers and the economy as a whole, and the concept of humancapital recognizes that not all labor is equal. firm performance and competitive advantage are largely dependent on the competence, knowledge, talents, capacities, and skills of the personnel. 3. methodology this study adopted correlation research design. the population of the study consists of all the 14 deposit money banks listed on the nigerian stock exchange as at 31 december 2021. the study adoptedcensus method to select the sample size by applying two criteria; first, the bank must be listed before 2014 and secondly, hra expenditure can be identified in the financial statement of such banks. based on the criteria, 10 banks were selected as the sample size of the study. the study used secondary data which were extracted from the annual reports of deposit money banks listed on the nigerian stock exchange for the period of seven years from 2014 to 2020. the dependent variable is return on assets (roa) used as a proxy of financial performance and the independentvariables are variables of human resource which are: staff cost (sc), and directors’ remuneration’s (dr). for the purpose of presentation and discussion of the result of data generated in the course of these research, descriptive statistics, correlation and regression techniques of data analysis were used in stata version 14th statistical tools of analysis. model specification roait = β0it + β1stcit +β2drrit + β3ageit + β4sizeit + eit where: roait = return on assets (measure by pbt divided total assets)scit = staff cost (measure by natural log. of staff cost) drit = directors’ remunerations (measure by natural log. of directors’ remunerations) ageit = age (measure by counting from year of listing to the periods covered)sizeit = size (measure by natural log. of total assets) β0 = constant (i.e., the intercept) β1 – β5 = coefficient of the explanatory variables (i.e., the slope)e = error term i = individual bank t = time period (i.e., year) gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 168 4. discussion of results the section presents the data analysis and interpretation of result of the dependent variable and independent variables. it presents the descriptive statistics, correlation and regression results of the study. descriptive statistics table 1: descriptive statistics n minimum maximum mean std. dev roa 70 0.152 0.370 0.251 0.243 sc 70 4.763 7.831 6.999 0.780 dr 70 0.000 6.048 5.274 0.987 age 70 1.000 50.00 18.285 12.151 size 70 8.1119 9.695 8.958 0.496 source: stata output, 2022 in table 1, the mean, minimum, maximum and standard deviation of the study is presented. from the table, it can be deduced that during the period under study, the performance (roa) of listed deposit money banks in nigeria increased gradually to a maximum of 37.0 percent from a minimum of 15.2 percent with an average of 25.1 percent. meaning that the performance of listed deposit money banks improved within the period of the study. also, deposit money banks spent on the average n6.99 million on staff cost (sc), with a maximum of n7.83 million and a minimum of n4.76 million. implying a sharp increase in staff maintenance costs such as; training, emoluments and other benefits within the period of the study. averagely, n5.274 million was spent on director’s remuneration (dr) with a minimum of zero naira and a maximum of n6.04 million. this infers a sudden increase in director’s emolument during the period of the study. the table also revealed that deposit money banks’ age which is a control variable ranged between 1 to 50 years and size, (the second control variable) is 8.95 percent on the average during the period of the study. diagnostic testing table 2: multicollinearity tolerance vif sc 0.2473 4.04 dr 0.900 1.11 age 0.666 1.50 size 0.264 3.79 source: stata output, 2022 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 169 according to the results in table 4.2, it shows that the vif for all the independent variables individually are below 5. sc (4.04), dr (1.11), age (1.50) and size (3.79). the tolerance for all independent variables: sc (0.24), dr (0.90), age (0.26) were all greater than 0.1 or 10%. therefore, the study concludes that there is no multi-collinearity among the variables. this was an indication that the estimators: sc, dr, age and size are reliable to estimate the model. heteroscedasticity tests table 3: heteroscedasticity tests breusch-pagan/cook-weisberg chi2 40.58 prob. > chi2 0.501 source: stata output, 2022 the results in table 3 show that the p-value is 0.501 which greater than 0.05. this implies that there is no presence of heteroscedasticity problems in the study data. this is because, the varianceof each error term is the same for all values of the explanatory variable as a result all the banks doreflect their monetary term. correlation result table 4: correlation result roa sc dr age size roa 1 sc -0.517 1 dr 0.381 -0.233 1 age -0.552 0.372 -0.256 1 size 0.468 0.901 0.633 0.701 1 source: stata output, 2022 table 4 shows the correlation result of the dependent variable: roa, the independent variables: sc, dr, and the control variables: age and size. the relationship between roa and sc is negative, with a coefficient of -0.517, this means that, all things being equal the higher the sc thelower the roa. the relationship between roa and dr is positive but weak, with a coefficient of 0.381, this means that, all things being equal the higher the dr the higher the roa. the relationship between roa and age is negative and weak, with a coefficient of -0.552, this means that, all things being equal the higher the age the lower the roa. the relationship between roa and size is positive, with a gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 170 coefficient of 0.468, this means that, all things being equal the higher the size the higher the roa. regression result table 5: regression coefficient t-statistic prob.t (constant) -0.788 -2.640 0.011 sc -0.166 -2.650 0.011 dr 0.109 2.900 0.005 age 0.133 -3.010 0.004 size 0.154 2.840 0.006 r2 0.686 adj. r2 0.641 f-statistic 21.39 prob. (f) 0.001 source: stata output, 2022 table 3 shows the regression results of the model. the model consists of dependent variable roa and other explanatory variables (sc, dr, age and size). in the model the multiple coefficientsof determination r2 is 0.686. this means that 68.6 percent of change in roa was caused by the change in the explanatory variables while the 31.4 percent change in roa was caused by other factors not included in the model. the f-statistics is 21.39 with p-value of 0.001 which is less than 0.05 and is statistically significant which mean the model is fit, because it accounts for the variation in the dependent variable. the effect of sc on dependent variable roa is negative with coefficient value of -0.166, meaning that an increase in the sc while other variable remains constant lead toa decrease in roa by 16.6 percent. the effect of dr on dependent variable roa is positive with coefficient value of 0.109, meaning that an increase in the dr while other variable remains constant lead to an increase in roa by 10.9 percent. test of hypotheses in order to decide whether to reject or accept the null hypothesis at 0.05 (5%) level of significant,the rejection point is use which states that. (1) if the p value is equal to or less than 5%, the null hypotheses is rejected and the alternate hypotheses is accepted; (2) if the p value is more than 5%, the null hypotheses is accepted and the alternate hypotheses is rejected. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 171 sc and profitability of listed deposit money banks in nigeria. the t-test of stc is -2.650 with p value of 0.011 which is less than 0.05. therefore; the null hypothesis one which states that staff cost has no significant effect on the financial performance of listed deposit money banks in nigeria is hereby rejected. dr and profitability of listed deposit money banks in nigeria. the t-test of dr is 2.900 with p value of 0.009 which is less than 0.05. therefore; the null hypothesis two which states that directors’ remunerations have no significant effect on the financial performance of listed deposit money banks in nigeria is therefore rejected. 5. conclusions and recommendations conclusively, the results show that hra has a significant effect on the profitability of listed deposit money banks in nigeria. the study recommends that since hra has a significant effect on the profitability workers should be retained to prevent unemployment, and company management should send workers on training and development to accommodate the structural changes. the study suggests for further research that more studies should be carry out on other hra related sector. references adebawojo, o. a., enyi, p. e., & adebawo, o. o. (2015). human asset accounting and corporateperformance. american international journal of contemporary research, 5(1), 45-52. almeida, r., & carneiro, p. (2008). the return to firm investments in human capital," social protection discussion papers and notes 44947, the world bank. asein, a. a., soetan, t. a., & akintoye, i. r. (2019). implications of human resource accounting on human capital measurement in financial reports. international journal of advanced research, 7(1), 287295. barney, j. (1991). firm resources and sustained competitive advantage. journal of management,17, 99120. bloomsbury, (2009). qfinance: the ultimate resource. retrieved from http://www.freebookspot.es/ ebrahim, m.a., abdullah, k.a., & hanim, f.f. (2014). the measurements of firm performance’s dimensions. asian journal of finance & accounting, 6(1). https://ideas.repec.org/p/wbk/hdnspu/44947.html https://ideas.repec.org/p/wbk/hdnspu/44947.html https://ideas.repec.org/s/wbk/hdnspu.html https://ideas.repec.org/s/wbk/hdnspu.html http://www.freebookspot.es/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 172 erasmus, p.d. (2008). evaluating value based financial performance measures. friedman, a., & lev, b. (1974). a surrogate measure of the firm’s investment in human resources. journal of accounting research, 12, 235-250. gibson, c. h. (2012). financial reporting and analysis (13th ed.). retrieved from http://freebookspot.es/ goel, s. (2014). financial statements analysis: cases from corporate india. retrieved from http://www.freebookspot.es/ gogo, s.f. (1987). accounting for human resources: the nigerian accountant, 20(3). gupta, d.k. (1991). human resource accounting in india: a perspective. administrative staff college of india journal of management, 20(1), 9-10. hill, c.w.l., schilling, m.a. & jones, g.r. (2015). strategic management: theory & cases: an integrated approach, 12 edition. cenage learning. huang, y. (2011). assessment of return on human resource investments: phillips, stone and phillips’s roi process model perspective. european journal of social sciences, 20(3), 443-445. ijeoma, n., & aronu, c. o. (2013). effect of human resource accounting (hra) on financial statement of nigerian banks. international journal of advancements in research & technology, 2(8). izedonme, p. f., odeyile, l. g., & kuegbe, k. (2013). human resource accounting and its impact on organizational performance. journal of economics and sustainable development, 4(15). jasrotia, p. (2004). the need for human resource accounting, retrieved from http://www.itpeopleindia.com/20021216/cover.shtml. assessed on 9/19/2021 lau, a.h. & lau, h.s. (1978). some proposed approaches for writing off capitalized human resource assets. journal of accounting research, 16, 80-102. ofe, i. i., & david, j. o. (2018). human resources accounting attributes and the financial performance of quoted banks in nigeria. fuo quarterly journal of contemporary research, 6(4). ofurum, c. o., & adeola, s. o. (2018). human resource accounting and profitability of quotedfirms in nigeria. international journal of advanced academic research accounting & economic development, 4(2). okpako, p. o., atube, e. n., & olufawoye, o. h. (2014). human resource http://freebookspot.es/ http://www.freebookspot.es/ http://www.itpeopleindia.com/20021216/cover.shtml gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 173 accounting and firmperformance. global journal of commerce and management perspective, issn: 2319 – 7285, 3(4):232-237. oladejo, k. s., & ojokuku, r. m. (2019) human resource accounting practices and financial performance of nigerian quoted manufacturing companies. international journal of mgt. science & entrepreneurship,11(7). oladele, p. o., aribaba, f. o., ahmodu, o. l., & omobola, m. a. (2018). an empirical study of human resource accounting disclosure on financial performance of selected listed firms in nigeria. journal of accounting and management, 8(2). oluwatoyin, a.s. (2014) human resources and accounting and disclosure in financial statement: literature review. research journal of finance and accounting, 5(22). omodero, c. o., & ihendinihu, j. u. (2017). human resource accounting and financial performance of firms in nigeria: evidence from selected listed firms on the nigerian stock exchange. international journal of interdisciplinary research methods, 4(2), 25 33. pacharopoulos, g. & woodhall, m. (1997). education for development: an analysis of investment choice. new york: oxford university press. pandurangarao, d. basha, s., c.& rajasekhar, d.(2013). a study on human resource accounting methods and practices in india. international journal of social science & interdisciplinary research, 2(4), 95 101. perera, a. (2012). impact of measuring and reporting human resources on investment decisions in sri lanka. retrieved from http://www.ipedr.com/vol54/008-ichsd2012f00009.pdf porter, m. e. (1985). competitive advantage: creating and sustaining superior performance. new york: free press. prince, f.i., lucky, g.o., & kingsley, k. (2013). human resource accounting and its impact on organizational performance. journal of economics and sustainable development, 4(15). rahaman, m., hossain, a. & akter, t. (2013). problem with human resource accounting and possible solution. research journal of finance and accounting, 4(18). robert, b. (1991). economic growth in a cross section of countries. quarterly journal of economic, 106(2), 407414. roslender, r. (2004). the prospects for satisfactorily measuring and reporting intangibles: time to embrace a new model of accounting? journal of http://www.ipedr.com/vol54/008-ichsd2012-f00009.pdf gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 158 human resource costing and accounting, 13(4), 338–359. saeed, f., shekoofeh, f., & mahnaz, k. (2013). impact of intellectual capital on financial performance. international journal of academic research in economics and management sciences, 2(1), 6 -17 schuler, r. s., & macmillan, i. (1984). gaining competitive advantage through human resource practices. human resource management, 23, 241-56. tycho, p. (2013). stock marketing investing for beginners: essentials to start investing successfully [adobe digital editions version]. retrieved from http://www.freebookspot.es/ vohra, p. s., & vipla, c. (2014). human resource accounting practices leads firm performance. international journal of business and general management (ijbgm), 3(3), 67-76. warren, c. s., reeve, j. m., & duchac, j. e. (2014). financial and managerial accounting (13 th ed.). retrieved from http://www.freebookspot.es/ http://www.freebookspot.es/ http://www.freebookspot.es/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 159 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 1 moderating effect of leverage on the value relevance of accounting information in the nigerian listed oil and gas firms aliyu abubakar department of accounting & finance, federal university gusau, zamfara state +2348066434558, aliyunbuba@gmail.com muhammad yusuf shuaibu department of accounting, business school, ahmadu bello university, zaria +2348066299551, ysmkafi22@gmail.com adamu magaji department of accounting & finance, federal university gusau, zamfara state +2347066544311, adamszinatu@gmail.com abstract the study investigates the moderating effect of leverage on the value relevance of accounting information in the nigerian listed oil and gas firms. the study used correlational research design and the data was extracted from the published annual financial reports of the firms for the independent variables and the moderator. on the other hand, the data for the dependent variable (share prices) was collected from nigerian stock exchange website. a sample size of 6 firms were used for a period of eight years (2011-2018). the data was analysed using multiple regression analysis. findings from the analysis showed that earnings per share, and leverage to be value relevant. additionally, book value per share moderated with leverage was value relevant in addition to earnings per share moderated with leverage as well. based on the findings, the study recommends that listed oil and gas firms in nigeria should strategize to improve their earnings, moreover, they should also find way of managing their book value, as any unnecessary investment means negative effect on share price. additionally, listed oil and gas firms should maintain an appropriate level of leverage so that the cheap cost of leverage will reduce the weighted average cost of capital and subsequently increase value to investors. finally, the explanatory power of the moderated variables are more than the ones not moderated. keywords: value relevance, earnings per share, book value per share and leverage 1. introduction value relevance as an area of research in the field of accounting and finance has drawn the attention of academics for long, which attracted many researches and mailto:ysmkafi22@gmail.com gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 2 made the area to be a centre of debate (beest & boelens, 2009). value relevance is understood to be the ability of financial statement information (quantitative and qualitative) to capture and summarise information that affects share values and empirically tested as a statistical association between market values and accounting values (hellstrom, 2005), financial information is only termed value relevant if there is an established association between accounting numbers and company share prices. moreover, accounting information can only assist investors in coming up with the right investment decision that will give them higher returns on investment and minimize risks only if it gives the true and fair view of financial operations (mamuda, 2015). financial statements achieve that role if they possess certain characteristics which are: reliability, relevance, comparability, timeliness and understandability (iasb, 2014). bello (2009) also held accounting to be an information system that is used by various economic units to make informed decisions. the bases for all accounting decisions depend on readily available information. in line with this, the companies and allied matters act (cama) 1990 as amended, mandates all listed firms on the nigerian stock-market to submit their yearly reports to the securities and exchange commission in addition to the shareholders (companies and allied matters act 1990, 2016). the study of ball and brown (1967) published in 1968 was believed to be the pioneer study conducted in the area of value relevance (global asset management, 2014). if market participants consider accounting information to be of high quality, a positive relationship between the information and the share prices is expected, and vice versa (sabri & mohd-saleh, 2010). hence, qualitative information disclosure is not only of benefit to the disclosing firms but to the investors as well. earning is the most significant determinant of share prices because it is from it that investment rewards (dividend and capital gain) are earned and other business obligations are paid. other investors consider value of the firm and how the firm gains wide acceptability from within and outside the country: investors of this preference favour long run benefits that accrue to them and therefore look at the firm’s book value in their investment decision. the pump price per litre of premium motor spirit (pms) widely known as fuel, which the listed oil and gas firms trade in, has been unstable in the last two decades. for instance, former president olusegun obasanjo increased the price severally (dailymedia, 2014). however, former president, late umaru musa yar’adua decreased the price from n75 to n65. in contrast, former president good luck jonathan increased the pump price in the early month of january 2012 from n65 to gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 3 n141 per litre, but after monumental pressure from the relevant stakeholders, the price was reduced to n97 in the same month. in converse, the administration reduced the price by n10 at the beginning of 2015. moreover, present administration has increased the price severally. the unstableness in the prices of fuel will certainly affect the earnings and finally the market prices of the listed oil and gas firms. the nigerian capital market is today faced with numerous challenges ranging from the global financial crisis of 2008 where by many investors incurred some losses, which watered away a great part of their investment, to the recent economic recession of 2016. premiumtimes, (2016) gave an editorial, where it compared the 2016 economic recession’s effect on the nigeria capital market to that of the global financial meltdown of 2008. a development that made some investors to lose a great part of their investment and some to even withdraw out of the market. the paper described 2016 as a year of wailing and lamentation to the investors in the market. moreover, analysis of share prices showed that, forte oil emerged as the worst performing stock as it had dropped by 83.72%, having closed the year 2016 at n52.71 as against the opening value of n330. although, the empirical relationship between accounting information and share prices have been carried out by different scholars. however, one cannot find a commonly agreed conclusion. this is because different countries are at different level of development and have different institutional arrangements therefore the following mixed findings, for instance: (bello, 2009); (mamuda, 2015); (alslehat, 2014) and ( publisher, r. i., shehzad, k., & ismail, a. 2014) reported that accounting information positively and significantly affect market value while; (abubakar, 2011) reported that accounting information is not value relevant. as for the foregoing, this study deems it necessary to introduce a moderating variable. moderator is introduced when there are inconsistencies in findings regarding a particular area of study (farooq and vij,2017). within the context of our study, we expect leverage to moderate the relationship highlighted. in line with the above, the study deems it necessary to use leverage as moderating variable. however, based on the modigliani and miller’s capital structure theory, one may say leverage has no impact on market value. however, the following empirical studies proved otherwise: lixin and lin (2008), buigut et al., (2013), aghdaei and ghasemi (2012) and adetunji et al (2016). additionally, the assumptions of modigliani and miller theory of capital structure theory may not be applicable in nigeria because, gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 4 nigerian capital market is not perfectly efficient and the presence of tax on the market returns. the broad objective of this study is to examining the moderating effect of leverage on the value relevance of accounting information on the listed oil and gas firms in nigeria. while the specific objectives are to examine the impact of: i. earnings per share on share prices of listed oil and gas firms in nigeria. ii. book value per share on share prices of listed oil and gas firms in nigeria. iii. moderating effect of leverage on the relationship between earnings per share and share prices of listed oil and gas firms in nigeria. iv. moderating effect of leverage on the relationship between book value per share and share prices of listed oil and gas firms in nigeria. in line with the objectives of the study, the following null hypotheses were formulated in: h01: earnings per share have no significant impact on the share prices of listed oil and gas firms in nigeria. h02: book value per share has no significant impact on the share prices of listed oil and gas firms in nigeria. h03: leverage has no significant impact on the share price of listed oil and gas firms in nigeria. h04: leverage has no significant moderating effect on the relationship between earnings per share and share prices of listed oil and gas firms in nigeria. h05: leverage has no significant moderating effect on the relationship between book value per share and the share prices of listed oil and gas firms in nigeria. it is believed that the results of this study are beneficial to investors as it will provide information of the determinants of market value so that they can maximize their wealth, it will also increase to the available literature in the area of value relevance and serve as a guide to further researches. the remaining part of this study is structured as follows: section two provides the review of the relevant literature concerning the subject matter and the theoretical framework. section three dealt with the methodology adopted for the purpose of this study. section four centered on the discussion of the results. while conclusion and recommendations are presented in section five. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 5 2. literature review and frameworks value relevance is an ability of financial statements information to capture and summarize firm value. value relevance is measured as the statistical association between financial statement information and stock market values or returns. earnings and book value are regarded as the basis for firm valuation. below is the pictorial graph of the relationship between the variables the theoretical framework that best underpins this study is efficient market hypotheses (emh) theory developed by eugene fama in 1960s. the emh states that in an efficient market there is large number of rational, profit maximisers competing with one another trying to predict future market values and this study uses predictability model of earnings. review of related empirical studies amir and lev (2008) examined value relevance in the wireless communication industry in the usa between 2003-2007 using ols technique of data analysis and found that accounting information such as: book value and earnings have no value relevance. however, nonfinancial indicators such as: pops (a growth proxy) and market penetration (an operating performance measure), are highly value-relevant. but combined with nonfinancial information, earnings do contribute to the explanation of share prices. however, the period covered by this study is not current. bello (2009) studied value relevance of accounting information in the nigerian listed cement firms using the whole population as the sample of the study. the study used a time frame of ten years between 1996 and 2005 using ols technique of data analysis. in his comparative analysis of historical cost accounting information and inflation adjusted one; he found both the information to be of value relevant. however, the latter was found to be more value relevant. yet, the study is earnings per share book value per share market value per share leverage gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 6 deficient as the data used in the study is old which may not reflect the current reality. sabri and mohd-saleh (2010) investigated value relevance of financial instruments disclosure in malaysian firms listed in the main board of bursa malaysia, using a population of 812 firms and a sample size of 484. the study did a comparative analysis before and after financial instrument disclosure and presentation (masb 24) compulsory adoption. the year 1999 and 2000 were used for pre while; 2002 and 2003 for the post implementation, using ols technique of data analysis. the study found financial instrument disclosure to be less value relevant in the period when the standard becomes mandatory. however, as applicable to bello (2009), a new study of this nature is needed because, the data of the study ended in 2003. buigut et al., (2013) investigated the relationship between capital structure and share prices in the nairobi stock exchange. the study used panel data of listed energy sector between the period of 2006 and 2011 and employed multiple regression. the results indicated that leverage and equity among other variables are significant determinants of share prices for the sector under consideration. similarly, ernest and oscar (2014) examined value relevance of accounting information in the listed banking and oil &gas firms in nigeria between 2007 and 2011, using ols tool of data analysis. the study randomly selected 10 firms from each of the industries as samples. finally, the comparative results revealed that accounting information revealed by the listed oil & gas firms to be of more value relevance to the one revealed by the listed banking firms. the study further revealed that earning is the most value relevant accounting information followed by leverage. additionally, shehzad and ismail (2014) researched value relevance in the listed banks in pakistan using a time frame of 5 years between 2008 and 2012, the study used ols tool of analysis and the results revealed that earnings and book value to be statistically and positively related to share prices. besides the two variables used, this study introduced another variable. additionally, mamuda (2015) studied value relevance in the listed industrial good firms in nigeria, between the year 2007 and 2013, with a sample size of sixteen firms out of the twenty five listed firms, using ols technique of data analysis, the study found earnings per share, dividend per share, book value per share to be gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 7 statistically and significantly correlated with market value. despite the study reported mix findings by previous studies reviewed, however it made no effort to tackle the problem. omokhudu and ibadin (2015) examined value relevance between the year 1994 and 2013. the study used ols technique of analysis and a sample size of 47 firms out of the listed firms in the nigeria stock market and found that earnings and dividends to be statistically and significantly associated with market value. but book value was related but not statistically significant. mulenga (2015) conducted an empirical study of value relevance in the bombay listed banks, between 2007 and 2012 using a sample of 20 banks and the study adopted ols as tool of analysis, the result shows that earnings is positively and significantly related to share prices while book value was found to be negatively but insignificantly related to share prices. adetunji et al., (2016) studied the relationship between leverage and firms’ value in the listed nigerian manufacturing firms using a sample of 5 firms for a period of 6 years between 2007 and 2012. data were sourced from annual reports of selected firms. the ordinary least square (ols) statistical technique was used for data analysis. the study revealed that there is significant relationship between financial leverage and firms. however, the data used by the study is not current. altahtamouni and alslehat (2014) conducted a study of value relevance of all the jordan listed banks between 2002 and 2011 using ols tool of data analysis and found that book value and earnings per share are positively and statistically significant with share prices. 3. methodology, measurement and model specification the research design employed in this study is correlational; the choice of the design was informed by the effectiveness of the design in revealing the association of two or more variables and the impact of one variable on another. data was collected from secondary sources through the use of nigeria stock exchange fact book and audited financial reports and accounts of the study firms for a period of eight (8) years (2011– 2018), the choice of this period has been influenced by the abysmal performance of nigerian stock exchange and government policy of deregulating the oil and gas industry. the population of the study consist of all the listed oil and gas firms on the floor of nigerian stock exchange as at 31st december, gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 8 2016.the study employs census strategy. however, the following filters were used to arrive at the sample; i. a firm should not have been delisted within the last eight years ii. a company’s data must be available throughout the period of the study. having applied the above filters, the following companies have made the sample; conoil plc, forte oil plc, mobil plc, mrs nigeria plc, oando nigeria plc and total nigeria plc. this study relies upon ohlson model (1995) which has its root from the work of edward and ball. it states that, market value is a function of book value and earnings. beyond that, this study extends the model to incorporate leverage as moderating variable as follows: mpsit = β0+ +β1epsit+ β2bpsit + ε it --------------------------------------------------(1) when the moderator is introduced into the model it becomes: mpsit = β0+ +β1epsit+ β2bpsit +β3levit + β4epslevit+ β5bpslevit+ ε it ---(2) where: mps = market value per share of firm i during period t. eps = earnings per share of firm i during period t. bps = book value per share of firm i during period t. lev = leverage of firm i during period t. epslev= earnings per share moderated by leverage of firm i during period t. bpslev= book value per share moderated by leverage of firm i during period t. β1 β4 = the coefficients of independent variables β0 = intercept ε = error term of firm i during period t. the variables of the study were measured as follows: market share price: this is the market price per share as obtained from the nigerian stock exchange website 4 months after the accounting period. earnings: this is computed as the profit after tax divided by the weighted average number of shares at the end of the accounting year. book value: this is measured as the net value of equity divided by the outstanding number of shares at the end of the accounting period. leverage: this is obtained by diving total liabilities by the book value of equity. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 9 epslev and bvpslev: are obtained by multiplying the individual ivs by leverage 4. result and discussions under this section the results of the study are presented and discussed, from which conclusions were drawn. it begins by presenting descriptive statistics, followed by correlation matrix, multicollinearity tests, heteroskedasticity test and finally regression results. descriptive statistics the descriptive statistics highlight the basic features of all the regression variables used in the study: the dependent, independent and the moderating variable as reported in the below table. table 1: summary of descriptive statistics variables mean minimum maximum standard deviation mps 97.61 4.58 300 96.10 eps 7.94 -15.97 43.58 11.81 bps 36.25 1.02 87.26 27.48 lev 3.81 1.48 8.82 1.52 source: output of stata, 2020 from table 1, the mean value of mps is 97.61, this means on average the share prices of listed oil and gas firms in nigerian between 2011 and 2018 stand at 97.61. the minimum value of 4.58 and maximum of 300 means within the period of the study among the firms, the minimum share price was 4.58 and maximum was 300, and standard deviation of 85.40 shows that most market share prices in the nigerian listed oil and gas companies are above average. the table also shows the mean value of eps was 7.94, minimum of -15.97 shows the highest loss per share within the period of the study; the maximum of 43.58 shows the highest earnings per share within the period of the study. the standard deviation of 9.34; signifies that earnings per share of most of the listed companies were above average. the table also shows the average value of bps was 36.25, the minimum value of bps was 1.02 while the maximum was 87.26. the standard deviation of 27.48 shows the dispersion of the data from the mean to be above average. as can also be gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 10 observed, the mean value of lev is 3.81, minimum value stands at 1.48, while maximum value was 8.82 and standard deviation of 1.52 signifies that most of the companies are above average in size. correlation matrix the correlation matrix table shows the relationship between all explanatory variables individually with explained variable and the relationships among the independent variables themselves. table 2: correlation matrix mps eps bps lev mps 1.0000 eps 0.4500 1.0000 bps 0.3156 0.4573 1.0000 lev 0.3102 0.4638 0.2635 1.0000 source: output of stata, 2020 table 2 shows the correlation matrix with the correlation coefficient between all pairs of variables. checking the pattern of relationships between dependent and independent variables, it is observed that eps is 45% positively related with market share prices of listed oil and gas firms in nigeria, while a positive correlation of bps and market share prices to the turn of 32%. finally, leverage has a positive relationship with msp at 31%. from the above table the correlation between the independent variables and the dependent variables all have values less than 0.8 which shows the unlikelihood of multicollinearity. however, it cannot be concluded except a multicollinearity test is conducted. gujarati (2004) states that a correlation of greater than 0.8 may amount to multicollinearity however it cannot be confirmed until multicollinearity test is conducted. to test for multicollinearity, variance inflation factors (vif) and tolerance tests were carried out. the results are presented below. table 3: multicollinearity test variable vif 1/vif eps 4.16 0.2402 bps 3.72 0.2688 lev 1.86 0.5366 mean vif 3.25 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 11 source: output stata, 2020 from the table 3 above, the tolerance value (1/vif) of the individual variables are all greater than 10% and less than 1. so also, the highest value of vifs is 4.16 (less than 10), confirm the absence of multicollinearity among the variables (gujarati, 2004). to test for heteroskedasticity, the study employs breusch-pagan/cook-weisberg test. the test shows a chi2 value of 1.18 and the prob> chi2 of 0.2768 (insignificant). this indicates the absence of heteroscedasticity. table 4: regression result variables coefficient zvalue p>(z) eps 0.220115 1.12 0.064 bps 0.212254 -0.19 0.147 lev 0.9315155 1.75 0.085 epslev 1.759971 2.71 0.009 bpslev 11.42192 2.60 0.014 constant 0.6853939 4.80 0.000 r. squared 0.3508 fstatistics 4.69 f-sig 0.0050 source: output of stata, 2020 having run the fixed effect and random effect regressions, hausman test for fixed effect was conducted and the probability of the chi2 was not significant. this informed the study to conduct langrangian multiplier test for random effect, it was also not significant, the researcher moved further to run robust regression. based on the above, the results of robust ols are interpreted below. the multiple coefficient of determination (r2) gives the proportion or percentage of the total variation in the dependent variable explained by the explanatory variable jointly. hence, it signifies that 35.08% of total variation in share prices of listed oil and gas firms in nigeria is caused by their earnings per share, book value per share and leverage as moderator. the f-statistics is 4.69, which indicates that the model is fit and the explanatory variable are properly selected, combined and used. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 12 earnings per share and market share prices the results show that the coefficient of earnings per share is 0.22 and a probability of 0.064 indicating a significant positive relationship between earnings per share and share prices of listed oil and gas firms in nigeria at 10% level of significance. we therefore reject the null hypothesis. this is in line with the findings of mamuda (2015), omokhudu and ibadin (2015) and ernest and oscar (2014). this reveals that a one-naira increase in earnings will result to 0.22-naira increase in the prices. however, the coefficient of moderated earning per share is 1.76 and a probability of 0.009 indicating a significant positive relationship between moderated earnings per share and share prices of listed oil and gas firms in nigeria at 1% level of significance. we therefore reject the null hypothesis. this reveals that a 1 naira increase in moderated earnings will result to 1.76 naira increase in the share prices. again, the coefficient of book value per share is -0.21 and a probability is 0.147, indicating negative relationship between book value per share and share prices of listed oil and gas firms in nigeria. however, it is not significant. we therefore fail to reject the null hypothesis. this is in line with the findings of mulenga (2015). this pointed out that book value is not a significant determinant of the share prices. contrarily, the coefficient of moderated book value per share is 11.42 and the probability is 0.014, indicating a positive relationship between moderated book value per share and share prices of listed oil and gas firms in nigeria at 5% level of significance. with this the researcher rejects the null hypothesis. finally, the coefficient of leverage is 0.93 and a probability of 0.085, indicating a significant positive relationship between leverage and share prices of listed oil and gas firms in nigeria at 10% level of significance. we therefore reject the null hypothesis. this is in line with the findings of omokhudu and ibadin (2015) and mamuda (2015). this means that, a naira increase in leverage will result to 0.93 naira increase in share prices. 5. conclusion and recommendations the study focused on the moderating effect of leverage on the value relevance of accounting information in the listed oil and gas firms in nigeria. in other to achieve this, the study made use of secondary data sourced from the firms’ annual reports and accounts. the study considered share prices as proxy for firm value, while earnings per share and book value per share as accounting information. additionally, leverage was used as moderating variable. data were analysed using multiple regression (ols). the study concluded that earnings per share and gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 13 leverage to be value relevant; while book value per share was not. however, the moderated book value was value relevant as well as moderated earnings per share. based on the findings, the study hereby recommended that listed oil and gas firms in nigeria should strategize to increase their earnings, as any increase means increase in value (higher value for investors). moreover, they should appropriately manage their book value, because any unnecessary investment means negative effect on share price. additionally, listed oil and gas firms should maintain an appropriate level of leverage so that the cheap cost of leverage will reduce the weighted average cost of capital and subsequently increase value to investors. finally, the explanatory power of the moderated variables are more than the ones not moderated; as such investors should invest in firms with the higher earnings per share and appropriate leverage. references abubakar, s. (2011). value relevance of accounting information of listed new economy firms in nigeria: an empirical investigation using ohlson model. nigerian journal of accounting research, 6. adetunji, a. a., akinyemi, a. i., & rasheed, olalekan k. (2016). financial leverage and firms’ value : a study of selected firms in nigeria. european journal of research and reflection in management sciences, 4(1), 14–32. aghdaei, s. h., & ghasemi, k. (2012). studying the effect of debt ratio on market value of stock firms by using the liquidity. 36, 105–110. alslehat, z. a. (2014). the impact of accounting indicators and growth on the market value. 4(2), 9–18. https://doi.org/10.6007/ijarafms/v4-i2/725 beest, f. van, & boelens, s. (2009). quality of financial reporting : measuring qualitative characteristics. april, 1–41. beisland, l. a. (2009). the value relevance across industries: what happened to the new economy? bello, a. (2009). the marginal value relevance of inflation accounting adjustments in nigeria. nigerian journal of accounting research, 5, 1–15. buigut, k., soi, n., koskei, i., & kibet, j. (2013). the effect of capital structure on share price on listed firms in kenya . a case of energy listed firms the effect of capital structure on share price on listed firms in. european journal of business and management, 5(9). companies and allied matters act 1990, (2016). dailymedia. (2014). history of fuel price increases in nigeria daily media nigeria. dailymedia. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 14 farooq, r., & vij, s. (2017). moderating variables in business research. 14(december 2017), 34–54. global, & assetmanagement (2014). ball and brown ( 1968 ): the seed that made a difference (vol. 6, issue january). gujarati, damodar n. (2004). basic econometrics (fourth). mcgraw-hill companies. hellström, k. (2005). the value relevance of financial accounting information in a transitional economy : the case of the czech republic katerina hellström centre for financial analysis in accounting stockholm school of economics box 6501 sse / efi working paper series in busi. iasb. (2014). accounting and reporting concepts (f. i. ogunjuboun, m. odejayi, s. o.adeleke, s. a. bammeke, j. a. ekungba, u. i. erobu, d. o. o. obisesan, & t. popoola (eds.); second). ican publishers. lixin, x., & lin, c. (2008). the relationship between debt financing and market value of company : empirical study of listed real estate company of china 2 advantages and disadvantages of debt financing. 2043–2047. mamuda, m. u. (2015). value relevance of accounting information of listed industrial goods firms in nigeria. mulenga, m. j. (2015). value relevance of accounting information of listed public sector banks in bombay stock exchange . vol. 6(8), 222–232. mokhudu, o. o., & ibadin, p. o. (2015). the value relevance of accounting information : evidence from nigeria. 4(3), 20–30. https://doi.org/10.5430/afr.v4n3p20 premiumtimes. (2016). difficult year for nigeria’s capital market. publisher, r. i., shehzad, k., & ismail, a. (2014). value relevance of accounting information and its impact on stock prices : case study of listed banks at karachi stock exchange. 3(1), 40–48. quarterly, b. s. (2014): oshodin ernest and mgbame chijoke oscar accounting department, faculty of management sciences, university of benin, nigeria. 6(1). sabri, m., & mohd-saleh, n. (2010). the value relevance of financial instruments disclosure in malaysian firms listed in the main board of bursa malaysia. 4(2), 243–270. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 i gusau journal of accounting and finance (gujaf) vol. 3 issue 3, october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state –nigeria gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ii © department of accounting and finance vol. 3 issue 3 october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com mailto:abupress2020@yahoo.com http://www.abupress.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos stat gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. muhammad aminu isa department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. prof. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeiza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vi advisory board members prof. kabiru isah dandago, bayero university kano,kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng mailto:elfarouk105@gmail.com http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng mailto:elfarouk105@gmail.com mailto:05@gmail.com http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ix contents capital structure and firm financial performance of listed deposit money banks in nigeria: moderating effect of board financial literacy anas idris abdulwahab, hussaini bala ph.d, mansur lubabah kwambo ph.d, & abubakar adamu 1 influence of socialization on msme compliance by mediating understanding and moderating knowledge of tax visits yayuk ngesti rahayu 17 does international financial reporting standard narrows audit expectation gap? musa ibrahim dauda, ibrahim adagye dauda, phd 35 sustainability reporting and financial performance of listed manufacturing firms in nigeria aiyesan, olabode olutola ph.d 49 firm attributes and financial reporting timeliness of listed consumer goods firms in nigeria akume james terkende, dele ikese karim 67 value relevance of accounting information for listed financial service firms in nigeria kassim busari, ishaya luka chechet ph.d, aliyu ahmed abdullahi ph.d, & ibrahim mohammed ph.d 87 nigeria economic growth and capital market development: does contributory pension scheme matter? akinwumi ayorinde olutimi, toluwa celestine oladele ph.d, &adeboye emmanuel sanmi 101 audit committee and financial reporting quality: the moderating effect of board independence of listed deposit money banks in nigeria kassim yusha’u shika, mark david kantiyok 117 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 x determinants of financial performance of listed deposit money banks in nigeria mary seansu lazarus, nurradden usman miko ph.d, & saifulahi abdullahi mazadu ph.d 140 human resource accounting and profitability of listed depositmoney banks in nigeria ahmad adamu ibrahim, ahmad rufa’i adamu, fatihu mahmud alhassan &muhammad iliyas abdulsalam 158 board independence, audit effectiveness and the quality of reported earnings in the nigerian consumer goods firms isah shittu ph.d, misbahu, abubakar muhammad 175 impact of capital structure on financial performance of listed agricultural companies in nigeria ahmad muhammad ahmad, shehu usman hassan ph.d., &abubakar abubakar 192 trade oriented money laundering and era of cybersecurity tax evasion in nigeria oluwayemi joseph kayode, adewole joseph adeyinka ph.d, adewale abass adekunle & kadiri kayode ph.d 205 effect of females in the boardroom on corporate sustainability reporting salami suleiman ph. d, olanrewaju atanda aliu ph.d 224 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 175 board independence, audit effectiveness and the quality of reported earnings in the nigerian consumer goods firms misbahu, abubakar muhammad department of accounting federal polytechnic, kaltungo +2348065622650, misbahuabubakar3@gmail.com isah shittu ph. d department of accounting abu business school ahmadu bello university zaria +234806943221, isahshittu15@yahoo.com abstract this paper studied the link of board independence, audit effectiveness and the quality of reported earnings in nigeria. using convenient sampling, 7 consumer-goods firms quoted in the nigerian stock exchange (nse) from 2016 to 2020 (5 years) were used in conducting the research. the data source was primarily obtained from firm’s annual report and analyzed by using random effect gls in stata 14. the findings show that board independence and expertise are statistically significant in affecting the quality of reported earnings. the result found board independence and audit expertise to be negatively affecting earnings quality in the nigerian consumer goods firms. considering the fact that the results found the characteristics of firms board – independence and expertise to be significant in affecting earnings quality, the study recommended that the financial users should not over rely and have absolute confidence in using financial report. the monitoring mechanisms for shielding financial report may not be effective, and the final report can mislead the stakeholders in their various decisions. thus, the regulatory bodies should focus more in revising it guides that will improve quality of earnings to restore stakeholder’s confidence in using financial reports. key words: earnings quality, earnings persistence, board independence and audit effectiveness doi: https://doi.org/10.57233/gujaf.v3i3.188 1. introduction there is need for a constant and periodic presentation of qualitative financial statement by every firm as per its true financial status so as to abreast the related stakeholders with all necessary information they required for their decisions. this is in line with kusnadi leong suwardy and wang (2015) which documented that due to the asymmetrical differences between the management and the stakeholders, there may be fraudulent presentation of financial statement, and any miss presentation of firm’s performance by the management is detrimental to the stakeholders – specifically the equity holders. decline in quality of financial mailto:misbahuabubakar3@gmail.com mailto:isahshittu15@yahoo.com https://doi.org/10.57233/gujaf.v3i3.188 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 176 reporting fades the confidence of investors; it is as a result of abuses by the management on the ethics and practice of corporate reports, several scandals in nigeria were uncovered such as oceanic bank, cadbury plc, intercontinental bank and so on (mbobo & umoren, 2016). reacting to such scandals nationally and globally, several measures were taken (such as, sabanes-oxley act of 2002 (sox) in usa; the blue ribbon committee, 1999 and corporate governance code by nigerian security and exchange commission (sec) 2003, and modified in 2011). literature has not been consistent on earnings quality as it reflects divergent opinions that describe the linkage between quality of reported earnings and the influence of earning persistence over it (nelson & skinner, 2013). as further explained by dichev, graham, harvey and rajgopal (2013); velury and jenins, (2006), despite the criticality of earnings quality in financial reporting, yet it has not got generalized definition and terms of its measurement by empirical researches as various proxies were used in measuring it. some of these proxies are: earning persistence, smoothing, numerous benchmarking beating, asymmetry in time-loss recognition, predictability, and magnitude of accruals with several ways of detecting it. kantudu and samaila, (2015) stated that although the financial statement serve as a fundamental basis through which the stakeholders examine the board effectiveness and how it perform, several loopholes are been used by the management to systematically temper and contaminate the quality of the financial reports. earnings quality and usefulness of financial report as parameters for reporting criteria differs with firm’s efficiency as they do not signifies optimality, the reason for this is that the variant of either lower demand for quality or higher cost of its supply does not imply sub-optimality (ball & shivakumar, 2005). this call for a decent policy that will checkmate the entire process and to ensure a qualitative financial report that will restore the confidence of all related stakeholders. thus, it is one of the most important aims of researching on corporate governance mechanisms, to empirically show how agency crisis as a result of separation between ownership and control, can be mitigated through the information contained in the financial report (bushman & smith, 2001). corporate board and the audit committee are regarded as the core components responsible for the safeguarding of financial report; this is why almost all alleged failures and malpractices were attributed to them (gosh, marra & moon, 2010). corollary referencing, financial report can be ameliorated with board independence since outside director has a specific motive contrary to inside director, to diligently protect shareholders interest in a deteriorated agency situation and thus, the management efficacy will be improved. being effective, audit committee gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 177 observably monitors the corporate board performance in enhancing the credibility of financial report; serves as a checkmating mechanism that defends the stakeholder’s interest by intermediating between the independent auditors and the directors. soliman and ragab (2014) argue that auditors are expected to verify the financial report and state the level of compliance with the regulatory laws as well as its true reflection of the firm’s condition in terms of its operations and economical value, purposely to add credibility to the financial report. in nigeria, the security and exchange commission (sec) 2011 has revised its initial corporate governance code of 2003 to steadfastly enhance corporate governance practice and protect investors. eyenubo, muhammed and ali (2017) reported that despite the efforts by nigerian government to improve regulations in the corporate governance mechanisms including both audit committee and board of directors, it has woefully failed to ensure credibility in financial reporting. coming up with governance mechanisms in nigeria is aimed at reducing the issues of corporate failures, but however, the corporate scandals still occur incessantly (miko & kamardin, 2015), such scandals in nigeria includes removal of some ceo’s due to financial irregularities that affected several corporate bodies (ejeagbasi, nweze, ezeh & nze 2015); sale of forged shares of public quoted companies (kantudu & samaila, 2015) few to be mentioned. although there has been a reasonable amount of literature on corporate board, audit committee and the financial reporting quality (akeju & babatunde, 2017; khalil & ozkan, 2016; sun & liu, 2013; johl et al., 2013; wu, wang & yin, 2007; xie, davidson iii & dadalt, 2003; klien, 2002; dezoort & salterio, 2001), pre and post regulation code evidences (miko & kamardin, 2015; malik, 2014 and gosh et al., 2010), a little emphasis was given to the developing countries such as nigeria. hence, the uniqueness of this study is to consider specific corporate governance attributes – which are the board independence, audit effectiveness and financial reporting quality. unlike the prior nigerian literatures where considerations were vested on pre sec corporate governance code 2011 (kantudu & samaila, 2015 and hassan, 2013) or both data from pre and post 2011 sec regulation code without comparison (akeju & babatunde, 2017 and mbobo & umoren, 2016), or comparing and assessing pre and post sec code of 2011 (miko & kamardin, 2015), the study used the data from post sec corporate code of 2011 only to implore its effectiveness. thus, this study will concentrate on specific features of corporate using consumer goods firms to establish the unitary behavior of the variables affecting financial reporting quality. the study, using the nigerian context, examines how financial reporting quality behaves toward some specific corporate governance attributes in a severely distorted economic situation. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 178 therefore, the study examines the effects of board independence, audit effectiveness (audit committee meetings and expertise) and the quality of reported earnings of listed nigerian consumer goods firms. hence, the study hypothesize that there is no significant relationship between board independence, audit effectiveness and quality of earnings. the study aimed to contribute in enriching the literature and equip all related stakeholders with empirical evidence of how some factors influence the quality of financial statement specifically in nigerian context. the evidences of which will basically serve as a yardstick for decision making, improving regulatory framework and addressing any challenge of fraudulent financial reporting. 2. literature review/theoretical framework this section presents a review of relevant literature on the relationship between board independence, audit effectiveness and the quality of reported earnings. by the end of the section, a theoretical frame work will be presented. the quality of reported earnings depends on the effectiveness and guarantee of monitoring mechanisms, for instance, a governance mechanism capable of efficiently controlling the process of financial reporting. galal, soliman and bekheit (2022) described the director’s independence as the core corporate governance aspect that will undoubtedly play a key role in supervising firm’s financial reporting process and the quality of reported earnings. strengthening the board of directors, such as enhancing the board’s independence, improving the capabilities of detecting problems in financial statements, and clarifying explicitly directors’ responsibilities, is regarded as a way to effectively ameliorate the corporate governance actions and the quality of financial reporting. this idea has been increasingly adopted in various regulations and rules made by concerning professional associations and regulatory bodies. similarly consistent with this view, kantudu and samaila (2015) and klien, (2002) documented that financial report tend to be more qualitative if there is high proportion of non-executive director, meanwhile, a structured board that is more independent is highly effective in financial reporting process. the proportion of non-executive directors is greater on the firms governing board and an independent audit committee may not be sufficiently enough to curtail opportunistic earnings management. because the audit committee's mere existence does not ensure that it will serve as an effective monitoring body, the impact of its characteristics needs to be given further thought. as a result, corporate governance standards establish specific qualities for the audit committee's composition and structure in order to guarantee its performance (akpomedayo & williamson, 2021). hence, improved gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 179 audit quality has the ability to reduce reported profits uncertainty by limiting earnings management. therefore, investors are better able to identify a company's genuine value because earnings management tactics are regulated. lippolis and grimaldi (2020) aims to analyze the relationship between the characteristics of the board of directors (bod) and the effectiveness of the monitoring of earnings manipulation activities in family – controlled companies in italy. in particular, specific hypotheses relating to the link between those aspects of the board, that substantiate its independence, and earnings quality have been formulated to verify whether the mechanisms for monitoring management activity are less effective in these companies. this study applies a univariate and multivariate methods on a sample of italian listed company over the period 2014 2016. earnings management is defined by the proxy of abnormal working capital accrual (awca) estimed model according to defond and park (2001). proxies for corporate governance mechanism are the board size, the level of board independence, the ceo non-duality and the interaction between the last two variables. the research shows that independent directors are not, as in other contexts, a factor that contributes to earnings quality, in the same way that the separation of the offices of chairman of the board of directors and chief executive officer (ceo) does not appear to be relevant to this end. in the study of akpomedayo and williamson, the researchers examine the relationship between board independence and earnings management of listed healthcare firms in nigeria. using convenience sampling, a panel data from eleven (11) healthcare companies that are listed on the nigerian stock exchange were collected from 2012 to 2019. inferential analyses were done using ordinary least square and logit regression techniques based on 5% level of significance. earnings management was operationalized with earnings restatement and discretionary accruals. on the final analysis, it was found that board independence was negatively and significantly related to both earnings restatement and discretionary accruals. therefore, on the basis of the results obtained, the study came to the conclusion that is consistent with independent directors having strong incentives to curb earnings management tendencies. it is therefore recommended that listed healthcare companies should ensure adequate and reward remuneration package to attract and retain industry experienced independent professionals to serve on their boards. ejeagbasi et al., (2015) used 11 nigerian deposit money banks as sample with 77 firm-year observations, covering the periods 2007-20014 to examine the relationship between the qualities of audit report and corporate governance. their result suggests that while board compositions have negative and insignificant relationships with audit quality, separation of the roles of the ceo from that of the gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 180 chairman of the board, board size, and compositions of the audit committee have a positive and significant relationship with audit quality. furthermore, in another research by james & izien, (2014), the findings show that a corporate board and audit characteristic has a positive but insignificant relationship with audit quality. however, the study concludes that effective corporate governance arises out of responsible and simultaneous vigilant actions by the managers, the board of directors, shareholders and auditor’s effectiveness. a research by al-ajmi, (2009) documented the perceptions of credit and financial analysts with regard to the relationship between the effectiveness of audit committee, size of the auditing firm and audit quality in the context of bahrain, which is characterized by a developed financial sector, low-liquidity stock market, low turnover in board of directors of listed firms, an inactive merger and acquisitions market and almost non-extent litigation. a survey of 300 credit and financial analysts shows that analysts considered auditors' opinion useful. both credit and financial analysts see the credibility of financial statements to be a function of the size of the auditing firm. both groups assume that the characteristics of big-four firm’s allow them to produce better-quality reports than non-big firms. audit committee was found to affect earnings quality and hence impair financial report quality, likewise effective audit committee improve the quality of auditors reports and financial analyst perceive financial report to be more credible. in a paper by felo, krishnamurthy and solieri, (2003), it has been empirically examine the relationship between two audit committee characteristics the composition (expertise and independence) and size of the audit committee and the quality of financial reporting. the findings shows that after controlling for firm size, board composition and institutional ownership and the percentage of audit committee members having expertise in accounting or financial management is positively related to financial reporting quality. the result also provides an evidence of a positive relationship between the size of the audit committee and financial reporting quality. however, audit committee independence is not related to financial reporting quality. the study suggested that mandating greater expertise on audit committees rather than simply requiring one expert on the audit committee may be beneficial to investors. in addition, the results also provide weak support for the recommendation of the blue ribbon committee that firms devote significant directorial resources to the audit committee. given the prior evidence of a negative relationship between financial reporting quality and cost of capital, firms could improve their reporting quality by appropriately structuring their audit committees, thus reducing their cost of capital. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 181 it is however, that the literature didn’t provide an obviously consistent result that shows the relationship between board independence, audit effectiveness and earnings quality. although, there are numerous literatures as for reporting quality, the nigerian literature fails to measure the efficiency of sec 2011 code of corporate governance, as data from specific period of its implementation are not captured alone by the literature. furthermore, most of the literatures are in wholly generalizable form, the literature fails to establish the unitary behavior of the concern variables specifically in exceptionally problematic situations where the firms are faced with tedious economic aspects of recession, political and global changes. 2.1 theoretical frame work this study will use stakeholder’s theory to explain the relationship among the variables. the theory was adopted to fill the observed gap created by omission found in the agency theory which identifies investors (equity owners) as the only interest group of a corporate entity (ejeagbasi et al., 2015). within the framework of the stakeholders' theory the problem of agency has been expanded to include multiple principals including creditors, government, employees, suppliers and general public. the stakeholders' theory attempts to address the questions of which group of stakeholders deserve the attention of management. the stakeholders' theory proposes that companies have a social responsibility that requires them to consider the interest of all parties affected by their actions. the original proponents of the stakeholders' theory suggested a restructuring of the theoretical perspectives that extends beyond the owner manage-employee position and recognizes the numerous interest groups. if organizations want to improve their efficacy, they must consider the relationships that can affect or be affected by the achievement of the organization's objectives (ejeagbasi et al., 2015). in agency relationship, the theory is based on the idea of separation of ownership (referring to principal) and management (referring to agent). it is generally assumed that there is presence of information asymmetry, where by the agent is likely to pursue interest that may hurt the principal, i.e. the two parties who enter into the contract will act to maximize their own self-interest and that all actors have the freedom to enter into a contract or to contact elsewhere (hassan, 2013). the study will therefore use the framework as depicted by the figure 2.2.1 below. it establishes the relationship of board independence, audit effectiveness (audit committee meeting and expertise) and earnings quality proxy by earnings persistence. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 182 earnings persistence figure 2.2.1: board independence audit committee meeting audit expertise 3. methodology the population of this study comprises all 22 listed consumer goods companies on the nigerian stock exchange (nse) as at 31st december, 2020. however, a convenient sampling approach was adopted to filter out those firms that have problem with their data due to its availability. a company must be listed on nse within period of the study; and have presented the required financial report available for it to be among the study sample. therefore, the population was adjusted considering the criterion. only seven companies perfectly pass through the filtration processes. the firms are dangote sugar plc, newco, flourmills, nestle nigeria, nigerian breweries, pz, and uniliver. the study covers the period of five (5) years from 2016 to 2020 with thirty five (35) firm-year observations. as explained by dechow et al. (2010) and defond (2010), earnings persistence (ep) is a forefront proxy of earnings quality and a measurement of financial reporting quality. a simple linear regression of previous year earnings (earningst 1) as the dependent variable is to be run against an explanatory variables of current year earnings (earningsi,t). the beta value (coefficient of the explanatory variable) from the regression residuals is the determinant that shows the level of earning persistence. a beta of higher value tends to have more desirable earnings and cash flow stream which will affect the firm’s market value. the model was used by sloan (1996) and is based on the views of graham and dodds (1934) on earnings as a simple matric that can be used to predict cash flows and quality valuation. the ep model is as follows: earningst-1 = α + βearningst + εt ................................................................ (eqt 1) earningst-1 is the previous year absolute value of earnings earningst is the absolute value of current year earnings α is the intercept, β is the coefficient of the explanatory variable (which as far this study explain the magnitude of ep), and εt is the error term of the residuals. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 183 the model of this study consists of two variables; the explained and the explanatory variables. the explanatory variables constitutes board independence, audit effectiveness (audit committee, meetings and expertise) while the dependent (explained) variable is the quality of reported earnings proxy by the coefficient values of current earnings from the output of eqt 1 in detecting the level of persistence. the longitudinal and balanced panel data used by this study employs ep as proxy for the quality of reported earnings as it was measured by sloan (1996) and dechow et al., (2010), therefore the dependent variable ep, which is measured by the coefficient values of reported earnings that have been tested as to have a highly and significant persistence over time by eqt 1. as for the explanatory variables, three variables were used. the variables are board independence (b_ind) measured by the proportion of independent directors to the total number of directors on the board (sun & liu, 2013; wu et al., 2007; song & windram, 2004; xie et al., 2003; klien, 2002 & beaseley 1996); audit committee meetings (ac_mtin) measured as total number of meeting by the committee in the financial accounting period (eyenubo et al., 2017; malik, 2014; devlaminc & saren, 2013 & soliman & ragab, 2014). audit committee expertise (ac_exprt) is the last variable in the model. it is a dummy variable that reflect 1 if there is an expert in the committee and 0 if it is otherwise. the meaning of expert is to have a qualification of any national or international professional accounting body such as anan, ican or acca (al-ajmi, 2009; abbott, et al., 2004; felo et al., 2003; dezoort et al., 2002 & dezoort & salterio, 2001). the study holds firm size for control variable. the natural log of total asset (log_ta) is the proxy that featured in the model (kantudu & samaila, 2015; hassan, 2013 & rainsbury, bradbury & cahan, 20009). the firm size as a control variable is paramount because the expectation is that a larger firm may have wider problem considering the stakeholders theory (hassan, 2013). moreover, kantudu and samaila (2015) state that lager firms may contain more information required by the stakeholder’s. base on the afore-mentioned variables the model is specified as follows: epit = α+β1bindit+β2ac_mtinit+β3ac_exprtit+β4log_tait+ε… ......... (eqt 2) where: ep = earning persistence bind = board independence ac_mtin = audit committee meetings ac_exprt = audit committee expertise gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 184 log_ta = natural log of total assets α = the intercept (i.e parameter of the estimate as an average amount that is directly proportion of the dependent variable to the independent variable whether it increase upward or downward). βn = the coefficients values or the partial derivatives (independent variables gradients) ε = stochastic error term 4. data presentation and analysis a linear regression was used to test the level of earnings persistence as mentioned earlier using eqt 1. the result shows that the overall earnings persistence is very high, having a percentage of 98% (the overall coefficient of current earnings from the regression output) with 1% level of significance). this entails further that the invariability of earnings increasing in the nigerian consumer goods firms is a systematic way of improving the earnings quality that can be regarded as smoothening. after all, the beta figures for each firm-year observation was predicted and used in the panel as the measure to explain ep. 4.1 descriptive statistics and correlation results table 4.1.1 descriptive statistics variables mean std. deviation minimum maximum skewness kurtosis ep 1.20 1.30 7.39 4.31 0.00 0.33 bind 0.21 0.11 0.06 0.44 0.73 0.04 ac_mtin 3.88 0.90 1 5 0.00 0.02 ac_exprt 0.65 0.48 0 1 0.09 0.00 log_ta 7.78 0.61 6.33 8.56 0.00 0.30 source: stata 14 output. in table 4.1.1, the descriptive statistic shows that ep is having the mean average of 1.20 and the standard deviation of 1.30 meaning that there is slight deviation of the data from the mean. the table also shows the minimum, maximum, skewness and kurtosis values for the dependent variable. however, both skewness and kurtosis figures fails to meet the criterion of gausian and asymmetrical distribution which suggested them to be 0 respectively in some instances of bind & ep, though the figures are all positive. further explanation from the table is the mean values of board independence, audit committee meeting and audit expertise of 0.22, 3.9 and 0.66 respectively. the revealed values of standard deviation for all independent variables shows a wide variation from the mean which implies that there is present of dispersion among the variables. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 185 table 4.1.2 correlation matrix ep bind ac_mtin ac_exprt log_ta ep 1.0000 bind -0.2213*** 1.0000 ac_mtin -0.1588*** -0.1153*** 1.0000 ac_exprt 0.4576** -0.5103* -0.0252*** 1.0000 log_ta 0.5386* -0.1629*** -0.247*** 0.6300* 1.0000 source: stata 14 output (the asterisks *, **, and *** shows the significance levels at 1%, 5% and 10% respectively). the summary of pearson correlation result was shown in table 4.1.1. ep is statistically insignificant related to both board independence and audit committee meeting. the relationship appears to be negative at 10%, meaning that even if ep will influence board independence and audit committee meetings it will be an inverse relationship i.e. ep increase with the decrease of board independence and audit committee meetings. contrary to bind and ac_mtin, audit expertise is statistical significant in affecting ep. the correlation coefficient of 0.4576 is significant at 5% (95% degree of confidence). the implication of this that ep and ac_exprt are moving towards the same direction i.e. each increase of ep will also increase ac_exprt. in summary, the bivariate analysis shows the influence of ep over the explanatory variables. henceforth, the multivariate figures reflect that there is more likely absent of collinearity between the variables. table 4.1.3 random-effect gls regression results ep coefficient std. error t-values prob. chi2 constant 3.87 2.17 1.78 0.07 bind -1.88 82 -2.28 0.02 ac_mtin -78534.32 71 -0.11 0.91 ac_exprt -37 19 -1.87 0.06 log_ta -25 27 -0.99 0.35 r square 0.16 wild chi 8.80 f-statistics 2.59 sig. 0.06 source: stata 14 output the interpretation of random-effect gls result was selected after all post estimation test reveals it appropriateness over ols and fixed effect models. hausman test was conducted after the data was run using both fixed and random effect models. both hausman and breusch-pegan langrangian multiplier test for gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 186 random effect shows that random effect gls is more appropriate to explain the relationship between ep and the explanatory variables in this study. cumulatively, the overall relationship between ep and board independence, audit committee meeting and audit expertise is positively 0.16 as depicted by the multiple coefficient of determination which is the r2; it means that 16% variation of earnings persistence in the nigerian consumer goods is caused by board independence and audit effectiveness. similarly the table shows the fitness of the model. the f statistics of 2.59 which is significant at 5% confirms that the independent variables jointly and significantly the variation in the dependent variable. therefore all the selected variables are proper and appropriate. furthermore, the result shows that board independence has negative relation with ep and statistically significant at 5% significance level. the practical implication of this is that an independent board is negatively affecting the quality of reported earnings. thus, having more independent directors on the board reduce the quality of financial reports through reported earnings. this is contrary to the expectation that the board independence will enhance the quality of financial reporting. although, it may be possible since the independent directors are not fully participants and well engaged in the financial reporting process, and most at times they are less informed and lack expertise in reporting process. independent directors may have influence over the board decisions, and the dominance of their view will affect the eq due to asymmetrical difference within the board. the result is consistent with prior researches such as sun and liu, (2013); bradbury et al., (2009) song and windram, (2004); vafeas, (2005) and abbott, park and parker (2000); however, the result is contrary to khalil and ozkan, (2016); kantudu and samaila, (2015); hassan (2013); xie et al., (2003); klien, (2002) and bushman and smith, (2001). the regression table also reflects that the relationship between ep and audit expertise is negatively insignificant a t-value of -1.87 with a corresponding p-value of 0.06. this is also contrary to the expectation that audit expertise will improve the quality of financial reporting. as implied by the result, having expert in the audit committee is inconsequential to earnings persistence. the result is consistent with the findings of devlaminck and saren, (2013) and felo et al., (2003). but however, the result contradicts johl et al., (2013); lin, li and yang, (2006) and abbott et al., (2004). the study is therefore having various practical, theoretical and regulatory implications which will serve as the major contribution of the study to the existing gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 187 literature on financial reporting and the nigerian regulatory bodies. the findings suggest that there is need to re-strategize the corporate board in such a way that the board can have other means of enhancing reporting quality. the regulatory bodies should also look a way to improve the board independence so as to have a financial report the will not be misleading. as for the audit committee, the financial report users should not over rely on the audit committee effectiveness since it has statistically shown that the committee cannot be 100% reliable. moreover, the practical pressures on audit committee can force the auditors to pervert from what is expected from them. the result contradict the theory from all angles which says that both board independence and audit effectiveness are instrumental organs in enhancing quality of reported earnings. 5. summary and conclusion the findings of this study are complementary to those in extant earnings quality literature as it shows that changes in board independence and audit effectiveness are significantly negative and influencing the quality of reported earnings. board meeting and firm size are however insignificant to affect earnings quality. in fact, the results suggest that having an expert on the audit committee may reduce the quality of financial report as such, users should be extra careful in using it more specifically the reported earnings. in addition, the results suggest that commitment of more directorial resources to the audit effectiveness may not enhance the firm's reporting quality because it influences the reporting process negatively. base on the result, there is need to further look over the laid governance practice in the nigerian consumer goods firms. however, the study concludes that the regulatory bodies should put more emphasis on earnings persistence in the listed consumer goods firms in nigeria so as to enhance the financial reporting process through board independence and audit effectiveness. similarly, the reported earnings cannot be 100% reliable due to inability of monitoring mechanism in shielding it quality. it is also contrary to the expectation that board independence and audit effectiveness can mitigate agency crises through the quality of financial report. again, the nature of listed consumer firm in nigeria contribute in defaming the process of financial report, such a situation is basically cause by a severe distorted economic activities. finally the study recommends board independence and audit effectiveness should be carefully monitored as they are significant determinants of earnings quality through which they affect the decisions of the financial report users. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 188 references abbott, l. j., park, y. & parker, s. (2000). the effects of audit committee activity and independence on corporate fraud. managerial finance, 26(11) 55-67. abbott, l.j., parker, s. & peters, g.f (2004). audit committee characteristics and restatement.auditing: a journal of practice and theory, 23(1), 69 87 akeju, j. b., & babatunde, a. a. (2017). corporate governance and financial reporting quality in nigeria. international journal of information research and review, 4(2), 3749–3753. akpomedaye, o.p., & williamson, g.s., (2021) “board independence and earnings management of healthcare firms in nigeria” international journal of business & law research 9(4):108119, oct.-dec., 2021 al-ajmi, j. (2009). audit firm, corporate governance, and audit quality: evidence from bahrain. advances in accounting, 25(1), 64–74. https://doi.org/10.1016/j.adiac.2009.02.005 ball, r., & shivakumar, l. (2005). earnings quality in uk private firms: comparative loss recognition timeliness. journal of accounting and economics, 39(1), 83–128. https://doi.org/10.1016/j.jacceco.2004.04.001 beasley, m. s. (1996). an empirical analysis of the relationship between the of board of directors and financial statement fraud, 71(4), 443–465. bushman, r. m., & smith, a. j. (2001). financial accounting information and corporate governance. journa of accounting and economics (vol. 32) 237 333. de vlaminck, n., & sarens, g. (2013). the relationship between audit committee characteristics and financial statement quality: evidence from belgium. journal of management and governance, 19(1), 145–166. https://doi.org/10.1007/s10997-013-9282-5 dechow, p., ge, w., & schrand, c. (2010). understanding earnings quality: a review of the proxies, their determinants and their consequences. journal of accounting and economics, 50(2–3), 344–401. https://doi.org/10.1016/j.jacceco.2010.09.001 defond, m. l. (2010). earnings quality research: advances, challenges and future research. journal of accounting and economics, 50(2–3), 402–409. https://doi.org/10.1016/j.jacceco.2010.10.004 dezoort, f. t., hermanson, d. r., archambeault, d. s., & reed, s. a. (2002). audit committee effectiveness: a synthesis of the empirical audit committee literature. journal of accounting literature, 21, 38–75. dezoort, f. t., & salterio, s. e. (2001). the effects of corporate governance gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 189 experience and financial reporting and audit knowledge on audit committee members’ judgments. auditing: a journal of practice & theory, 20(2), 31– 47. https://doi.org/10.2308/aud.2001.20.2.31 dichev, i. d., graham, j. r., harvey, c. r., & rajgopal, s. (2013). earnings quality: evidence from the field. journal of accounting and economics, 56(2–3), 1–33. https://doi.org/10.1016/j.jacceco.2013.05.004 ejeagbasi, g.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(18), 18–39. enofe, a. o., aronmwan, e. j., & abadua, h. s. (2013). audit committee report in corporate financial statements : users ’ perception in nigeria. european journal of accounting, auditing and finance research, 1(1), 16–28. eyenubo, s. a., mohammed, m., & ali, m. (2017). audit committee effectiveness of financial reporting quality in listed companies in nigeria stock exchange, 7(6), 487–505. https://doi.org/10.6007/ijarbss/v7 i6/3006 felo, a. j., krishnamurthy, s. & solleri s.a (2003). audit committee characteristics and the perceived quality of financial reporting : an empirical analysis. cpa journal, 1–40. https://doi.org/10.2139/ssrn.401240 galal, h.m., soliman, m.m. & bekheit, m.b. (2022) “the relation between audit committee characteristics and earnings management: evidence from firms listed on the egyptian stock market” american journal of industrial and business management, 2022, 12, 1439-1467 ghosh, a., marra, a., & moon, d. (2010). corporate boards, audit committees, and earnings management: preand post-sox evidence. journal of business finance and accounting, 37(9–10), 1145–1176. https://doi.org/10.1111/j.1468-5957.2010.02218.x graham, b. & dodd, d. (1934) in: security analysis. the mcgraw-hill book company, inc. habib, a. (2012). non-audit service fees and financial reporting quality: a meta-analysis. abacus, 48(2), 214–248. https://doi.org/10.1111/j.1467-6281.2012.00363.x hassan, s. u. (2013). financial reporting quality , does monitoring characteristics matter ? an empirical analysis of nigerian manufacturing sector . the business & management review, 3(2), 147–161. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 190 james, i. o. & izien, o.f (2014). audit firm characteristics and audit quality in nigeria. international journal of business and economics research, 3(5), 187. https://doi.org/10.11648/j.ijber.20140305.14 johnson, v. e., khurana, i. k., & reynolds, j. k. (2002). audit-firm tenure and the quality of financial reports. contemporary accounting research, 19(4), 637–660. https://doi.org/10.1506/llth-jxqv-8cew 8mxd k. johl, s., kaur johl, s., subramaniam, n., & cooper, b. (2013). internal audit function, board quality and financial reporting quality: evidence from malaysia. managerial auditing journal, 28(9), 780–814. https://doi.org/10.1108/maj-06-2013-0886 kantudu, a. s., & samaila, i. a. (2015). board characteristics, independent audit committee and financial reporting quality of oil marketing firms: evidence from nigeria. journal of finance, accounting and management, 1(july), 34–50. https://doi.org/10.1017/cbo9781107415324.004 khalil, m., & ozkan, a. (2016). board independence, audit quality and earnings management: evidence from egypt. journal of emerging market finance, 15(1), 84–118. https://doi.org/10.1177/0972652715623701 klein, a. (2002). audit committee, board of director characteristics, and earnings management. journal of accounting and economics, 33(3), 375–400. https://doi.org/10.1016/s01654101(02)00059-9 kusnadi, y., leong, k. s., suwardy, t., & wang, j. (2015). audit committees and financial reporting quality in singapore. journal of business ethics, 139(1), 197–214. https://doi.org/10.1007/s10551-015-2679-0 lin, j. w., li, j. f., & yang, j. s. (2006). the effect of audit committee performance on earnings quality. managerial auditing journal, 21(9), 921– 933. https://doi.org/10.1108/02686900610705019 lippolis, s. & grimaldi, f. (2020) “board independence and earnings management: evidence from italy” international journal of business and management; vol. 15, no. 8; 2020 malik, m. (2014). audit committee composition and effectiveness: a review of post-sox literature. journal of management control, 25(2), 81–117. https://doi.org/10.1007/s00187-014-0188-4 mbobo, m. e., & umoren, a. o. (2016). the influence of audit committee attributes on the quality of financial reporting. international journal of economics, commerce and management, united kingdom, iv(7), 116– 141. miko, n. u., & kamardin, h. (2015). impact of audit committee and audit quality on preventing earnings management in the preand postnigerian gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 191 corporate governance code 2011. procedia-social and behavioral sciences, 172, 651–657. https://doi.org/10.1016/j.sbspro.2015.01.415 nelson, m. w., & skinner, d. j. (2013). how should we think about earnings quality? a discussion of “earnings quality: evidence from the field.” journal of accounting and economics, 56(2– 3), 34–41. https://doi.org/10.1016/j.jacceco.2013.10.003 pomeroy, b., & thornton, d. b. (2008). meta-analysis and the accounting literature: the case of audit committee independence and financial reporting quality. european accounting review, 17(2), 305–330. https://doi.org/10.1080/09638180701819832 rainsbury, e. a., bradbury, m., & cahan, s. f. (2009). the impact of audit committee quality on financial reporting quality and audit fees. journal of contemporary accounting and economics, 5(1), 20–33. https://doi.org/10.1016/j.jcae.2009.03.002 sloan, r., (1996). do stock prices fully reflect information in accruals and cash flows about future earnings? the accounting review 71, 289–315. soliman, m. m., & ragab, a. a. (2014). audit committee effectiveness, audit quality and earnings management: an empirical study of the listed companies in egypt. research journal of finance and accounting, 5(2), 155–166. song, j., & windram, b. (2001). benchmarking audit committee effectiveness in the uk. ssrn electronic journal, 205, 195–205. https://doi.org/10.2139/ssrn.249865 sun, j., & liu, g. (2012). auditor industry specialization, board governance, and earnings management. managerial auditing journal, 28(1), 45– 64.https://doi.org/10.1108/02686901311282498 vafeas, n. (2005). audit committees, boards, and the quality of reported earnings. contemporary accounting research, 22(4), 1093–1122. https://doi.org/10.1506/1qyn-2rfq-fkyx-xp84 velury, u., & jenkins, d. s. (2006). institutional ownership and the quality of earnings. journal of business research, 59(9), 1043–1051. https://doi.org/10.1016/j.jbusres.2006.05.001 wu, q., wang, p., & yin, j. (2007). audit committee, board characteristics and quality of financial reporting: an empirical research on chinese securities market. frontiers of business research in china, 1(3), 385– 400. https://doi.org/10.1007/s11782-007-0023-y xie, b., davidson iii, w. n., & dadalt, p. j. (2003). earnings management and corporate governance: the role of the board and the audit committee. journal of corporate finance, 9(3), 295–316. https://doi.org/10.1016/s0929-1199(02)00006-8 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 192 gusau journal of accounting and finance (gujaf) vol. 4 issue 1, april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ii © department of accounting and finance vol. 4 issue 1 april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 v department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vi advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ix contents board characteristics and earnings management of listed consumer goods firms in nigeria benjamin gwabin joseph, murtala abdullahi phd, benjamin kumai gugong phd 1 dividend policy and value of listed non-financial companies in nigeria: the moderating effect of investment opportunity abubakar umar 18 trialability and observability of accrual basis international public sector accounting standards implementation in nigeria aliyu abdullahi ahmed phd, zakari usman 35 liquidity risk and performance of non-financial firms listed on the nigerian stockexchange muhammed alhaji abubakar, nurnaddia binti nordin phd, abubakar hamisu umar 54 board diversity, political connections and firm value: an empirical evidence from financial firms in nigeria rofiat oyetunji, isah shittu phd, ahmed bello phd. 75 moderating effect of bank size on the relationship between interest rate, liquidity, and profitability of commercial banks in nigeria shehu usman hassan, bello sabo (ph. d), ismai'l idris tijjani (ph. d), idris ahmed aliyu. (ph. d) 96 sources of health care financing among surgical patients seen at the dalhatu araf specialist hospital lafia nasarawa state nigeria ahmed mohammed yahaya, babatunde joseph kolawole, bello surajudeen oyeleke 121 transparency, compliance and sustainability of contributory pension scheme in nigeria olanrewaju atanda aliu (ph. d), mohamad ali abdul-hamid (ph. d), salami suleiman (ph. d), salam mudathir olanrewaju 135 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 x examining the impact of working capital management on the financial performance of listed industrial goods entities in nigeria 151 sani abdulrahman bala (ph. d), jamilu jibril, taophic olarewaju bakare corporate governance factors and tax avoidance of listed deposit money banks in nigeria 171 sani abdulrahman bala (ph. d), umar salim ibrahim, samaila dannana risk committee demographic traits: a study of the impact of expertise on risk disclosure quality of listed insurance firms in nigeria wada najib abbas, dandago, kabiru isa (ph. d), rabiu, naja’atu bala 192 moderating effect of audit committee on the relationship between audit quality and earnings management of listed non-financial services firms in nigeria ahmad muhammad ahmad, lubabah mansur kwanbo (ph.d.), shehu usman hassan (ph.d.) musa suleiman umar (ph.d.) 216 determinants of audit opinion of negative-book-value firms in nigeria: firm value and audit characteristics perspective asma’u mahmood baffa (ph. d), lawal mohammed (ph.d.), ahmed bello (ph.d.) umar farouk abdulkarim 237 intervention announcements and naira management: evidence from the nigerian foreign exchange market adedeji daniel gbadebo 254 is there earnings discontinuity after the implementation of ifrs in nigeria? adedeji daniel gbadebo 275 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 18 dividend policy and value of listed non-financial companies in nigeria: the moderating effect of investment opportunity abubakar umar department of accounting yusuf maitama sule university, kano abubakar2235@gmail.com +2348039247517 abstract the relationship between dividend policy (dp) and the value of firms (fv) has been investigated by several researchers in different jurisdictions. however, the findings of these researchers have been always inconsistent. this is due to the other factors that affect this relationship, which include the investment opportunity (io). this paper is therefore aimed to empirically examine the impact of dividend policy on firms’ value with investment opportunity as moderator. the population of the study consists of 102 listed non-financial companies. based on the criterion set by the researcher, a judgmental technique of sampling was used in selecting 30 non-financial companies from the year 2011 to 2020. tobin’s’ q (tq) and market price per share (mps) are the proxies for firms’ value, while dividend per share (dps) dividend payout ratio (dpr) and dividend yield (dy) are the proxies for dividend policy. investment opportunity (io) was measured as fixed asset growth. the study also used firms’ size (fsize), leverage (lev) and industry dummy (ind) as control variables. descriptive statistics, correlation, and feasible generalized least squares (fgls) analysis were used. it was found that dp, dpr, and dy are statistically significant to influence tq. while mps was only influenced by dp and dy. it was also found that io did not moderate the relationship between dividend policy and firm value. it is recommended that the management of corporations should put measures in place that will increase revenue and decrease expenses so that regular dividend payments could be maintained. key words: dividend per share, dividend payout ratio, dividend yield, tobins’ q, market price per share, investment opportunity. https://doi.org/10.57233/gujaf.v4i1.198 1. introduction according to putu et al. (2014), how investors perceive a company is linked to its value, which is directly tied to stock prices. the company's principal goal is to maximize its value, which also affects the level of shareholder prosperity. the share price may be seen as the market value of the firm that can benefit the shareholder; as a result, an increase in a company's share price raises the welfare of its shareholders. it's essential to enhance corporate value as it also means increasing shareholder wealth, which is the primary objective of the company (ibrahim, 2020). a firm's value (fv) can be influenced by several factors, including the dividend policy (dp) (setiyawati et al., 2017). the focus of the dp is to determine the portion mailto:abubakar2235@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 19 of earnings that should be disbursed as dividends to investors and the portion that should be kept for reinvestment. the development of the dp is heavily influenced by the available investment opportunities and dividend value of the company. therefore, it’s critical financial decisions that will have a significant impact on a company's profitability. it is a plan that guides management on how to distribute the company’s returns to stockholders through various forms of dividends over a set period (kehinde & abiola, 2001). however, previous literature states that companies delay distribution of dividends due to investment opportunities (io) (abo and bokpin, 2010; subramaniam et al., 2011; subramaniam and shaiban, 2011). according to jones and sharma (2001), a firm’s investments or options to grow constitute the investment opportunity set (ios) of that firm. myers (1977) explains an io as any potentially profitable investment with the prospect of providing an economic return that has yet to be realized by the firm. therefore, an io is the part of the value of a firm that results from the option to make a future investment (smith & watts, 1992). the dp of a company will be influenced, to a large extent, by the io available to that company because they will determine the amount of funds that will be available for distribution as a dividend (brigham & houston, 2016). the amount of dividend to be paid by a company would be determined by the number of potentially profitable investments that are available to the company. companies will pay a small portion of their earnings as dividends when they have many potential profitable investments (myers & majluf, 1984). as asserted by jensen (1986), companies will rather use their internal resources to take advantage of available io than use external resources, which are more expensive. this would no doubt reduce the fund that would otherwise be paid out as dividend. previous studies conducted on dp usually focus on the direct impact of dp on fv. mixed results were obtained by different researchers. some studies found a significant influence between dp and fv (amollo, 2016; budagaga, 2017; anton, 2017; safitri et al., 2020). other researchers (like emeni and ogbulu, 2015; rehman, 2016; husain and sunardi, 2020) found insignificant effects. the inconsistency in the results shows that there is a need for moderation to see if the direction of the result could be changed. hence, the present study will use io as a moderating variable to moderate the relationship between dp and fv as used by yustisiana (2017). the non-financial sector is critical to the economy of any country. it accounted for more than 63% of nigerian listed companies (nse, 2020). it comprises manufacturing and services sectors. however, a close examination by the researcher of the information published either by the companies in their annual gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 20 reports or by the nigerian stock exchange (nigerian exchange group) about the dividend payment reveals that between the years 2011 to 2020, only about 56% of listed non-financial companies in nigeria paid a dividend at least once. in fact, this study will use data from only 30 companies as the only companies who paid dividend in the seven out of the ten years covered by this study. this reveals that, as noted by ajayi and mougouė (2017), some prefer companies that constantly pay dividend to shareholders, while others believe that companies should retain profits and use it to tap into the available investment opportunities. the remaining part of the paper will cover the literature review and the hypothesis development, the methodology, result and discussion, and the conclusion and recommendation. 2. literature review and hypothesis development miller and modigliani's (1961) dividend irrelevance theory offers insight into the relationship between dp and fv. the theory suggests that a company's stock price and cost of capital aren't influenced by its dp. according to pilotte (1992), companies that pay out most of their earnings as dividends experience less capital appreciation. dividend payout and capital appreciation have an inverse correlation. according to this theory, irrespective of its size, the sum of the dividends is always equal to the capital appreciation. hence, investors are always indifferent. if the dividend paid by the company falls short of investors’ expectations, investors can dispose-off part of their shareholding to obtain cash, and vice versa (farrukh et al., 2017). evidence from empirical studies on dp and fv yielded mixed results. for instance, egbeonu et al. (2016) proved that dividend per share is negatively related to fv. aroh et al. (2021) discovered that dp had a negative influence on company value using data from 81 nigerian companies. in contrast, anton (2016) discovered that the dividend payout ratio has positive effects on company value based on a sample of 63 romanian non-financial companies. similarly, budagaga (2017) established a positive and significant association between dividend payment and company value utilizing a residual income technique based on 44 chosen companies. likewise, okeke et al. (2021) found that dividends per share and earnings per share positively affect the share price of nigerian companies. also from nigeria, lawrence et al. (2021) proved that dp determined the value of non-financial firms. however, emeni and ogbulu (2015), using a sample of 10 firms, proved that firm dp does not affect fv. similarly, husain and sunardi (2020) used a sample of 11 companies from the automobile and components sub-sector to study the influence gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 21 of dp on fv in indonesia and found no significant effect. also, hansda et al. (2020), using the gmm model, found that dp does not affect the value of 500 firms listed on the bse. likewise, bon and hartoko (2022) using data from 30 indonesian companies, found an insignificant relationship between dp and value. from the above literature review, we can see conflicting findings from different authors. while some studies found a significant relationship between dp and fv, others found an insignificant relationship. therefore, based on this literature, we proposed the following hypothesis: h1 dividend policy has an impact on firms’ value. dividend policy, investment opportunity and firm’s value the relationship between dp, io, and fv can be explained with the help of the dividend remaining theory. according to this theory, the focal point of any organization should not be the number of dividends to be shared with shareholders. a dividend should only be paid when all the available potential investments with prospective economic benefits are exhausted. therefore, the amount of dividend to be paid would be determined by the amount and number of capital projects that the organization planned to embark on. the reason for calling this theory "the residual theory of dividends" is that dividends will only be paid with residual profits after investments (livoreka et al., 2014). titman (2011) states that there is a negative association between io and dividend payout ratio. a rise in io will result in a fall in the dividend payout ratio. previous literature proves the existence of a relationship between dp and io. for instance, smith and watts (1992) contend that a low dividend distribution strategy is likely to be chosen by companies with a large ios since dividends and investments are competing in the uses of a company’s cash resources. similarly, abbott (2001) asserts that a company’s dividend payout is inversely affected by an increase in ios. in other words, companies that experienced an increase in io usually reduced their dividend payout, and vice versa. abor and bokpin (2010) found a negative and significant relationship between io and dividend payout ratio. likewise, subramaniam et al. (2011) also found a negative and significant relationship using a sample of 409 companies in malaysia. in contrast, siboni et al. (2015) proved that there is a positive association between io and dp using a sample of 88 iranian companies. similarly, andaswari et al. (2017) using structural equation modeling on 14 companies from the indonesian construction sector, found that ios positively affects dp. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 22 the inconsistency in the findings opens a possibility that io is not a direct determinant of dividend decisions but rather a moderating variable of the direct relationship between profitability, company growth, and dividend decision (sarmento et al., 2014). it is on this note that yustisiana (2017) investigates the influence of dp on shareholder wealth by incorporating io as a moderating variable. it is proved that io moderates the relationship between dp and shareholders' wealth. similarly, raharja et al. (2020) found that io moderates the relationship between dividend decisions and a firm’s profitability. we, therefore, developed the following hypothesis: h2: investment opportunity moderates the impact of dividend policy and firms’ value. 3. methodology this paper examines the effect of dividend policy and firms' value of listed nonfinancial companies in nigeria, with investment opportunity as moderating variable. data for the study was gathered from the annual reports of the firms covering the years 2011 through 2020. the researcher used a judgmental sampling technique in selecting the sample size based on the following criterion: (1) the company must have been listed on the floor of the nigerian stock exchange not later than january 1, 2011; and (2) the company must have paid a dividend for at least seven (7) years out of the ten (10) years covered by this study. therefore, this paper removed companies that paid dividends for less than 7 years and companies with other missing data. the final sample comprises 30 companies over a period of 10 years. this makes it a 300-firm-year observation. see table i for the sampling procedure. definition of variables and measurement firm value this study use tobin’s q and market share price to measure firm value, consistent with previous studies (safitri et al., 2020; akhmadi and januarsi, 2021). tobin’s q is calculated by summing up the market capitalization and book value of debt and then dividing it by the total assets. the market share price is the closing share price independent variables consistent with the study of oniyama et al. (2021), this paper used three measures of dp. dividend per share is calculated in this study as the divided total dividend paid to the ordinary shareholders divided by the total number of shares in issues, dividend payout ratio-measured as dividend per share minus earning per share gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 23 dividend by dividend per share, and dividend yieldmeasured as dividend per share dividend by earning per share. moderating variable investment opportunity is the moderating variable, which is measured as the ratio of increase in fixed assets over the total assets of period one, consistent with the study of nasir et al. (2020). control variables three control variables namely firm size, leverage, and industry dummy was used in this study. firm size is computed as the natural logarithm of the total assets (hansda et al., 2020). leverage is computed as the ratio of total interest-bearing liabilities to total assets (hansda et al., 2020). as for the industry dummy, a value of 1 is assigned to manufacturing companies and 2 is assigned to service companies. see table ii for the summary of the variables used. regression model the followings models were constructed: tqit = β0 + β1dpsit + β2dprit + β3dyit + β4levit + β5fsizeit + β6indit + εit……….. (1) mpsit = β0 + β1dpsit + β2dprit + β3dyit + β4levit + β5fsizeit + β6indit + εit………(2) tqit = β0 + β1dpsit + β2dprit + β3dyit + β4ioit + β5io*dpsit + β6io*dyrit + β7io*dyit + β8levit + β9fsizeit + β10ind εit……………………………………. ………………....(3) mpsit = β0 + β1dpsit + β2dprit + β3dyit + β4ioit + β5io*dpsit + β6io*dyrit + β7io*dyit + β8levit + β9fsizeit + β10ind εit……………………………………. …………………(4) where: β0 = constant β1 to β10 = coefficient of the parameters ε = error term i= firm t= time table i sample procedure initial sample size before elimination 158 companies listed after 2011 (10) financial services (48) companies with payment of dividend less than 7 times (58) companies with other missing data (12) final sample size 30 observation period (2011 – 2020) 10yrs number of observation 300 source: author’s compilation (2023) gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 24 table ii variables definitions and measurements variable name measurement source(s) tobin’s q (tq) (market capitalization plus total debt)/ =total assets siboni and pourali (2015) market share price (mps) closing share price oniyama et al. (2021) dividend per share (dps) ordinary share dividend/total number of shares in issue oniyama et al. (2021) dividend pay-out ratio (dpr) (dividend per share – earning per share)/dividend per share bon and hartoko (2022) dividend yield (dy) dps/mps oniyama et al. (2021) investment opportunity (io) (fixed assetst2 – fixed assestst1)/total assetst1 nasir et al. (2020) leverage (lev) total interest-bearing debt/total assets hansda et al. (2020) firm size (fsize) natural logarithm of total assets hansda et al. (2020) industry dummy (ind) dummy variable 1= manufacturing companies, 2= service companies alkurdi and mardini (2020) source: author’s compilation (2023) 4. results and discussions descriptive statistics and correlation analysis table iii descriptive statistics variable obs mean sd minimum maximum tq mps dps dpr dy io lev fsize ind 300 300 300 300 300 300 300 300 300 1.372 50.258 2.1185 0.586 0.051 0.018 0.108 24.21 1.100 1.255 66.911 3.0537 0.381 0.032 0.041 0.119 1.704 0.301 0.330 2.110 0.080 0.000 0.007 -0.042 0.00 20.657 1.000 4.990 232.98 11.00 1.473 0.117 0.127 0.351 28.381 2.000 source: stata output (2023) gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 25 table iv pearson correlation variables tq mps dps dpr dy io fsize lev ind vif tq mps dps dpr dy ios fsize lev ind 1.000 0.5620 0.4480 0.2360 -.2983 -.0491 0.1907 0.0641 -.1962 1.000 0.9220 0.1178 -.2484 -.0639 0.5657 0.1708 -.2316 1.000 0.2276 -.0063 -.0781 0.5008 0.1491 -.2004 1.000 0.3816 -.0427 0.0568 -.0538 0.0982 1.000 -.0011 -.2046 -.1013 0.3024 1.00 -.1050 0.1011 0.0159 1.00 0.2225 -.3660 1.00 -.149 1.00 1.42 1.26 1.31 1.03 1.56 1.08 1.24 source: stata output (2023) the table iii contains the summary statistics of the variables. the average value of tq is 1.371967. this shows that non-financial enterprises in nigeria have an average fv of 1.37 times their total assets. it also has a standard deviation of 1.255198; the lowest and highest values are 0.33 and 4.99 respectively. score for mps range from 2.11 to 232.98 respectively. aside from that, it has a mean of50.25797 and a standard deviation of 66.91101. this suggest that there is a significant difference in share prices between the firms. with regards to independent variables, dps ranged from 0.08 to 11, with 0.08 being the lowest score and 11 being the highest value. dps has a mean value of 2.118467 and a standard deviation of 3.053724. the minimal values for dpr and dy are 0 and 0.006865, respectively. dpr had an average value of 0.5857307 and a standard deviation of 1.472727. dy has a 0.050669 mean, a 0.1166667 maximum, and a 0.0317097 standard deviation. finally, the control variables, the lev value stood at 0.1081419. this indicates that, on average, 11% of the capital of the sampled companies is debt capital. lev has a maximum value of 0.3511082 and a standard deviation of 0.118713. fsize has a mean value of 24.21 and a standard deviation of 1.704. this shows a wide gap in size between the companies. table iv contained the pearson correlation analysis of the variables. the correlation matrix suggests that there is a positive correlation between tq, mps, dps and dpr. dy has a negative correlation with tq, mps, dps, and dpr, while a negative correlation exists between dy and io. other variables, namely, io, lev, and fsize, have a positive correlation with tq, mps, and dps. all the correlation values are below 0.8, which indicates the absence of multicollinearity, with the exception of dps. however, the variance inflation factor (vif) was run and the result indicated the absence of multicollinearity. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 26 regression results the data of the study is a combined both time series and cross-sectional. therefore, the fixed effect model and random effect model were conducted. the hausman specification test was also run, and the result indicates that the fixed effect model is appropriate. furthermore, the modified wald test for group-wise heteroscedasticity results shows that there is a problem with heteroscedasticity as the probability values are less than 5%. for this reason, the pesaran test was conducted to check the presence of cross-sectional dependency, and the result indicates the absence of cross-sectional dependency as the probability values are more than 5%. finally, the wooldridge test was run and the probability values were less than 5%, which indicates the presence of autocorrelation. for this reason, the feasible generalized least squares (fgls) model was adopted to test the hypothesis. according to (greene, 2018), fgls would be preferable when there is a problem of serial-autocorrelation cross-sectional dependency in panel data. the chi2 value in the first model is given as 185.37 with a probability value of 0.0000 indicating that the model is well-fitted. dps and dpr have a positive coefficient with tq. the coefficient and probability values of dps are given as (β=0.181, p=0.000). this shows a positive correlation between the independent and dependent variables and that dps has a positive effect on tq. this also indicates that the value of the company increases as it pays a dividend. dpr also has a positive coefficient value with tq (β=1.036, p=0.000). additionally, this suggests that dpr has a significantly positive effect on tq. this result is in accord with that of siboni and pourali (2015) and conflicts with that of safitri et al. (2020). dy is negatively associated with tq as it has a negative coefficient value (β=16.934, p=0.000). accordingly, a rise in dy will cause a fall in tq, and vice versa. as for the control variables, lev is positively associated with tq but this relationship is insignificant as the probability value is more than 5%. the fsize has a negative significant association with tq (β=-0.118, p=0.005). as the fsize increase by 1%, tq will fall by 11.8%. in the second model, the coefficient value of dps is given as β=19.392 with a corresponding probability value of p=0.000, which is less than 5%. this means dp is positively significant in influencing mps. this is consistent with the studies of (sarwar 2013; okeke et al., 2021). dpr has a negative coefficient value of β=0.527 with a corresponding probability value of p=0.873, which is more than 5%. this indicates a negative relationship between dpr and mps. as mps increases, gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 27 dpr decreases and vice versa. however, the probability value is more than 5%, which is insignificant. this finding contradicts the findings of nugraha (2019). dy also has a negative coefficient value of β=-503.061, with a corresponding probability value of p=0.000 which is significant at all levels. this indicates a negative relationship between dy and mps. dy is statistically significant to influence mps. these findings contradict the findings of farruk et al. (2017). lev has a negative, insignificant association with mps. fsize has a positive and significant assocation with mps. it has a beta coefficient of β= 3.640 a probability value of p = 0.000, which is significant at 1%, 5%, and 10%. table 3 regression result (fgls) tobin’s q mps constant dps dpr dy lev fsize ind summary wald chi2 hausman modified wald test wooldridge test coeff. 4.403 0.181 1.036 -16.934 -0.028 -0.118 -0.285 185.37 39.38 2568.86 59.155 p-value 0.000 0.000 0.000 0.000 0.954 0.005 0.177 0.000 0.000 0.000 0.000 coeff. -66.066 19.392 -0.527 -503.061 0.915 3.640 11.651 3249.24 15.94 3.8e+05 45.001 p-value 0.002 0.000 0.873 0.000 0.925 0.000 0.005 0.0000 0.0070 0.0000 0.0000 source: stata output (2023) testing moderating effect of investment opportunity these models are designed to determine if io modifies the association between dividend policy and company value as determined by tq and mps. the fixed effect as well as the random effect models of estimation were conducted since the data is a combined both time series and cross-sectional. the results of the hausman specification tests showed that the tq model's fixed effect is the most suitable, but the mps model's random effect is the most appropriate. furthermore, the modified wald test was also conducted and the result indicates that both models have characterized by the problem of heteroscedasticity. therefore, both fixed effect and random effect models would be biased gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 28 (moundigbaye et al., 2018). consequently, this study employed a feasible generalized least squares (fgls) model to correct this abnormality. in the tq model, the dps positively influences the tq (β =0.1832, p=0.000) which means that as the tq increases, companies increase their dividend per share. dpr also positively impacts tq (β =1.0395, p=0.000) meaning an increase in tq will lead to an increase in dpr. this is in line with the findings of siboni and pourali (2015) and contradicts the findings of safitri et al. (2020). finally, dy negatively influences tq (β =-17.0431, p=0.000), meaning an increase in tq will result in a decrease in dy. io is negatively associated with tq (β =-0.4579, p = 0.876). however, the relationship is not significant as the probability value is greater than 0.005. this means io is not significantly associated with tq. on the interaction variables, which is product of io and independent variables, dps_io, dpr_io and dy_io have (β =-0.2079, p=0.785), (β =-0.4530, p=0.929) and (β =6.5672, p=0.895) respectively. however, their probability values are more than 0.005. this indicates that io did not moderate the relationship between dp and tq. among the three control variables, namely lev, fsize, and ind, only fsize is statistically significant. with regards to the fourth model, dps and dy significantly influence the mps. while dps influenced it in a positive way (β =19.4749, p=0.000), dy, on the other hand, negatively affects mps (β =-505.8155, p=0.000). the dpr is not significant as the probability value is more than 0.005. also, io is not statistically significant to influence the mpr (β =4.4810, p=0.938) as its probability value is more than 0.005. also, none of the interaction variables (β =-5.0203, p=0.738), (β =31.9062, p=0.749), and (β =157.1166, p=0.872 for dp_io, dpr_io and dy_io is statistically significant to moderate the relationship between dividend policy and mps. therefore, io did not moderate the relationship between dp and fv. with regards to the control variables, fsize and ind are positively and statistically correlated to mps as they have coefficient and probability values (β =3.6742, p=0.000) and (β =11.3735, p=0.007) respectively. on the other hand, lev is not statistically significant (β =0.1849, p=0.985). gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 29 table vi moderation result (fgls) tobin’s q mps constant dps dpr dy io dps_io dpr_io dy_io lev fsize ind summary wald chi2 hausman modified wald test wooldridge test coeff. 4.4508 0.1832 1.0395 -17.0431 -0.4579 -0.2079 -0.4530 6.5672 -0.0055 -0.1191 -0.2865 40.42 2513.09 56.509 p-value 0.000 0.000 0.000 0.000 0.876 0.785 0.929 0.895 0.991 0.004 0.180 0.0000 0.0000 0.0000 coeff. -66.668 19.4749 -1.0080 -505.8155 4.4810 -5.0203 31.9062 157.1166 0.1849 3.6742 11.3735 10.47 80271.43 52.935 p-value 0.002 0.000 0.779 0.000 0.938 0.738 0.749 0.872 0.985 0.000 0.007 0.3136 0.0000 0.0000 source: stata output (2023) 5. conclusion and recommendation in this study, the focus was to examine the effect of dp on the value of listed nonfinancial companies in nigeria, with io as the moderating variable. tobin’s q and market price per share was used measure of value; dividend per share, dividend payout ratio, and dividend yield served as proxies of dp. the study established that dps and dpr positively influence tq and dy yield negatively influences tq. also, dr positively influences mpr and dy negatively influences mps. these findings are in conformity with several prior research conducted in nigeria and other countries including developing and developed nations. the author concludes that dp influenced the value of listed non-financial companies in nigeria. finally, the study proved that io do not moderate the relationship between dp and fv. in all four models, the empirical results show a positive association between dps and both tq and mp. it is therefore recommended that the company's management be advised to create policies and strategies that increase revenue and decrease expenses to maintain regular dividend payments, which will ultimately increase the value of their firm. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 30 references abbott, l. (2001). financing, dividend and compensation policies subsequent to a shift in the investment opportunity set. managerial finance, 27(3), 31-47. abor, j., & bokpin, g. a. (2010). investment opportunities, corporate finance, and dividend payout policy. studies in economics and finance, 27(3), 180-194. akhmadi, a., & januarsi, y. (2021). profitability and firm value: does dividend policy matter for indonesian sustainable and responsible investment (sri)-kehati listed firms? economies, 9(163), 1-23. alkurdi, a., & mardini, g. h. (2020). the impact of ownership structure and the board of directors composition on tax avoidance strategies: empirical evidence from jordan. journal of financial reporting and accounting, 18(4), 795-812. amollo, k. o. (2016). effects of dividend policy on firm value for commercial banks in kenya. research project submitted in partial fulfillment of the requirements for the award of the degree nor master of business administration, school of business, university of nairobi. andaswari, s., pitono, h., & iskandar, r. (2017). analysis of investment opportunity set to construction companies registered in idx. mulawarman international conference on economics and business (miceb 2017) (pp. 81-88). balikpapan: atlantis press. anton, s. g. (2017). impact of dividends policy on firm value: a panel dataanalysis of romanian listed firms. journal of public administration, finance and law, 2016(10), 107-112. aroh, n. n., egolum, p. u., & chukwuani, v. n. (2021). dividend policy determinants of firm value: empirical evidence from listed nonfinancial companies in nigeria. international journal of research and innovation in social science, 5(7), 612-634. bhabra, g. s. (2007). insider ownership and firm value in new zealand. journal of multinational financial management, 17(2), 142-154. bon, s. f., & hartoko, s. (2022). the effect of dividend policy, investment decision, leverage, profitability and firm size on firm value. european journal of business and management research, 7(3), 7-13. brigham, e. f., & houston, j. f. (2016). fundementals of financial management (14th edi.). boston: cengage learning. budagaga, a. (2017). dividend payout and its impact on the value of firms listed on istanbul stock exchange: a residual income approach. international journal of economics and financial i̇ssues, 7(2), 370-376. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 31 davies, j. r., hillier, d., & mac colgan, p. (2005). ownership structure, managerial behavior, and corporate value. journal of corporate finance, 11(4), 645-660. dewiningrat, a. i., & baskara, g. k. (2020). does dividend policy moderate the relationship between profitability, ios, and liquidity toward firm value? american journal of humanities and social sciences research, 4(1), 4952. ejem, c. a., & ogbonna, u. g. (2019). modelling dividend policy and firms’ value relations in nigeria. international journal of economics and financial issues, 9(6), 171-176. http://orcid.org/0000-0003-4970-6947. emeni, f. k., & ogbulu, o. m. (2015). the effect of dividend policy on the market value of firms in the financial service sector in nigeria. archives of business research, 3(4), 15-29. farrukh, k., irshad, s., khawani, m. s., ishaque, s., & ansari, n. y. (2017). impact of dividend policy on shareholders wealth and firm performance in pakistan. cogent business and management, 4(1), 1-11. https://doi.org/10.1080/23311975.2017.1408208. green, w. (2018). econometric analysis (8th ed.). london: pearson education limited. hansda, s., sinha, a., & bandopadhyay, k. (2020). impact of dividend policy on firm value with special reference to financial crisis. sit journal of management, 10(2), 158-175. husain, t., & sunardi, n. (2020). firm's value prediction based on profitability ratios and dividend policy. finance & economics review, 2(2), 13-26. ibrahim, u. a. (2020). effect of financial leverage on firm value: evidence from selected firms quoted on the nigerian stock exchange. european journal of business and management, 12(3), 124-135. jensen, m. c. (1986). agency costs of free cash flow, corporate finance, and takeovers. the american economic review, 76(2), 323-329. jones, s., & sharma, r. (2001). the association between the investment opportunity set and corporate financing and dividend decisions: some australian evidence. managerial finance, 27(3), 48-64. kallapur, s., & trombley, m. a. (1999). the association between investment opportunity set proxies and realized growth. journal of business finance and accounting, 26(3), 505-519. kehinde, j. s., & abiola, j. o. (2001). foundation of financial management. lagos-nigeria: life spring house publisher agege. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 32 lawrence, e., kingsley, o., & priscilla, i. (2021). dividend policy determinants of firm value in nigeria. academic journal of digital economics and stability, 9, 9-22. livoreka, b., hetemi, a., shala, a., hoti, a., & allanaj, r. (2014). theories on dividend policy empirical research in joint stock companies in kosovo. international conference on applied economics (icoae) (pp. 387-396). kosovo: elsevier b.v. miller, m. h., & modigliani, f. (1961). dividend policy, growth and valuation of shares. journal of business, 34(4), 411-433. moundigbaye, m., rea, w. s., & reed, w. r. (2018). which panel data estimator should i use?: a corrigendum and extension. de gruyter open access , http://dx.doi.org/10.5018/economics-ejournal.ja.2018-4. myers, s. c. (1977). determinants of corporate borrowing. journal of financial economics, 5(2), 147-175. myers, s., & majluf, n. (1984). corporate financing and investment decisions when firms have information those investors do not have. journal of financial economics, 13(2), 187-221. nasiri, m. m., mas'ud, m., junaid, a., & nur, a. n. (2020). impact of ownership structure, capital structure, investment opportunities on dividend and value policy company. iosr journal of business and management, 22(11), 08-31. nugraha, j. (2019). investment opportunity set, dividend policy and corporate value: evidence from trade, services and investment sector of indonesian stock exchange. jurnal nusamba, 3(1), 151-164. okataria, m., & alexanddro, r. (2020). analysis of the influence of capital structure, investment opportunity set and profitabilty to value companies in manufacturing companies before and during pendamic covid-19. advances in economics, business and management research, volume 158 proceedings of the 5th international conference on tourism, economics, accounting, management and social science (teams 2020) (pp. 348-352). bali: atlanti press. okeke, v. c., anike, c. a., & onuora, d. v. (2021). dividend policy and shareholders wealth in nigeria (2014-2019). internationa ljournal of innovative finance and economics research, 9(1), 81-91. oniyama, m. e., olaoye, s. a., & ogundajo, g. o. (2021). dividend policy and market performance of listed manufacturing companies in nigeria. journal of accounting and finance , 21(2), 82-95. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 33 pilotte, e. (1992). growth opportunities and the stock price response to new financing. journal of business, 65(3), 371-394. premeswari, s. y., & suprihadi, h. (2017). pengaruh kinerja keuangan dan investment opportunity set (ios) terhadap return saham. jurnal ilmu dan riset manajemen, 6(2), 1-19. putu, m., moeljadi, d., & djazuli, a. (2014). factors affecting firms value of indonesia public manufacturing firms. international journal of business and management invention, 3(2), 35-44. raharja, b. s., anwar, q. k., nugroho, a., & aligarh, f. (2020). the moderating role of investment opportunity set on the firms’ dividend decisions. international conference of business, accounting and economics, icbae 2020. purwokerto, indonesia. rehman, o. u. (2016). impact of capital structure and dividend policy on firm value. journal of poverty, investment and development, 2016(21), 40-57. resti, a. a., purwanto, b., & ermawati, w. j. (2019). investment opportunity set, dividend policy, company’s performance, and firm’s value: some indonesian firms evidence . jurnal keuangan dan perbankan, 23(4): 611– 622. safitri, j., fuady, m., wahyudi, s., & utom, m. n. (2020). the influence of dividend policy, investment opportunity and capital adequacy to firm value: evidence in indonesia banking companies. international journal of scientific and technology research, 9(2), 764-767. sarwar, m. s. (2013). effect of dividend policy on share holder’s wealth: “a study of sugar industry in pakistan”. global journal of management and business research finance, 13(7), 46-54. siboni, z. m., & pourali, m. r. (2015). the relationship between investment opportunity, dividend policy and firm value in companies listed in tse: evidence from iran. european online journal of natural and social sciences, 4(1),1805-3602. smith, c. w., & watts, r. l. (1992). the investment opportunity set and corporate financing,dividend compensation policies. journal of financial economics, 32(3), 263-292. subramaniam, r. k., & shaiban, m. s. (2011). investment opportunity set and dividend policy in malaysia: some evidence on the role of ethnicity and family control. 2nd international conference on economics, business and management (pp. 170-177). singapore: iacsit press. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 34 subramaniam, r., devi, s. s., & marimuthu, m. (2011). investment opportunity set and dividend policy in malysia. african journal of business management, 5(24), 10128-10143. titman , s., keown, a. j., & martin, j. d. (2011). financial management principles and applications. new jersey: prentice hall. yustisiana, r. (2017). the relationship between dividend policy and shareholder’s wealth (a case study at mining companies in indonesia). iosr journal of business and management (iosr-jbmb), 19(2), 53-57. www.iosrjournals.org. zainuddin, f., wayudi, s., & muharam, h. (2021). ownership concentration, investment opportunity, operational efficiency, and firm value in indonesian banking industry . journal of management information and decision sciences , 24(4), 1-10. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 1 monitoring attributes and earnings quality of listed conglomerate firms in nigeria munir aliyu saleh department of accounting federal university wukari, taraba state, nigeria salehmuniraliyu@gmail.com +2347038422454 umar farouk abdulkarim department of accounting and finance federal university gusau, zamfara state, nigeria elfarouk105@gmail.com +2348069393824 isah abdulkarim ibrahim tax investigation department, federal inland revenue service adkusmaniya@gmail.com +23491241672 abstract this paper examines the effect of monitoring characteristics on earnings quality of listed conglomerate firms in nigeria for the period of ten years from 2010-2019. as at 31st december, 2019, there were six (6) listed conglomerate firms in nigeria and all were selected to serve as the sample using census approach. three variables independent directors, audit committee and institutional ownership were used to represent monitoring characteristics. the francis et al (2005) model was used as measure of earnings quality. multiple panel regression was used to test the model of the study using ordinary least square ols regression and data was collected from the annual reports and accounts of the sampled firms. the findings of the paper revealed that two of the monitoring characteristics variables (ind and inst) positively and significantly affect earnings quality while ac has a significant but negative effect on earnings quality of listed conglomerate firms in nigeria. it is therefore recommended that, board of directors of listed conglomerate firms should compose more of independent directors as it was found to have a significant positive influence on earnings quality, also their ownership structure should comprise more institutional shareholders as it has been found to improve earnings quality positively. keywords: monitoring characteristics, earnings quality, conglomerates firms, nigeria. 1. introduction the sole responsibility for the preparation of accurate and timely financial statements rests with management of a company. however, financial statements should disclose relevant, reliable, comparable and understandable information mailto:salehmuniraliyu@gmail.com mailto:elfarouk105@gmail.com mailto:adkusmaniya@gmail.com gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 2 (kamaruzaman, et al 2009). this is because when these earnings are accurate and reliable, users of these financial reports will be able to make reasonable and informed decisions. however, it has been argued by johnson (2005) that financial statement cannot be entirely accurate and unbias because some economic activities reported are measured under the condition of uncertainty. therefore, as a result country round the globe nigeria inclusive reviewed and or enacted policies to ensure the safety of shareholders’ funds and to prevent future reoccurrences of corporate failures. amongst the policies is the review of the harmonized corporate governance code of best practices to cover all entities in nigeria. these corporate governance codes serve as a watchdog that is charged with the responsibility of checkmating managers opportunistic tendencies while preparing financial statements. several corporate scandals around the world has created doubt and mistrust in the eyes of investors and also destroyed investor confidence on corporate financial statement. for example, enron, worldcom, xerox, oceanic bank and skye bank were involved in planned fraud and scandal in developed nations and nigeria alike that left investors with loss of part or full investment. therefore, in order to curtail managers’ opportunistic behaviors and regain investors trust, international organizations for example, world bank, the organization for economic cooperation and development (oecd) etc campaigned for the establishment of supervisory mechanisms to enhance effectiveness of corporate governance. this has however gained the attention of researchers around the world whom has given their quota of contribution to the literatures on corporate governance. supervisory mechanisms like the presence of independent directors on the board of a company will improve its capability to detect problems in financial statement. strengthening the audit committee and presence of institutional investors can serve as a means of enhancing monitoring practices and quality of earnings reported. therefore, monitoring characteristics are there to serve as check for the quality of the earnings reported by company managers. the importance of these monitoring characteristics on the quality of firms’ earnings cannot be over emphasized, this is due to the fact that some of the managers tend to use the loopholes found in accounting principles to manipulate earnings and when these earnings are not reliable and verifiable, investors tend to make decisions that will be at their own detriment. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 3 according to shehu (2012), there are various obvious reasons that could result to smoothening of financial statements that ranges from demand for higher returns on investment by shareholders, the desire to be seen as a well to do firm in the eyes of competitors, also the need to satisfy the desire of others stakeholders. managers usually get involved in smoothening of financial statement to overstate the profits in order to achieve a target(s). manager’s incentives are based on targets and they use earnings management to manipulate results in order to achieve the required targets (leuz et al., 2016). however, the nigerian regulatory agencies have shown less interest and pro-activeness in this uprising and are been lackadaisical by leaving problems regarding earnings management in the disguise of business ethics. the relation between earnings quality and good corporate governance has been examined by previous studies using a variety of research designs and in various contexts. there are several researches that provided empirical evidence that there is a positive and significant relationship between some elements of monitoring and earnings quality shehu (2013). similarly, bushman et al (2004), karamanou and vafeas (2005) argued that earnings quality increases as the number of independent directors increases. this means that, the higher the number of independent director on the board of a firm, the higher will be the quality of earnings to be reported. this is because the independent directors are watch dogs to the financial reports making sure that the reports presented by managers are true representation of the company’s operation for a given period. this paper aimed to determine the effect of monitoring characteristics on earnings quality of listed conglomerate firms in nigeria. amongst the monitoring characteristics examined by this study are; independent directors, audit committee independence and institutional ownership. in line with the objective of the study, the following hypotheses are formulated in null form: ho1. independent directors have no significant influence on earnings quality of listed conglomerate firms in nigeria. ho2. audit committee independence has no significant impact on earnings quality of listed conglomerate firms in nigeria. ho3. institutional shareholders have no significant impact on earnings quality of listed conglomerate firms in nigeria. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 4 the findings of this research will help directors of the company since they form part of the monitoring mechanism to enhance their frontiers of responsibility by been more vigilant and provide stronger and effective policies that can help reduce the opportunistic behavior of managers of a company. the government can use the findings of the study in its policy making and strategic decision making in area of business. these policies or strategic decisions can be provision of additional codes in the corporate governance code or any law, or standard that can foster development of businesses in the country and reduce opportunistic behaviors. this study will also add to the existing literatures in the field of monitoring characteristics and earnings quality by enabling researchers utilize the gap they find in other to develop new studies. the remainder of this paper has the following organization; literature reviews and theoretical framework, research methodology, analysis and discussion of results, conclusion and recommendations. 2. literature review and theoretical framework earnings quality is quite a vague concept in financial reporting which is yet to have a formal definition and a generally accepted measure. however, dechow et al. (2010) used the terms from the draft of financial accounting standard board to define earnings quality as: “higher quality earnings provide more information about the features of a firm’s financial performance that are relevant to a specific decision made by a specific decision maker”. the research foundation of certified financial analyst institution sees high-quality earnings as that which accurately shows the current operating performance of a firm, an indicator of future prospect of the firm, and a useful summary for measuring the value of a firm. earnings quality is an honest expression of a company’s activities by revealing the true picture of the company and its ability to strive in the future. there are various models developed by researchers to measure earnings quality and this is to fulfill a specific need of the researcher. however, the most used measures are; absolute value of discretionary accruals, earnings persistence, asymmetric or recognition, size of accruals etc. the concept of independent director is also a vague concept which has no universally accepted definition. the definitions available are those given by different people to satisfy their peculiar need. the code of corporate governance for private sector requires all companies listed in the floor of the nigerian stock exchange to have a board which shall comprise of executive and non-executive gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 5 directors and two-third members of the non-executive directors shall be independent non-executive directors. these independent non-executive directors are required to have an insignificant holding in the company which should not exceed 0.1% of the total paid up capital of the company. this is done so that the interests they have in the company do not affect their independent judgment. sandra (2014) believed that the presence of independent directors on the board of a company can help improve the quality of earnings reported by mitigating managerial opportunistic tendencies in preparation of company’s financial statements. according to her, there is high possibility of increase in earnings quality of company whose board comprises more of independent directors than executive directors. this is due to their ability to control and monitor the activities of those officers saddled with the responsibility of managing the affairs of the company. shehu (2013) in his paper financial reporting quality, does monitoring characteristics matter? using 32 manufacturing firms listed on the nigerian stock exchange covering five years (2007-2011) found that there is a significant positive association between monitoring characteristics and financial reporting quality. in his study, six independent variables (leverage, independent directors, audit committee independence, institutional investors, block shareholding, management shareholding) and the residuals of dichev and dechow (2002) was used to measure of the dependent variable financial reporting quality. the study is however restricted to only activities between 2007-2011, and therefore making it deficient and not all encompassing. so many activities have taken place after the study period that needs to be taken into account. also the study used the residuals of dichev and dechow (2002) as the model to measure earnings quality, while there are better and new models like francis et al (2005), roychowdhury (2006) and so forth. hussaini and idris (2014) examined monitoring characteristics and financial reporting quality of listed conglomerates firms in nigeria where they looked at the association between monitoring characteristic and earnings quality. their paper used all the nine listed conglomerate firms as its population and selected eight to form its sample. the study also covers a period of six years (2009-2014). they found that there exist a positive relationship between board independence, board meetings, audit committee independence, audit committee meetings and financial reporting quality of listed conglomerates firms in nigeria. while board financial expertise, audit committee financial expertise and firm sizes are negatively significantly related to financial reporting quality of listed conglomerates firms in nigeria. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 6 shehu and jibril (2012) studied audit firm characteristics and financial reporting quality of listed building materials firms in nigeria using seven listed building materials firms in nigeria covering a period of ten years (2001-2010) found that there is a significantly positive relationship between audit firm characteristics and financial reporting quality of listed building materials firms in nigeria and concluded that for a firm to engage in a quality financial reporting, its audit firm characteristics is to be of stringent importance. again, shehu and saifullahi (2016) in their study titled “monitoring characteristics and financial reporting quality of nigerian listed consumer goods firms”. they used purposive sampling technique to arrive at a sample of ten (10) firms out of a population of twenty-seven (27) listed consumer goods firms in nigeria covering a period of nine (9) years (2007-2015). the findings of their study reveals that all the monitoring characteristics variables used in their study significantly affect the financial reporting quality of nigerian listed consumer goods firms. omar (2017) investigated impact of audit committee characteristics on earnings management in the preand postbahraini corporate governance code 2011”. his study covers only two years which are pre (2010) and post (2012) bahraini corporate governance code 2011. he used a sample of 31 companies listed in the bahraini bourse. the findings of his study show that earnings management is not significantly associated with any of the audit committee characteristics and control variables used in the study. shehu & musa (2014) examined firm attributes and earnings quality of listed oil and gas companies in nigeria using a sample of seven companies listed in the oil and gas industry covering five years’ period (2007-2011). their findings reveal that, leverage, liquidity and firm growth significantly and positive affects earnings quality. however, institutional ownership, firm size, and profitability significantly but negatively influence earnings quality of listed oil and gas companies in nigeria. mohammad & ramezanali (2012) conducted an empirical study in iran using a sample of 165 firms listed in tehran stock exchange covering a period of six years (2005-2010) found that the number of non-executive directors on the board of the sampled firms will increase earnings quality. also, the presence of executive directors on the board tends to improve earnings quality by lesser proportion. firm size was also found to improve quality of earnings reported. however, they found a significant negative relationship between leverage and earnings quality. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 7 this study is underpinned using the stakeholder theory because of the obvious significance of the theory. the theory seems to look at all individuals that are been affected by the operation of a company. this is followed by the corporate governance requirement that every company is to be accountable to the environment in which it operates, this environment includes all stakeholders of the company such as employees, shareholders, investors, customers, suppliers, creditors, competitors, government, the society and all those that are directly or indirectly affected by the decisions of the company. 3. research methodology and model specification this paper examines the effect of monitoring characteristics on earnings quality of listed conglomerate firms in nigeria. in doing this, a correlational research design was adopted for the research because it is more appropriate in establishing the relationship and the extent to which monitoring characteristics affect earnings quality of listed conglomerate firms in nigeria. the population of the study covers all six conglomerate firms listed on the nigerian stock exchange for a period from 2010-2019. a census sampling approach was adopted which adopts six conglomerates companies listed on the nigerian stock exchange as at 31st december, 2019 as sample. multiple regressions was used for the analysis with stata as tool. the data used in this paper were obtained specifically from the annual reports and accounts of the sampled conglomerate firms obtained from the website and nse facts books covering the years of study. model specification to ascertain the effect of monitoring characteristics on earnings quality of listed conglomerate firms in nigeria, a multiple regression model was built. the model captures the impact of independent directors, audit committee independence, and institutional ownership on earnings quality. this paper employs the francis et al (2005) model which estimates earnings quality as prediction error or residuals from ols regression as follows. daait = β0 + β1cfoit −1 + β2cfoit + β3cfoit +1 + β4δrevit + β5ppeit + ε where: daait= discretionary accounting accruals, β0-β5= constant, β1-β5= coefficients cfoit −1= previous cash flow from operating activities, gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 8 cfoit= present cash flow from operating activities, cfoit +1= future cash from operating activities, δrevit=change in revenue at time t, ppeit = plant property and equipment and ε. = error term/residuals. the regression model for testing the relationship between the explanatory variables and earnings quality is presented as follows: eqit= β0+ β1indit+β2acit+β3instit+ε eq=earnings quality measured as residuals from the regression of francis et al (2005) model ind = independent directors measured as % of independent directors on the board ac= audit committee independence measured as % of non-executive directors on the audit committee inst= institutional shareholders measured as proportion of shares held by institutions β0= constant β1 – β3= coefficients ε= error term. 4. analysis and discussion of result the results and the interpretations are presented under descriptive statistics, correlation matrix, and regression result. table 1: descriptive statistics variables min max mean standard dev. eq 0.005 0.50976 0.083431 0.1018829 ind 0.111111 0.3 0.2108559 0.0639977 ac 0.333333 0.666667 0.445555 0.0979964 inst 0.4228 0.8795 0.6264027 0.1360577 source: stata output, 2020 the mean value of earnings quality of the sampled firms as shown above is 0.083431, while the explanatory variables ind, ac, inst have the average values of 0.2108559, 0.445555, and 0.6264027 respectively. the 63% average value for institutional shareholding indicates that over half of the shareholdings of conglomerate firms in nigeria are held by institutional investors, while the remaining 37% is held by other class of investors. since the mean value of the gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 9 endogenous is relatively high, it therefore means low earnings quality. but this could be a result of the disclosure useful information. it is however observed that, amongst the explanatory variables, institutional ownership indicated a high standard deviation meaning that it contributes less to earnings quality. table 2: correlation matrix table variables eq ind ac inst eq 1.0000 ind 0.1955 1.0000 ac -0.3846 0.2560 1.0000 inst 0.1764 0.2260 0.2259 1.0000 source: stata output, 2020 the table above presents the correlation matrix of the dependent and independent variables as well the relationship among the explanatory variables themselves. the values were gotten from the pearson correlation of two-tailed significance. from table 2 above, ac is negatively and significantly correlated to earnings quality of listed conglomerate firms in nigeria. however, ind and inst are positive but insignificantly correlated to earnings quality of listed conglomerate firms in nigeria. it can also be seen that all the independent variables are positively correlated and there is a very weak relationship amongst the independent variables themselves, indicating that colinearity isn’t a problem. however, this may not be a result enough to conclude that multicolinearity exists until the variance inflation factor and tolerance values exceed their expected limits. therefore, the tolerance value and the variance inflation factor (vif) are two advanced measures of determining the existence of multicollinearity between the independent variables of the study. the vif and tolerance as computed using stata are found to be consistently lower than the standard level of ten and one respectively, indicating that multicolinearity isn’t a problem. regression result table3: summary of regression result variables coefficient t-values p-values tolerance vif constant 0.1187929 1.69 0.097 ind 0.4352237 2.31 0.025 0.904673 1.11 ac -0.5264097 -4.27 0.000 0.904709 1.11 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 10 inst 0.1714764 1.95 0.057 0.918713 1.09 r2 0.2886 adj. r2 0.2505 f-stat. 7.57 f-sig. 0.0002 source: stata output, 2020 the cumulative r2 (0.2886) which is the multiple coefficient of determination, gives the proportion of the total variation in the dependent variable (eq) explained by the independent variables all together. hence, it signifies that about 29% of the total variation in earnings quality of listed conglomerate firms in nigeria is caused by independent directors on their board, audit committee independence, and institutional ownership. this indicates the fitness of the model and that the independent variables are selected properly and combined accordingly. this can be confirmed by the value of fstatistics of 7.57 significant at 1% level of significance. independent directors and earnings quality the regression result reveals that the independent directors as depicted in table 3 have a coefficient of 0.4352237, t-value of 2.31 and a p-value of 0.025. this indicates that the existence of independent directors on the board of listed conglomerate firms in nigeria is positively and statistically related to their earnings quality at 5% level of significance. this implies that the independent directors are not under the influence of the management of the company, and hence help to monitor the opportunistic behaviors of this management and also help improve the quality of financial information conveyed to user of financial statements of listed conglomerate firms in nigeria. this also shows that any increase in the percentage of independent directors on the board of listed conglomerate firms will help improve their earnings quality as well as the reliability of their financial report. another important reason for this finding may be as a result of the fact that, independent directors’ do not in any way participate in the management of a corporation, this may serve an efficient and effective mechanisms of monitoring the activities of managers and hence, provide some high quality earnings reported. the above findings are however consistent with the findings of; shehu (2013), saifullahi & shehu (2016), sandra (2014), hussaini & idris (2014) but contrary to those of; firth et al. (2007), ahmad and mansor (2009), dimitropoulos & asteriou (2010) who did not find any significant relationship between independent directors and earnings quality. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 11 audit committee and earnings quality the result of audit committee as a monitoring tool reveals that, audit committee has a significant effect on earnings quality of listed conglomerate firms in nigeria. table 3 depicts that audit committee independence has a coefficient of 0.5264097with t-value of -4.27 and a p-value of 0.000. this implies that number of non-executive directors on the audit committee strongly, significantly and negatively affects the quality of earnings of listed conglomerate firms in nigeria. this means that, any increase in the number of non-executive directors on the audit committee will lead to a significant decrease in the quality of earnings reported by these firms. the reason for this result could be that the independence that some members of the committee have been jeopardized and it’s rather in form, not in execution. this could be as a result financial or family connection they have with some members of the committee responsible for their appointment (hamdan, mushtapha & al-sartawi 2013). this finding is contrary to the findings of shehu (2013), klein (2002), bédard et al (2004) and anderson et al. (2004) who found a positive relationship between audit committee independence and financial reporting integrity. institutional ownership and earnings quality further, the regression result reveals that institutional shareholding has a t-value of 1.95, a regression coefficient of 0.1714764 and a p-value of 0.057. this implies that institutional ownership positively and significantly affects earnings quality of listed conglomerate firms in nigeria at 5% level of significance. therefore, any increase in number of shares held by institutional shareholders of listed conglomerate firms in nigeria will significantly improve the quality of earnings reported by those firms. this result is not surprising because, institutional investors are effective in curtailing managers’ opportunistic behavior of earnings management through abusive accounting, income manipulations and smoothening. the result of significant effect of institutional ownership on earnings quality found in this study is consistent with the findings of shehu (2013), and inconsistent with the findings of wahal and mcconnell (2000), eng and shackell (2001), and ahmad and mansor (2009). 5. conclusion and recommendations this paper investigated the impact of monitoring characteristics on earnings quality of listed conglomerate firms in nigeria. the study used three variables (ind, ac, and inst) to represent monitoring characteristics and used the absolute values of residuals from francis et al (2005) model to proxy the dependent variable (eq) of gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 12 the study. the findings of the study revealed that independent directors and institutional ownership positively and significantly affects earnings quality of listed conglomerate firms in nigeria. however, audit committee independence depicted a significant but negative impact on earnings quality of listed conglomerate firms in nigeria. therefore, it can be concluded that, monitoring characteristics proxy by ind, ac and inst significantly affected the earnings quality of listed conglomerate firms in nigeria. based on the findings of this paper, it is recommended that the number of independent directors on the board of conglomerate firms in nigeria should be increase because it was found that any increase in the number will as well improve earnings quality tremendously. similarly, the ownership structure of the firms should comprise more of institutional investors because of the watchful eyes they put on the management of companies which usually help reduce income smoothening by managers. also precautionary measures should be taken in selecting the non-executive directors to the audit committee because the independence that come of the members of the committee has is by form than execution. references ahmed, a. c &mansor n., (2009) board independent, ownership structure, audit quality and income smoothing activities: a study of malaysian market. journal of modern accounting and auditing. 5(11), 1-13. anderson, r. c., mansi, s. a., &reeb, d. m., (2004). board characteristics, accounting report integrity, and the cost of debt. journal of accounting and economics 37, 315-342. bédard. j. chtourou. s. & l. courteau. (2004). the effect of audit committee independence expertise, independence, and activity on aggressive earnings management. working paper. beasley m (1996). an empirical analysis of the relation between the board of director composition and financial statement fraud. the accounting review 71 (4): 443-465. bushman, r., q. chen, e. engel, and a. smith. (2004). financial accounting information, organizational complexity and corporate governance systems. journal of accounting and economics 37(2): 167–201. cristini, g. g., (2010). financial reporting quality and corporate governance: the portuguese companies evidence. journal of business finance & accounting. 2 (1) 118-164. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 13 dechow, p., dichev, i., (2002). the quality of accruals and earnings: the role of accrual estimation errors. the accounting review 77, 35-59. defond, mark l., & james j., (1994), debt covenant violation and manipulation of accruals, journal of accounting and economics 17, 145-176. denis c., marie j. l. and michael m. (2009) financial reporting transparency and earnings quality: a governance perspective. journal of business finance & accounting june, 21-35. dimitropoulos, p. & asteriou, d. (2010). the effect of board composition on the informativeness and quality of annual earnings: empirical evidence from greece, research in international business and finance, 24, 190-205. dechow, p.m., r.g. sloan & a.p. sweeney (1996). causes and consequences of earnings manipulation: an analysis of firms subject to enforcement actions by sec. contemporary accounting research 13: 1-36. dechow, p., ge, w. and schrand, c. (2010), ‘understanding earnings quality: a review of the proxies, their determinants and their consequences’, journal of accounting & economics, vol. 50 no. 2/3, pp. 344–401 eng, l.l. & m. shackell (2001). the implications of long-term performance plans and institutional ownership for firms’ research and development expenses. journal of accounting auditing and finance 16: 117-139. firth, m., fung, p. & rui, o. (2007). ownership, two-tier board structure, and the informativeness of earnings: evidence from china. journal of accounting and public policy, 26, (4), 463-496. francis, j, r. lafond, p. olsson & k. schipper. (2005). the market pricing of accruals quality. journal of accounting and economics 39(2): 295-327. hamdan a.m., mushtaha s.m., & al-sartawi, a.m. (2013). the audit committee independence, characteristics and earnings quality: evidence from jordan. australasian accounting, business andfinance journal, 7 (4), 51-79. hussaini and idris (2014). monitoring characteristics and financial reporting quality of listed conglomerates firms in nigeria. journal of accounting research and practice, vol. 3, no.2,pg.75-93 johnson, t. (2005). relevance and reliability. article from the fasb report. feb. 28. karamanou, i. & vafeas, n. (2005). the association between corporate boards, audit committees, and management earnings forecasts: an empirical analysis. journal of accounting research, 43, (3), 453486. kamaruzaman, a. j., mazlifa m.d., & maisarah a. r (2009). the association between firm characteristics and financial statements transparency: the gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 14 case of egypt. international journal of accounting, vol. 18 no.2, 211223. klein, a (2002). audit committee independence, board of director characteristics, and earnings management journal of accounting and economics, vol. 33, p. 375−400. leuz, c., &wysocki, p. d. (2016). the economics of disclosure and financial reporting regulation: evidence and suggestions for future research. journal of accountingresearch, 54(2), 525-622. muhammad & ramezanali (2012). board monitoring and earnings quality: an empirical study in iran. african journal of business management vol. 6(11), pp. 4179-4184, 21 march, 2012. omar (2017). the impact of audit committee independence characteristics on earnings management in the pre-and postbahraini corporate governance code 2011. asian journal of economics, business andaccounting4(3): 112, roychowdhury, s. (2006) earnings management through real activities manipulation. journal of accounting and economic, 42, 335–370. saifullahi and shehu (2016). monitoring characteristics and financial reporting quality of nigerian listed consumer goods firms. unpublished journal sandra (2014). the effect of board independence on the earnings quality: evidence fromportuguese listed companies, australasian accounting, business and finance journal, 8(3), 23 44. shehu, u.h. (2013). financial reporting quality, does monitoring characteristics matter? an empirical analysis of nigerian manufacturing sector. the business &management review, 3 (2), 147-158. shehu, u. h., & farouk m. a. (2014). firm attributes and earnings quality of listed oil and gas companies in nigeria. research journal of finance and accounting, 5 (17), 10-16. shehu u.h (2012). firm attributes and financial reporting quality of quoted manufacturing firms in nigeria. unpublished phd. dissertation, postgraduate school, ahmadu bello university, zaria. vafeas, n. (2005). audit committee independences, boards, and the quality of reported earnings, journal of business research, 5 (3) 43-52. wahal, s. & j.j. mcconnell (2000). do institutional investors exacerbate managerial myopia? journal of accounting and economics 6: 307-325. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 i gusau journal of accounting and finance (gujaf) vol. 3 issue 3, october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ii © department of accounting and finance vol. 3 issue 3 october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com mailto:abupress2020@yahoo.com http://www.abupress.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos stat gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. muhammad aminu isa department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. prof. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeiza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vi advisory board members prof. kabiru isah dandago, bayero university kano,kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng mailto:elfarouk105@gmail.com http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng mailto:elfarouk105@gmail.com mailto:05@gmail.com http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 ix contents capital structure and firm financial performance of listed deposit money banks in nigeria: moderating effect of board financial literacy anas idris abdulwahab, hussaini bala ph.d, mansur lubabah kwambo ph.d, & abubakar adamu 1 influence of socialization on msme compliance by mediating understanding and moderating knowledge of tax visits yayuk ngesti rahayu 17 does international financial reporting standard narrows audit expectation gap? musa ibrahim dauda, ibrahim adagye dauda, phd 35 sustainability reporting and financial performance of listed manufacturing firms in nigeria aiyesan, olabode olutola ph.d 49 firm attributes and financial reporting timeliness of listed consumer goods firms in nigeria akume james terkende, dele ikese karim 67 value relevance of accounting information for listed financial service firms in nigeria kassim busari, ishaya luka chechet ph.d, aliyu ahmed abdullahi ph.d, & ibrahim mohammed ph.d 87 nigeria economic growth and capital market development: does contributory pension scheme matter? akinwumi ayorinde olutimi, toluwa celestine oladele ph.d, &adeboye emmanuel sanmi 101 audit committee and financial reporting quality: the moderating effect of board independence of listed deposit money banks in nigeria kassim yusha’u shika, mark david kantiyok 117 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 x determinants of financial performance of listed deposit money banks in nigeria mary seansu lazarus, nurradden usman miko ph.d, & saifulahi abdullahi mazadu ph.d 140 human resource accounting and profitability of listed depositmoney banks in nigeria ahmad adamu ibrahim, ahmad rufa’i adamu, fatihu mahmud alhassan &muhammad iliyas abdulsalam 158 board independence, audit effectiveness and the quality of reported earnings in the nigerian consumer goods firms isah shittu ph.d, misbahu, abubakar muhammad 175 impact of capital structure on financial performance of listed agricultural companies in nigeria ahmad muhammad ahmad, shehu usman hassan ph.d., &abubakar abubakar 192 trade oriented money laundering and era of cybersecurity tax evasion in nigeria oluwayemi joseph kayode, adewole joseph adeyinka ph.d, adewale abass adekunle & kadiri kayode ph.d 205 effect of females in the boardroom on corporate sustainability reporting salami suleiman ph. d, olanrewaju atanda aliu ph.d 224 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 87 value relevance of accounting information for listed financial service firms in nigeria kassim busari department of accounting abu business school ahmadu bello university zaria kassimbusari@gmail.com ishaya luka chechet professor of accounting and finance department of accounting abu business school ahmadu bello university zaria aliyu ahmed abdullahi ph.d department of accounting abu business school ahmadu bello university zaria ibrahim mohammed ph.d department of business administration abu business school ahmadu bello university zaria abstract over a 5-year period from 2016 to 2020, this paper compares the value relevance of accounting numbers of banks and insurance firms listed on the nigerian stock exchange market. the analysis used data from annual accounts of these companies and the nigerian stock exchange facts sheet to apply ohlson's (1995) valuation model to test the comparative value validity of accounting numbers of these two sub-sectors in the financial service industry. the findings of the empirical analyses revealed the importance of accounting information's value relevance to listed group financial service firms in nigeria. furthermore, the accounting numbers of banks have been found to be more important in terms of information quality than the accounting numbers of insurance firms. as a result, the paper proposes that firms' operations be sustained in order to improve profits, performance, and shareholder wealth. keywords: value relevance, consolidated financial statements, accounting information. doi.org/10.57233/gujaf.v3i3.181 mailto:kassimbusari@gmail.com gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 88 1. introduction this paper provides analytical evidence on the information quality of financial results of nigerian public financial service firms. this is achieved with an emphasis on financial service providers, with a measure of the sector's total valuation significance followed by a comparison of the relative relevance of banks and insurance companies. decision on the elements to disclose and recognize in the financial statements need to take into cognizance the relevance of such elements. information is helpful on the likelihood that it is applicable, dependable, practically identical and reasonable. information is relevant if it can impact the financial choices of users and is given on schedule to impact those choices. the ability of financial statements of a firm to increase in usefulness is dependent on the comparability with equivalent figures of the firm for other period(s) in order to ascertain trends in financial outcomes. information is much more valuable if it is comparable with similar information about other entities in order to evaluate their relative financial strength and worth. it is therefore essential for users to recognize its implication. however, it may be difficult to present comparable, reliable and relevant information in a way that can be understood by all the users. as a result, the usefulness of accounting data is determined by how sensitive changes in market valuation are to changes in accounting figures. many scholars have written on market based accounting research (mbar) since ball and brown's seminal work on the information content of accounting numbers in 1968 (barth, beaver & landsman, 1998; dechow, 1994; kwon, 2018). most of these studies' empirical evidence suggests that accounting information has value relevance, leading to the development of models (easton, bell, & ohlson, 1995; feltham & ohlson, 1995; ohlson, 1995) based on the assumption that earnings and book value are critical in determining value. prior research on value relevance in nigeria and other nations, with the exception of studies on the whole listed firms, have omitted financial service firms. furthermore, nearly all analyses focused on financial data used numbers from separate financial accounts, including the fact that for firms with group arrangements, the shares of companies are classified for the group. as a result of the mismatch of information, results drawn from such studies may not be entirely accurate for making rational choices. thus, a study of the valuation relevance of gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 89 accounting information for group financial service firms using information from group financial statements and an assessment of banks and other financial service firms listed on the nigerian stock exchange is necessary to disclose the types of information applicable to shareholders in each sub-sector. this is due to the fact that the strength of the economy's financial sector has a significant impact on its well-being. the more robust it is, the better off the economy will be as economic downturns are almost often preceded by banking sector weakness. based on literature reviewed, there are few studies that carried out comparative value relevance of different sectors in nigeria. also, several studies excluded financial service firms from their analyses. furthermore, almost all studies based on numbers from the financial statement are based on company data (even when the study firms have group structures). thus for any study on the market price of stock or market value, the group information is appropriate for companies with group structure. the remainder of the paper is organized as follows: the second section is devoted to study of scientific literature and theoretical framework; the third section is dedicated to methodology; the fourth section is on discussion of findings; and the final section is conclusion and recommendations. 2. literature review and theoretical framework comparative value analysis produces a range of findings depending on the nature of the sample (prihatni et. al., 2018). el-diftar and elkalla (2019) looked at value relevance in the middle east and north africa (mena) area, comparing gulf countries (gcc) and non-gcc companies. they discovered that eps and bvps are important determinants of value relevance in companies in both gcc and non gcc countries. earnings, book value, and dividend among non-financial and financial firms quoted in ghana were investigated by basil, masri, and abubakar (2018). they found that book valuation and profits are important for financial firms, but only dividends and earnings are important for non-financial firms. from the asian viewpoint, kwon (2018) contrasted the importance of accounting numbers of different information for manufacturing companies listed on the exchange markets in korea, japan and china. from the european perception, elbakry et. al. (2016) analyzed the differences in the information contents of accounting numbers pre versus post ifrs using three different valuation models and considers higher significance in uk than in germany. they discovered on the gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 90 overall that japanese data generates the greatest value for all independent variables. agir (2017) studied the ifrs adoption’s effect on value relevance of banks quoted in nigeria finding both information contents from both periods significant. additionally, ernest and oscar (2014) compared the information contents of accounting numbers between firms in the banking sector and the petroleum sector, they establish that information from the petroleum sector are more relevant than those from the banking sector. however, this is rather a mismatched comparison. furthermore, various studies have demonstrated that the r2 is a measure of the degree of responsiveness of stock prices to accounting data. as a result, accounting data has been shown to be valuable in many reports (adeyemo et. al., 2017; agbo et. al., 2020; el-diftar & elkalla, 2019; mbekomize & popo, 2020). based on their study of the value prominence of book value, earnings, and dividend for non financial and financial firms listed in ghana, basil et. al. (2018) find no distinction in the degree of explanation of the ohlson model relative to other two models. in addition, bhatia and mulenga (2019) reviewed literatures and summarized results from 90 observational studies conducted in various countries across continents from 1993 to 2016. the majority of these studies concluded that accounting numbers are meaningfully significant, although only a few studies found the contrary. several studies used the ohlson formulation for variable-based analysis, which classically consists of two variables: earnings and book values. however, subsequent studies altered the model to incorporate additional variables such as dividends, cash flow, and liquidity, among others. earnings per share, liquidity, and bank capital efficiency of nigerian listed banks were found to be value relevant by agbo et. al. (2020). however, they discovered that book value was not value relevant. mbekomize and popo (2020) found that profits have more effect than dividends and book value on share prices, while operational cash flows are negligible. adeyemo et. al. (2017) discovered a favourable relationship between book value and earnings and share price; however, book value is less significant. ahmadi (2017) found the same outcome. in light of the foregoing, this paper investigates the comparative value-relevance of accounting information for nigerian deposit money banks and other financial service firms. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 91 literature gap centered on the above, this paper investigates the comparative value-relevance of accounting numbers for nigerian banks and other financial service companies using companies’ financial statements. to accomplish this aim, the analysis makes an attempt to test the following hypotheses: ho1: accounting information has no significant impact on the share prices of listed group financial service companies in nigeria. ho2: in nigeria, there is no significant gap in the value relevance of listed banks and other financial service companies with a group structure. theoretical framework two theories are applicable to this investigation: the decision usefulness theory and signalling theory. decision usefulness suggests the revelatory capacity of the accounting data. the more exact users can forecast financial and economic occurrences utilizing accounting data, the more valuable this data is to them. this could give the management and standard setters an appropriate device regarding the decision on the best accounting estimations and principles. signaling theory advances that organizations with great performance will in general make intentional revelations all the more promptly, as doing so is viewed as a simple method for differentiation from others in the market. dividend payout is a signal for investors showing the future potential of an organization; improvements in dividends payments have a bearing on the market's reaction of stock valuation. signaling illuminates the correlation with information asymmetry and business strategy. this theory helps explain the behaviour of administrators who have more access to data than investors. the annual reports of the company include data which are required as indicators in decision-making meditations by shareholders. accounting data is more useful to users when it has a greater revelatory ability. furthermore, it is agreed that the signaling hypothesis will overcome the problem of data inequality and information asymmetry by ensuring that important data is transferred to the financial exchange. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 92 one of the key concerns of standard setters is the utility of accounting statistics. there is broad consensus on how to enhance this usefulness by promoting similarity and, most importantly, dependable consistency of financial results all around the world. regardless of the market's effectiveness, the degree of resilience of increases in stock value to changes in accounting numbers is dependent on the market's effectiveness. 3. methodology secondary data was hand-picked from the group financial statement for the accounting numbers and the nigerian stock exchange website for the share prices for the first trading day in april each year following the accounting year end. the study covers a 5-year period from 2016 to 2020 based on a total of 25 firms leading to 125 firm-years observations (45 for banks and 80 for others). firms that are not having group structure were eliminated from the study. this paper modified ohlson's (1995) price valuation model, which was consistent with previous research. this is chosen to verify dividend per share and net operating cash flows per share, all of which have an impact on the valuation relevance of accounting statistics. centered on a pooled data collection, this model is first applied to the study of nigerian listed financial services companies. and then to the comparative study which was carried out for each sub-sector (banks and other financial service firms). the positivism theory serves as the foundation for this study. the ex-post factor research design was used in this case. in addition, based on the model below, multiple regression techniques of analysis was used. mppsit = β0 + β1𝐵𝑉𝑃𝑆𝑖𝑡 + β2epsit + β3dpsit + β4ocfit + εit (1) table 1: measurements of the variables variables measurement mpps market price per share measured as the price per share on the stock exchange bvps book value of equity per share measured as total shareholders’ equity divided by the number of ordinary shares outstanding eps earnings per share measured as profit after tax (pat) divided by the number of ordinary shares outstanding dps total dividend divided by weighted average number of ordinary shares outstanding gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 93 ocf operating cash flow measured as net cash flow from operating activities divided by the number of outstanding shares source: researchers compilation, 2022 4. results and discussion the findings of the study and explanation are presented in this section. the aim is to assess the relative value-relevance of accounting data for nigerian listed group financial service firms. the descriptive statistics are the first category covered in this section. the correlation matrix, post estimation analyses, fixed and random effect test regression results, test of hypotheses, and discussion of observations are then presented and discussed. descriptive statistics table 2 shows based on the total of 125 observations that the mpps has a mean n4.38k with a standard deviation of n6.82k, a maximum of n31.61k and a minimum price of n0.50k. this implies that on the average a listed financial service firm has a unit of its shares valued at n4.38k and the deviation of share prices from the mean is by n6.82k. the minimum prices of shares are generally from the insurance companies; this may be due to lower number of investors in these firms when compared with the investments in the bank. again, the maximum price indicates the highest price for which any listed financial service firm’s share is traded on the stock market – which probably is from the banking sector in addition to the fact that some firms have been in existence for a while now; gaining goodwill overtime and also some firms were listed earlier than others thereby contributing to their market prices over time. furthermore, the variability is made clearer by the significance of the skewness and kurtosis normality tests which showed that the market price data are not normally distribute at all levels. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 94 table 2: descriptive statistics bvps has an average value of n4.91k, and on the overall a standard deviation of n5.86k, the minimum bvps is n0.00k and a maximum of n22.44k meaning that the average book value of equity per share of n4.91k for listed financial firm. eps on the average is 58k with a standard deviation of n1.00k and minimum loss on the overall is 31k per share and a maximum earnings of n4.31k. for dps, the mean is n0.25k representing the average dividend payment by a firm of 25 kobo per share yearly. the standard deviation of n4.49k shows the dispersion between firms’ dividend policies for the period of study. some of the firms made no dividend payments throughout the study period while the maximum paid is n2.00k. finally, from table 2, ocf has a mean of n0.53k, standard deviation of n4.51k, a minimum of n14.36k and maximum of n20.12k. the net operating cash flow per share is a measure of a company’s financial strength; on the average a listed financial firm has 53k. although, the least a group may have is a shortage of n14.36k and the highest net cash flows from operations per share is n20.12k. this figure may be as a result of high variability in size, age, capital base of firms in the sub-sector under the financial service sector and also the volume of transactions, customer base, branch network, service quality and so on. this variability is evidenced by the deviation of n4.51k. correlation matrix the correlation matrix for the dependent (mpps) and independent variables (bvps, eps, dps and ocf) is shown in table 3. correlation is a statistical method for determining the relationship or inter-relationships between two sets of graded or ordered results. the table displays that only dps have positive and strong gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 95 correlation with mpps at 0.88. bvps and eps are also positive but not significant at 0.75 and 0.45 while ocf is positively but not strongly correlated with mpps at about 0.14. the implication of this is that all the independent variables move in the same directions as the dependent variable; as mpps increase, all the independent variables too increase and vice versa. also, all the correlations are significant at 5% with the exception of ocf. the interaction of all independent variables is also moderate, as is the relationship between eps and dps with bvps. table 3: correlation matrix post estimation tests the tests conducted includes; multicollinearity, heteroscedasticity and normality test of error term. the multicollinearity test is used to determine whether or not there is a relationship between the study's independent variables. to test for multicollinearity in the two regressions, the variance inflator factor (vif) and tolerance values are calculated. the vif and tolerance values were consistently found to be less than ten and one, respectively. (see table 5 in the appendix) this is clear from the mean vifs of 1.75, 1.26, and 1.35 for the combined, bank, and insurance data sets, which are all less than ten, suggesting the absence of multicollinearity. the chi-square values for the pooled, bank, and insurance data sets are 200.17, 4.95, and 34.70, respectively, according to the heteroscedasticity test results. these values are significant at 5%, suggesting that heteroscedasticity occurs in all three regressions. as a result, the interpretation of ordinary least squares (ols) is inapplicable since it does not satisfy the assumptions of ols. to fix this, the robust standard error was calculated, and the error term's normality was checked. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 96 regression analysis table 4 displays the regression results for the dependent variable (mpps) and the study's independent variables (eps, bvps and ocf). the discussion is followed by an examination of the relationship and effect between the study's independent and dependent variables, as well as a cumulative comparison. research model mppsit = β0 + β1𝐵𝑉𝑃𝑆𝑖𝑡 + β2epsit + β3dpsit + β4𝑂cfit + εit (1) the fixed effect model is therefore stated as follows for pooled data: mppsit= 4.4031-0.4967bvpsit-0.1811epsit + 10.21dpsit+ 0.0326ocfit+εit table 4 summary of fixed effect regression result according to the results in table 4, r2 (within) for the pooled data is 0.38, indicating that the proportion of the overall variance in the dependent variable are jointly described by the independent variables is 0.38. as a result, the information quality of accounting numbers accounts for 38% of the overall differences in mpps of listed group financial service companies in nigeria. furthermore, the f-stat of 14.91, which is significant at 1%, shows that the study's model is well suited and the independent variables are appropriately chosen, grouped, and used. for the bank data set, the fixed effect model is as follows: mppsit= 5.1242-0.7379bvpsit-0.0663epsit + 10.4956dpsit+ 0.0148ocfit+εit gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 97 according to the results in table 5, r2 for banks is 0.36, indicating that the independent variables collectively decide a proportion of the overall variance in the dependent variable. as a result, the relevance of accounting information accounts for 36% of the overall differences in mpps of listed community deposit money banks in nigeria. also, the f-stat of 56.49 which is significant 1 percent signifying that the model of the study is well fitted and the independent variables are correctly selected, combined and used. the p-value for the above model of 0.0000 which is significant at 1% provides evidence for rejecting the null hypothesis one which states that the value relevance of accounting information for listed group financial service firms in nigeria is not significant. for the insurance firm data set, the fixed effect model is as follows: mppsit= 5.1242-0.7379bvpsit-0.0663epsit + 10.4956dpsit+ 0.0148ocfit+εit table 5 summary of fixed effect regression result from the result in table 5, r2 is 0.13 for the insurance companies which shows the portion of the total variation in the dependent variable determined by the independent variables jointly. hence, signifying 13 percent of the total variations in mpps of listed group insurance companies in nigeria is as a result of the value relevance of accounting information. also, the f-stat of 2.17 which is significant gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 98 10 percent signifying that the model of the study is well fitted and the independent variables are correctly selected, combined and used. however, the r2 of 0.39 and 0.13 for deposit money banks and insurance companies respectively show that accounting information for dmbs have more information content than that of insurance companies in nigeria. since the banks information explain about 26 percent more, the variation in mpps. this in addition to the p-values of 0.0000 and 0.0832 for banks and insurance companies respectively provides evidence for rejecting the null hypotheses which states that there is no significant difference between the value relevance of listed banks and other financial service firms in nigeria. 5. conclusion and recommendations the study compared the value relevance of book value per share, earnings per share, dividend per share and operating cash flow per share for listed group financial service firms in nigeria. the analysis is carried out by implementing three regression models based on modified ohlson's model. the study revealed that accounting information for listed group financial service firms in nigeria are relevant. also, the paper reveals the superiority of the relevance of accounting information of group listed banks over insurance companies in nigeria while concluding that the information quality of listed group banks is considerably more than that of the insurance companies in nigeria. consequently, the paper suggests that of listed financial service firms ought to reinforce their activities to boost incomes and productivity to improve the value relevance of earnings per share. similarly, more effort should be made to record book values that are similar to market values, since book values are expected to reflect a fair approximation of accounting statistics based on ifrs. furthermore, dividend strategy should be designed in such a way that it favourably impacts the equity of shareholders. moreover, the management of publicly traded financial services companies should boost their operations in order to improve their operating cash flows from operations. since cash flows per share measures the amount of cash in sales without taking into account all forms of cash flows, it more accurately reflects the company's long-term core operations. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 99 references adeyemo, k.a., ajibolade, s.o., uwuigbe, u. & uwuigbe, o.r. (2017). mandatory adoption of international financial reporting standard (ifrs) by nigerian listed banks: any implication for value relevance? international journal of accounting research (ijar), 3(1), 21-33. agbo, a., anande-kur, f., ipuele, o. a. & tanimu, a. (2020). value relevance of accounting information of deposit money banks in nigeria agir, p. a. (2017). a comparative analysis of the effect of ifrs adoption on value relevance of accounting information in an emerging economy: a focus on listed deposit money banks in nigeria. iiard international journal of banking and finance research, 3(2), doi: 10.1177/2278682118823307 ball, r., & brown, p. (1968). an empirical evaluation of accounting income numbers. journal of accounting research, 6, 159-178. barth, m. beaver, e., & landsman, w.h. (1998). relative valuation roles of equity book value and net income as a function of financial health. journal of accounting and economics,25(1), 1-34. basil, a. d., masri, m. h. & salisu, m.a. (2018). a comparative study of the value relevance of accounting information between financial and non-financial companies listed on the ghana stock exchange. afro-asian journal of finance and accounting. doi:10.1504/aajfa.2018.093466 bhatia, m. & mulenga, m. j. (2019). value relevance of accounting information: a review of empirical evidence across continents. jindal journal of business research, 1–15 dechow, p.m. (1994). accounting earnings and cash flows as measures of firm performance: the role of accounting accruals. journal of accounting and economics, 18(1), 3-42. elbakry, a. e., nwachukwu, j. c., abdou, h. a. & elshandidy, t. (2017). comparative evidence on the value relevance of ifrs-based accounting information in germany and the uk. journal of international accounting, auditing and taxation, 28 (2017), 10–30. el-diftar, d. & elkalla, t. (2019). the value relevance of accounting information in the mena region: a comparison of gcc and non-gcc country firms journal of financial reporting and accounting. 17 (3), 519-536 doi 10.1108/jfra-09-20180079 feltham, g.a., & ohlson, j.a. (1995). valuation and clean surplus accounting for operating and financial activities. contemporary accounting research, 1(2), 689-731. gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 100 kwon, g-j. (2017). comparative value relevance of accounting information among asian countries: focusing on korea, japan, and china", managerial finance, https://doi.org/10.1108/mf-07-2017-0261 mbekomize, c. j. & popo, s. (2020). value relevance of accounting information in the botswana listed companies. international business research; 13 (5), doi:10.5539/ibr.v13n5p46. ohlson, j. (1995), ‘earnings, book values and dividends in equity valuation’, contemporary accounting research, spring, 11(2), 661-687. oshodin, e. & mgbame, c.o. (2014). the comparative study of value relevance of financial information in the nigerian banking and petroleum sector. journal of business studies quarterly, 6 (1), 42-54. prihatni, r., subroto, b., saraswati, e., & purnomosidi, b. (2018). comparative value relevance of accounting information in the ifrs period between manufacturing company and financial services go public in indonesia stock exchange. academy of accounting and financial studies journal, 22(3), 1 – 9 gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 101 gusau journal of accounting and finance (gujaf) vol. 1 issue 2, october, 2020 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state –nigeria gusau journal of accounting and finance, vol. i, issue 2, october, 2020 1 impact of audit quality on earnings management of listed deposit money banks hassan suleiman ahmadu bello university, zaria department of accounting ask4sman@gmail.com, 07030394555 taofik ajadi abdu gusau polytechnic, talata mafara, zamfara state department of accountancy taofikajadi@gmail.com, 08035941228 mohammed ola maroof federal polytechnic, bali, taraba state department of accountancy maroofolamohammed8@gmail.com, 08069264670 abstract the study examined the impact of audit quality on earnings management of listed deposit money banks in nigeria for the period of 2012-2019 the study adopted correlational research design. the study used data extracted from annual reports of listed deposit money banks in nigeria. the study was anchored on the agency theory to establish conceptual relationship between the variables. the population of the study comprised of the 14listed deposit money banks. the adjusted population was 12 listed deposit money banks in nigeria. the data collected were analyzed with the aid of paneled regression. the findings revealed that there is positive and significant relationship between audit industry specialization and earnings management of listed deposit money banks. however, audit tenure has negative and significant relationship with earnings management of listed deposit money banks. based on the findings, the study recommends that regulatory authorities in nigeria such as sec should come out with a policy that encourages audit firms in nigeria to create departments within their firms that specialize along industry lines of companies listed on the nigerian stock exchange (nse)and that auditor tenure of three years and above for external auditors of public companies in nigeria. this reinforces sec (2014) code of corporate governance which states that nigerian public companies can retain external auditors for a period of ten years consecutively, while disengaged auditors can only be reappointed after a period of seven years. keywords: earnings management, audit firm size, audit industry specialization and audit tenure. mailto:ask4sman@gmail.com mailto:taofikajadi@gmail.com mailto:maroofolamohammed8@gmail.com gusau journal of accounting and finance, vol. i, issue 2, october, 2020 2 1. introduction in recent years, profit control activities within the nigerian banking industry have been intensified to attract hapless creditors or to acquire undue rewards on an accounting basis by implementing an unrealistic scenario of manipulation in financial transactions. banking. these days, nigerian banks have witnessed systematic economic irregularities that have contributed to the financial disaster of many banks, and acquisitions and mergers have marked a milestone in the history of the economic services industry within the country (saleh, 2017). additionally, nigerian commercial banks are guilty of intentionally selling off unethical company behavior and shady business practices. certainly, the terrifying scale of these malpractices is an indictment against some of the commercial banks for failing to adjust their internal manipulation device and for circumventing their ethics, mainly in conflict of interest and handling of exclusive records. unfortunately, the imperative bank of nigeria (cbn) is not doing enough to curb these malpractices (thisday, 2018). in addition, the cases of fraud and counterfeiting registered through the cash deposit banks (dmb) amounted to 25,029 at the end of december 2018, from 20,774 cases at the end of june 2018. in terms of the amount involved, the sum of n18.94 billion was recorded as fraud and counterfeiting cases in 2018 12 full months, with actual losses forecasted at n2.21 billion. this event is an indication that revenue management danger lurks. the implication of that is that there may be a continual rise of doubts in the minds of traders, shareholders, and other stakeholders about the reliability of corporate monetary reporting in nigeria. while a management fails to achieve its financial goals, this could be a personal effect for them due to the fact that, in general, a company will reward its management with the help of the use of the monetary reward device (stringer, didham and theivananthampillai, 2011). consequently, earlier researchers such as beatty, chamberlain, and magliolo (1995) have shown that the provision for credit losses is one of the components of banks' earnings subject to manipulation. a provision for bad loans is an expense item that appears in the income statement and that reflects the current period of management's evaluation of the level of future credit losses. based on the recognized risk of default on certain credit lines, specific provisions were made while general provisions were made based on the recognition of the fact that the performance of the credit line takes into account some risks of loss due to small let them be (cbn, 2010). gusau journal of accounting and finance, vol. i, issue 2, october, 2020 3 at any level within an entity, financial incentives are based directly or indirectly on accounting results. at some point, the motivation to increase personal profit may become a priority for management to manage profits (othman & zeghal, 2006). profit management has been a concern of regulators and professionals because it erodes the quality of financial reporting and misleads users of financial statements by providing them with false information about the true operating performance of a company (chen, elder & hsieh, 2007). the literature indicates that audit quality is one of the effective mechanisms to control managerial opportunism. the accuracy of the audit is synonymous with the mutual ability to find a designated auditor and document a gaap violation in the company's accounting framework. as a result, company regulations in various countries around the world make formal examination of public sector financial reports a legislative obligation for auditors of professional standards. examples include trade rules in the united states, united kingdom (united kingdom), germany, japan, and malaysia. likewise, the cama rules of article 357 of the companies and related matters law (cama) limit 20 lfn 2004. the audit quality literature has documented a number of audit quality attributes that affect companies' profit management. popular among these attributes are audit firm size, auditor industry specialization, and auditor tenure. the size of the audit firm is believed to affect the management of companies' results because large audit firms have more resources to acquire the latest audit technology than small audit firms (sawan & alsaqqa, 2013; hosseinniakani, inacio & mota, 2014). also, large audit firms have more clients and their total fees are spread across the many clients, making them less dependent on a single client. large audit firms conduct more effective audits than small audit firms because they have greater wealth that is exposed to litigation risk in the event of audit failure (dye, 1993). industry specialization of auditors is another attribute of audit quality that the existing literature suggests could affect companies' earnings management practices. this is because specialized auditors in the industry are familiar with the business operations of the industry of their specialization and also possess industry-relevant experience and knowledge that enables them to audit companies in the industry more effectively than their counterparts (minutti meza, 2013; sarwoko & agoes, 2014). furthermore, previous studies in this area from both developed and developing economies have produced inconsistent and sometimes contradictory empirical gusau journal of accounting and finance, vol. i, issue 2, october, 2020 4 evidence. while some of the studies documented a significant negative relationship, others suggested a significant positive relationship or no relationship between audit quality indicators, such as the size of the audit firm and the companies' earnings management. for example, becker, defond, jiambalvo, and subramanyam (1998) reported that the use of the six large audit firms (one of the indicators of audit quality) is associated with lower earnings management for a sample of firms. americans. similar findings include piot and janin (2005), habbash (2010), memis (2012), okolie, izedonmi and enofe (2013) and okolie (2014). in contrast, yasar (2013), pouraghajan, tabari, emamgholipour, and mansourinia (2013) documented evidence suggesting that the big 4 audit firms are not likely to be associated with lower firm earnings management. one of the reasons for the mixed empirical evidence could be the difference in the economic and legal conditions of the countries. however, most of these studies are carried out abroad. given the disparities in the nature of the economies, the level of sophistication in monitoring mechanisms, and the litigation risks faced by external auditors, the nigerian studies may produce different results. furthermore, the works of leslie and okoeguale (2013), for example, covered the period from 2005 to 2010. hassan (2012) covered the period from 2008 to 2010, and fodio (2013) covered the period from 2007-2010. these periods can be considered not too current as many activities have been carried out, including changes to the current corporate governance code of 2014 by the nigerian securities and exchange commission. studies such as (kingsley et al., 2016; eriki & omoye, 2014; oba, ibikunle & fodio) on the management of profits in the nigerian banking sector have considered the use of modified jones models that are not useful in the financial sector without considering the most appropriate model, such as discretionary bad debt provision models. it is in this context that the present study is set to fill the identified gaps in the audit quality and earnings management literature by broadening its analysis to cover the size of the audit firm, the industry specialization of auditors, and the auditors' permanence focusing on deposit money banks in nigeria in view of their strategic importance to the nation's economy from 2012-2019. therefore, the researcher hypothesized that the quality of the audit has a significant effect on the profit management of deposit money banks listed in nigeria. the practical result of the study could be used by regulatory authorities such as the securities and exchange commission (sec) and the central bank of nigeria (cbn), among others, to strengthen existing regulatory policies that would improve audit quality gusau journal of accounting and finance, vol. i, issue 2, october, 2020 5 and integrity. of the financial reports of companies listed on the nse. this is important because most of the existing regulatory policies in nigeria were adopted by developed countries with different economies and a sophisticated regulatory framework. the financial reporting council of nigeria (frcn) would also benefit greatly from the findings and recommendations of this study. the remainder of the article is organized as follows: section 2 presents relevant existing studies. section 3 analyzes the methodology used for the study. in section 4, the results of the data analysis are presented and discussed. section 5 concludes the study by highlighting the finding and its policy implications. 2. literature review and theoretical framework the debate on the relationship between audit quality and earnings management has attracted great attention from accounting researchers in both developed and developing economies. this is evident in the number of empirical studies conducted from both economies over the years. 2.1 audit firm size and earnings management bisogno and deluca (2016), the largest audit firms are considered more independent for at least two reasons. first, due to the size of the firms, the audit fee generated by a particular client constitutes a smaller percentage of the firm's total revenue. second, larger audit firms typically have many divisions to provide the services that clients need, and therefore the person who audits the client would be different from the person who provided non-audit services. much work has been done reflecting the size of the audit firm and earnings management, for example, aliyu, musa and zachariah (2015) examined the effect of audit quality (represented by the size of the audit firm). audit, joint audit and auditor's financial dependence, a measure of client importance.) on profit management of nigerian listed money deposit banks. the discretionary provision earnings management approach for bad loans was estimated using the beaver and engel (1996) model, tested by researchers such as fiechter and meyer (2011). the study used a sample of seven (7) deposit money banks listed in the nse for the period 2006 to 2013, while the data analysis was performed using the ordinary least squares (ols) regression technique. the results of the data analysis indicated that both the size of the audit firm and the joint audit have a significant negative effect on the profit management of the nigerian listed money deposit banks. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 6 zhou and guan (2014) investigated the relationship between audit quality and earnings management of companies in china for the period 2008-2011. discretionary accumulations were estimated using the modified jones model for a sample of 4,640 firm-year observations. the study revealed that the size of the auditing company has a significant negative effect on earnings management in china, especially for companies with abnormal accumulations of increasing revenue. given the different nature of the sampled companies in china, the results of the study are likely not applicable to money deposit banks in nigeria due to sectoral and economic differences. molik, mir, mclver, and bepari (2013) examined the effect of audit quality on the earnings management of australian companies during the global financial crisis from 2006 to 2009. the earnings management represented by discretionary accruals was estimated using the jones model (1991), the modified jones model (dechow, sloan and sweeney, 1995) and the modified jones model adjusted for company performance (kothari, leone and wasley, 2005) to improve robustness. panel regression analysis was used as a data analysis tool for a sample of 149 companies. however, the study findings indicated that a negligible positive relationship was found between the size of the audit firm (represented by the big 4) and the profit management of the firms. 2.2 auditor industry specialist and earnings management specialized auditors possess industry-specific knowledge and experience that make them more effective in identifying accounting irregularities than nonspecialist auditors. industry auditors also invest more in relevant auditing technology than their counterparts (tyokoso & tsegba, 2015). studies on industry specialization such as hegazy (2015) examined the effect of audit firms' specialization on earnings management in egyptian firms. a sample of seventy (70) auditors, comprising both specialist auditors and non-specialist auditors, were assigned a common task with equal time to perform under the supervision of an audit professor and three (3) practicing senior auditors. findings at the end of the experiment indicated that specialized industry auditors do not constrain earnings management better than non-specialist auditors. however, the study is limited because even though egypt and nigeria are both developing economies, there are still differences that could make the study's findings not applicable to oil trading in nigeria. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 7 in addition, karimi and gerayli (2014) studied the relationship between audit quality (represented by auditor industry specialization and auditor tenure) and estimated earnings management through the modified 1991 jones model of 91 listed companies. on the tehran stock exchange (tse) for the period 2008-2012. evidence from the study indicated that industry specialization for auditors is associated with lower earnings management of companies listed on the tse. results are unlikely to apply to publicly traded money deposit banks in nigeria due to industry differences. rohaida (2011) examined the association between audit quality (represented by audit fees, auditor specialized in the industry, size of the audit committee, independence of the audit committee, financial experience of the audit committee and meeting of the audit committee) and company earnings management in the uk. earnings management, represented by discretionary accruals, was estimated using the 1991 modified jones and jones model and the kothari, lcone, and wasley (2005) model. the results of the study showed that specialized auditors are associated with lower earnings management of the sampled companies for all earnings management measures. 2.3 audit tenure and earnings management auditors working with clients for a long time would likely have increased specific knowledge about their clients' activities, thus increasing earnings management and resulting in a positive association between auditor tenure and earnings management (jenkins & velury, 2008) studies on audit tenure and managerial earnings such as okeke-muogbo and egungwu (2019), examined the effect of audit tenure on the earnings management of listed non-financial companies in nigeria. according to the objective of the study, the research question and the hypothesis were formulated and tested at the 5% level of significance. secondary data was obtained from twenty-four (24) companies listed on the floors of the nigerian stock exchange for the period 2007-2017 (11 years). the study adopted an ex post facto research design. the study findings indicated that audit tenure has a significant positive effect on the earnings management of listed companies in nigeria. moeinadin, heirany, and moazen (2013) investigate the relationship between tenure and size of the audit firm and earnings management. the statistical population is made up of pharmaceutical companies listed on the tehran stock exchange and the sample was selected from 25 pharmaceutical companies using the systematic elimination method. the temporal scope of this study is from 2005 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 8 to 2010. the objective of the present investigation is applied and is descriptive correlational in terms of implementation and the data were analyzed using multivariate regression based on the panel data method. although the research findings indicate that there is no relationship between auditor tenure and earnings management. similarly, okolie (2014) investigated the relationship between audit quality and accrual-based earnings management of nigerian companies. using a sample of 57 nonfinancial companies listed in the nse and the modified jones model to measure discretionary accruals, the study documented a significant positive association between audit fees and discretionary accruals, and a negative association between holding of the audit and discretionary accruals of nigerian companies. this study therefore draws on agency theory to test the relationship between audit quality and the incidence of earnings management in listed deposit money banks in nigeria. the agency theory is based on the relationship between the principal (shareholder) and the agent (managers). the separation of ownership from management and control in modern day business corporations provides the basis for the function of agency theory. this separation provides the opportunity for an agent (manager) to be appointed to manage the daily operations of the. company. this relationship however, creates the potentials for conflicts of interests between the agent and principal, and requires monitoring costs associated with resolving these conflicts (jensen &meckling, 1976). the main problem with agency theory is how to align the conflicting interests of managers with the interests of shareholders. consequently, when managers have incentives to manage earnings, such as meeting or exceeding target earnings and performance-based compensation, they manipulate the company's reported earnings. this manipulation reduces the relevance and reliability of the reported accounting earnings and the financial statements in general. therefore, agency theory suggests control mechanisms such as high-quality audits to reduce these conflicts and align the interests of managers with the interests of shareholders. the selfish interest of managers therefore increases costs to the company, such as the costs of contract formation, losses due to decisions made by agents, and the costs of observing and controlling the actions of agents. in light of the above, shareholders cannot fully trust the managers. consequently, the agency theory gusau journal of accounting and finance, vol. i, issue 2, october, 2020 9 suggests strict control of managers by shareholders or their representatives, such as external auditors, to protect the interest of shareholders from being compromised by the self-interest of the managers. the agency theory assumes that revenue management could be indicative of an agency problem and may be limited by follow-up mechanisms such as a high-quality audit. from the above, the agency theory explains better and clearer unethical practices in accounting and financial issues such as earnings management (me). the agency theory is chosen because it better explains the motivation for earnings management and the association between audit quality as a monitoring mechanism and earnings management. 3. methodology the study adopted the correlational research design. the design is informed by the research paradigm which is the positivism approach. the population of the study comprised of all the fourteen (14) listed deposit money banks in nigeria stock exchange (nse) and three points filter were used as criterion to arrive at the adjusted population of twelve banks (12). the technique is based on these criteria: i. the firm must be listed on the nse one (1) year before 2009. ii. firm must not be delisted during the period of study iii. availability of data in the annual financial reports of the firms for the period under study i.e., 2012-2019. the financial data used for the study is secondary in nature obtained from the annual reports. panel regression analysis was employed based on the fact that the study involves the use of both time-series and cross sectional data, where the audit quality consists of audit firm size, audit industry specialization and audit tenure and as independent variables of the study. while earnings management is considered as dependent variable. variables measurement and model specification the dependent variable for this study is earnings management. the absolute value of discretionary accruals was used as the proxy for earnings management. discretionary accruals were used as the proxy for earnings management because it best captures the earnings management practices of deposit money banks in nigeria (bello & yero, 2011). the measurement of the dependent and independent variables are provided in the table below. the study analyzed the chang, shen, & fang, (2008) model of gusau journal of accounting and finance, vol. i, issue 2, october, 2020 10 discretionary loan loss provision which was specifically built for banking sector. the model is shown below. dllpi /tat-1 = llpit/tat-1 – {α0 1/tat-1 + α1 lcoi/tat-1 + α2 bbali/tat-1} where: dllp = discretionary loan loss provision llp = loan loss provision lco = loan charge-off bbal = beginning balance of loan loss tat-1 = lagged total assets α0= constant independent variables the audit firm size is measured as dummy variable 1, if the firm is audited by a big 4 auditor, 0 otherwise (becker, 1998). auditor industry specialization is measured as a dummy variable 1 if market size (ms) of the auditor ≥20 percent and 0 (inaam, 2012). finally, audit firm tenure is measured number of consecutive years the client has retained a particular audit firm. dummy variable 1 for 3 years+, 0 otherwise (inaam, 2012). model specification the model is stated below: dacit = β0 + β1afsit + β2aisit + β3adtit + εit where: dac = discretionary accruals afs = audit firm size ais = auditor industry specialization adt = auditor tenure β0 = constant of the model β1 – β3 = coefficients of the study model ε = error term 4. data presentation and discussion in this section, data collected in the course of carrying out the study were presented and discussed. the hypothesis formulates for the study was tested to determine the effect of audit quality on earnings management table 4.1 descriptive statistics gusau journal of accounting and finance, vol. i, issue 2, october, 2020 11 variable mean std.dev. min max dac .023 .013 .001 .054 afs .533 .503 0 1 ais .5 .504 0 1 adt .617 .490 0 1 source: summary of stata output the table indicated an average value of 0.023 for discretionary accruals. since earnings management is measured by absolute value of discretionary accruals in this study, the value of 0.023 is an indication that sampled companies were involved in minimal earnings manipulations during the study period. the standard deviation of 0.013 shows low variability across the deposit money banks. the minimum and maximum values of discretionary accruals during the study period are 0.01 and 0.054 respectively. these values imply that some sampled companies were actually not involved in earnings manipulations during the study period while the highest manipulation of earnings by the sampled banks during the study period stood at 0.054. this further corroborates the inference of minimal manipulation of earnings earlier revealed by the mean of dac. the table further revealed an average value of 0.533 for audit firm size. the value implies that 53% of the sampled deposit money banks was audited by the big 4audit firms in nigeria (kpmg, pwc, ernst and young, akintola williams delloitte) during the study period. this shows that the audit market in the sector is dominated by the big 4 audit firms in nigeria and just a few nonbig 4 audit firms audited listed deposit money banks in nigeria. while the standard deviation of 0.503 shows moderate variability across the deposit money banks. the minimum and maximum values of audit firm size during the study period were zero (0) and one (1) respectively. similarly, the table shows that auditor industry specialization had a mean value of 0.5 during the study period. this value implies that 50% of the sampled companies were audited by industry specialist auditors during the period of the study. the standard deviation of 0.504 indicates high variability across the deposit money banks. the minimum and maximum values of auditor industry specialization stood at zero (0) and one (1) respectively because the variable was measured by dichotomous numbers of one if the sampled b is audited by an industry specialist auditor and zero if otherwise. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 12 finally, the table indicated that auditor tenure had a mean value of 0.617 during the study period. this value indicates that 61.7% of the sampled deposit money banks retained their auditors for a period of three years and above. this shows that more than sixty percent of the audit firms in the sector enjoy long tenure which enables them to acquire client’s specific knowledge and its financial reporting practices necessary for a more effective audit. the standard deviation of 0.490 shows low variability across the deposit money banks. the minimum and maximum values of auditor tenure during the study period are zero and one respectively in view of the fact that auditor tenure was measured by a dummy variable which takes a value of one for companies which retained their auditors for a period of three years plus and zero if otherwise. table 4.2 correlation matrix variables (1) (2) (3) (4) (1) dac 1.000 (2) afs 0.041 1.000 0.758 (3) ais 0.205 -0.198 1.000 0.116 0.129 (4) adt -0.298* 0.054 -0.443* 1.000 0.021 0.679 0.000 * shows significance at the .05 level source: summary of stata output from the correlation matrix table 4.2, it can be seen that audit firm size (afs) and audit industry specialization (ais) are positively correlated with discretionary accruals (dac) of the listed deposit money banks in nigeria, implying that the variables move in the same direction with discretionary accruals (dac). however, audit tenure (adt) has negative correlation with discretionary accruals (dac). the implication is that the above variables move in the opposite direction with the discretionary accruals (dac). with respect to association among the independent variables themselves, the table reveals that afs has positive relationship with audit tenure. however, there is negative relationship afs and ais. finally, the table shows that ais is negatively correlated with adt. on the gusau journal of accounting and finance, vol. i, issue 2, october, 2020 13 other hand, the relationship among the independent variables is too strong to warrant problem of multicollinearity. residual tests to test for the existence of heteroskedasticity, the present study used breuch pagan/cook-weisberg. the study reveals that chi2 of 0.45 with p-value of 0.0817, implying absence of heteroskedasticity and that the null hypothesis that the variance of the residual is constant (homoscedastic) is not rejected. the study conducted multicollinearity test to show the strength of relationship among the explanatory variables themselves, which may affect the result of the study. variance inflation factor (vif) was conducted and the values for all the variables are less than 10 and the tolerance values for all the variables are greater 0.10 (rule of thumb). this shows there is no multicollinearity problem. the hausman specification test was conducted to choose between the fixed and random effect model. the result of the hausman test revealed that the value of chi2 is 0.00 and the prob>chi 1.0000, the insignificant value as reported by the probability of chi2 indicates that the hausman test is in favor random effect model. further to this, the breusch and pagan lagrangian multiplier test for random effect was conducted to choose between the random effect result and ols regression. the result deduced from the test showed chi2 of 0.35 with the p-value of 0.2763. this implies that ols regression is the best suitable to be interpreted in this study. table 4.3 linear regression dac coef. st.err. tvalue pvalue sig afs 0.070 0.082 0.85 0.397 ais 0.301 0.090 3.33 0.002 *** adt -0.011 0.003 -3.75 0.000 *** constant -0.185 0.048 -3.87 0.000 *** r-squared 0.240 prob > f 0.001 adj r-squared 0.199 number of obs 54.000 f-test 5.884 *** p<0.01, ** p<0.05, * p<0.1 author’s computations generated with stata 13 software the cumulative correlation between the dependent variable and all the independent variables of 0.199 shows that audit firm size (afs), audit industry specialization (ais) and audit tenure (adt) jointly explained 19.9% of discretionary accruals of listed deposit money banks in nigeria and it is statistically significant at 1% with p-value of 0.001, while the remaining 80.1% gusau journal of accounting and finance, vol. i, issue 2, october, 2020 14 are caused by other factor not captured in the model. table 4.3 shows that audit firm size has positive and insignificant relationship with discretionary accruals as indicated with the coefficient and p-value of 0.07 and 0.397 respectively. therefore, we fail to reject null hypothesis which states that audit firm size has no significant effect on discretionary accruals. table 4.3 also reported a beta coefficient of 0.301 with a p-value of 0.002 which is statistically significant at 5%. the result indicates that the specialization of the auditing industry could not restrict but rather increased the earnings management of the companies included in the sample during the study period. however, the result contradicts a priori expectations that predicted a negative relationship between specialized industry auditors and discretionary accruals by nigerianlisted deposit money banks. industry specialty auditors are expected to mitigate companies 'earnings management because they possess industry-specific experience of clients' business operations, which is supposed to make them more effective than non-industry specialty auditors. industry to mitigate profit manipulation companies. specialty auditors also invest in up-to-date and industryrelevant auditing technology that enables them to conduct a higher quality audit than their counterparts. this provides evidence to reject the null hypothesis that the industry specialization of auditors does not have a significant effect on earnings management. this finding is in line with that of karimi and gerayli (2014). however, the result contradicts the findings of hegazy (2015) and rohaida (2011) who found that specialized auditors are associated with lower earnings management of the sample companies for all earnings management measures. finally, table 4.3 also reported a negative relationship between auditor tenure and earnings management that is significant at 1% based on a coefficient of -0.011 and a p-value of 0.000. this result supports a priori expectations that predicted a negative relationship between auditor tenure and earnings management of depository money banks in nigeria. this result implies that the prolonged tenure of the auditor is associated with lower earnings management of the sampled companies in nigeria. the outcome is expected because as the duration of the auditor-client relationship increases, it becomes more effective in detecting questionable client financial reporting practices as a result of the firm's specific knowledge of the business environment and financial reporting practices. of the gusau journal of accounting and finance, vol. i, issue 2, october, 2020 15 customer you have purchased. on the basis of empirical evidence regarding auditor tenure, the third hypothesis of the study stating that auditor tenure does not have a significant effect on the earnings management of listed money deposit banks in nigeria is rejected. the present result is consistent with the finding by okolie (2014), who found a negative relationship between audit tenure and earnings management. however, the result contradicts the finding of okekemuogbo and egungwu (2019), who found a positive relationship between audit tenure and earnings management. 5.0 conclusion and recommendations based on the result of data analysis and discussion, the study concludes that there is positive and significant relationship between audit industry specialization and earnings management suggesting that industry specialist auditors do not constrain but rather increases earnings management of sampled firms, while positive relationship between audit firm size and earnings management is not significant. however, the study concludes that there is significant and negative relationship between audit tenure and earnings management suggesting that auditor tenure constrains earnings management of sampled firms. in line with findings of this study, we therefore recommend that regulatory authorities in nigeria such as sec should come out with a policy that encourages audit firms in nigeria to create departments within their firms that specialize along industry lines of companies listed on the nigerian stock exchange (nse). this is necessary despite the fact that there are relatively few companies listed on the nse and irrespective of the significant positive relationship between auditor industry specialization and earnings management of sampled firms. the study also recommends auditor tenure of three years and above for external auditors of public companies in nigeria. this reinforces sec (2014) code of corporate governance which states that nigerian public companies can retain external auditors for a period of ten years consecutively, while disengaged auditors can only be reappointed after a period of seven years. auditor tenure of at least three years would enable the auditor acquire client specific experience that could make him detect questionable financial reporting practices of the firm more easily than he was at the beginning of his audit engagement while an auditor tenure of less than three years could deny the auditor firm specific experience, thus resulting to increase in earnings management of firms. references gusau journal of accounting and finance, vol. i, issue 2, october, 2020 16 ahmadzade, y., hassanzadeh, r.b., pooryegane, n., &ebrahimi, h. (2012). the study of audit firm tenure and industry specialization influence on earnings management (emphasizing on interim financial reports) evidenced from iran. australian journal of basic and applied sciences, 6(13), 267-273. aliyu, m.d., musa, a.u., & zachariah, p. (2015). impact of audit quality on earnings management of listed deposit money banks in nigeria. journal of accounting and finance management, 1(4), 1-16. becker, c., defond, m., jiambalvo, j., &subramanyam, k.r. (1998). the effects of audit quality on earnings management. contemporary accounting research, 15(1), 1-24. becker, c.l., defond, m.l., jiambalvo, j., subramanyam, k.r., 1998. the effect of audit quality on earnings management. contemporary accounting research 15 (1), 1–24. bello, a., &yero, j.i. (2011). debt reliance and earnings management in the nigerian listed conglomerates. nigerian journal of accounting research, 7(2), 1-23. bello, m.s. (2002). how ethical is accounting income smoothening? an empirical investigation. an unpublished seminar paper presented at the department of accounting, ahmadu bello university, zaria beatty, a.l., chamberlain, s.l., &magliolo, j. (1995). managing financial reports of commercial banks: the influence of taxes, regulatory capital, and earnings. journal of accounting research, 333, 231-262 central bank of nigeria (2010). prudential guidelines for deposit money banks in nigeria, retrieved from www.ndic.org.ng/.../prudentia chen k. y, elder r. j. and hsieh y. m. (2007). “corporate governance and earnings management: the implications of corporate governance bestpractice principles for taiwanese listed companies” available at: http://ssrn.com/abstract=981926 dye (1993). seeking advice in a dynamic and complex business environment: impact on the success of small firms. journal of developmental entrepreneurship, 13(2), 133-149. ebrahim, a. (2001). auditing quality, auditor tenure, client importance, and earnings management: an additional evidence fodio, m. i., ibikunle, j., & oba, v. c. (2013). corporate governance mechanisms and reported earnings quality in listed nigerian insurance firms. international journal of finance and accounting, 2(5), 279 – 286. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 17 fodio, m. i., ibikunle, j., & oba, v. c. (2013). corporate governance mechanisms and reported earnings quality in listed nigerian insurance firms. international journal of finance and accounting, 2(5), 279 – 286. habbash, m. (2010). the effectiveness of corporate governance and external audit on constraining earnings management practice in uk, durham theses, durham university. available at http://etheses.dur.ac.uk./448/ hegazy, m. (2015). the effect of audit firm specialization on earnings management and quality of audit work. retrieved from https.//www.researchgate.net/publication/281319919 on 14th may, 2016. hosseinniakani, s. m., inacio, h., and mota, r. (2014). a review on audit quality factors. international journal of academic research in accounting, finance and management science, 4(2), 247 – 258. jenkins d, velury u (2008) does auditor tenure influence the reporting of conservative earnings? journal of accounting and public policy 27: 115132. jensen, m., &meckling, w. (1976). theory of the firm: managerial behavior, agency costs and ownership structure. journal of financial economics, 3(4), 305-360. junaidu muhammad kurawa and saheed, a. (2014). corporate governance and earnings management: an empirical analysis of firms in petroleum and petroleum products distributors in nigeria. research journali’s journal of accounting, 2(2), 1–18 karimi, k., &gerayli, m.s. (2014). an investigation into the relationship between auditor industry specialization and length of auditor tenure, and earnings management in the firms listed in tehran stock exchange. indian journal of fundamental and applied life sciences, 4(4), 1258 – 1264 kee k. b. (2010). “why democracy and drifter firms can have abnormal returns: the joint importance of corporate governance and abnormal accruals in separating winners from losers” available at: http://ssrn.com/abstract=1646783 klein memis, m. u. (2012). earnings management, audit quality and legal environment: an international comparison. international journal of economics and financial issues, 2(4), 460-469. miko, n. u., &kamardin, h. (2015). impact of audit committee and audit quality on preventing earnings management in pre – and post – nigerian corporate governance code 2011.procedia – social and behavioral sciences, 172, 651 – 657. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 18 minuttimeza, m. (2013). does auditor industry specialization improve audit quality? journal of accounting research, 51 (4), 779 – 817. minuttimeza, m. (2013). does auditor industry specialization improve audit quality? journal of accounting research, 51 (4), 779 – 817. mishra, m. &malhotra, a. k. (2016). audit committee characteristics and earnings management: evidence from india. international journal of accounting and financial reporting, 6(2), 247 – 273. moeinadin, m., heirany, f., &moazen, h. (2013). investigating the relationship between auditor tenure and the size of the audit firm with earnings management in pharmaceutical companies listed in tehran stock exchange, 2(3) bisogno, m. & de luca, r. (2016), “voluntary joint audit and earnings quality: evidence from italian smes”, international journal of business research and development, vol.5, no.1: 1-22 molik, a. t., mir, m., mclver, r., &bepari, m. k. (2013). effects of audit quality on earnings management during the global financial crisis: an empirical analysis of australian companies. proceedings of 9th asian business research conference, 20 – 21 december. okeke-muogbo, g., &egungwu, i. (2019). double-blind peer reviewed refereed open access international journal, 07(01), 134–151 okoeguale (2013) can earnings management be influenced by audit quality? international journal of finance and accounting, 5(4), 209 – 219 okolie, a. o. (2014). auditor tenure, auditor independence and accrual-based earnings management of quoted companies in nigeria. european journal of accounting, auditing and finance research, 2(2), 63-90. okolie, a.o., izedonmi, f. o., &enofe, a. o. (2013). audit quality and accrualbased earnings management of quoted companies in nigeria. journal of economics and finance, 2(2), 7-16 othman, h. b., zeghal, d., 2006. a study of earnings-management motives in the anglo-american and euro-continental accounting models: the canadian and french cases. the international journal of accounting, 41(4), 406-435. piot, c., & janin, r. (2005). audit quality and earnings management in france.social sciences and humanities research council of canada. retrieved from www.ssrn.com pouraghajan, a., tabari, n.a.y., emamgholipour, m., & mansourinia, e. (2013). the effect of audit quality on earnings management: evidence from iran. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 19 international journal of basic sciences and applied research, 2(4), 399404 rohaida, b. (2011). the relationship between governance practices, audit quality and earnings management: uk evidence, durban theses, durham university. available at durham etheses online: http://etheses.dur.ac.uk/1382/ samaila, i. a. (2014). corporate governance and financial reporting quality in the nigerian oil marketing industry. unpublished ph.d thesis submitted to school of postgraduate studies, bayero univerity kano–nigeria. sarwoko, i., agoes, s. (2014). an empirical analysis of auditors‟ industry specialization, auditor‟s independence and audit procedures on audit quality: evidence from indonesia. proceedings of international conference on accounting studies, held in kuala lumpur, malaysia on august, 18 – 19. sawan, n., and alsaqqa, i. (2013). audit firm size and quality: does audit firm size influence audit quality in the libyan oil industry? african journal of business management, 7(3), 213 – 226 securities and exchange commission (2011). code of corporate governance for public companies in nigeria. stringer, c., didham, j., theivananthampillai, p., 2011. motivation, pay satisfaction, and job satisfaction of front-line employees. qualitative research in accounting & management, 8(2), 161-179 yasar, a. (2013). big four auditors‟ audit quality and earnings management: evidence from turkish stock market. international journal of business and social sciences, 4(17), 153163. zhou and guan (2014) auditor brand name, industry specialization and earnings management: evidence from taiwanese companies. international journal of accounting, auditing and performance evaluation, 3(2), 147-181 gusau journal of accounting and finance (gujaf) vol. 4 issue 1, april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ii © department of accounting and finance vol. 4 issue 1 april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vi advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ix contents board characteristics and earnings management of listed consumer goods firms in nigeria benjamin gwabin joseph, murtala abdullahi phd, benjamin kumai gugong phd 1 dividend policy and value of listed non-financial companies in nigeria: the moderating effect of investment opportunity abubakar umar 18 trialability and observability of accrual basis international public sector accounting standards implementation in nigeria aliyu abdullahi ahmed phd, zakari usman 35 liquidity risk and performance of non-financial firms listed on the nigerian stockexchange muhammed alhaji abubakar, nurnaddia binti nordin phd, abubakar hamisu umar 54 board diversity, political connections and firm value: an empirical evidence from financial firms in nigeria rofiat oyetunji, isah shittu phd, ahmed bello phd. 75 moderating effect of bank size on the relationship between interest rate, liquidity, and profitability of commercial banks in nigeria shehu usman hassan, bello sabo (ph. d), ismai'l idris tijjani (ph. d), idris ahmed aliyu. (ph. d) 96 sources of health care financing among surgical patients seen at the dalhatu araf specialist hospital lafia nasarawa state nigeria ahmed mohammed yahaya, babatunde joseph kolawole, bello surajudeen oyeleke 121 transparency, compliance and sustainability of contributory pension scheme in nigeria olanrewaju atanda aliu (ph. d), mohamad ali abdul-hamid (ph. d), salami suleiman (ph. d), salam mudathir olanrewaju 135 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 x examining the impact of working capital management on the financial performance of listed industrial goods entities in nigeria 151 sani abdulrahman bala (ph. d), jamilu jibril, taophic olarewaju bakare corporate governance factors and tax avoidance of listed deposit money banks in nigeria 171 sani abdulrahman bala (ph. d), umar salim ibrahim, samaila dannana risk committee demographic traits: a study of the impact of expertise on risk disclosure quality of listed insurance firms in nigeria wada najib abbas, dandago, kabiru isa (ph. d), rabiu, naja’atu bala 192 moderating effect of audit committee on the relationship between audit quality and earnings management of listed non-financial services firms in nigeria ahmad muhammad ahmad, lubabah mansur kwanbo (ph.d.), shehu usman hassan (ph.d.) musa suleiman umar (ph.d.) 216 determinants of audit opinion of negative-book-value firms in nigeria: firm value and audit characteristics perspective asma’u mahmood baffa (ph. d), lawal mohammed (ph.d.), ahmed bello (ph.d.) umar farouk abdulkarim 237 intervention announcements and naira management: evidence from the nigerian foreign exchange market adedeji daniel gbadebo 254 is there earnings discontinuity after the implementation of ifrs in nigeria? adedeji daniel gbadebo 275 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 1 board characteristics and earnings management of listed consumer goods firms in nigeria benjamin gwabin joseph department of accounting kaduna state university, kaduna gwabin.kasu@gmail.com murtala abdullahi phd department of accounting kaduna state university, kaduna murtala.abdullahi@kasu.edu.ng benjamin kumai gugong phd prof. accounting and finance department of accounting kaduna state university, kaduna bkgugong@gmail.com abstract corporate governance mechanisms have continued to strengthen the operations and activities of corporate entities in nigeria. board characteristics and earnings management have attracted many scholars trying to establish relevant relationship that will assist policy makers and regulatory agencies in facilitating good corporate governance. this study examines the impact of board characteristics on earnings management of listed consumer goods firms in nigeria. the agency theory was used to underpin the study. board characteristics as the independent variable was proxied using board independence, board meetings, board gender diversity and board expertise while earnings management as the dependent variable was measured using the modifies jones model. the panel data multiple regression was used on data extracted from annual reports of sixteen listed consumer goods firms from 2011 to 2020. the study found that, board gender diversity and board expertise negatively and significantly influence earnings management while board independence and board meetings have no significant influence on listed consumer goods firms in nigeria. the study therefore recommends that, regulatory agencies and policy makers should encourage listed consumer goods firms in nigeria to increase diversity in boards and expertise as this will minimize earnings management activities by management. keywords: board characteristics, consumer goods, discretionary accrual, earnings management https://doi.org/10.57233/gujaf.v4i1.197 1. introduction earnings management is driven by opportunistic tendencies of management towards achieving personal gains as against maximizing shareholder’s wealth and mailto:gwabin.kasu@gmail.com mailto:murtala.abdullahi@kasu.edu.ng mailto:bkgugong@gmail.com https://doi.org/10.57233/gujaf.v4i1.197 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 2 improving company value. secondly, earnings management is perpetrated to enhance corporate value which project the company as stable and having excellent future performance. it is in view of some of these tendencies that corporate governance has become inevitable in maintaining financial sanity in listed entities. as a corporate governance mechanism, it is the responsibility of the board of directors to ensure appropriate assignment of roles and responsibilities that will allow for good corporate governance practice. the board is to ensure that managers execute responsibilities that are in tandem with corporate objectives and goals. they are expected to ensure that, conflict of interest between managers, shareholders and other stakeholder group is minimized by aligning corporate objectives with stakeholders interest (buraik & idris, 2020). the code of corporate governance recommends that the board of directors carry out its roles and responsibility in pursuance to maximizing shareholders wealth. board of directors in executing their assigned roles and responsibility should possess the necessary skill and knowledge. this will ensure that interest of the shareholders are well served (shatima et al., 2020). the board is characterized by individuals with diverse knowledge, experience and background this characteristics is essential in fostering diversity and expertise that will equip the board in making good strategic decision that will increase the shareholders wealth (buraik & idris, 2020). the quality of earnings of listed firms is linked to the quality of decisions made by the board in giving direction to the entity. various scholars have examined certain board characteristics and their effect on earnings management. some of these characteristics include board size, board independence, board diversity, board expertise, board composition, women directorship etc. these board characteristics have been found to have varied level of influence on earnings management. as a consequence of the corporate scandals such as enron, worldcom, etc., the sarbanes-oxley act of 2002 was introduced in the us to enhance corporate governance quality. in nigerian, the code of corporate governance of nigeria 2011 (recently amended in 2018) was considered a benchmark in corporate entities in nigeria. moreover, researchers over the years have investigated into the menace with a view to explore the reasons behind the collapse of those big companies and have attributed it to the low ethical standards and poor corporate governance mechanisms (akeju & babatunde, 2017; aifuwa et al., 2018; aifuwa & embele, 2019). the study contributes practically as it brings to fore, the practical implication of board characteristics on earnings management of listed consumer goods firms in gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 3 nigeria. in this way, the study fills the gap that may probably arise in the implementation and execution of board characteristics variables in enhancing earnings. also, the study empirically extends the body of existing literature especially in the period covered and the area of using audit committee financial expertise to moderate the impact of selected board characteristics and earnings management. this will provide varied implications of board independence, meetings, diversity and expertise on earnings management of listed consumer goods firms in nigeria. the study will theoretically contribute to knowledge as it justifies the use of multiple theories in explaining the impact of board characteristics on earnings management of listed consumer goods firms in nigeria. finally, the study will be of immense significance to policymakers such as the security and exchange commission and financial reporting council in understanding the extent to which board characteristics are influenced by audit committee financial expertise. this will enable them to strengthen the corporate governance code to allow for good corporate practices that will protect the interest of shareholders, lenders, and creditor. this current study is motivated by the use of modified jones model as proposed in (dechow et al., 1995) as proxy for measuring earnings management of board characteristics and earnings management of listed consumer goods firms in nigeria. although, prior studies have been undertaken on this area as mention earlier but not on consumer goods companies. therefore, the main objective of the study is to examine the impact of board characteristics on earnings management of listed consumer goods firms in nigeria. from the objective of the study, the following hypotheses have been formulated in null form: ho1: board independence has no significant impact on earnings management of listed consumer goods firms in nigeria. ho2: board meetings has no significant impact on earnings management of listed consumer goods firms in nigeria. ho3: board gender diversity has no significant impact on earnings management of listed consumer goods firms in nigeria. ho4: board expertise has no significant impact on earnings management of listed consumer goods firms in nigeria. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 4 the remaining part of the paper consist of section two which review the related empirical evidence and theoretical framework, section three gives the methodology of the study, while the result and discussions of findings was given by section four. section five concluded the paper with recommendations. 2. literature review and theoretical framework this section reviews relevant and related previous studies with a view to providing direction of the linkages between board characteristics and earning management. board committees are expected to exhibit high degree of independence by ensuring that the number of independent non-executive directors on a board outweighs inside directors in order to maintain the independence of the board and comply with the code of corporate governance of 2018. in view of this, several studies have established an association between board characteristics and earnings management in nigeria. 2.1 board independence and earnings management moura et al. (2017) examined the influence of board independence on earnings management. earnings management was proxied using the modified jones model while independence of the board was measure by the proportion of independent members on the board. the study employed the descriptive and quantitative research designs in sampling 270 companies. secondary data extracted from the audited annual reports and accounts of the sampled firms covered a four-year period (2012-2015). on analysing the panel data collected using multiple regression, it was established that, board independence does not influence the level of earnings management among the sampled firms. this was attributed to pressure exerted by controlling shareholder and other internal directors. this study only considered one component of board characteristics (board independence) despite several characteristics which may influence earnings management positively. luo and jeyaraj (2019) examined the relationship between board characteristics and earnings management among listed companies in the united kingdom. the study employed the correlational and ex-post facto research designs in addressing the major objectives of the study. 203 sampled firms were selected out of a total number of 351 firms listed on the financial times and stock exchange (ftse) 2012 to 2016. data collected from the annual reports and accounts of sampled firms were analysed using the multiple regression (ols, fe and re) all tests necessary in validating the assumptions of linear regression were estimated. the study established that, board independence significantly influences earnings management negatively under the ols models, revealing an insignificant influenced under the gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 5 fixed effect and random effects models. although the study employed a mixed research design, the period covered by the study was only five years which could be considered not sufficient to make reliable statistical inference. the ols model used in the study does not account for the heterogeneous nature of sampled firms, hence not suitable for the study. 2.2 board meetings and earnings management buraik and idris (2020) investigated the impact of board of directors’ characteristics on monitoring earnings management (em) intentions in jordan. the characteristics of concern include director certificates in economic sciences, directors’ turnover, ceo duality, board member remuneration and board meetings. the study carried out an analysis of a panel dataset of all publicly traded services firms listed on the amman stock exchange (ase) for the period 2014-2017 using logistic regression analysis. the study documents that directors’ turnover motivates beneficial em, whereas ceo duality motivates opportunistic em in jordanian services firms. however, the results do not show significant effect of director certificates in economic sciences, board member remuneration and board meetings on monitoring em intentions. it was recommended that the election of directors be subject to rigorous requirements that ensure the appointment of efficient directors who can distinguish managerial intentions. this is expected to lead to the structuring of an effective internal control system based on proper ethical codes of conduct. idris (2015) investigated the relationship between board characteristics and earnings management among listed foods and beverages firms in nigeria. board characteristics was proxied using board competence, frequency of board meeting and gender mix while earnings management was proxied using the modified jones model of 1995. the study employed the ex-post facto research design in sampling nine (9) foods and beverages firms out of a total population of twenty-one (21) listed on the nse as at december 31st 2014. data extracted from the annual reports and accounts covered a period of seven (7) years (2007 2013). these were analysed using the multiple regression and stata 13 as tool of analysis. the findings of the study revealed that, frequency of board meeting negatively but significantly influence earnings management in listed foods and beverages firms in nigeria. in view of recent changes and development in the regulatory framework (code of corporate governance, 2018) it is imperative that, studies like this be reexamined. despite several board characteristics as defined by the code of corporate governance, 2018 only three proxies of board characteristics were examined. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 6 2.3 board gender diversity and earnings management harakeh et al. (2019) examined the effect of the exogenous increase in the presence of female directors on ftse350 corporate boards in the uk, as mandated by the davies report (2011), on the association between earnings management and ceo incentive compensation. secondary data were extracted from ftse350 uk public companies between 2007 and 2015. the empirical design used was a difference-in-differences methodology where the treatment group is gender-diverse corporate boards and the control group is corporate boards that lack gender diversity. the study used two measures of gender diversity that include executive and non-executive female directors. the results showed a positive association between earnings management and ceo incentive compensation, and a negative association between female directors and earnings management. overall, the study showed some of the economic consequences that the increased presence of female directors on corporate boards carries to public firms. though recently published the study period is outdate and needs to be updated to reflect current changes in listed firms. riyadh et al. (2019) examined whether the board characteristics have any impact on earnings management among the international oil and gas corporation in the world. the board characteristics such as (board independence, board size, board diversity, and ceo duality). the study applied a quantitative research approach, secondary data, a sample of 71 corporations were selected from top 250 corporations for one year (2016). the findings of the study indicated that gender diversity has a significant impact on the reduction of earnings management. more recently, harakeh et al. (2019) investigating female directors and earnings management. the study employed the multiple panel data regression as technique of analysis. the study found that, there is a negative relationship between female directors and earnings management of uk listed firms between 2007 and 2015. on the contrary (edwin & timothy, 2019) investigated how board gender diversity influence financial reporting quality (measured using the modified jones model) of listed nigerian deposit money banks and revealed a positive relationship between gender diversity and reporting quality of deposit money banks. this implies that, gender diversity does not in any way mitigate earnings management in deposit money banks. 2.4 board expertise and earnings management aifuwa and embele (2019) examined the relationship between board characteristics and financial reporting quality: evidence from jordan. the study argued that, a board is considered to have the required expertise when majority of its members have adequate educational and professional qualification in areas such gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 7 as finance, accounting and auditing (aifuwa & embele, 2019). board expertise were found to have negative and significant influence on earnings management of listed foods and beverage firms in nigeria (bala & kumai, 2015). on the contrary, analyzing data of 71 listed companies in bursa malaysia from 2001 2005 using multiple linear and panel data regression, (ahmed, 2013) reported that, board financial expertise positively relates to earnings management, this signifies that, having increased members with financial and professional expertise on the board would not reduce earnings management. this could be as a result of arguments among financial experts on the board on strategic issues that will end up delaying policy implementation and hence unable to check the quality of financial statement prepared and presented by management. the theory of hegemony was first introduced by gramsci (1937) (as cited by alvarado & boyd-barrett, 1992) while in jail. this theory has two dimensions namely “class hegemony” and “managerial hegemony.” class hegemony explains that directors view and perceive themselves as an elite set of people at the top of the company and they will recruit or appoint other directors who are of the same caliber and can align with them (fahr, 2010). while managerial hegemony is that corporate management members run the day-to-day operations of the company and as a result directors lose control to a certain extent. this not only weakens the influence of the directors, but also casts a passive role on the directors who become mere statutory bodies, (okpara 2011). in view of these, the characteristics of the board will determine the extent to which it manage and direct the activities of an entity. an independent board will tend to direct the affairs of the firm in the interest of the shareholders. a well-informed board that is independent could serve as “managerial hegemon” that tend to act collectively since most decisions are based on votes. however, board diligence (meetings) could affect the level of independence of the board. sometime attendance by independent directors is not consistent. this could reduce its independence thus, create room for the management to act in their best interest. it is therefore important that the board meet regularly and deliberate on issues that affect the shortand long-term survival of the firm. this can only be achieved where there is no class hegemony. again, given the size, composition and diversity of the board, the management and shareholder representatives must promote good corporate governance at all times. the adopting and implementation of the corporate governance code will ensure that class hegemony is eliminated thus, allowing for managerial hegemony which will gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 8 ensure that the management and other directors work together toward maximizing shareholders’ wealth. however, shareholders must be aware of the tendencies for directors to act in their own self-interest which earnings management is one of the means to achieving that. thus, the characteristics of the board should be evaluated to ensure compliance with good corporate practice. in addition, the appointment of auditors by the shareholders when done properly, could reduce management opportunistic tendences. hence the theory of managerial hegemony underpins this study. 3. methodology and model specification this study employed correlational and ex-post facto research designs. the combination of these research designs is necessary in describing and analysis historical data extracted from annual report and accounts with a view to making inferences relating to board characteristics and earnings management. the data for this study were obtained mainly from secondary sources which were extracted from the audited annual reports and accounts of listed consumer goods firms on the nigerian stock exchange (nse) from 2011 to 2020. the population of the study consist of all the twenty listed consumer goods firms on the nigerian stock exchange as at 31st december, 2020. using census approach, sixteen listed consumer goods firms were selected as sample given the availability of their annual reports and accounts needed for the extraction of the data. in analyzing the data for this study, a multiple regression technique, correlation and descriptive statistics were used. the variables of the study consist of dependent variable which is earnings management measured by discretionary accruals using the modified jones model by dechow et al. (1995). the independent variables board characteristics were proxied by board independence, board meetings, board gender diversity and board expertise. this is shown in table 3.1, which contains each variable with their respective definitions. tait = niit − cfoit ---------------------------------------------------------------------------(1) tait ait−1 = β0 + β1 ( 1 ait−1 ) + β2 ( δrevit− δrecit ait−1 ) + β3 ( ppeit ait−1 ) + µit----------------------(2) ndait = β0 + β1 ( 1 ait−1 ) + β2 ( δrevit− δrecit ait−1 ) + β3 ( ppeit ait−1 ) + µit -------------------(3) daccit = tait ait−1 − 𝑁𝐷𝐴it = µit--------------------------------------------------------------(4) daccit = β0 + β1bdindit + β2bdmtgit + β3bdgdtit + β4bdexpit + µit------(5) gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 9 where: tait = total accruals of firm i in year t , ndait = non-discretionary accruals of firm i in year t, ait−1 = total assets of firm i in year t-1, δrevit = change in revenue of firm i in year t, δrecit = change in receivables of firm i in year t, ppeit = gross property, plant and equipment of firm i in year t, daccit = discretionary accruals of firm i in year t, µit = residuals of firm i in year t , β0 = firm specific parameters calculated by the ols regression model, niit =net profit after tax of firm i in year t, cfoit= cash flow from operation of firm i in year t table 1: variable measurement variable definition measurement and source dependent variable em earnings management measured by absolute values of the residuals (discretionary accruals) using modified jones model by (dechow et al., 1995) independent variable bdind board independence proportion of non-executive directors to by board size. (bala & kumai, 2015; kankanamage, 2016) bdmtg board meetings the number of board meetings held during the year by the board of directors (bala & kumai, 2015; talbi et al., 2015) bdgdt board gender diversity proportion of the number of female to total board size (aifuwa & embele, 2019; edwin & timothy, 2019) bdexp board expertise number of financial experts on board (mohammed et al., 2019) source: compiled by the author, 2023. as part of fulfilling the assumptions of linear regression analysis, robustness test of multicollinearity and heteroscedasticity test were conducted. multicollinearity test is used to check the correlation of the independent variables among themselves which tends to make the outcome of the study unreliable. heteroskedasticity test helps to check for consistent variation of the residuals. homoskedasticity is desired to ensure a stable and reliable model. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 10 4. results and discussion this section of the study provides statistical outcome and inferences as generated from the selected samples of the study. the section covers descriptive statistics, correlation matrix, summary of regression results and robustness test. descriptive statistics describes the nature of sample data. the mean, standard deviation, minimum and maximum values help the reader to understand measures of central tendencies and variance associated with variables of the study. table 2: descriptive statistics variables mean std. dev min max em .1224 .1007 .0003 .5765 bdind .6277 .1869 .1429 .9167 bdmtg 4.5625 .8809 3 9 bdgdt .1412 .1149 0 .5454 bdexp 1.925 .3279 1 3 source: stata 16 output, 2023. table 2 above shows the descriptive statistics of the data collected from a sample of 16 listed consumer goods firms in nigeria for the period of 10 years leading to 160 observations. earnings management in the sampled firms showed a mean value of .1224 (12.24%) and standard deviation of .1007 (10.07%). the standard deviation signifies that the dispersion of the data from the mean value from both sides is moderate. implying that that there is a relative significant variation regarding earnings management of listed consumer goods firms in nigeria for the period of the study. moreover, the table shows a minimum value of .0003 and a maximum of .5765. this shows that the minimum percentage of earnings management is 03% (which is less than 5%). however, the study shows that there was evidence of earnings management in listed consumer goods firms during the period of the study up to a maximum of 57.65%. similarly, board independence as shown above has as minimum value of .14.29 (14.29%) and maximum of .9167 (91.67%). this implies that boards of listed consumer goods firms during the period of this study had at least one non-executive director while the maximum number of non-executive directors was found to be over 9 directors. for board meetings, minimum value of 3 and maximum of 9 implies that, the number of meetings held by boards of listed consumer goods firms during the period of this study was 3 while the highest number of meetings recorded by listed consumer goods firms during the period was 9 times. on the average, most boards of listed consumer goods firms meet at least four times which is in gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 11 complacence with the code of corporate governance that recommend that corporate boards meet at least once every quarter. board gender diversity showed a minimum value of 0 and maximum of .5454 (54.54%) this means that, some boards of listed consumer goods firms in nigeria during the period of this study had no female representation on its board while other boards had more than half its board members to be female. on the average, the result revealed that, .1412 (14.12%) of total number of board members are female directors. this is expected to allow of gender inclusion and balance in listed consumer goods firms in nigeria. on board expertise, the minimum value of 1 and maximum value of 3 implies that, at least one independent non-executive director with financial experience and professional qualification sits on the board of listed consumer goods firms in nigeria during the period of this study. the result also showed that boards of listed consumer goods firms during the period of this study had up to three independent non-executive directors that have financial knowledge and are professionally qualified. table 3: correlation matrix variables em bdind bdmtg bdgdt bdexp em 1 bdind -.0182 1 bdmtg -.2068* .0789 1 bdgdt -.2154* -.1081 .2367* 1 bdexp -.2112* .3702* .0951 .1832* 1 source: stata 16, correlation matrix output, 2023. (* correlation is significant at 0.05 level (2 tailed)) table 3 explains the strength of the relationship among variables while the signs explain the direction of the relationship. there is a negatively significant relationship between board meetings, board gender diversity, and board expertise and earnings management of listed consumer goods firms in nigeria. only board independence showed a negative and insignificant relationship with earnings management of listed consumer goods firms in nigeria during the period of this study. by implication and increase in board meetings, board gender diversity and board expertise will result in a decrease in earnings management by listed consumer goods firms in nigeria during the period of this study. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 12 table 4: summary of random effect variables coefficients z – values p – values vif tolerance values constant .3177193 4.34 0.000 bdind -.0193234 0.31 0.760 1.35 0.738503 bdmtg -.0045548 0.46 0.643 1.11 0.902788 bdgdt -.1597068 1.92 0.055 1.12 0.892664 bdexp -.0717896 2.27 0.023 1.37 0.732403 mean vif 1.24 r2 0.1386 wald chi2 11.67 prob > chi2 0.0200 source: stata 16, random regression and vif output, 2023. emit = β0 + β1bdindit + β2bdmtgit + β3bdgdtit + β4bdexpit + µit emit = 0.3177 – 0.0193(bdindit) – 0.0046(bdmtgit) – 0.1597(bdgdtit) – 0.0718(bdexpit) table 4 shows the summary of regression results and variance inflation factor (vif). the r2 value of 0.1386 (13.86%) explains the predict power of the model. it means that, 13.86% variation in earnings management of listed consumer goods firms is explained jointly by board independence, meetings, diversity and expertise. therefore, it can be said that, board independence, meetings, diversity and expertise have a combined predictive power of 13.86% in impacting on earnings management of listed consumer goods firms in nigeria during the period of this study. the wald-chi2 value of 11.67 and a prob. value of 0.0200 is significant at 5% level of significance. this means that board characteristics impact on earnings management of listed consumer goods firms in nigeria. from the above table, it can be observed that there is an insignificant relationship between board independence and earnings management of listed consumer goods firms in nigeria. with a coefficient of -0.0193 and p-value of 0.760 it can be inferred indicate that board independence on its own does not influence earnings management in listed consumer goods firms. however, when board independence is combined with other board characteristics, board independence could influence earnings management of listed consumer goods firms in nigeria. this findings is in line with (koevoets, 2017; luo & jeyaraj, 2019; onwuchekwa & madumere, 2019) and contrary to (kapoor & goel, 2016; khalil & ozkan, 2016). similarly, the result of the study showed a negative and insignificant relationship between board meetings and earnings management. with a constant value of 0.0046 and p-value of 0.643 it can be inferred that an increase in board meetings gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 13 would minimise the tendency to manage earnings by management. although not statistically significant, when combined with other variables of board characteristics, board meetings are found to influence earnings management of listed consumer goods firms in nigeria. thus, it can be said that, board meetings insignificantly influence earnings management in listed consumer goods firms in nigeria. this findings is in line with (bala & kumai, 2015; luo & jeyaraj, 2019) and contrary to (buraik & idris, 2020; hemathilake et al., 2019; ibrahim, 2015). on the contrary, board gender diversity, with a constant value of -.1597 and p-value of 0.055 (significant at 5%) implies that there is a significant and negative relationship between board gender diversity and earnings management of listed consumer goods firms in nigeria. the negative relationship means that, an increase in the number of female directors in boards of listed consumer goods firms in nigeria will result in a decrease in earnings management. this is in line with the general believe that, female directors are more honest and diligent than their male counterpart. thus, it can be said that, board gender diversity significantly and negatively influences earnings management. this is in line with (ibrahim, 2015; kouaib & almulhim, 2019; obigbemi et al., 2016) and contrary to (temile et al., 2018). finally, board expertise measured as the number of directors with financial knowledge and professional qualification showed a constant value of -.07178 and a significant p-value of 0.023 (at 5%). this implies that as board expertise of listed consumer goods firm’s increases, earnings management decreases significantly. the negative relationship means that, as the number of directors with financial knowledge and professional qualification increases, earnings management will decrease. this could mean that, financially experienced and professionally qualified directors will ensure that the board comply with relevant standards and regulatory requirements with will improve the quality of the financial statement being prepared and presented to shareholders. hence, minimizing earnings management in listed consumer goods firms in nigeria. thus, it can be said that, board expertise significantly and negatively influences earnings management of listed consumer goods firms in nigeria. this is in line with the findings of (bala & kumai, 2015; gull, 2018; kankanamage, 2015) and contrary to (ahmed, 2013; hemathilake et al., 2019). robustness tests even though correlation matrix was used to detect potential multicollinearity between independence variables, the absent of high correlation does not always mean that there is no multicollinearity. to deal with this problem, the gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 14 multicollinearity was tested by finding the variance inflation factor (vif) values for explanatory variables relevant to the model. the vif above 10 should be taken as a presence of multicollinearity (studenmund, 2000). from the result above the mean vif value is 1.24 which is far less than benchmark 10. this shows absent of multicollinearity in the model. in order to ensure validity and reliability of statistical inferences, robustness tests were conducted. this was necessary in identify which of the panel regression results is most appropriate and robust in explaining the impact of board characteristics variables and earnings management of listed consumer goods firms in nigeria. based on the hausman specification test that showed a chi2 value of 0.59 and prob>chi2 value of 0.9644, the random effect model was identified as the most appropriate for the study. this model recognizes the individual characteristics of listed consumer goods firms hence do not allow the entities error term and constant to be correlated with other firm’s characteristics. 5. conclusion and recommendations having examined theoretical and empirical evidence that attempt to establish a relationship between board characteristics and earnings management it was concluded that board characteristics influence earnings management. board independence, meetings, diversity and board expertise were used to measure the level of influence on earnings management of listed consumer goods firms in nigeria. while the modified jones model for estimating discretionary accruals was used to measure earnings management. the study revealed that board independence has no significant influence on earning management of listed consumer goods firms in nigeria. similarly, it was found that, board meeting of listed consumer goods firms in nigeria has no significant influence on earnings management. however, board gender diversity and board expertise were found to have a negative and statistically significant influence on earnings management. thus, from the above findings, the following recommendations were made. i. regulatory agencies such as the financial reporting council of nigeria (frcn) and the security and exchange commission (sec) should above ensuring compliance ensure that there is increased female representation on the boards of listed consumer goods firms in nigeria. this is because it has been established that increase in gender diversity will significantly influence earning management by decreasing it. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 15 ii. shareholders and other stakeholders should ensure that only directors with relevant experience and skills are appointed as board members. this will introduce professionalism and increase competence of the board. this is necessary as it will help minimize earnings management tendencies by management. references ahmed, s. (2013). board of director characteristics and earnings management in malaysia. journalon business review (gbr), 2(4), 94–99. https://doi.org/10.5176/2010-4804 aifuwa, h. o., & embele, k. (2019). board characteristics and financial reporting quality: evidence from jordan. journal of accounting and financial management, 5(1), 8–29. https://doi.org/10.22495/cocv11i3p1 akeju, j. b & babatunde, a. a. (2017). corporate governance and financial reporting quality in nigeria. international journal of information research and review, 4(2), 3749-3753. alvarado, m. & boyd-barrett, o. (1992). media education: an introduction. london: british film institute. pp. 10-135. antic, bala, h., & kumai, g. b. (2015). board characteristics and earnings management of listed food and beverages firms in nigeria. european journal of accounting, auditing and finance research, 3(8), 25–41. buraik, o., & idris, m. (2020). board characteristics and intentions of earnings management. international journal of innovation, creativity and change, 14(5), 25–41. dechow, p. m., sloan, r. g., & sweeney, a. p. (1995). detecting earnings management. the accounting review, 70(2), 193–225. https://doi.org/10.5694/j.1326-5377.1952.tb109167.x edwin, a. o., & timothy, p. (2019). board gender diversity and financial reporting quality: empirical evidence from nigeria. global journal for research analysis, 8(4), 120–126. fan, y., jiang, y., zhang, x., & zhou, y. (2019). women on boards and bank earnings management: from zero to hero. journal of banking and finance, 107, 105607. https://doi.org/10.1016/j.jbankfin.2019.105607 fahr, r. (2010). comparative corporate governance: lecture notes – bachelor module summer, university of paderborn. gramsci, a. (1937) gramsci hegemony. retrieved on 25th april 2012 from www.google.lk. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 16 gull, a. a. (2018). gender-diverse boards and financial statements quality: the role of female directors’ attributes. 1–210. harakeh, m., el-gammal, w., & matar, g. (2019). female directors, earnings management, and ceo incentive compensation: uk evidence. research in international business and finance, 50(november 2018), 153–170. https://doi.org/10.1016/j.ribaf.2019.05.001 ibrahim, i. (2015). board characteristics and earnings managment of listed foods and beverages firms in nigeria. ahmadu bello university zaria. ican. (2019). corporate strategic management and ethics (2nd edition). emile woolf international bracknell enterprise & innovation hub. idris, i. (2015). board characteristics and earnings management of listed foods and beverages firms in nigeria. in ahmadu bello university zaria (vol. 3, issue 8). ahmadu bello university zaria. johnson, j. l., daily, c. m., & ellstrand, a. e. (1996). boards of directors in smes: a review and research agenda. entrepreneurship and regional development, 22(3), 409–438. https://doi.org/10.1080/08985620050177912 kankanamage, c. a. (2016). the relationship between board characteristics and earnings management: evidence from sri lankan listed companies. kelaniya journal of management, 4(2), 36. https://doi.org/10.4038/kjm.v4i2.7499 kapoor, n., & goel, s. (2016). board characteristics , firm profitability and earnings management : evidence from india. journal of australian accounting review, 1(1), 1–15. https://doi.org/10.1111/auar.12144 khalil, m., & ozkan, a. (2016). board independence, audit quality and earnings management: evidence from egypt. journal of emerging market finance, 15(1), 84–118. https://doi.org/10.1177/0972652715623701 koevoets, s. (2017). board characteristics and earnings quality : evidence from the u.s.a . master thesis , msc accounting and finance (issue 9). erasmus university rotterdam. kouaib, a., & almulhim, a. (2019). earnings manipulations and board’s diversity : the moderating role of audit. journal of high technology management research, 2(4), 1–13. https://doi.org/10.1016/j.hitech.2019.100356 lakhal, f., aguir, a., lakhal, n., & malek, a. (2015). do women on boards and in top management reduce earnings management? evidence in france. journal of applied business research, 31(3), 1107–1118. luo, j., & jeyaraj, s. . (2019). board characteristics and earnings management: gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 17 empirical analysis of uk listed companies. european journal of accounting, auditing and finance research, 7(5), 27–54. mohammed, i. a., che-ahmad, a., & malek, m. (2019). regulatory changes, board monitoring and earnings management in nigerian financial institutions. dlsu business and economics review, 28(2), 152–168. moura, g. d. de, almeida, i. x. de, andreola, l., & mazzioni, s. (2017). influence of board independence on earnings management. contabilidade, gestão e governança brasília, 20(3), 370–391. obigbemi, i. f., omolehinwa, e. o., mukoro, d. o., ben-caleb, e., & olusanmi, o. a. (2016). earnings management and board structure : evidence from nigeria. convenant university journal of accounting, 4(3), 1–15. https://doi.org/10.1177/2158244016667992 okpara, j. o. (2011). corporate governance in a developing economy; barriers, issues and implications for firms. corporate governance journal, 11 (02) 184-199. onwuchekwa, j. c., & madumere. (2019). board characteristics and earnings management : evidence from quoted firms in nigeria. international accounting and taxation research group, 3(1), 118–129. shatima, s., babayo, j., & madaki, j. (2020). board attributes and financial reporting quality of listed consumer goods companies in nigeria. jalingo journal of social and management sciences, 2(2), 55–67. studenmund, a. h. (2000). using econometrics: a practical guide (sixth edition). university of san diego: addison wesley. talbi, d., ali omri, m., guesmi, k., & ftiti, z. (2015). the role of board characteristics in mitigating management opportunism: the case of real earnings management. journal of applied business research, 31(2), 661–674. https://doi.org/10.19030/jabr.v31i2.9147 temile, s. o., jatmiko, d. p., & hidayat, s. (2018). gender diversity , earnings management practices and corporate performance in nigerian quoted firms. international journal of economics, commerce and management, 6(1), 1–14. gusau journal of accounting and finance (gujaf) vol. 4 issue 1, april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ii © department of accounting and finance vol. 4 issue 1 april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vi advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ix contents board characteristics and earnings management of listed consumer goods firms in nigeria benjamin gwabin joseph, murtala abdullahi phd, benjamin kumai gugong phd 1 dividend policy and value of listed non-financial companies in nigeria: the moderating effect of investment opportunity abubakar umar 18 trialability and observability of accrual basis international public sector accounting standards implementation in nigeria aliyu abdullahi ahmed phd, zakari usman 35 liquidity risk and performance of non-financial firms listed on the nigerian stockexchange muhammed alhaji abubakar, nurnaddia binti nordin phd, abubakar hamisu umar 54 board diversity, political connections and firm value: an empirical evidence from financial firms in nigeria rofiat oyetunji, isah shittu phd, ahmed bello phd. 75 moderating effect of bank size on the relationship between interest rate, liquidity, and profitability of commercial banks in nigeria shehu usman hassan, bello sabo (ph. d), ismai'l idris tijjani (ph. d), idris ahmed aliyu. (ph. d) 96 sources of health care financing among surgical patients seen at the dalhatu araf specialist hospital lafia nasarawa state nigeria ahmed mohammed yahaya, babatunde joseph kolawole, bello surajudeen oyeleke 121 transparency, compliance and sustainability of contributory pension scheme in nigeria olanrewaju atanda aliu (ph. d), mohamad ali abdul-hamid (ph. d), salami suleiman (ph. d), salam mudathir olanrewaju 135 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 x examining the impact of working capital management on the financial performance of listed industrial goods entities in nigeria 151 sani abdulrahman bala (ph. d), jamilu jibril, taophic olarewaju bakare corporate governance factors and tax avoidance of listed deposit money banks in nigeria 171 sani abdulrahman bala (ph. d), umar salim ibrahim, samaila dannana risk committee demographic traits: a study of the impact of expertise on risk disclosure quality of listed insurance firms in nigeria wada najib abbas, dandago, kabiru isa (ph. d), rabiu, naja’atu bala 192 moderating effect of audit committee on the relationship between audit quality and earnings management of listed non-financial services firms in nigeria ahmad muhammad ahmad, lubabah mansur kwanbo (ph.d.), shehu usman hassan (ph.d.) musa suleiman umar (ph.d.) 216 determinants of audit opinion of negative-book-value firms in nigeria: firm value and audit characteristics perspective asma’u mahmood baffa (ph. d), lawal mohammed (ph.d.), ahmed bello (ph.d.) umar farouk abdulkarim 237 intervention announcements and naira management: evidence from the nigerian foreign exchange market adedeji daniel gbadebo 254 is there earnings discontinuity after the implementation of ifrs in nigeria? adedeji daniel gbadebo 275 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 35 trialability and observability of accrual basis international public sector accounting standards implementation in nigeria aliyu abdullahi ahmed phd department of accounting abu business school ahmadu bello university, zaria, nigeria +2348023584830 & +2347068637232 aliyuahmedabdullah@gmail.com, aaahmed@abu.edu.org orcid id http://orcid.org/0000-0002-3372-9901 zakari usman department of banking and finance school of management studies nuhu bamalli polytechnic, zaria, nigeria +2348034539689 & maruzaks@gmail.com abstract the study examined the effect of trialability and observability of ipsas on accrual basis ipsasimpl in nigeria. 656 accounting staff of all the 29 federal government ministries in abuja constitute the population of the study. the sample size of 242 was arrived at using krejcie and morgan table for determining sample size from a given population. the sampling technique adopted for the study was proportionate stratified random sampling techniques. closed ended questionnaires were used in collecting the data for this study. the data collected was analyzed using binary logistic regression techniques with the aid of stata 13 software. the study revealed that trialability (triala) and observability (observ) were negative and significantly related to accrual basis ipsasimpl in nigeria. it was therefore concluded that triala and observ have negative effect on accrual basis ipsasimpl in nigeria. the study recommends for an increased consideration of the visibility and benefits of ipsas on one hand and its testing capability and suitability on the other hand in order to facilitate the implementation process of accrual basis ipsas in nigeria. keywords: federal government ministries, ipsasimpl, nigeria, observability, trialability https://doi.org/10.57233/gujaf.v4i1.199 1. introduction in 2010, nigerian government made a pronouncement for the adoption/ implementation of ipsas in nigeria (ahmed, 2017). since then, some ministries are yet to fully adopt the standard due to the fact that there have been some issues concerning the visibility and communicability of the result/benefit of adopting the standard to potential adopters on one hand; and testability, suitability and mailto:aliyuahmedabdullah@gmail.com mailto:aaahmed@abu.edu.org http://orcid.org/0000-0002-3372-9901 mailto:maruzaks@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 36 trialability of the standard before the adoption on the other hand. scholars are of the view that any system that is visible and can easily be communicated to others is more likely to be accepted and adopted (dunk, 1989; rogers, 1995, 2003). likewise, a proposed standard that can be tested on a trial basis in order to test its suitability before they are adopted are used more quickly. according to the previous literatures in this field, the adoption of ipsas is considered to be an accounting innovation (ezzamel et al., 2014; liguori & steccolini, 2014). an innovation is a new idea whether invented or discovered, and may comprise a mixture of old ideas. the concept of what is new is seen generally as relative to the subject organization, situation or individual (dunk, 1989). in the words of rogers (1995), innovation is an idea, object, or practice viewed by individuals or other organizations as new. rogers (2003) specified five characteristics of innovations that are perceived by the members of the social system to highly determine its rate of adoption, and defined the relationship between these attributes to rate of adoption in his theory. the five characteristics of innovations specified by rogers were relative advantage, compatibility, complexity/ease of use/simplicity, trialability and observability. a number of studies have documented trialability as one of the most significant variables influencing new product/service adoption (hsbollah & idris, 2009; wang, 2014). numerous research findings have confirmed that trialability has a positive effect on the e-commerce of small and medium enterprises (seyal & rahman, 2003), internet banking (ndubisi & sinti, 2006), and e-learning (hsbollah & idris, 2009) adoption decisions. however, other findings in the literature contradict previous research results, which have found a negative relationship (chong & pervan, 2007; hernandez & mazzon, 2007) or a non-significant relationship between perceived trialability and intention (alam et al., 2007; lin et al., 2007; peter et al., 2012). the mixed results of previous research on the relationship between trialability and adoption decisions and the effects of trialability remain a compelling and unresolved issue. to resolve the issues regarding the role of trialability in developing an effective product development/communication program, it is imperative for market operators to better grasp the cause of trialability effects. many studies have been conducted in other countries geared towards providing empirical evidence on how observability affects adoption decision of a new idea (pankratz et al., 2002; rogers, 2003; scott et al., 2008; sanni et al., 2013; duan et al., 2010). based on the above arguments and paucity of researches in this area especially in nigeria, motivate the researchers of the present study made use of gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 37 trialability and observability as study variables and attempt to fill the gap identified. the main objective of this study is to investigate the effect of trialability and observability of ipsas on ipsas implementation in federal government ministries in nigeria. however, the specific objectives of this study are to: (i) investigate the effect of trialability of ipsas on accrual basis ipsas implementation in federal government ministries in nigeria. (ii) examine the effect of observability of ipsas on accrual basis ipsas implementation in federal government ministries in nigeria. in an attempt to find solutions to the issues raised, this research study seeks to provide answers to the following questions; (i). how does trialability of ipsas affect accrual basis ipsas implementation in federal government ministries in nigeria? (ii). what is the effect of observability of ipsas on accrual basis ipsas implementation in federal government ministries in nigeria? based on the objectives of the study, the following hypothetical statements were formulated in the course of the research. (i). ho1: there is no significant positive relationship between trialability of ipsas and ipsas implementation in federal government ministries in nigeria (ii). ho2: there is no significant positive relationship between observability of ipsas and ipsas implementation in federal government ministries in nigeria. the research will be of great significance to stakeholders in the educational sector and other academic researchers in proving the correctness or otherwise of previous researches conducted in the same area and it would give them room to conduct further research on the subject matter. this study provides useful and timely information to the policy makers in order to better understand the attributes valued/perceived to be important by the stakeholders in ipsass implementation decisions in nigeria. the remaining sections of the paper are as follows: literature review and theoretical framework is covered in section 2.0 and methodology of the study in gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 38 section 3.0, section 4.0 results and discussions while conclusions and recommendations are presented in section 5.0 2.0 literature review and theoretical framework this section discusses the conceptual issues on ipsas, trialability and observability, empirical review of the relevant literature on the subject matter and the theoretical framework. concept of ipsas according to ifac-ipsasb (2014), ipsass are high quality global financial reporting standards for application by public sector entities other than government business enterprises (gbes). international public sector accounting standards (ipsass) the new accounting and reporting systems, are a set of high quality and independently developed accounting standards aimed at meeting the financial reporting needs of the public sector (aliyu, 2014). the standards are issued by ipsasb based on international financial reporting standards (ifrss) with changes appropriate to public sector issues. the majority of ipsass use full accrual based accounting, which recognizes full assets, liabilities, net assets equity, revenue and expenses regardless of when the cash or cash equivalents are received or paid. the ipsass set out requirements of recognition, measurement, presentation and disclosure of financial transactions and events in general purpose financial statements of all public sector entities (ifac-ipsasb, 2014). when accrual basis of accounting underlies the preparation of the financial statement, such statements will include the statement of financial position, the statement of financial performance, the cash flow statement and the statement of changes in net assets/equity. when cash basis of accounting underlies the preparation of the financial statements, the primary financial statement is the statement of cash receipts and payments. accrual based accounting based on ipsas standards require that the public finance management and accounting of the country is developed enough to pave way for implementation. the implementation of ipsass would require a migration from the cash to accrual accounting. ipsass provide a shift in focus from cash inputs, to outputs and outcomes, and thereby stimulate better management efficiencies. the transition seeks to facilitate the availability of accurate and more comprehensive information and the rendering of quality services, improved internal controls, increased transparency, and consistency and comparability of financial statements (aggestam, 2010). gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 39 cash basis ipsas this is a comprehensive ipsas on financial reporting under the cash basis. it establishes requirements for the preparation and presentation of a statement of cash receipts and payments, as well as notes to support accounting policy. it also encourages disclosures to enhance the cash basis report. governments of different countries are free to adopt accrual based ipsass directly or through the adoption of cash based ipsas as a way forward in order to implement accrual accounting. cash basis accounting means a basis of accounting that recognizes transactions and other events only when cash is received or paid (schaik, 2014). similarly, aliyu (2007) documented that the basic features of cash basis accounting is that revenues are recognized only when cash is received and expenses recorded only when cash is paid out irrespective of the accounting period when the benefits are received or when the services are rendered. this simply means that revenues and expenses are recorded in the books of account when received or paid for without regard to the period to which they apply. cited among the advantages of cash bases of accounting are its simplicity, clarity and focus on disbursement of money, as well as its consistency with the importance attached to cash movement in and out of the government sector as an influence on the economy as a whole. however, the disadvantages of cash basis accounting do not make allowance for the usage of assets, and stock held at period ends, it produces an imperfect measures of economic cost, it does not reveal an accurate picture of the state of affairs at the end of the period; and it is not good for decision making concerning cost, efficiency and resources usage. additionally, cash basis of accounting has been identified as the major cause for the unnecessary operational rush at the end of a financial year to carry out procurement transactions and process payments (aliyu, 2007). governments in developing countries usually adopt the cash-basis ipsas as a steppingstone towards the adoption of the accrual-basis ipsass (schaik, 2014; nongo, 2014). the primary statement under the cash-basis ipsas is the statement of cash receipts and payments. by adopting the cash-basis ipsas and following the ipsasb’s encouragement to prepare the statement of cash receipts and payments in the format of a cash flow statement, governments effectively comply with ipsas 2 cash flow statements, a standard from the accrual suite of ipsas standards (schaik, 2014). the cash-basis ipsas comprises two parts. the first part, which is mandatory, sets out the requirements that must be complied with by entity which claim to be reporting in accordance with the cash-basis ipsas. the second part of the standard, which is optional identifies additional accounting policies and disclosures that an gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 40 entity is encouraged to adopt in order to enhance its financial accountability and the transparency of its financial statements. this second part also includes explanations of alternative methods of presenting certain information (ifac-ipsasb, 2007). according to the ifac-ipsasb (2007), cash-basis ipsas part 1, an entity should prepare and present general purpose financial statements which include the following components: (i) statement of cash receipts and payments, which recognizes all cash receipts, cash payments and cash balances controlled by the entity and separately identifies payments made by third parties on behalf of the entity, (ii) accounting policies and explanatory notes, and (iii) comparison of the government’s publicly available budget and actual amounts (budget execution statement) and explanations of differences between budget and actual accrual basis ipsass zarandi et al., (2013) described accounting methods or basis as a type of accounting system or policy operated in entities for keeping track of income and expenses. the two main methods employed are the cash basis method and the accrual basis method. cash basis of accounting has been the main accounting system in the public sector of many countries for many years (ifac, ipsasb, 2007). in this type of system, revenue is not recorded until they are actually received, and expenses are recognized in the accounting records when they are actually paid (ifac, ipsasb, 2007). the accrual basis is a basis of accounting under which transactions and other events consisting assets, liabilities, net assets/equity, revenue and expenses are recognized when they occur irrespective of whether or not cash or its equivalent is received or paid (aliyu, 2007). under accrual basis, the transactions and events are recorded in the accounting records and recognized in the financial statements of the periods to which they relate (ifac, ipsasb, 2014). accrual basis is the superior method of accounting for the economic resources of an organisation. it results in accounting measurement based on the substance of the transactions and events (aliyu, 2007). zarandi et al., (2013) confirmed that accrual basis is superior over the cash basis because the information provided by it, is reliable, comprehensive, comparable and could be used to take well informed decisions. concept of trialability trialability as a factor promoting the adoptability of an innovation is the opportunity for a potential user to experience using the innovation itself. such trialability covers opportunities such as test drives, demonstration units, and simulations. the user gets the chance to try the technology without having to fully gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 41 commit to purchasing or adopting it. trials can be great sources of information searched for and needed during the persuasion and implementation stages. in particular, trials directly limit or prevent forming inaccurate assumptions about the technology (rogers, 2003). concept of observability the most critical factor that shapes innovation diffusion is observability. observability refers to how visible the use of the technology is to those around. for a person to adopt a technology, seeing, hearing about, or otherwise knowing that other individuals are using that technology dramatically encourages adoption. observing a technology stimulates awareness of the innovation and conversations among one’s peers. rogers found evidence for the power of observability when he plotted the number of adoptions over time. adoption of new idea is slow in the beginning as awareness of it is limited. as more and more people use the technology, the public becomes more aware of the technology and thus the rate of adoption increases until the technology is in common use and has reached a saturation point where at this point, the number of adoptions drops off as there are fewer and fewer new adopters are available (rogers, 2003). review of relevant empirical studies trialability and accrual basis ipsas implementation trialability refers to the extent to which an innovation can be experimented. it is expected that innovations that can be tried or experimented before they are adopted are used more quickly. in the context of the present study, trialability is considered as the degree to which a proposed standard is tested on a trial basis in order to test its suitability. according to pankratz et al. (2002), trialability is a difficult construct to measure and does not produce any significant association with the principles of effectiveness. studies indicated that prior experience with technological innovations might increase the likelihood of future adoption (hausman & stock, 2003). findings from gardner and amoroso (2004) showed the importance of experience (trialability) of using the internet as a variable affecting the perceived usefulness of the internet. another empirical study revealed that trialability of integrated pest management (ipm) practices was positively and significantly related to its adoption in iran (ghane et al., 2011). in a related study conducted in malaysia, sanni et al., (2013), reported that trialability was positively and significantly related with the rate of adoption of e-journal among malaysian journal publishers. hsbollah and kamil, (2009) measured the influence of trialability on egusau journal of accounting and finance, vol. 4, issue 1, april, 2023 42 learning adoption decision and revealed that trialability is positively related to the adoption of e-learning. this is similar to what has been found by martins et al. (2004), where trialability was the most significant variable towards influencing the internet adoption as a teaching tool at foreign language schools. the finding of bennett and bennett, (2003) suggests that lecturers need to be given the opportunity to pre-test the technology prior to implementation. however, other findings in the literature contradict previous research results, which have found a negative relationship (chong & pervan, 2007; hernandez & mazzon, 2007) or a non-significant relationship between perceived trialability and intention (alam et al., 2007; lin et al., 2007; peter et al., 2012). another interesting finding of scott et al., (2008) is that years of experience of the physicians were found to be negatively associated with the frequency of use of the canadian heart health kit (hhk). this finding perhaps suggests that older physicians are less open to adopting new ideas (scott et al., 2008). observability and accrual basis ipsas implementation observability is the degree to which “the results of an innovation are visible to others. the easier it is for individual to observe the results of an innovation, the more likely they are to adopt” (rogers, 2003). within the context of this study, observability is considered to be the degree to which the results of adopting the proposed standard are visible and communicable to others. pankratz et al., (2002) explained that when respondents perceived that members of the social system would notice changes upon implementing the innovation, they were more likely to fully adopt it. but it was observed that though observability has not always been significantly associated with the adoption decision of new idea, prior research has provided some information that observability was an important and significant predictor of adopting the internet as a teaching tool (martins et al., 2004). martins et al. (2004) used rogers’s theory to determine the factors that influenced teachers in language school to adopt the internet as a teaching tool and they found that observability and trialability were the two most significant predictors of adoption. the study conducted by scott et al., (2008) found two of its attributes to be more influential than the others, namely relative advantage and observability, they were positive and significantly associated with physician’s intention to use hhk. an empirical study revealed that observability of ipm practices was positively and significantly related with its adoption in iran (ghane et al., 2011). in a related study conducted in malaysia, sanni et al., (2013) reported that observability was positively and significantly related with the rate of adoption of e-journal among malaysian journal publishers. however, the findings of the study carried out by gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 43 aleg and panayiotis (2016) revealed that compatibility, triability and observability acted as negative pull factors that hindered the adoption of and implementation of ipsas compliant financial reports. the result of another study indicates that perceived e-learning observability have no significant effects on students’ intention to adopt e-learning while trialability is, however, negatively related to e-learning adoption (duan et al., 2010). theoretical framework of the study grabriel tarde developed the diffusion theory in 1903 and later everrett rogers made the theory more popular in 1962 (kaminski, 2011). rogers explored the theory in greater in detail in 1962. in the words of rogers (1995), innovation is an idea, object, or practice viewed by individuals or other organizations as new. overall the diffusion of innovation is defined as “the process by which an innovation is communicated through certain channels over time among members of the social system” (rogers, 1995:5) rogers (2003) specified five characteristics of innovations that are perceived by the members of the social system to highly determine its rate of adoption, and defined the relationship between these attributes to rate of adoption as follows: 1) relative advantage: is the degree to which “the proposed innovation is perceived to work better than the one in practice. it is not so important if the innovation has an objective, but rather if individuals perceive the innovation as advantageous. advantages can be measured in economic terms: however social stature, convenience, and satisfaction may play a significant role” rogers concluded with a generalization (hypothesis) of the construct to the rate of adoption as follows: “the relative advantage of an innovation, as perceived by members of a social system, is positively related to its rate of adoption”. 2) compatibility is the extent of consistency of an innovation with existing organizational ways and the need of the potential users. innovations consistent with past experiences, values and the need of users diffuse more quickly that those not in line with values and norms of the social system. rogers hypothesized as follows: “the compatibility of an innovation as perceived by members of a social system is positively related to its rate of adoption” gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 44 3) complexity refers to the extent to which innovation is viewed as simple or difficult to adopt and use. easy and simple to use innovations, which allow for rapid development of skills, are more easily adopted than those perceived as complex and difficult. rogers concluded with a generalization (hypothesis) of the construct to the rate of adoption as follows: “the complexity of an innovation as perceived by members of a social system is negatively related to its rate of adoption”. if intended users perceive the innovation as simple and easy to use, then the above hypothesis can be restated as follows “the uncomplex (ease of use) of an innovation as perceived by members of a social system is positively related to its rate of adoption”. 4) trialability: is the degree to which “an innovation may be experimented with on a limited basis. new ideas that can be tried before the potential adopter has to make a significant investment into the innovation are adopted more quickly”. rogers hypothesized as follows: “the trialability of an innovation as perceived by members of a social system is positively related to its rate of adoption” 5) observability: is the degree to which “the results of an innovation are visible to others. the easier it is for individual to observe the results of an innovation, the more likely they are to adopt” (rogers, 2003). rogers hypothesized as follows: “the observability of an innovation as perceived by members of a social system is positively related to its rate of adoption” the study is underpinned by the theory explained above. the theory provides an evidence of how both the dependent and independent variables intermingled together to explain the implementation of accrual basis ipsass in nigeria. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 45 in order to establish the relationship between the dependent variable and independent variables, a proposed research framework for the study was developed based on the theory that underpin the study and review of empirical literature. the review of the empirical literature enables the researcher to identify the independent variables of the study. the independent variables identified are: trial-ability of ipsas and observability of ipsas. however, the dependent variable is accrual basis ipsas implementation. consequently, the research framework is depicted in figure 1 3.0 methodology the study adopted descriptive survey and correlation research designs. the descriptive survey design focuses on the assessment of the respondents’ perceptions on the attributes important in the ipsasimpl decisions. the study used correlation design to measure the relationship between the dependent variable and independent variables. the objective of the study is to determine direction and extent of the relationship between the independent and dependent variables. the population of the study consists of 656 accounting staff of 29 federal ministries in nigeria. the study collected data through the closed questionnaire for (trialability and observability) adopted from (moore & benbasat, 1991; taylor & todd, 1995; sarel & marmorstein, 2003). the questionnaires were administered on the total sample of 242 respondents consisting accountants, internal auditors and budget officers. out of 242 administered questionnaires, 226 were collected back and only 220 were useable for the analysis. accrual basis ipsas implementation trial-ability of ipsas observability of ipsas gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 46 logistic regression technique was adopted in analyzing the data and explaining the relationship between the dependent variable ipsasimpl measured as dichotomous/binary variable (i.e. “1” for implementation and non-implementation “0”); and the independent variables measured using seven-point likert scale ranging from 1 (strongly disagree) to 7 (strongly agree) on the questionnaire items. descriptive statistics was being employed to give a clear picture of the basic characteristics of the data and correlation was employed to examine the relationship between all pairs of independent variables. the study model is as follows: logit ipsasimpli = β0 + β1trialai + β2observi + ei where; ipsasimpli = accrual basis international public sector accounting standards implementation, trialai = trialability observi = observability β0= intercept, β1… β5 = coefficient of the independent variables, ei = error term. 4.0 results and discussions in this section, the results are presented and discussed. the presentation starts with descriptive statistics, followed by correlation matrix and lastly logistic regression. descriptive statistics section 1 of the questionnaire is for demographic information and section 2 of the questionnaire asked respondents to indicate on a likert scale of 1 (strongly disagree) to 7 (strongly agree), the extent to which they consider each of the 10 individual items of trialability and observability attributes to be important in their ipsasimpl decision. the full results are presented in the appendix. table 1 presents the summary of the descriptive statistics of the dependent and independent variables. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 47 table 1: summary statistics ipsasimpl triala observ mean 0.66 6.27 6.55 standard deviation 0.47 0.64 0.67 minimum 0 4.71 5 maximum 1 7 7 observations 172 220 220 source: output of summary statistics using stata software the results reveal that the average ipsasimpl is 0.66 and the standard deviation is 0.47. since the variable is binary, the minimum and maximum are 0 and 1 respectively. this indicates that there is no much difference between the mean and standard deviation which shows that most of the observation is clustered at the center. triala averages 6.27 and the standard deviation is 0.64 and lying between 4.71 and 7. the mean value of the observ variable is 6.55, having standard deviation, minimum and maximum of 0.67, 5 and 7 respectively. it is worth noting that the mean of all independent variables have wide differences with their respective standard deviation. this attests to the fact that responses regarding the importance of these variables in explaining ipsas implementation differs significantly across the respondents as well as the federal government ministries. the wide disparity between the mean and the standard deviation indicates that the data may not be normally distributed, which will pose valid questions on the reliability of the result. this study goes ahead to perform goodness of fit test and the result is presented alongside the regression result. overall, the summary statistics reveals the basic characteristics of the data. however, it does not yield itself to drawing inferences and hence making valid conclusions. this necessitates the use of logistic regression which is presented later. the correlation matrix is presented in table 2. the full result is contained in the appendix. table 2: correlation matrix variable ipsasimpl triala observ ipsasimpl 1.0000 triala -0.1979 1.0000 observ -0.2377 0.1740 1.0000 source: output of summary statistics using stata software gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 48 table 2 is the correlation matrix table. the correlation matrix explains the relationship among all pairs of variables in a study. it is useful in explaining the compatibility of independent variables in a regression model. high correlations between independent variables (above 0.80) according to gujarati (2004) mean excessive relationships and could distort and inflate standard errors leading to spurious result. though, there is the need for advance tests of multicollinearity such as the variance inflation factor (vif), the pearson correlation is often used as an alternative test of exact correlations. the result further indicates that all the two variables i.e. triala and observ have negative correlation or inverse relationship with ipsasimpl. this implies that these variables move in the opposite direction with ipsasimpl. on the contrary, the two independent/explanatory variables i.e. triala and observ are positively related to each other. this is an unexpected result because the ministries expected to be given a trial period for testing and experimenting the standard before adopting it but provision for such has not been made by the standard setters. again, staffs are expected to have experience on the standard before the implementation that will boost their morale and ability to apply it more effectively. they are also expected to consider the visibility, communicability and the changes that may be notice by the members of the social system after adopting ipsas. on the other hand, those institutions that have difficulty in observing the benefits of the standard and less experienced and qualified staff to man the ipsasimpl process, they will be unable to convey the merits of innovation (ipsass) to the government and it can lead to later implementation difficulties. the summary of the logistic regression output is given in table 3. the full results are contained in the appendix table 3: summary of logistic regression result variable coefficient std. error z prob.>/z/ constant 10.4619 2.8020 3.73 0.000 triala -0.6369 0.3050 -2.09 0.037 observ -0.8587 0.3256 -2.64 0.008 r2 0.0729 lr chi2 (5) 15.93 prob 0.0003 source: summary of regression result using stata software gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 49 the estimated regression model is expressed thus: logit ipsasimpli = 10.46 – 0.64trialai – 0.86observi + ei from the regression result on table 3, triala has a coefficient of -0.6369 with a zvalue of -2.90 which is significant at 5%. this implies that the ipsasimpl rate or chance decreases at 0.64% as a result of 1% increase in triala. a negative linear relationship exists between ipsasimpl and observ which is significant at 1% level of significance. this also implies that 1% increase in observ led to 0.86% decrease in ipsasimpl while holding other predictors in the model constant. based on the logistic regression result, the two hypotheses stated earlier were accepted because the result of the study indicates that there is no positive and significant relationship between trialability and observability and accrual basis ipsasimpl in the nigerian federal government ministries. this finding is unexpected owing to the fact that it is not in line with and does not support the theory underpinning the study. it is therefore, a pointer to the fact that ministries lacks prior experience with ipsas innovations and cannot observe its benefits which might reduce the likelihood of its future adoption. the findings of this study contradict the result of the similar/related studies conducted by ghane et al., (2011), sanni et al., (2013), hsbollah and kamil, (2009), martins et al. (2004) to investigate the effect of trialability and observability on rate of adoption of new ideas/innovations and all the studies empirically documents positive and significant relationship between trialability and the rate of adoption of the innovation. however, the findings of the study support the findings of chong and pervan, (2007), hernandez and mazzon, (2007), scott et al., (2008), duan et al., (2010), aleg and panayiotis (2016) which provided evidence of negative interaction between adoption of a new system and its trialability and observability. the present study also contradicts the findings of alam et al., (2007), lin et al., (2007), peter et al., (2012), duan et al., (2010) which reported a non-significant relationship between perceived trialability and observability, and intention to adopt a new system. the table also reveals that the overall coefficient of determination (r2) is 7.29% which implies that all the independent variables provide an explanation about the changes in the ipsasimpl decisions. the even noisy and variability of data could be the reasons for the low r2 in this study. in order to boost the value of r2, additional input variable(s) is (are) required to be added to the model. the lr chi2 of 15.93 signifies that the overall model is significant at 1% level of significance. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 50 hence the model could be used for ipsasimpl decisions in 2022. this further indicates that there is a linear relationship between the dependent and independent variables used in the regression model. 5.0 conclusion and recommendations this study examined the effect of trialability and observability on ipsasimpl decision in nigeria. from the foregoing analysis and findings reported, a conclusion with respect to ipsasimpl may be drawn. all the two independent variables (triala and observ) have inversely/indirect effect on ipsasimpl in federal government ministries in nigeria. based on the conclusions, the study suggests that the policy-setters may be able to consider triala and also consider the observ of ipsas when taking a decision to implement/adopt a new standard i.e. ipsas. also the study recommends for an increased consideration of the visibility and benefits of ipsas on one hand and its testing capability and suitability on the other hand in order to facilitate the implementation process of accrual basis ipsas in federal government ministries in nigeria. a limitation of this study is that it focuses on the perceptions of federal government ministries’ accountants, internal auditors and budget officers only. this limits the generalizability of the findings. although these officers are the major participants in ipsasimpl decisions in nigeria, the perceptions of other stakeholders or observers of ipsasimpl might report different perceptions on important attributes of ipsas implementation in nigeria. also, federal government ministries are just one organ of government. this organ has the benefit for this study and hence allowed the examination of ipsasimpl decisions in nigeria. acknowledgements this is to show our sincere appreciation and gratitude to the tertiary education trust fund (tetfund) for funding this research project that led to the publication of this journal article. dr. aliyu abdullahi ahmed zakari usman gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 51 references aggestam, c. (2010). a project management perspective on the adoption of accrual based ipsas. international journal on government financial management, 10(2), 49-66. ahmed, a. a. (2017). determinants of accrual basis international public sector accounting standard implementation in nigerian federal government ministries. unpublished phd thesis of ahmadu bello university, zaria. alam, s. s., khatibi, a., ahmad, m. i. s., & ismail, h. b. (2007). factors affecting ecommerce adoption in the electronic manufacturing companies in malaysia. international journal of commerce and management, 17, 125–139. aleg, a. w., & panayiotis, s. (2016). the adoption and implementation of the international public sector accounting standards: the challenges faced by the united nation in producing un-ipsas compliant financial reports in kenya. international journal of finance and accounting 1(1), 75-91. aliyu, a. a. (2007). public sector accounting: theory and practice (1st ed.). sabon gari, zaria: sa’adeen press. aliyu, a. a. (2014). ipsas: history and its adoption in nigeria. a paper presented at a workshop organized by the office of the accountant general of kaduna state. bennett, j. & bennett, l. (2003). a review of factors that influence the diffusion of innovation when structuring a faculty training program. the internet and higher education, 6, 53-63. chong, s., & pervan, g. (2007). factors influencing the extent of deployment of electronic commerce for smalland medium-sized enterprises. journal of electronic commerce in organizations, 5, 1–29. duan, y., qile, h. , weizhe, f., daoliang l. , & zetian, f. (2010). a study on e-learning take-up intention from an innovation adoption perspective: a case in china. computers & education 55, 237–246 dunk, a. s. (1989). management accounting lag. abacus, 25( 2), 149-155 ezzamel, m., hyndman, n., johnsen, a. & lapsley, i. (2014). reforming central government: an evaluation of an accounting innovation. critical perspectives on accounting, 25, 409-422 gardner, c., & amoroso, d. l. (2004). development of an instrument to measure the acceptance of internet technology by consumers. paper presented at the proceedings of the 37th hawaii international conference on system sciences. ghane, f., samah, b. a., ahmad, a., & idris, k. (2011). the role of social influence and innovation characteristics in the adoption of integrated pest management (ipm) practices by paddy farmers in iran. international conference on social science and humanity ipedr vol.5 (2011) pp 217-220 iacsit press, singapore. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 52 gujarati, d. n. (2004). basic econometrics. usa:mcgraw-hill. hsbollah, m. h., & kamil, m. i. (2009). e-learning adoption: the role of relative advantages, trialability and academic specialisation. campus-wide information systems, 26(1), 54–70. http://dx.doi.org/10.1108/10650740910921564 hausman, a., & stock, j. r. (2003). adoption and implementation of technological innovations within long-term relationships. journal of business research, 56(8), 681–686 hernandez, j. m. c., & mazzon, j. a. (2007). adoption of internet banking: proposition and implementation of an integrated methodology approach. the international journal of bank marketing, 25, 72–88. ifac-ipsasb (2007). cash basis international public sector accounting standard financial reporting under the cash basis of accounting. new york: ifac. ifac-ipsasb (2014). ifac handbook of international public sector accounting pronouncements. new york: ifac. kaminski, j. (2011). diffusion of innovation theory. canadian journal of nursing informatics, 6(2). http://cjni.net/journal/?p=1444 krejcie, r. v., & morgan, d.y. (1970). determining sample size for research activities. the journal of psychological measurement, 30, 607-610 liguori, m. & steccolini, i. (2014). accounting, innovation and public-sector change: translating reforms into change? critical perspectives on accounting, 25(4/5), 319-323 lin, j. y. c., wang, e. s. t., kao, l. l. y., & cheng, j. m. s. (2007). a study of the perceived recognition affecting the adoption of innovation in respect to the online game in taiwan. cyber psychology and behavior, 10, 813–816. martins, c.b.m.j., steil, a.v., and todesco, j.l. (2004). factors influencing the adoption of the internet as a teaching tool at foreign language schools. computers and education, 42, 353-74. moore, g. c., & benbasat, i. (1991). development of an instrument to measure the perceptions of adopting an information technology innovation. information systems research, 2(3), 192222. ndubisi, n. o., & sinti, q. (2006). consumer attitudes, system’s characteristics and internet banking adoption in malaysia. management research news, 29 (1), 16–27. nongo j. y. (2014). ipsas issue for public finance management executive – ipsas outlook. e. y.com/ipsas. pankratz, m., hallfors, d., & cho, h. (2002). measuring perceptions of innovation adoption: the diffusion of a federal drug prevention policy. health education research, 17(3), 315–326. http://dx.doi.org/10.1108/10650740910921564 http://cjni.net/journal/?p=1444 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 53 peter, k. n., ritho, c., olweny, t., & wanderi, m. p. (2012). internet banking adoption in kenya: the case of nairobi county. international journal of business and social science, 3, 246–252. rogers, e. m. (1995). diffusion of innovations (4th ed.). new york: free press. rogers, e. m. (2003). diffusion of innovations (5th ed.). new york: free press. sanni, s. m., ngah, z. a., abdul karim, n. h., abdullah, n., & waheed, m. (2013). using the diffusion of innovation concept to explain the factors that contribute to the adoption rate of e-journal publishing. serial review, serrev-01011, 1-8 http://dx.doi.org/10.1016/j.serrev.2013.10.001 sarel, d. & marmorstein, h. (2003). marketing online banking services: the voice of the customer. journal of financial service marketing, 8(2), 106-118. schaik, f. v. (2014). auditing cash basis ipsas financial statements. international journal of government auditing, 41(4), 15-19 scott, s. d., plotnikoff, r. c., karunamuni, n., bize, r., & rodgers, w. (2008). factors influencing the adoption of an innovation: an examination of the uptake of the canadian heart health kit (hhk). implementation science, 3(1), 41. http://dx.doi.org/ 10.1186/1748-5908-3-41 (retrieved july 2013 from http://www.implementation science.com/content/3/1/41) seyal, a. h., & rahman, m. n. a., 2003. a preliminary investigation of e-commerce adoption in small and medium enterprises in brunei. journal of global information technology management, 6 (2), 6-26. taylor, s., & todd, p. (1995). decomposition and crossover effect in the theory of planned behavior: a study of consumer adoption intentions. international journal of research in marketing, 12(2), 137-155 wang, e. s. (2014). perceived control and gender difference on the relationship between trialability and intent to play new online games. computers in human behavior 30 315–320 zarandi, h. m., ghafari, e., arab, m., & mozdabadi, s. m. (2013). accrual-based accounting system versus cash-based accounting: an empirical study in municipality organization. management science letters, 3, 251-256. http://dx.doi.org/10.5267/j.msl.2012.10.035 http://dx.doi.org/10.1016/j.serrev.2013.10.001 http://dx.doi.org/ http://www.implementation/ http://dx.doi.org/10.5267/j.msl.2012.10.035 gusau journal of accounting and finance (gujaf) vol. 4 issue 1, april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ii © department of accounting and finance vol. 4 issue 1 april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 v dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vi advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ix contents board characteristics and earnings management of listed consumer goods firms in nigeria benjamin gwabin joseph, murtala abdullahi phd, benjamin kumai gugong phd 1 dividend policy and value of listed non-financial companies in nigeria: the moderating effect of investment opportunity abubakar umar 18 trialability and observability of accrual basis international public sector accounting standards implementation in nigeria aliyu abdullahi ahmed phd, zakari usman 35 liquidity risk and performance of non-financial firms listed on the nigerian stockexchange muhammed alhaji abubakar, nurnaddia binti nordin phd, abubakar hamisu umar 54 board diversity, political connections and firm value: an empirical evidence from financial firms in nigeria rofiat oyetunji, isah shittu phd, ahmed bello phd. 75 moderating effect of bank size on the relationship between interest rate, liquidity, and profitability of commercial banks in nigeria shehu usman hassan, bello sabo (ph. d), ismai'l idris tijjani (ph. d), idris ahmed aliyu. (ph. d) 96 sources of health care financing among surgical patients seen at the dalhatu araf specialist hospital lafia nasarawa state nigeria ahmed mohammed yahaya, babatunde joseph kolawole, bello surajudeen oyeleke 121 transparency, compliance and sustainability of contributory pension scheme in nigeria olanrewaju atanda aliu (ph. d), mohamad ali abdul-hamid (ph. d), salami suleiman (ph. d), salam mudathir olanrewaju 135 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 x examining the impact of working capital management on the financial performance of listed industrial goods entities in nigeria 151 sani abdulrahman bala (ph. d), jamilu jibril, taophic olarewaju bakare corporate governance factors and tax avoidance of listed deposit money banks in nigeria 171 sani abdulrahman bala (ph. d), umar salim ibrahim, samaila dannana risk committee demographic traits: a study of the impact of expertise on risk disclosure quality of listed insurance firms in nigeria wada najib abbas, dandago, kabiru isa (ph. d), rabiu, naja’atu bala 192 moderating effect of audit committee on the relationship between audit quality and earnings management of listed non-financial services firms in nigeria ahmad muhammad ahmad, lubabah mansur kwanbo (ph.d.), shehu usman hassan (ph.d.) musa suleiman umar (ph.d.) 216 determinants of audit opinion of negative-book-value firms in nigeria: firm value and audit characteristics perspective asma’u mahmood baffa (ph. d), lawal mohammed (ph.d.), ahmed bello (ph.d.) umar farouk abdulkarim 237 intervention announcements and naira management: evidence from the nigerian foreign exchange market adedeji daniel gbadebo 254 is there earnings discontinuity after the implementation of ifrs in nigeria? adedeji daniel gbadebo 275 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 54 liquidity risk and performance of non-financial firms listed on the nigerian stock exchange muhammed alhaji abubakar faculty of entrepreneurship and business universiti malaysia kelantan abumuhammed89@yahoo.com +2347036874529 nurnaddia binti nordin faculty of entrepreneurship and business universiti malaysia kelantan naddia.n@umk.edu.my +60 11-1081 1728 abubakar hamisu umar department of business administration, al-qalam university katsina, nigeria. abuhamisu2365@gmail.com +234803 603 1205 abstract this study has examined the effect of liquidity risk on performance of non-financial firms listed on the nigerian stock exchange. the main objective was to assess the degree of influence liquidity risk measured by (standard deviation of quick ratio and current ratio) have on performance (return on assets) of the non-financial firms in nigeria. data from all the 87 non-financial firms listed on nse were extracted through financial reports and analyzed using descriptive statistics, correlation and regression through stata version 16. the findings revealed that current ratio have negative and significant effect on performance, while the quick ratio was not significant in influencing performance. the result implies that an increase in liquidity risk (difficulty in running the operations and offsetting short term maturing obligations), leads to a significant decrease in performance of the firms. the result also confirms that the standard deviation of current ratio provides better measurement of liquidity risk. it was however concluded that, liquidity risk has negative and significant effect on performance of firms in nigeria. the study recommends that more attention should be given to liquidity management to minimize the risk of insolvency or bankruptcy of firms in nigeria as such will help in reducing liquidity risk issues and improve performance of the nonfinancial firms in nigeria. keywords: liquidity risk, liquidity, performance, non-financial firms. https://doi.org/10.57233/gujaf.v4i1.200 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 55 1. introduction the non-financial firms constitute the bedrock of any economy as they contribute immensely to the growth and development of any country. the sector comprises both non-financial services as well as the manufacturing and agriculture. ishola and olusoji (2020) reported that about 80% of u.s, and 60% of india gross domestic product (gdp) comes from the non-financial sector economic activities. also among african countries, the contribution of these sectors to the gdp in uganda is 40%, and 50% in zambia. in nigeria, this sector recorded between 70% and 80% of the gdp from 2016 to 2021 (statista, 2022). these reports simply indicate how significant the survival of the sector to the development of the country. according to sodiq (2022) food business, real estate, e-commerce and logistics, which are also part of the non-financial firms, are the fastest growing businesses in africa especially in nigeria, south africa, kenya, ethiopia, ghana and mauritus. a report shows that 53% of the service sector gdp comes from the non-financial services (nigerian investment promotion commission, 2022). these simply implies that, the non-financial sector contributes larger to the economy, and thus such sector performance is vital for growth and development of the country. madaleno and barbuta-misu (2019) in a study from 2006 to 2015, and found economic and financial crisis, liquidity, assets turnover, and labour productivity, are the major factors influencing financial performance of firms in european countries. liquidity is an important factor that shows the ability of the firms to meet shortterm maturing obligations. mbah et al. (2018) confirms that manufacturing firms in nigeria are facing decline in performance due to reduction in share prices, lowcapacity utilization, high labour turnover, high inventory turnover, slowing gross domestic product, high inflation and interest rates because they limit liquidity, or the amount of money available to invest. also, khan (2022) discovered that creditrationed businesses in europe were less likely to receive short-term bank financing and were more likely to have more liquidity and cash flow issues. similarly, liquidity problem has made it difficult for some manufacturing firms in nigeria to pay dividends (duru et al., 2014). babatope et al. (2021), and olusi and ibrahim (2021) states that consumer goods firms in nigeria are experiencing decline in sales revenue due to inflation, fall in naira value and low income of consumers resulting in to liquidity problems and decline in profits. similarly, cole, et al. (2022) states that manufacturing and fmcg firms in nigeria suffered lower production output and reduced profitability basically due to cost pressures, and if nothing is done by stakeholders, the manufacturing industry will continue to experience rise in operational costs emanating from foreign exchange increase, illiquidity, inflation, low income, poor infrastructure, and other shipping challenges. it is therefore gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 56 extremely important for managers of firms to ensure effective and efficient liquidity management without having adverse effect on profitability. also, in response to some of these issues the central bank of nigeria (cbn) has recently recommended the manufacturers association of nigeria (man) to contact development financing institutions for their funding requirements, notably the development bank of nigeria and bank of industry (cbn, 2022). thus, this effort by the cbn would go a long way in minimizing the liquidity issues of the non-financial sector firms in nigeria. in view of the issues raised above, the major gap identified include; most previous studies were focused more on liquidity and performance, and the few that examined the risk aspect of liquidity used weak measurement without taking care of the risk aspect. the notable studies on liquidity risk and profitability and performance (rudhani, et al., 2016; chen, et al., 2018; effiong and enya, 2020; khan, et al., 2020) were examined outside nigeria and in the financial sector. however, a study was also observed in the nigerian banking industry linking liquidity risk with profitability (akindele & odusina, 2015). in light of this, review of empirical literature shows that no study has examined liquidity risk in the non-financial sector of nigeria, serving as a major contribution of the present study. also, previous studies mostly looked at the sub sectors of the non-financial firms or the financial sector, which makes it difficult to generalize across all the sectors. the reason is that the financial sector is more highly regulated when compared to the nonfinancial sector, hence the tendency of serious liquidity issues. thus, this study has adopted standard deviation of both current and quick ratios as proxies for liquidity risk which considered the tendency of firms to face difficulty or even make losses when financing their short term maturing obligations. in view of the above, this paper aimed to achieve the following objectives: i. to examined the effect of liquidity risk (sd of quick ratio) on performance of non-financial firms in nigeria. ii. to evaluate the effect of liquidity risk (sd of current ratio) on performance of non-financial firms in nigeria. 2. literature review performance evaluation is a management tool used to determine how far an organization's goal has been achieved, examine how its operations are being carried out, its director, its divisions, and its employees, as well as to predict future organisational goals (syafa and haron, 2019). an effective performance assessment index is one of the key factors in the firm’s success (bhagat and bolton, 2019). firm's performance is dependent on both the stakeholders' and the gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 57 organization's economic perspectives of meeting investors needs while maximising profits for the same organisation (aifuwa, 2019). akenga (2017) viewed financial performance as monetary evaluation of a company’s activities over time, typically through the calculation of return on assets or return on equity. the liquidity position and management is an issue of interest by all stakeholders as it determines the performance and success of the firm. it simply means the funds needed to finance short term debts. in other words, kurfi (2010) describe liquidity as the short term assets and obligations of the firm. thus, if a firm can easily convert its short term assets in to cash or even pay short term debts, such firm is said to be liquid and vice verca. also, greenaway, et al. (2007) measure liquidity in terms of the excess of liquid assets over short term liabilities. in addition, proper liquidity management, ensures smooth operations of the firm’s activities and improve chances profitability and success (effiong and enya, 2020). however, according to akenga (2017), the true measurements of liquidity are the current ratio, quick ratio, and cash conversion cycle. the capacity of a firm to meet short-term maturing obligations without suffering a loss was further defined as liquidity risk. liquidity risk describe the low financial ability of a firm to satisfy its obligations as at when due or become outstanding without negatively affecting its operations. liquidity risk, according to noor and abdulla (2014), is the risk connected to an investment's inability to be bought or sold quickly enough to prevent or minimize a loss. the potential for a particular security or asset to not be able to be traded in the market quickly enough to prevent a loss (or make the required profit). similarly, according to murithi and waweru (2017), liquidity risk can occur as a result of liquidity mismatch, which could be determine in terms of liquidity gap. the excess of a company's short-term assets over liabilities is referred to as the liquidity gap. they assess whether this gap is favourable or unfavourable. a favourable gap occurs when the company has liquid assets left over after all liabilities have been paid for, while an unfavourable gap occurs when the firm's net income is less than the amount of liabilities accepted. accordingly, muriithi and waweru (2017) opined that break down or delays in cash flows from debtors may cause liquidity risk problems. also, explained that economic crisis and sometimes ineffective corporate governance or management may leads to liquidity risk. in view of the above, this study adopts the liquidity gap perspective, that is, the quick ratio as measures of firm’s liquidity risk. standard deviation would be attached to measure the riskiness aspect of the liquidity. there have been important studies looking at the connection between firm performance and liquidity in the literature. some of such researches found positive gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 58 relationships while some found negative or mixed links. for example; rudhani, et al. (2016) found liquidity risk having negative effect on profitability of banks but could be improved by increasing lending and other investments, while ensuring efficiency in liquidity management. a negative association between liquidity risk and bank performance was also confirmed by (chen, et al., 2018). it was further clarified that the main drivers of liquidity risk are dependency on external funds, liquid assets, supervisory and regulatory considerations, and macroeconomic concerns. according to ogungbade et al. (2020), contrary to current ratio; quick ratio, cash conversion cycle had a negative impact on the performance of firms in nigeria. according to bari, et al. (2021), who focused on the liquidity, activity, and gross profitability of the chosen enterprises in bangladesh, high inventory turnover as a measure of liquidity had a substantial impact on the performance of firms. akindele and odusina's (2015) 2015 study in nigeria found negative association between a firm's profitability and liquidity risk. long-term debts, quick ratios, and cash defensive intervals all significantly affect eps and roa, while cash ratio and long-term debts only have an impact on roce, according to (effiong and enya's, 2020) measures liquidity risk in terms of liquid cash, cash defensive intervals, long-term debts, and quick ratios. the working capital financing and firm performance of 437 non-financial firms in india were examined by (altaf and ahmad, 2019), who discovered a u-shaped relationship between the two. additionally, it was found that companies with less financial restriction used short-term loans to fund more working capital. also, according to wetzel and hofmann (2019), the existence of a profit-maximizing level of working capital, superior performance of enterprises adopting a scf-oriented wcm approach, higher profit-maximizing levels of working capital for focal companies dealing with financially constrained supply chain partners, a positive performance impact of efficient inventory management, and differentiated payment strategies toward up and down suppliers are the main factors influencing performance. similarly, rudhani and balaj (2019) discovered a substantial and positive correlation between liquidity risk and bank performance, and they suggested that performance may be enhanced by preparing for liquidity shocks. khan et al. (2020) investigation of the performance of companies with liquidity risk found that while deposit ratio, cash ratio, and liquidity risk have minimal impact on bank earnings, net profit or loss and liquidity gap had significant effects. additionally, pervan, et al. (2017) examined 195 croatian firms over a 10-year period and discovered that the enterprises' size, liquidity, solvency, and age all significantly affect their profitability. in addition, adekola, et al. (2017) explored the link between gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 59 profitability and working capital measured accounts receivable period, accounts payable period, inventory turnover in days, receivable turnover in days, cash conversion cycle and current ratio of nigerian non-financial service firms and found non directional link. another nigerian study by akindele and odusina (2015) established adverse relationships among profitability and liquidity risk of a firm. the survey of saudi firms, found current ratio as most important measure of liquidity, while working capital management and profitability seems to have significant negative on profitability (almazari, 2014). in the study of 720 russian companies' working capital and profitability, (garanina and belova, 2015) discovered an inverse relationship between cash conversion cycles and return on net operating asset (rnoa). li, et al. (2020) also used 15 ghanaian firms and discovered that profitability was significantly negatively impacted by liquidity. when moreso, sultana, et al. (2019) looked at non-financial enterprises in pakistan, they found an adverse association between performance and liquidity management. alnuaimi and nobanee (2020) have noted that successful working capital management boosts a company's revenue, shareholder dividend rate, and goodwill. deloof (2003) observed that by lowering days of accounts receivables and inventories, corporate profitability can be increased. he investigated 1,009 large belgian enterprises between 1992 and 1996. additionally, konak and guner (2016) discovered that the cash conversion cycle and short term loan turnover days have a negative impact on net margin. in other words, profitability can be raised by efficient working capital management. similar to this, singh et al. (2017) found a negative correlation between the cash conversion cycle and firm profitability and proposed that aggressive working capital management will increase profitability. almeida, et al. (2004) discovered that firm value and performance are influenced by liquidity management through access to finance. the cash conversion cycle of non-state-owned businesses has a large negative influence on profitability, but not significantly for state owned businesses, (ren, et al., 2019) in analysis of chinese companies. it has been proven that a company's ownership structure affects how well its working capital is managed. the inverse relationship between share price and financial constraints might be weakened by liquidity (dhole et al., 2019) which indicated that effective working capital management has correlations with financial constraints of australian enterprises. this indicates that companies with effective working capital management have better market values. the impact of various working capital management components on firm performance was varied, according to assey et al. (2020). they claimed that bettering the firms' financial performance involved raising the gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 60 inventory days and paying period while lowering the receivable periods. according to (dioha, et al., 2018), debt, growth, and firm size had a substantial impact on profitability but firm age and liquidity did not. in a survey of malayan businesses, kokodey et al. (2020) discovered that investing in working capital lowers firm value. according to boisjoly et al. (2020), elements like working capital management techniques help a corporation both internally (via performance) and externally (through capital gains). additionally, working capital management differs between sectors and firms. further, islam et al. (2018) discovered a mixed link between working capital or liquidity components and profitability. particularly, it was shown that the current ratio and recievables had a considerable positive and negative impact on profitability. amir sharif (2018) also found mixed links between liquidity and performance of firms. a positive correlation between fixed asset turnover, cash conversion cycle, day’s sales outstanding, inventory turnover period, sponsor shareholding, total assets, and performance was found by (khan, et al., 2020). also, 82 pharmaceutical companies in india were surveyed by yameen et al. (2019), who found that the current liquidity ratio and quick ratio have a favourable and significant impact on the performance. another study conducted in india demonstrates that a manufacturing company's liquidity, profitability, and solvency were good (maheswari, 2015). further, marozva (2015) analyzed south african banks and discovered significant negative nexus between the liquidity and performance. even though net interest margin was used as a proxy of profitability which is a weak measure. similarly, obi et al. (2017) conducted an analysis of the relationship between liquidity and the performance of dmbs in nigeria and discovered that both short and long-term profitability are not significantly correlated with liquidity methods. according to patjoshi (2016), profitability (operating profit margin, net profit margin, return on total asset, and return on investment) and liquidity (measured by the current ratio, liquid ratio, and inventory turnover ratio) all have a substantial impact on performance. a significant positive association between liquidity and profitability was also discovered by njure (2014) among kenya's listed nonfinancial companies. also, some proxies of liquidity established mixed relationships. in light of the above, most of the existing literature established positive relationships, very few found negative and mixed links. additionally, the researcher has determined that it is necessary to investigate the impact of liquidity risk on the financial performance of listed non-financial firms in nigeria due to the gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 61 inconsistent findings of earlier studies. in line with the above arguments and previous empirical findings, this study has establish the following hypotheses: h1: liquidity risk (sd of quick ratio) has no significant effect on performance of non-financial firms in nigeria. h2: liquidity risk (sd of current ratio) has no significant effect on performance of non-financial firms in nigeria. optimality theory was used to explain the research model. the theory believed that due to scarce resources, firms cannot choose financing method on the basis of optimal capital, while income from leverage becomes difficult to obtain. the financial mix of firms and financial policy are irrelevant and have no bearing on their investment decisions, (modigliani & miller, 1950) theorem, which states that external financing is a perfect substitute for internal financing. it demonstrates how businesses aim for the best degree of liquidity to balance the benefit and expense of holding onto cash. however, this assumes the presence of ideal capital markets, which are not relevant in practice. in essence, organizations encounter challenges when selecting to borrow (debt or equity). the figure 2.1 below shows the diagrammatic illustration of the research: independent variables dependent variable 3. methodology this study adopts a quantitative research design because it examines the effect of liquidity risk on the performance of non-financial firms in nigeria. according to zikmund, et al. (2013) the methods and processes for gathering and interpreting information are indicated by the research design, which has been considered as a blueprint or road map. the population comprises all the non-financial firms currently operating and are listed on the nigerian stock exchange (nse). population refers to the entire set of individuals, items, events, or phenomena that a researcher is interested in examining (sekaran & bourgie, 2010). according to the nse report (2021) there are 87 firms listed on the nse. thus, the sample size is a census survey which constitute all the eighty (87) non-financial firms listed on liquidity risk: sd of quick ratio sd of current ratio performance: return on assets gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 62 the nigerian stock exchange as at december, 2021. zikmund, et al. (2013) defined a sample as a subset or a small portion of a larger population. moreover, effective sampling techniques can increase the overall accuracy of the research by ensuring its validity (saunders et al 2009). further, purposive sampling technique was used because only those firms with the relevant data were considered for the analysis. this study used secondary technique to source data for this survey. the data were extracted from annual financial reports of the various firms under investigation. for the analysis, the study used stata version 16 to run the descriptive statistics, correlation matrix, regression estimates comprising the pooled ordinary least square (ols), the fixed effect, the random effect, the hausman specification test as well as some diagnostic tests. model specification the model specify the mathematical representation of the hypothesis tested in the analysi. there are two hypothesis in this research, and the models were specified in line with the hypothesis below: 𝑅𝑂𝐴𝑖𝑡 = 𝛼 + 𝛽1𝑆𝐷𝑄𝑅𝑖𝑡 + 𝛽2𝐹𝑆𝑖𝑡 + 𝛽3𝐹𝐴𝑖𝑡 + 𝛽4𝐿𝐸𝑉𝑖𝑡 + 𝜀𝑖𝑡 ………………………………..1 𝑅𝑂𝐴𝑖𝑡 = 𝛼 + 𝛽1𝑆𝐷𝐶𝑅𝑖𝑡 + 𝛽2𝐹𝑆𝑖𝑡 + 𝛽3𝐹𝐴𝑖𝑡 + 𝛽4𝐿𝐸𝑉𝑖𝑡 + 𝜀𝑖𝑡 ……………………………….. .2 where; roa = return on asset (performance), sdqr = standard deviation of quick ratio (liquidity risk), sdcr = standard deviation of the current ratio (liquidity risk), while firm size (fs), firm age (fa) and leverage (lev) represent the firms specific control variables. measurement of variables the dependent variable is performance which was measured using the return on assets (roa), while liquidity risk proxies were the independent variables measured using standard deviation of current ratio and quick ratio. in addition, the model also used three (3) firm specific control variables such as: firm size (log of total assets), leverage (total debts to total assets ratio), and firms age (number of year the firm has been in operation). 4. results and discussions descriptive analysis the descriptive statistics shows the features of the data in terms of the mean, median standard deviation, minimum and maximum values for each of the variables under investigation. the dependent variable is measured by return on assets (roa), gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 63 the independent variable which is liquidity risk was surrogated by two proxies such as: standard deviation of current ratio (sdcr), and quick ratio (sdqr). also, the control variables proxies include: firm size (fs), leverage (lev), and firms age (age). in addition, it shows the variables with an outlier or missing values issues. in relation to table 4.1 below, the descriptive shows two (2) out of the three financial constraint proxies were found to have outlier problem given their high standard deviation and wide gap between the mean, minimum and maximum values, and such were corrected by winsorizing the affected variables. these is depicted in table 4.1 below: table 4.1 descriptive statistics variables mean median std. dev. min max performance (roa) 0.007 0.022 0.169 -1.161 1.763 liquidity risk (sdqr) 0.323 0.253 0.221 0.080 0.771 liquidity risk (sdcr) 0.395 0.322 0.267 0.092 0.930 firm size (fs) 4.177 4.038 0.825 2.330 6.379 leverage (lev) 0.679 0.623 0.527 -1.029 4.908 firm age (age) 40.236 38.00 20.504 3.000 98.00 source: stata output (2023) table 4.1 above shows the mean, median, standard deviation, minimum and maximum values of all the study variables. it shows that return on assets (roa) has an average of (0.007) with the median being (0.022), standard deviation (0.169), minimum (-1.16), and maximum being (1.763). the low value of the standard deviation (0.167) validate the accuracy of the mean value, simply implying that firms in the non-financial sector earned average of (0.7%) return on their assets, with the highest earning being approximately (176%) and lowest having a loss of (-116%) on their assets. also, liquidity risk proxy (sdqr) shows an average of (0.323), median (0.253), standard deviation of (.221), minimum (0.08) and maximum of (0.771). these indicate that firms in the non-financial sectors have average quick ratio of (32%), with highest being (77%), and lowest (8%). similarly, the second measure of liquidity risk surrogated by (sdcr) depicts an average of (0.395), median (0.322), standard deviation (0.267), minimum (0.092) and maximum value of (0.93). this indicate that average firms in the non-financial sector have current ratio of (39.5%). these suggests that average firms in the nonfinancial sector have liquidity risk problem given the high average quick and current ratios. lastly, the control variable firm size (fs) shows a mean of (4.18), median of (4.03), standard deviation of (0.83), minimum value of (2.33), and maximum of (6.38). gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 64 the low value of the standard deviation (0.83) denotes accuracy of the mean score (4.18) indicating that firms in the non-financial sector have an average firm size of (4.18) measured by log of total assets. the second control variable denoted by leverage (lev) shows a mean score of (0.68), median (0.62), standard deviation of (0.53), minimum (-1.03), and a maximum value of (4.91). the low value of the standard deviation (0.53) validate the mean, indicating that majority of firms within the non-financial sector finance large portion of their assets by use of debts given the average value (68%) leverage. the lastly, firms age denoted by (age) has a mean score of (40.22), median (38), standard deviation (20.5), minimum (3) and maximum of (98). these simply implies that majority of firms in the non-financial sector have an average of (40) years of operations, with (3) years being the minimum and maximum age of (98) years. correlation matrix the correlation matrix shows the interrelationships among the variables under investigation. specifically, the matrix outlines the association between dependent variable (roa) and independent variable which is liquidity risk measured by (sdqrw) and (sdcrw) and control variables; firm size (fs), leverage (lev), and firm age (age). this could be observed in table 4.2 below: table 4.2: correlation matrix variables roa sdqrw sdcrw fs lev fa vif performance(roa) 1.000 liquidity risk (sdqr) -0.019 1.000 2.48 liquidity risk (sdcr) -0.096 0.838 1.000 2.39 firm size (fs) 0.121 -0.179 -0.131 1.000 1.05 leverage (lev) -0.434 -0.142 -0.106 -0.097 1.000 1.04 firm age (ge) 0.051 -0.099 -0.074 0.031 0.080 1.000 1.01 source: stata output (2023) table 4.2 above, shows that performance (roa) has a negative relation with liquidity risk (sdqr = -0.019), and (sdcr = -0.096) indicating that liquidity risk reduces performance (roa) by approximately (2%) and (9.6%) respectively. however, performance (roa) and control variable firm size (fs) shows a positive relationship of (0.121), leverage (lev) showed negative relationship of (-0.434), and firms age (age) revealed a positive association of (0.051). these results means that firms size (fs) control increase in performance by (12%), leverage (lev) control decrease in performance by (43%), and firms age (age) control increase in performance by (5%). the second column (sdqr) in the matrix also revealed a positive relationship between liquidity risk (sdqr) and (sdcr) equals (0.838). gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 65 similarly, liquidity risk (sdqr) showed a negative relation with all the control variables as follows; firm size (fs = -0.179), leverage (lev = -0.142), and firm age (age = -0.099). these indicate that all the control varaibles control decrease liquidity risk such as; firm size (fs) by (17.9%), leverage by (14%), and firm age (age) by (9.9%) respectively. similar to this, liquidity risk (sdcr) showed a negative relation with all the control variables as follows; firm size (fs = -0.131), leverage (lev = -0.106), and firm age (age = -0.074). these indicate that all the control varaibles control decrease liquidity risk such as; firm size (fs) by (13%), leverage by (11%), and firm age (age) by (7%) respectively. however, all the control variables were assumed to be held constant in order not to influence the relationships. lastly, the eighth column showed that firm size (fs) has negative relation with leverage (lev = 0.097), and positive link with firms age (age = 0.031) indicating that leverage reduces (9.7%) of the firm size, while firm’s age improves the firm size by (3.1%). similarly, leverage (lev) was also found to have positive link with firm age (age = 0.08) indicating that firm age improve (8%) of the firm’s leverage. the correlation results could also be authenticated by the variance inflation factor (vif) shown in table 4.2, as no vif value was more than or equal to ten (10), indicating that no multicollinearity problem. as opined by hair et al (2014) that if the vif value is less than ten (vif < 10) the model is free from multicollinearity problem. regression result on liquidity risk and performance the result shows the degree of influence liquidity risk (sdqr and sdcr) have on performance (roa), as well as the pattern of the influence. the relationship in the model was controlled by firm size (fs), leverage (lev), and firm age (age), and can be vividly observed in table 4.3 below: gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 66 table 4.3: relationship between liquidity risk and performance performance (roa) pooled ols fixed effect random effect* liquidity risk (sdqr) 0.095 (0.110) 0.061 (0.459) 0.078 (0.227) liquidity risk (sdcr) -0.140*** (0.004) -0.102 (0.133) -0.130** (0.013) firm size (fs) 0.016* (0.056) -0.007 (0.830) 0.014 (0.188) leverage (lev) -0.139*** (0.000) -0.196*** (0.000) -0.153*** (0.000) firm age (age) 0.001** (0.033) -0.003 (0.429) 0.001* (0.094) constant 0.030 (0.478) 0.299 (0.107) 0.050 (0.334) poolability test 1.990*** (0.000) hausman test 11.140 (0.050) bp lm test 19.770*** (0.000) normality test 0.000*** heteroskedasticity test 0.311 mean vif 1.59 auto correlation test 0.674 r2 0.216 0.195 0.215 adjusted r2 0.208 0.123 0.191 p. value 0.000 0.000 0.000 obs 522 522 522 source: stata output (2023) table 4.3 above shows the various diagnostic and specification tests, as well as the pooled pls, fixed effect and the random effect regression estimate. on the diagnostic tests, the normality test was done by running the jarque bera (jb) test and skewness and kurtosis tests for normality. the test for jarque bera showed a (chi (2) = 0), while skewness and kurtosis test also revealed (p.values = 0) indicating that the data is normally distributed. also, the heteroskedasticity test showed (prob > chi2 = 0.3111) indicating there is no problem of heteroskedasticity in the data. further, multicollinearity test was also performed using the variance inflation factor (vif) which all showed (vif < 10, and mean vif = 1.59) indicating that the data is free from multicollinearity problem. also, the auto correlation test revealed a (p value = 0.674) that the model has no serial correlation problem. the gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 67 hausman specification test shows a p-value of (0.050) indicating that the random effect result was better. the lm test also revealed a significant result (p-value = 0.000) implying that the random effect is still the best result. hence, the justification for adopting the random effect estimate as the best regression result for this study. from the random effect result, it could be observed that (prob > chi2 = 0.000), and (r-squared = 0.215), indicating fitness of the model and that the independent variables: liquidity risk (sdqr and sdcr) explained about (22%) variability in the dependent variable measured by performance (roa). the result shows that liquidity risk measured by (sdqr) revealed a (p-value = 0.227) and (coef. = 0.078) implying that quick ratio was not significant in predicting performance. thus, hypothesis (h1) which states that liquidity risk measured by quick ratio (sdqr) have significant no effect on performance (roa) of non-financial firms in nigeria, was accepted given the result of the regression (see table 4.3) which shows that quick ratio was not significant on performance. this result indicate that standard deviation of quick ratio is a weak measure of liquidity risk, and hence does not have influence in firm performance. however, the result also shows that liquidity risk measured by (sdcr) revealed a (p-value = 0.013) and (coef. = -0.130) implying that current ratio has negative and significant effect in predicting performance (roa) at (5%) degree of freedom. hence, hypothesis (h2) which states that liquidity risk measured by current ratio (sdcr) does not have significant effect on performance (roa) of non-financial firms in nigeria, was rejected as shown in the result of the regression analysis revealing that current ratio have negative and significant effect on performance. this means that the lower the risk in the current ratio, the more the performance of the firms. in other words, when firms do not suffer any loss or experience less difficulty in settling their short term maturing obligations, that will have enhanced the performace of the company and vice versa. further, the control variables: firm size (fs) shows a (p-value = 0.188) and (coef. = 0.014) indicating that fimr size was not significant in explaining variability in performance. however, firms age (age) has a (p-value = 0.094) and (coef. = 0.001), and leverage (lev) revealed a (p-value = 0.000) and (coef. = -0.153) implying that both firms age and leverage (lev) have significant effect on performance (roa). however, all the control variables were assumed to be constant and thus, not influencing the relationships. discussion of findings the results revealed that liquidity risk measured by standard deviation of quick ratio was not significant in explaining performance. this might probably be because the quick ratio excludes inventories as part of liquid assets based on the gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 68 assumption that it takes longer period to convert the inventories in to cash. however, current ratio was found to have negative and significant effect on performance of non-financial firms in nigeria. these results support previous studies who discovered negative relation between liquidity risk and performance of firms (khan et al., 2020; effiong and enya, 2020; rudhani et al., 2016; chen, et al., 2018). in addition, firms have to ensure efficient management of the short-term assets and liabilities so as to have adequate working capital for smooth running of the business. in other words, it means that efficient management of the firm’s shortterm assets and liabilities, help firms have sufficient working capital or liquidity, which leads to improvement in performance of the firms. as observed that when firms face liquidity problems, operations and investment spending shifts in line with the availability of internal financing such as cash flow, cash, retained earnings, (hong, et al., 2012; cheng, et al., 2014; jordan, et al., 2011; fazzari et al., 1987). therefore, efficient management of the firm’s short-term resources helps firms mitigate liquidity risk problem, by ensuring that sufficient working capital is available either to finance daily operations or pay short term debts with having any difficulty. specifically, while the current assets of firms are the inventories, receivables, marketable securities and cash; the short term debts include the loans, overdraft, payables, and other short term maturing obligations. also, to take care of the risk in liquidity, standard deviation of current ratio was used to determine the extent of deviation in the liquidity. this is in line with the findings of previous studies which revealed significant and positive association between liquidity factors such as; current ratio, quick ratio, working capital, fixed asset turnover, cash conversion cycle, day’s sales outstanding, inventory turnover period and profitability or performance (bari, et al., 2021; khan, et al., 2020; ogungbade et al., 2020; alnuaimi and nobanee, 2020; assey et al., 2020; boisjoly et al., 2020; dhole et al., 2019; pervan, et al., 2017; islam et al., 2018; yameen et al., 2019; patjoshi, 2016; njure, 2014). conversely, some research discovered negative links between liquidity indicators like; working capital, cash conversion cycle, current ratio, receivables, and performance of firms (kokodey et al., 2020; ogungbade et al., 2020; li, et al., 2020; sultana, et al., 2019; konak and guner, 2016; konak and guner, 2016; ren, et al., 2019; obi et al., 2017; islam et al., 2018; singh et al., 2017; garanina and belova, 2015; marozva, 2015), and a few studies discovered mixed associations between some components of liquidity and performance (amirsharif, 2018; islam et al., 2018; adekola, et al., 2017). however, it was discovered that most of these studies who found negative association used either weak proxies to measure liquidity or performance. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 69 5. conclusions and recommendations this study concludes that liquidity risk measured by standard deviation of quick ratio was not significant in explaining performance, while current ratio has negative and significant effect on performance of non-financial firms in nigeria. in other words, it means that efficient management of the firm’s short term assets and liabilities, help firms have sufficient working capital, which leads to improvement in performance of the firms. specifically, while firms must ensure efficiency in managing the current assets of firms such as the inventories, receivables, marketable securities and cash; it must also ensure that the short term debts such as the loans, overdraft, payables, and other short term maturing obligations are settled as and when due, thereby minimizing the tendency of incurring losses or liquidity risk. in other words, to take care of the risk in liquidity, standard deviation of current ratio was used to determine the degree at which firms encounter difficulty when meeting short term maturing obligations. this study recommends that emphasis be given to various ways of reducing liquidity risk because it has significant negative effect on performance of nonfinancial firms in nigeria. specifically; i. firms should ensure efficient management of short term assets and liabilities, such as the inventories, cash and cash equivalence, receivables, payables, loans and overdraft, and any other short term facilities. ii. firm should ensure adequate working capital is available to finance any short term maturing obligations as and when due without facing any difficulty. iii. these options would help the firms to have adequate liquidity, thereby saving the firm from liquidity risk problem, and enhancing their performance. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 70 references adekola, a., samy, m., & knight, d. (2017). efficient working capital management as the tool for driving profitability and liquidity: a correlation analysis of nigerian companies. international journal of business and globalization, 18(2), 251. https://doi.org/10.1504/ijbg.2017.081957. aifuwa, h. o. (2019) sustainability reporting and firm performance: a review of the literature. unpublished msc seminar, university of benin, nigeria. akenga, g. (2017) effect of liquidity on financial performance of firms listed at the nairobi securities exchange, kenya. international journal of science and research (ijsr), 6(7), 279–285. https://doi.org/10.21275/art20175036. akindele, j. & odusina, o. (2015) working capital management and firm profitability: evidence from nigerian quoted companies. journal of finance and accounting, 6(7), 148–153. almeida, h., campello, m. & weisbach, m.s. (2004) cash flow sensitivity of cash. journal of finance, 59(4): 1777–1804 alnuaimi, s. & nobanee, h. (2020) working capital management and sustainability: a mini-review. available at ssrn 3539427. altaf, n. & ahmad, f. (2019) working capital financing, firm performance and financial constraints: empirical evidence from india. international journal of managerial finance, https:// doi.org/10.1108/ijmf-022018-0036. amir sharif, md. (2018) working capital management a measurement tool for profitability: a study on pharmaceutical industry in bangladesh. journal of finance and accounting, 6(1), 1. https://doi.org/10.11648/j.jfa.20180601.11. assey, l. h., su, x., & parveen, s. (2020) effect of working capital management on financial performance: evidence from listed firms at dare s salaam stock of exchange. iosr journal of business and management (iosrjbm), 22(4) 01–08. babatope, j., faminu, g., ibrahim, t. & olusi, w. (2022) nigeria’s largest fmcgs’ profits far from pre-pandemic levels. business day news, nigeria. bari, m. k., gosh & kabir, m. r. (2021) relationship between liquidity and firm performance: evidence from the pharmaceutical industry of an emerging economy. journal of knowledge globalization, 13 (1). https://www.researchgate.net/publication/357300681. bhagat, s., & jefferis, r. h. (2019). econometrics of corporate governance studies. journal of corporate finance, 10(3): 322–378. https://doi.org/10.1504/ijbg.2017.081957 https://doi.org/10.21275/art20175036 https://doi.org/10.11648/j.jfa.20180601.11 https://www.researchgate.net/publication/357300681 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 71 boisjoly, r. p., conine, t. e. & mcdonald, m. b. (2020) working capital management: financial and valuation impacts. journal of business research, 108, 1–8. https://doi.org/10.1016/j.jbusres.2019.09.025. chen, s., shen, a., kao, c. & yeh, b. (2018). building trust by socially responsible firms: evidence from cash holdings. journal of corporate finance, 56, 364-387. cole, m.o., faminu, g., hamma, k., kleinjan, r. & babatope, j, (2022). rising costs threaten manufacturers’ profits, output in half-year. business day news april, nigeria. deloof, m. (2003) does working capital management affect profitability of belgian firms? journal of business finance, 30(3–4), 573–588. https://doi.org/10.1111/1468-5957.00008. dhole, s., mishra, s., & pal, a. m. (2019) efficient working capital management, financial constraints and firm value: a text-based analysis. pacific-basin finance journal, 58, 101212. https://doi.org/10.1016/j.pacfin.2019.101212. duru, a. n., ekwe, m. c. & eje, g. c. (2014). liquidity positioning and firm performance in industrial/domestic product companies: evidence from nigeria. iosr journal of economics and finance, 5(6), 25–32. https://doi.org/10.9790/5933-05622532. effiong, s. a. & enya, e. f. (2020) liquidity risk management and financial performance: are consumer goods companies involved? international journal of recent technology and engineering (ijrte), issn: 22773878 (online), 9 (1). garanina, t. a., & belova, o. a. (2015) liquidity, cash conversion cycle and financial performance: case of russian companies. investment management and financial innovations, 12(1), 90– 100. greenaway, d., guariglia, a., & kneller, r. (2007). financial factors and exporting decisions. journal of international economics, 73, 377-395. hair, j. f., hult, g. t. m., ringle, c. m., & sarstedt, m. (2014). a primer on partial least squares structural equation modeling (pls-sem). thousand oaks: sage publications. he, g. & ren, h. (2018). financial constraints and futures stock price crash risk. working paper. durham: durham university. available online: http://www.fmaconferences.org/boston/financial_constraints_and_future _stock_price_crash_ risk.pdf. ishola, o. a. & olusoji, m. o. (2020) service sector performance, industry and growth in nigeria, international journal of service science, management, https://doi.org/10.1016/j.jbusres.2019.09.025 https://doi.org/10.1111/1468-5957.00008 https://doi.org/10.1016/j.pacfin.2019.101212 https://doi.org/10.9790/5933-05622532 https://www.igi-global.com/journal/international-journal-service-science-management/1132 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 72 engineering, and technology (ijssmet), 11(1) 15. doi: 10.4018/ijssmet.2020010103. islam, r., hossain, m. e., hoq, m. n. & alam, md. m. (2018) impact of working capital management on corporate profitabilityempirical evidence from pharmaceutical industry of bangladesh. international journal of economics and finance, 10(9), 136. https://doi.org/10.5539/ijef.v10n9p136. khan, s. u. (2022) financing constraints and firm-level responses to the covid19 pandemic: international evidence. research in international business and finance, elsevier, 59 (101545). https://doi.org/10.1016/j.ribaf.2021.101545. khan, a. a. s., khan, z. ramakrishnan, s., abbas, m. a. & mahar, o. (2020) performance of firms having liquidity risk: evidence from pakistani banks listed in stock exchange. ilkogretim online elementary education online, 19 (4), 2898 – 2905. http://ilkogretim-online.org doi: 10.17051/ilkonline.2020.04.764660. kokodey, t., namkhanova, m. & alesina, n. (2020) the impact of changes in working capital on firm value in bursa malaysia. in d. solovev (ed.), smart technologies and innovations in design for control of technological processes and objects: economy and production, (846–857), springer berlin heidelberg. https://doi.org/10.1007/978-3-030-15577-3_78. konak, f. & güner, e. n. (2016) the impact of working capital management on firm performance: an empirical evidence from the bist sme industrial index. international journal of trade, economics and finance, 7(2), 38– 43. https://doi.org/10.18178/ijtef.2016.7.2.496 kurfi, a. (2010). how do financial constraints related to financial reporting quality? evidence from seasoned equity offerings. european accounting review, 27: 527–57 li, k., musah, m., kong, y., adjei mensah, i., antwi, s. k., bawuah, j., donkor, m., coffie, c. p. k. & osei, a. (2020) liquidity and firms’ financial performance nexus: panel evidence from non-financial firms listed on the ghana stock exchange. sage open, 10(3), 215824402095036. https://doi.org/10.1177/2158244020950363. madaleno, m. & barbuta-misu, n. (2019). the financial performance of european companies: explanatory factors in the context of economic crisis. ekonomika, 98(2), 6-18, issn 1392-1258 eissn 2424-6166, https://doi.org/10.15388/ekon.2019.2.1 maheswari, v. (2015) financial performance of hero honda motors limited. new delhi, indian journal of applied research, 5(5), 19–21. https://www.igi-global.com/journal/international-journal-service-science-management/1132 https://doi.org/10.5539/ijef.v10n9p136 https://doi.org/10.1016/j.ribaf.2021.101545 https://doi.org/10.1007/978-3-030-15577-3_78 https://doi.org/10.18178/ijtef.2016.7.2.496 https://doi.org/10.1177/2158244020950363 https://doi.org/10.15388/ekon.2019.2.1 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 73 marozva, g. (2015) liquidity and bank performance. international business & economics research journal (iber), 14(3), 453. https://doi.org/10.19030/iber.v14i3.9218 mbah, p. c., chijioke, e., & nebechi, o. f. (2018). effect of economic recession on the performance of manufacturing firms in enugu state nigeria. international journal of academic research in economics and management sciences, 7(2), 32-44, http://dx.doi.org/10.6007/ijarems/v7-i2/4116. miller, m. & modigliani, f. (1958), ‘the cost of capital, corporation finance and the theory of investment’, the american economic review 48(3), 261–97. muriithi, j. g. & waweru, k. m. (2017) liquidity risk and financial performance of commercial banks in kenya. international journal of economics and finance, 9 (3), 256 – 265. doi:10.5539/ijef. v9n3p25 nigerian investment promotion commission (nipc) webmail reports, 2022 nigerian investment promotion commission website: https://nipc.gov.ng nigeria stock exchange website: https://ngxgroup.com njure, k. c. (2014). the relationship between liquidity and profitability of nonfinancial companies listed in nairobi securities exchange. the university of nairobi, volume 12. noor, j.a.m. & abdulla, a. i. (2014). the impact of financial risks on the firms’ performance. european journal of business and management, 6 (5), www.iiste.org issn 2222-1905 (paper) issn 2222-2839 (online). obi-nwosu, v. o., okaro, c., ogbonna, k. s. & atsanan, a. n. (2017) effect of liquidity on performance of deposit money banks. international journal of advanced engineering and management research, 2(4), 67-73. retrieved from http://ijaemr.com/ ogungbade, o. i., adekoya, a. c. & akeredolu, o. (2020) liquidity and performance of listed manufacturing companies in nigeria. international journal of economics, commerce and management, united kingdom, issn 2348 0386, viii, (11). patjoshi, p. k. (2016) a study on liquidity management and financial performance of selected steel companies in india. international journal of advanced information science and technology, 51(7), 108–117. https://doi.org/10.15693/ijaist/2016.v5i7.108-117 pervan, m., pervan, i. & ćurak, m. (2017) the influence of age on firm performance: evidence from the croatian food industry. journal of eastern europe research in business. 6 (3), 234 -258. https://doi.org/10.19030/iber.v14i3.9218 http://dx.doi.org/10.6007/ijarems/v7-i2/4116 https://nipc.gov.ng/ https://ngxgroup.com/ http://ijaemr.com/ https://doi.org/10.15693/ijaist/2016.v5i7.108-117 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 74 ren, t., liu, n., yang, h., xiao, y. & hu, y. (2019) working capital management and firm performance in china. asian review of accounting, 27(4), 546– 562. https://doi.org/10.1108/ara-04-20180099. rudhani, l. h. & balaj, d. (2019) the effect of liquidity risk on financial performance. advances in business-related scientific research journal, 10 (2). saunders, m. lewis, p. & thornhill, a. (2009) research methods for business students (5th ed.). pearson education limited, england sekaran, u., & bougie, r. (2016). research method for business: a skill building approach (7th ed.). chichester: john wiley & sons ltd. singh, h. p., kumar, s. & colombage, s. (2017) working capital management and firm profitability: a meta-analysis. qualitative research in financial markets, 9(1), 34–47. https://doi.org/10.1108/qrfm-06-2016-0018. sodiq, o. (2022). five (5) fastest-growing businesses in africa in 2022. business news africa. statista report (2022). nigeria: distribution of gross domestic product (gdp) across economic sectors from 2011 to 2021. statista.com/statistics/382311/nigeria-gdp-distribution-acrosseconomicsectors/#:~:text=in%202021%2c%20agriculture%20contributed %20around,percent%20from%20the%20services%20sector. sultana, f., raheman, a. & sohail, m. k. (2019). a comparative study on liquidity management, operating performance and firm value. paksitan business review, 21(1), 15–26. wetzel, p. & hofmann, e. (2019). supply chain finance, financial constraints and corporate performance: an explorative network analysis and future search agenda. international journal of production economics, 216 (364 – 383). https://doi.org/10.1016/j.ijpe.2019.07.001. yameen, m., farhan, n. h. s., & tabash, m. i. (2019). the impact of liquidity on firms’ performance: empirical investigation from indian pharmaceutical companies. academic journal of interdisciplinary studies, 8(3), 212–220. https://doi.org/10.36941/ajis-2019-001 zikmund, w.g., carr, b.j.b.j.c., griffin, m., babin, b.j., & carr, j.c. (2013). business research method, dryden press fort worth. https://doi.org/10.1108/ara-04-2018-%200099 https://doi.org/10.1108/qrfm-06-2016-0018 https://doi.org/10.1016/j.ijpe.2019.07.001 https://doi.org/10.36941/ajis-2019-001 gusau journal of accounting and finance (gujaf) vol. 4 issue 1, april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ii © department of accounting and finance vol. 4 issue 1 april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 v dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vi advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ix contents board characteristics and earnings management of listed consumer goods firms in nigeria benjamin gwabin joseph, murtala abdullahi phd, benjamin kumai gugong phd 1 dividend policy and value of listed non-financial companies in nigeria: the moderating effect of investment opportunity abubakar umar 18 trialability and observability of accrual basis international public sector accounting standards implementation in nigeria aliyu abdullahi ahmed phd, zakari usman 35 liquidity risk and performance of non-financial firms listed on the nigerian stockexchange muhammed alhaji abubakar, nurnaddia binti nordin phd, abubakar hamisu umar 54 board diversity, political connections and firm value: an empirical evidence from financial firms in nigeria rofiat oyetunji, isah shittu phd, ahmed bello phd. 75 moderating effect of bank size on the relationship between interest rate, liquidity, and profitability of commercial banks in nigeria shehu usman hassan, bello sabo (ph. d), ismai'l idris tijjani (ph. d), idris ahmed aliyu. (ph. d) 96 sources of health care financing among surgical patients seen at the dalhatu araf specialist hospital lafia nasarawa state nigeria ahmed mohammed yahaya, babatunde joseph kolawole, bello surajudeen oyeleke 121 transparency, compliance and sustainability of contributory pension scheme in nigeria olanrewaju atanda aliu (ph. d), mohamad ali abdul-hamid (ph. d), salami suleiman (ph. d), salam mudathir olanrewaju 135 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 x examining the impact of working capital management on the financial performance of listed industrial goods entities in nigeria 151 sani abdulrahman bala (ph. d), jamilu jibril, taophic olarewaju bakare corporate governance factors and tax avoidance of listed deposit money banks in nigeria 171 sani abdulrahman bala (ph. d), umar salim ibrahim, samaila dannana risk committee demographic traits: a study of the impact of expertise on risk disclosure quality of listed insurance firms in nigeria wada najib abbas, dandago, kabiru isa (ph. d), rabiu, naja’atu bala 192 moderating effect of audit committee on the relationship between audit quality and earnings management of listed non-financial services firms in nigeria ahmad muhammad ahmad, lubabah mansur kwanbo (ph.d.), shehu usman hassan (ph.d.) musa suleiman umar (ph.d.) 216 determinants of audit opinion of negative-book-value firms in nigeria: firm value and audit characteristics perspective asma’u mahmood baffa (ph. d), lawal mohammed (ph.d.), ahmed bello (ph.d.) umar farouk abdulkarim 237 intervention announcements and naira management: evidence from the nigerian foreign exchange market adedeji daniel gbadebo 254 is there earnings discontinuity after the implementation of ifrs in nigeria? adedeji daniel gbadebo 275 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 75 board diversity, political connections and firm value: an empirical evidence from financial firms in nigeria rofiat oyetunji department of accounting, a.b.u business school ahmadu bello university, zaria, nigeria rofiato553@gmail.com isah shittu department of accounting, a.b.u business school ahmadu bello university, zaria, nigeria ahmed bello department of accounting, a.b.u business school ahmadu bello university, zaria, nigeria abstract the effect of board diversity, political connections and firm value of listed financial service firms in nigeria is investigated in this study. firm value, proxied by tobin's q and computed as the ratio of the firm's market value of equity to the book value of total assets, is the study's explained variable, while board gender diversity, board nationality, board ethnic diversity, and political connections are the study's explanatory variables. the study’s population consists of fifty-one (51) listed financial service firms on the nigerian stock exchange as at 31st december 2020. thirty-five (35) of these firms made up the sample size for a period of nine years (2012-2020). data was gathered from the annual reports of the sampled companies and analyzed using the feasible generalized least square regression (fgls) approach. according to the study, board gender diversity, board nationality, and board ethnic diversity have a positive significant effect on the firm value of listed financial service firms in nigeria, whereas political connections had a positive but minor effect. according to the findings, the boards of directors of listed financial service organizations in nigeria should ensure that females are considered for directorship seats on the boards in order to increase their value, as suggested by the resource dependency theory. also, the board should be made up of foreign directors in order to lure foreign investors to the firm and enhance its value. in addition, the boards of directors of listed financial services firms in nigeria should consist of a mix of both northerners and southerners to improve firm value. keywords: board diversity, political connections, firm value, financial service firms, nigeria. https://doi.org/10.57233/gujaf.v4i1.201 1. introduction a firm's primary aim is to maximize shareholder’s wealth by growing the firm's value. maximizing firm value is important for businesses because it requires rising mailto:rofiato553@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 76 shareholder’s capital. a good firm value should entice investors to the business (shuaibu, ali, & amin, 2019). the value of a firm is one of the most critical measures of its success. it aids businesses in establishing reputation, attracting money, and contributing to a nation's strong economic prospects (nhan & quy, 2016). according to guardian (2018), investors expressed shock at the rate of decline in value of their investments on the nigerian exchange group (ngx). they noted that some publicly traded businesses in the financial service sector in nigeria have weak corporate governance frameworks, adding that this weak management results in dividend payments being withheld mostly because of negative retained earnings. these negative retained earnings can affect the firm value and make investing in these companies less appealing to investors. the financial sector is vital to any country's economic growth and development. this is due to the fact that it affects the amount of money stocks by making payments and extending credit. similarly, financial systems play a significant role in accelerating economic development, and a well-structured financial sector could be a source of economic growth. savings mobilization and well-organized financial intermediation roles will be among the advantages extracted from a strong and developed financial system. as a result, the collapse of this sector has an impact on a country's entire economy (onyekwere, wesiah, & danbatta, 2019). on the other hand, corporate governance standards and procedures are increasingly being recognized as significant in deciding and exercising corporate control in the use of a company's assets and resources. on their part, investors are gradually opting to invest based on the company's outlook, credibility, and corporate governance practices. this means that businesses must adopt corporate governance cultures and practices in order to attract foreign investors and boost their company’s sustainability and competitiveness. as a result, proper processes and mechanisms of corporate governance like those seen in the western world, the european union, and japan, are required for the long-term survival of businesses, especially in developing countries such as africa (mlthiria & musyoki, 2014). corporate governance practices are expected to boost a company's value. it is expected to raise the worth of companies who practice it than those companies that do not. in the long run, good corporate governance practices can improve stock returns and increase the value of a company. corporate governance is among the most critical factors in increasing economic efficiency and development thereby increasing investor trust. an effective corporate governance system in an organization contributes to the level of trust required for a well-functioning financial sector (haryono & paminto, 2015). due to corporate failures and gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 77 generally low corporate profits around the world, the reliability of existing corporate governance mechanisms has been called into question. this is because strong corporate governance is critical for optimal growth of the economy (ongore & k’obonyo, 2011). the consequences of poor corporate boards on businesses and national economies have prompted governments around the world to take steps to improve corporate governance. diversifying the corporate board of directors is one of these steps (garba & abubakar, 2014). diverse boards of directors have a significant impact on the company’s value, asset maximization, and investor's trust (hassan & marimuthu, 2014). the importance of board diversity in determining the value of a company will encourage firms to make informed decisions about appointment of board of directors in order to maximize the value of the firm (olaoti, 2016). according to carter, simkins, souza and simpson (2007), a more diverse or heterogeneous board has the ability to make important decisions while considering more alternatives than a homogenous board. individuals from various backgrounds and locations have a better knowledge of the company’s market, which improves the effectiveness of innovation and creativity by knowing what the market wants. since contributions are made by individuals of various backgrounds, a diverse board is easily equipped with ideas on better ways to treat their customers. as a result, customer satisfaction and the firm's goodwill or image will improve. this would improve consumer perceptions of the business and its goods while also growing the firm's value in order to draw investors. female participation among company directors may strengthen corporate governance and raise the company's value. women have qualities that can help improve companies’ performance and, as a result, improve the value of the firm. they are, on average, younger than their male colleagues, giving them a competitive advantage. better communication and new ideas are some of the advantages (mintah and schadewitz 2018). furthermore, having international directors on the board of directors’ assists in persuading foreign investors that the organization is operating in their best interests (fidanoski, simeonovoski, & mateska, 2014). ethnic diversity would help to create a higher degree of corporate governance, as well as the board of directors' decision-making process, and thereby increase the firm's value. this is because people of various ethnic backgrounds are more inclined to approach challenges in unique ways, encouraging the board to explore a larger variety of ideas and strategies when it comes to addressing organizational issues (olaoti 2016). furthermore, political connections are another major factor in every business environment. companies with political connections are granted gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 78 preferential treatment by the government, including lower funding costs, favorable tax treatment, and access to limited licenses (niessen & ruenzi, 2010). according to vanguard (2018), a total of nineteen firms registered on the nigerian stock market were subjected to hostile takeovers when stock values fell below par value. the stocks were exposed to low valuation when the nse scrapped the years-old nominal value price floor of 50 kobo which share prices could not fall below. fourteen out of the nineteen companies affected are insurance, while the other five come from other sectors. according to capital market operators and shareholders, the new nominal value policy, which presently enables quoted firms to sell for as little as one kobo, can ultimately result in forcible acquisitions and management changes because if the stock becomes too cheap or the price falls too low, the firm's value would be affected. this could result in a hostile takeover. they urged businesses that are affected by the policy to revise their procedures and re-strategize in order to provide the best possible value to their shareholders. the board of directors has faced criticism as a result of the decline in shareholders’ value caused by excessive corporate mismanagement, which has resulted in the demise of many well-established organizations around the world in recent years. such corporate failures have been linked to the board of directors' failure to perform effective supervision tasks over the businesses to which they have been entrusted (garba & abubakar, 2014). as a result, attention has been focused on a company's decision-making process in order to create a balanced board that will make the best decisions possible and provide optimum value to the shareholders (najjar 2013). forbes and miliken (2009) pointed out that, while a diverse board is likely to have differing viewpoints, it may face communication and teamwork difficulties as a result of failing to understand other members' experience in the problem-solving process. in addition, in 2018, the cbn governor godwin emefiele argued that weak corporate governance and noncompliance with legislation, lead significantly to chronic corporate failures in nigeria and other parts of the world. the cbn governor further argued that the board's relinquishment of power to corporate executives that serve their own self-interests, as well as the board's failure to fulfill its obligation to stakeholders, and inability to carry out their oversight duties effectively would have a detrimental effect on the firm's value. fair and reasonable persons with diverse qualities should be designated into the board of firms in order to help improve their firm value (the nation, 2018). although prior literatures examined how board diversity affects firm value (woschkowiak, 2018; nguyen, 2016;hassan & marimuthu, 2016;darmadi, 2012). however, these studies did not gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 79 examine political connections. yusoff, norwahida and salleh (2014) investigated political connections and firm value but their study was for a one year period and was not carried out in nigeria. there is a need to examine the effect of board diversity and political connections on firm value in nigeria using more than oneyear period. this is because there are few recent studies on board diversity and political connections in nigeria and the studies were crossectional. this study examines the effect of board diversity and political connections on value of listed financial service companies which includes deposit money banks, microfinance banks, insurance companies, mortgage banks and other companies in nigeria. 2. review of literature and theoretical underpinning firm valuation is a monetary measure of how the public views the business as a whole. that is the sum of all statements raised by investors. the list includes protected and unsecured creditors, as well as preferred and common equity investors. it is a term that is used to describe an entity's total worth overall rather than just the actual market capitalization. it’s a series of statements from borrowers and investors (kiharo&kariuki, 2018). the market valuation of a corporation is measured by the combined value of its properties, which represents the collective wealth of investors, lenders, and owners (awan, lodhi, &hussain, 2018). tobin's q is one of the most often used financial measurements for determining a firm's value. it is a market return measure that compares the assessed worth of a firm by financial markets to the value of its assets. james tobin developed the tobin’s q ratio after hypothesizing that the aggregate market valuation of all publicly traded firms must be nearly equivalent to their replacement costs. tobin’s q ratio is computed by dividing the market value of equity by the book value of the total assets (tobin, 1969). diversity on the board involves having members from diverse ethnic groups, languages, educational backgrounds, gender, skills, and experiences together to preside over a variety of important issues (abubakar, 2018). board gender diversity and firm value board gender diversity was described by khan and subhan (2019) as the overall number of female representatives on the board. according to mintah and schadewitz (2018), board gender diversity is described as the appointing committee nominating males and females to the corporate board of directors with the goal of combining diverse perspectives and increasing a firm’s valuation. the following studies were undertaken on the effect of board gender diversity and firm value: salem, metawe, youssef, and mohamed (2019) evaluated the qualities of the board of directors and firm value in egypt and the united states.variables like gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 80 ceo duality, board freedom, board size, board meetings, and board gender diversity were studied between 2012 and 2017. a total of 84 egyptian listed companies and 30 american companies were chosen for the report. secondary data was gathered from sampled firms’ annual reports and accounts and evaluated using multiple regression analysis. gender diversity on boards is linked to firm value in both nations, according to the survey. however, since the study was not conducted in nigeria, a local replication is needed.contrary to the above study, tarigan, hervindra and hatane (2018) examined the impact of board diversity and financial results using tobin’s q as a metric of financial progress. gender diversity, racial diversity, and educational diversity are among the study’s factors. the study’s sample consists of 525 firms that were quoted on the indonesian stock exchange within the period of 2011 to 2015. secondary data was collected from the sampled firms’ financial accounts and analyzed using regression analysis. according to the study, gender diversity has a negative effect on tobin’s q. the study, however, is not nigerian; therefore, a local replication is needed. based on theoretical stand, the study formulated the following hypothesis: h0: board gender diversity has no significant relationship with firm value nationality of the board of directors and the firm's value according to khan and subhan (2019), board nationality is described as having representatives from various countries on the board of directors. board nationality is defined as the proportion of foreigners on the board as a percentage of the total number of board members (okoro, onodugo, udoh, &chukwu 2019). studies conducted on board nationality and firm value include: woschkowiak (2018) examined board diversity and company success in europe using tobin’s q as a performance metric. the variables studied were gender diversity, nationality diversity and age diversity. all european firms traded on the european stock market in 2016 are included in the study’s sample. secondary data was gathered from the reported entities' annual reports and evaluated using regression analysis. the findings show that nationality diversity increases the mentioned firms’ tobin’s q substantially. the analysis, however, is not nigerian and it is a cross-sectional one. therefore, there is a need to repeat this study in nigeria using panel data analysis. however, contrary to the above study, charles et al., (2018) looked at the composition of corporate boards and their success in nigerian deposit money banks using tobin’s q as a metric for performance. the analysis used 14 nigerian classified banks as a sample. gender equity on the executive, board composition, international directorship and ethnic diversity were also investigated. the fixed effect generalized least square regression was used to study the impact of board gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 81 diversity on bank results from 2011 to 2015.the result shows that including an international director on the board has a detrimental effect on tobin’s q. the analysis, based on theoretical stand, the study formulated the following hypothesis: h0: board of director nationality has no significant relationship with firm value board ethnic diversity and firm value board ethnic diversity, according to joyce (2017), applies to members of a board that come from a variety of ethnic backgrounds. egwakhe, akpa, and ajayi (2019) define ethnic diversity as the amount, measure or presence of a race, ethnic, or socio-cultural community on a board in relation to the total number of directors on the board at any particular time. studies conducted on board ethnic diversity and firm value includes: chuah and hooy (2018) researched the effect of board ethnic diversity on company performance in malaysia, using tobin’s q as a metric for firm performance. the sample of the research consists of 260 publicly traded firms in malaysia from 2010 to 2012. secondary data was collected from the listed companies' annual reports and analyzed via regression analysis. according to the findings, ethnic diversity on the board has a favorable impact on tobin’s q. this research however, is not nigerian research; therefore, a nigerian replication is needed. contrary to the above study, ilogho (2017) investigated the impact of board nationality and ethnic diversity on the financial performance of nigerian listed companies. the research used tobin’s q as a metric of financial performance. the sample of the research includes 60 non-financial companies traded on the nigerian stock market between 2012 and 2015. secondary data was acquired from the sampled firms' annual reports and analyzed using ols regression. the findings reveal that ethnic diversity has no bearing on the sampled firms tobin’s q. however, the financial sector was excluded from the sample and just two variables of board diversity were examined in the study. based on theoretical stand, the study formulated the following hypothesis: h0: board ethnic diversity has no significant relationship with firm value political connections and firm value the board of directors is politically affected when a member or members of the board of directors occupy a political role, whether by referendum or nomination (urhoghide & omolaye, 2017). a board that is politically motivated has a chairman that is a present or former government political appointee, as well as military or exmilitary personnel on it (osazuwa, ahmad, & che-adam, 2016). studies conducted on political connections and firm value include: chung, byun, and young (2019) studied corporate political ties and companies’ value. the sample of the study gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 82 includes 93 korean firms traded on the korean stock market from 1998 to 2013. the research used the regression method of data analysis. according to the research, political connections have a favorable and considerable impact on the value of the firm. however, the study is foreign and therefore cannot be used in a nigerian context. contrary to the above study, berkman and galpoththage (2016) investigated political connections and firm value. the study’s sample consists of 99 publicly traded companies from 2006 to 2011. secondary data was gathered from listed companies’ annual reports and analyzed using regression analysis. the findings reveal that a firm's worth is unaffected by political connections. the research, however, was carried out in sri lanka; therefore, a nigerian replication is needed. based on theoretical stand, the study formulated the following hypothesis: h0: political connections has no significant relationship with firm value theoretical underpinning the resource dependency theory is the theory underpinning this research. jeffrey pfeffer and gerald salanick created the resource dependency theory in the 1970s. pfeffer and salanick (1978) argued that businesses operate in an open system in which they must exchange or acquire certain resources in order to survive, making them reliant on external units in their environment. this theory explains how critical it is for the board of directors of a company to connect to the outside world, because boards of directors’ serve as suppliers of resources that are lacking internally. organizations benefit from boards of directors because they provide advice, counsel, and information channels, as well as access to resources. firms are increasingly faced with a complex and uncertain macro environment, necessitating leadership from a diverse group of individuals who can provide a diverse range of resources compatible with modern business culture. as a result, resource dependency theory explains the link that exists between board diversity and the value of the firm by concluding that the best-performing management teams should include members with diverse ethnicity, nationality, and gender. similarly, hermalin and weisbach (2001) agree with resource dependence theorists, arguing that board members gender, nationality, and ethnicity are valuable resources for guiding and improving the firm's value. boards with a diverse ethnicity, gender and nationality according to thomsen and conyon (2012), have a diverse range of knowledge and skills. diverse boards assist directors in gaining a better understanding of markets, customers, workers, and business opportunities. this leads to a greater grasp of business situations, which raises the gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 83 company’s value. moreover, having female board of directors will also help the firm connect with important external elements. female directors on boards creates a positive image for companies which can assist organizations garner support from key stakeholders including suppliers, customers, and investors as well as gain access to valuable resources (knippen, shen, & zhu, 2019). unlike male directors, joyce (2017) contends that female directors bring to their boards unique and valuable resources and relationships. according to ruigrok, peck and tacheva (2007), as business becomes more internationalized, there will be higher demand for directors with the necessary skills and connections in international markets. a foreign director in this situation may be competent and capable of connecting the organization to various contexts in the countries where it operates. in addition, according to resource dependence theory, gender and ethnicity disparities are likely to create specific knowledge sets that may be accessible to management for improved decision making, thereby increasing the firm's value. according to pfeffer and salancik (1978), companies aim to establish connections with political actors in order to minimize reliance on limited resources managed by other parties. political sway, according to this theory, is an important tool for dealing with environmental uncertainties. this effect can be seen in the government's incorporation of directors or their engagement in political parties. in accordance with organizational standards; the directors serve as resource suppliers. political clout will make it easier for a corporation to obtain capital such as loans, contracts, and government funding, boosting the company’s efficiency and value. 3. methodology the study used a correlational research design to look into the effect of board diversity and political connections on firm value. the study’s population consists of all the fifty-one (51) financial service organizations that are listed on the nigerian stock market (nse) as at 31st december 2020. however, a sample of thirty five (35) organizations was arrived at after filtering out firms that did not have sufficient data for the period under study (2012-2020). (see appendix). the study used secondary data from annual reports of nigeria's publicly traded financial services organizations. panel data regression technique was used to estimate the link between the explained and explanatory variables. fixed effect and random effect options were explored to address the panel effect of the data. hausman specification test was also conducted to decide between fixed effect and random effect. in addition, robustness tests of multicollinearity and heteroskedasticity were also conducted. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 84 model specification in order to examine the factors that have effect on firm value, a multiple linear regression model is established. the model accounts for the effect of board gender diversity, board nationality, board ethnic diversity and political connections on firm value. in order to maintain consistency with previous studies, a control variable of firm size was added to the regression analysis. firm size was used as a control variable because of the general notion that larger firms have more competitive advantages and benefit from economies of scale. this variable was chosen as a control variable based on the findings of lee-kuen, sok-gee, and zainudin (2017), where they discovered a substantial association between firm size and firm value. the model is stated below: tobin’s q it = β 0 + β1bged it + β2bnait + β3bethdit + β4pconit + β5fsizeit + εit… where: tobin’s q = firm value bged = board gender diversity bna = board nationality bethd = board ethnic diversity pcon = political connection fsize = firm size ε = error term t = time i = firm β0 is the intercept, β1,β5 are the coefficients of the variables gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 85 variables definition and measurement table 3.1: variables measurement s/n variables measurement source 1. tobin’s q the ratio of a company’s market value of equity to itsentire assets book value. nguyen (2016). 2. board gender diversity female directors as a percentage of total board members. siantar (2016). 3. board nationality foreigners on the board as a percentage of the overall number of board members. okoro et al., (2019). 4. board ethnic diversity if the board is made up of both northern and southern nigerians, the value will be 1; otherwise, it will be 0. charles et al., (2018). 5. political connection if political connection exists, the value will be 1; otherwise, it will be 0. osazuwa et al., (2016). 6. size natural logarithm of total asset lee-kuen et al., (2017). source: compiled by author, 2023 4. results and discussion of findings the descriptive statistics, correlation matrix, and regression results on the relationship between board gender diversity, board nationality, board ethnic diversity, and political connection as explanatory variables, with firm value measured by tobin's q as the explained variable are presented in this section. table 4.1: descriptive statistics results variables obs mean std.dev. min max tobin’s q 315 0.435 0.717 0.014 6.901 bgd 315 0.175 0.131 0 0.667 bna 315 0.087 0.157 0 0.714 bethd 315 0.819 0.386 0 1 pcon 315 0.749 0.434 0 1 size (million) 315 680,095 1,426,243 382 7,689,028 source: stata output (2023) gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 86 the average tobin's q is 0.44, with a standard deviation of 0.72, as shown in table 4.1. this indicates that firm valuation varies widely among nigeria's publicly traded financial services organizations. tobin's q has a minimum and maximum value of 0.01 and 6.90, respectively. this implies that the lowest tobin’s q value across the listed financial service firms was 0.01 and the highest tobin’s q value was 6.90. board gender diversity (bgd), on the other hand, has a mean value of about 18% with a standard deviation of about 13%. the average value of 18% indicates that women made up 18% of the directors of nigeria’s publicly traded financial services firms. the standard deviation of 13% indicates that there is a little variation in gender diversity among nigeria’s publicly traded financial service firms. board gender diversity has a minimum and maximum value of 0 and 67% respectively. this indicates that some listed financial service firms in nigeria did not have any female directors on their boards, while others had as high as 67% of female directors on their boards. additionally, board nationality (bna) has a mean value of approximately 9%, which implies that only 9% of directors on average are foreigners. the standard deviation of 16% also indicates a low variation in board nationality across nigeria’s publicly traded financial services firms. board nationality has a minimum and maximum value of 0 and 71% respectively. this result indicates that some listed financial service firms did not have any foreigners on their boards, while others had as many as 71% of foreigners on their boards.board ethnic diversity (bethd) has an average of approximately 82%, which indicates that 82% of listed financial service firms in nigeria have both northerners and southerners present on their boards. the standard deviation of approximately 39% indicates a high variation in ethnic diversity across nigeria’s publicly traded financial service firms. board ethnic diversity has a minimum and maximum value of 0 and 1 respectively. political connection (pcon) has an average value of 75% with a standard deviation of 43%, which also indicates a high variation in political connection across nigeria’s publicly traded financial service firms. the result indicates that, on average, 75% of listed financial services firms in nigeria have directors with political connections. political connections have a minimum and maximum value of 0 and 1 respectively. lastly, firm size has an average of 680 billion naira and a standard deviation of 1.4 trillion naira, which indicates a high variation in the values of total assets across nigeria’s publicly traded financial service firms. firm size has a minimum and maximum value of 382 million naira and 7.6trillion naira respectively. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 87 table 4.2: correlation matrix results variables tobin’s q bgd bna bethd pcon fsize tobin’s q 1.000 bgd 0.008 1.000 0.884 bna 0.140* -0.158* 1.000 0.013 0.005 bethd 0.056 -0.084 -0.107 1.000 0.324 0.139 0.058 pcon -0.060 0.086 -0.220* 0.166* 1.000 0.291 0.128 0.000 0.003 fsize -0.319* 0.293* -0.021 0.184* 0.189* 1.000 0.000 0.000 0.705 0.001 0.001 * shows significance at the .05 level source: stata output (2023) the correlation matrix of the dependent and independent variables is shown in table 4.2 above. the result shows that board gender diversity has a correlation coefficient of 0.008, indicating that board gender has a positive link with the firm value of nigeria's listed financial service firms. this implies that board gender diversity and firm value move in the same direction. board nationality has a correlation coefficient of 0.140 as shown in the correlation matrix table above. this implies that board nationality has a positive relationship with the firm value of listed financial service firms in nigeria. board ethnic diversity has a correlation coefficient of 0.056 as shown in the correlation matrix table above. this implies that there is a positive link between board ethnic diversity and firm value of nigeria’s publicly traded financial service firms. table 4.2 shows that political connection has a correlation coefficient of-0.060, which means political connection has a negative link with the firm value of nigeria’s publicly traded financial service firms. this implies that political connection and firm value move in opposite directions, and an increase in political connection will result to a decrease in the firm value of nigeria’s publicly traded financial service firms. more so, the correlation coefficient of firm size has a value of -0.319. this implies that a negative relationship exists between firm size and firm value of listed financial service firms in nigeria. this relationship indicates that both variables are moving in the inverse direction. there is no evidence of possible multicollinearity among the explanatory variables, according to the correlation matrix table. this is because as shown in table 4.2, all the correlation coefficients among the explanatory variables are less than 0.80 as propounded by gujarati (2004). therefore, there is no possible presence of multicollinearity among the independent variables. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 88 table 4.3 robustness tests tests chi-square value p-value hettest 48008.50 0.0000 hausman test 10.938 0.053 lm test 462.44 0.0000 source: stata output (2023) the modified wald test was used to test for the presence of heteroskedasticity. the chi-square value was 48008.50, with a p-value of 0.0000, indicating that the result was significant. this indicates that there is presence of heteroskedasticity. the research carried out multicollinearity test to show the strength of the relationship among the explanatory variables themselves. the variance inflation factor (vif) test was conducted, and all the variables have values less than 10 and tolerance values more than 0.10. (rule of thumb). this demonstrates that there is no issue with multicollinearity. to decide between the fixed and random effect models, hausman specification test was conducted. the hausman specification test was insignificant with a chi square value of 10.938 and a p-value of 0.053 which was in favor of the random effect model. however, the breusch and pagan lagrangian multiplier test for random effects was carried out in order to select between the random effect regression and the pooled ordinary least square (ols) regression. the findings showed a chi-square value of 462.44 and a p-value of 0.0000, which is significant. this indicates that the random effect should be selected. however, the presence of heteroskedasticity made the researcher run and interpret further feasible generalized least square (fgls) regression. table 4.4 feasible generalized least square regression result tobin’s q coef. st.err. tvalue p value sig bgd 0.899 0.303 2.97 0.003 *** bna 0.809 0.245 3.30 0.001 *** bethd 0.296 0.100 2.95 0.003 *** bpcon 0.023 0.090 0.25 0.800 fsize -0.121 0.017 -7.05 0.000 *** constant 2.958 0.401 7.38 0.000 *** number of obs 315 chi-square 60.229 prob> chi2 0.000 ***p<0.01, **p<0.05, *p<0.1 source: stata output, 2023 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 89 the fitness of the model of the study as revealed in table 4.4 shows a chi-square value of 60.229 which is significant at 1%. this led to the robustness of the result and subsequent discussions that followed: table 4.3 reveals that gender diversity on the board has a coefficient of 0.899 and a p-value of 0.003, which is statistically significant at 1%. the findings show that gender diversity on corporate boards has a positive and significant impact on firm value. by implication, it means an increase in board gender diversity will contribute to a rise in the firm value of nigeria’s publicly traded financial service firms. this is because positive female participation among corporate directors strengthens corporate reputation and raises the company’s worth. the null hypothesis which states that board gender diversity has no significant effect on firm value of listed financial service firms in nigeria is thus rejected. this research agrees with the study of salem et al., (2019), however, it disagrees the study of tarigan et al., (2018). the result in table 4.3 shows board nationality has a coefficient of 0.809 with a pvalue of 0.001 which is statistically significant at 1%. the findings suggest that board nationality has a favorable and considerable impact on firm value. by implication, it means that adding more foreign directors to the board of nigeria’s publicly traded financial service firms will enhance the firm value. this is because foreign directors bring valuable and diverse experience to the table that local board members lack, and their presence on the board helps to persuade international investors that the company is acting in their best interests. this provides evidence for rejecting the null hypothesis, which states that board nationality has no significant effect on the firm value of listed financial service firms in nigeria. this study supports the research of woschkowiak (2018) and contradicts the study of charles et al. (2018). in addition, table 4.3 shows that board ethnic diversity has a coefficient of 0.296 with a p-value of 0.003 which is statistically significant at 1%. the findings show that ethnic diversity on the board of directors has a favorable and significant impact on the firm value. by implication, this means that an increase in the mix of northerners and southerners on the board of directors will lead to a rise in the firm value of nigeria’s listed financial service firms. this can be possible because people from various ethnic backgrounds are more inclined to approach challenges in distinctive ways, encouraging the board to explore a larger variety of options and strategies when it comes to addressing organizational issues. this provides evidence for rejecting the null hypothesis, which states that board ethnic diversity has no significant effect on firm value of listed financial service firms in nigeria. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 90 the findings are consistent is with chuah and hooy (2018) but not in line with ilogho (2017). furthermore, from table 4.3, political connection has a coefficient of 0.023 with a p-value of 0.800, which is insignificant. the result shows that the positive link between political connection and firm value is insignificant. the study, however, fails to reject the null hypothesis, which states that political connections have no significant effect on the firm value of nigeria’s listed financial service firms. the findings are in line with that of berkman and galpoththage (2016) but contradict chung et al., (2019), who showed a substantial relationship between political connection and firm value. 5. recommendation and conclusion the research looked into the effect of board diversity and political connections on firm value of listed financial service firms in nigeria. based on the findings, the research concludes that board gender diversity, board nationality, and board ethnic diversity have significant effects on the firm value of nigeria’s listed financial service firms, while political connections do not have a significant effect on the firm value of listed financial service firms in nigeria. according to the findings, the research recommends that females should be considered for directorship positions in order to boost the firm's value in line with the resource dependency theory proposition; they should also look at the possibility of board mixture with foreign directors, as their presence on the board could likely attract foreign investors to the firm; and lastly, the board of directors should consist of a mix of both northerners and southerners in nigeria. this is logical, because an ethnically diverse board would have a lot of synergy and its decisions are expected to have a bearing on all ethnic groups across the country. also, ethnic diversity helps to create a higher degree of corporate governance and hereby increase the firm value. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 91 references abubakar, a. (2018). corporate board diversity and financial performance : panel data evidence from quoted deposit money banks in nigeria. journal of humanities,law, social & management sciences, 1(1), 30–47. anderson, r.c., reeb, d. m., upadhayay, a. & zhao, w. (2011). the economics of director heterogeneity. journal of financial management, 40, 5-38. anh, v. t. t., & khanh, b. p. n. (2017). impact of board gender diversity on firm value: international evidence. journal of economics and development, 19(1), 65–76. awan, a. g., lodhi, m. u., & hussain, d. (2018). determinants of firm value : a case study of chamical industries of pakistan. global journal of management, social sciences and humanities, 4(1), 46–61. berkman, h., & galpoththage, v. (2016). political connections and firm value: an analysis of listed firms in sri lanka. pacific accounting review, 28(1), 92–106. bliss, m. a., & gul, f. a. (2012). political connection and cost of debt: some malaysian evidence. journal of banking and finance, 36(5), 1520–1527. borghesi, r., chang, k., & li, y. (2019). firm value in commonly uncertain times : the divergent effects of corporate governance and csr. applied economics, 1–16. carter, d. a., simkins, b. j., souza, f. d., & simpson, w. g. (2007). the diversity of corporate board committees and financial performance. chaney, p. k., faccio, m., parsely, d. (2011). the quality of accounting information in politically connected firms. journal of accounting and economics, 51(2), 58-76. charles, o., opemipo, a. v., & sunday, e. o. (2018). corporate board diversity and performance of deposit money banks in nigeria. international journal of humanities and social science., 8(1), 112–120. chuah, s. f., & hooy, c.w. (2018). the impact of board ethnic diversity on firm performance : evidence from public listed firms in malaysia. international journal of monetary economics and finance, 11(3), 260– 270. chung, c. y., byun, j. h., & young, j. (2019). corporate political ties and firm value: comparative analysis in the korean market. sustainability, 11(2), 1–25. https://doi.org/10.3390/su11020327 darmadi, s. (2012). board diversity and firm performance: the indonesian evidence. corporate ownership and control, 1(9), 524–539. diepen, n. van. (2015). the effect of gender , age and nationality diversity on gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 92 company performance – evidence from the netherlands supervisors. bachelor’s thesis, university of twente. egwakhe, a. j., akpa, v. o., & ajayi, a. a. (2019). board diversity and profitability of insurance firms in nigeria: evidence from listed insurance firms. international journal of advanced studies in business strategies and management, 7(1), 41–59. eulerich, m., velte, p., & van uum, c. (2014). the impact of management board diversity on corporate performance – an empirical analysis for the german two-tier system. journal of problems and perpectives in management, 2(4), 23–37. fidanoski, f., simeonovski, k., & mateska, v. (2014). the impact of board diversity on corporate performance: new evidence from south east europe. journal of advances in financial economics, 17, 81–123. forbes, d. p., & miliken, f. j. (2009). cognition and corporate governance: understanding boards of directors as strategic decision making groups. academy of management review, 24(3), 489–505. garba, t., & abubakar, b. a. (2014). corporate board diversity and financial performance of insurance companies in nigeria : an application of panel data approach. asian economic and financial review, 4(2), 257–277. gujarati, n.d. (2004). basic econometrics. fourth edition, new delhi: tata mcgraw-hill publishing company limited. haryono, u., & paminto, a. (2015). corporate governance and firm value : the mediating effect of financial performance and firm risk. european journal of business and management, 7(35), 18–24. hassan, r., & marimuthu, m. (2014). gender diversity on boards and market performance : an empirical investigation on malaysian listed companies. a journal of engineering, science and society, 10(1), 17–25. hassan, r., & marimuthu, m. (2016). corporate governance, board diversity, and firm value: examining large companies using panel data approach. economics bulletin, 36(3), 1737–1750. hermalin, b. e., & weisbach, m. s. (2001). board of directors as an endogenously determined institution: a survey of the economic literature (vol. 8161). ilogho, s. o. (2017). effects of board nationality and ethnic diversity on the financial performance of listed firms in nigeria. m.sc accounting, convenant university, ota, ogun state, nigeria joyce, j. (2017). relationship between board diversity and financial performance of insurance firms in kenya. m.sc project, university of nairobi, kenya. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 93 khan, a. w., & subhan, q. a. (2019). impact of board diversity and audit on firm performance. cogent business & management, 6(1), 1–16. kiharo, m. n., & kariuki, p. w. (2018). corporate governance practices and firm value of listed commercial banks in kenya. the international journal of business & management, 6(3), 184–192. knippen, j. m., shen, w., & zhu, q. (2019). limited progress? the effect of external pressure for board gender diversity on the increase of female directors. strategic management journal, 40(7), 1123–1150. lee-kuen, i. y., sok-gee, c., & zainudin, r. (2017). gender diversity and firms financial performance in malaysia. asian academy of management journal of accounting and finance, 13(1), 41–62. lehman, c., & dufrene, d. (2008). business communication 15th edition. mason: thomson south-western. mba, m. n., ofobruku, s. a., nwanah, c. p., & anikwe, n. m. (2018). ethnic diversity and performances of nigeria breweries plc. international journal of social sciences and management research, 4(5), 75–84. mintah, p. a., & schadewitz, h. (2018). gender diversity and firm value : evidence from uk financial institutions. international journal of accounting and information management, 26(3), 1–32. mlthiria, e. n., & musyoki, d. (2014). corporate governance , ownership structure perspective and firm value : theory, and survey of evidence. international journal of research in management and business studies, 1(3), 57–61. najjar, n. (2013). the impact of corporate governance on the insurance firm's performance in bahrain. international journal of learning and development, 3(2), 56-65. nguyen, m. n. (2016). board diversity and performance of publicly listed companies in asia. m.sc business administration, university of amsterdam, asia. niessen, a., & ruenzi, s. (2010). political connectedness and firm performance: evidence from germany. german economic review, 11, 441–464. okoro, b. c., onodugo, v. a., udoh, b. e., & chukwu, b. i. (2019). does board nationality influence the return on equity of money deposit banks ? empirical evidence from nigeria. international journalof mechanical engineering and technology, 10(7), 1–7. olaoti, y. i. (2016). board of directors heterogeneity and financial performance of listed deposit money banks in nigeria. m.sc accounting, ahmadu bello university, zaria, kaduna state, nigeria. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 94 omoye, s. a. & eriki, p. o. (2013). diversity in board ethnicity and firm performance: an empirical investigation of selected quoted firms in nigeria. african journal of social sciences, 3(4), 35-45. onyekwere, s. c., wesiah, s., & danbatta, s. n. (2019). the relationship between board diversity and corporate financial performance : empirical evidence from five selected commercial banks in nigeria. international journal of finance and banking research, 5(4), 76–90. https://doi.org/10.11648/j.ijfbr.20190504.13. osazuwa, n. p., ahmad, a. c., & che-adam, n. (2016). financial performance in nigerian quoted companies: the influence of political connection and governance mechanisms. international journal of economics and financial issues, 6(7), 137–142. pfeffer, j., & salancik, g. r. (1978). the external control of organizations: a resource dependence perspective. new york: harper and row publishers. poon, w., yap, a. k., & lee, t. (2013). the outcome of politically connected boards on commercial bank performance in malaysia. journal of modern applied science, 7(1), 35–50. https://doi.org/10.5539/mas.v7n1p35. ruigrok, w., peck, s., & tacheva, s. (2007). nationality and gender diversity on swiss corporate boards. corporate governance: an international review, 15(4), 546–557. https://doi.org/10.1111/j.1467-8683.2007.00587.x salem, w. f., metawe, s. a., youssef, a. a., & mohamed, m. b. (2019). boards of directors characteristics and firm value : a comparative study between egypt and usa. open access library journal, 6(4), 1–33. https://doi.org/10.4236/oalib.1105323 shuaibu, k., ali, i., & amin, i. m. (2019). company attributes and firm value of listed consumer goods companies in nigeria. journal of research in humanities and social science, 7(5), 40–49. siantar, c. s. d. (2016). effects of board gender diversity on firm performance and director compensation in india. 1–43. tarigan, j., hervindra, c., & hatane, s. e. (2018). does board diversity influence financial performance ? international research journal of business studies, 11(3), 195–215. the nation (2018, december 29) rumble from banking halls: polaris bank rises from skye's 'rubble' as diamond merges with access. https://thenationonlineng.net/rumble-banking-halls-polarisbank-risesskyes-rubble-diamond-merges-access/ thomsen, s., & conyon, m. (2012). corporate governance: mechanisms and systems. mcgraw-hill education, new york. https://doi.org/10.11648/j.ijfbr.20190504.13 https://doi.org/10.4236/oalib.1105323 https://thenationonlineng.net/rumble-banking-halls-polarisgusau journal of accounting and finance, vol. 4, issue 1, april, 2023 95 tobin, j. (1969). a general equilibrium approach to monetary theory. journal of money, credit and banking, 1(1), 15-29. ujunwa, a., nwakoby, i., & ugbam, c. o. (2012). corporate board diversity and firm performane: evidence from nigeria. corporate ownership and control, 9(2), 216–226. urhoghide, r. o., & omolaye, k. e. (2017). effect of corporate governance on financial performance of quoted oil and gas companies in nigeria. international journal of business and social science, 8(7), 114–124. vanguard (2018) 14 insurance companies, 5 others may face hostile take-overs. retreived from https://www.vanguardngr.com/2018/02/14-insurancecompanies-5-others-may-face-hostile-take-overs/ woschkowiak, a. (2018). board diversity and firm financial performance : gender, nationality and age diversity in european boardrooms. https://www.vanguardngr.com/2018/02/14-insurance-companies-5-others-may-face-hostile-take-overs/ https://www.vanguardngr.com/2018/02/14-insurance-companies-5-others-may-face-hostile-take-overs/ gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 1 the extent of sustainability disclosure: evidence from listed nigerian oil and gas companies tijjani habibu ahmad, nura badamasi & isaac oyibo marcel department of accountancy hussaini adamu federal polytechnic kazaure, jigawa state – nigeria +2348038908041 ahmatee123@gmail.com nbadamasi@gmail.com abstract global reporting initiatives (gri) guidelines has received wide spread acceptance across the globe in the area of sustainability reporting. several studies conducted in developed countries proved the effectiveness of the gri index. in order to enjoy the benefits attributable to sustainability reporting, many developing nations claim compliance with the gri index. however, the extent of compliance with the index remain sketchy. the objective of this research is to discuss this challenge by measuring the extent of sustainability disclosure in the nigerian oil and gas companies using the global reporting initiatives (gri) framework as yardstick. the study used secondary data collected from the annual report and accounts of eight (8) selected oil and gas companies listed on nigerian stock exchange (nse). weighted disclosure index was used to measure the level of compliance with sustainability disclosure among these companies. t-test was used to find the means difference of the selected companies using company characteristics. the findings reveal that there is significance level of compliance with sustainability disclosure requirement by the companies. it also reveals yearly improvement in the means compliance across the study period. in addition, companies complied more with the requirement under strategy and analyses than other categories of the disclosure requirement. it also shows that big companies complied more with the disclosure requirement than small companies. however, profitability and audit quality of the companies have no significance difference in influencing level of disclosure. the study further suggests for future research the assessment of value relevance of this level of compliance. keywords: sustainability disclosure, gri, disclosure index, oil & gas 1. introduction recently, global warming and climate change are the most challenging issues facing the world that attracts attention of government, corporations, and nongovernmental organizations, among other stakeholders. it is the negative reactions of the environment as a result of our day to day activities. these have become increasingly emergent problems that threaten the future of the world. many stakeholders urging action and proposing several solutions in relation with its mailto:ahmatee123@gmail.com mailto:nbadamasi@gmail.com gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 2 consequences (prado-lorenzo, rodríguez-domínguez, gallego-álvarez & garcíasánchez, 2009). there is an inevitable adverse effect of decline in environmental quality as a result of the rapid growth of industries, mainly due to the effect of their activities, which directly affect climate. consequently, the need for companies to be accountable for and disclose effects of their activities on the overall society and environment in which they operate. this call for concern to government and non-governmental organizations as to measures that will remedy this effect. one of the trending issues that attract the concerns of government, professionals, academic researchers and other stakeholders is the issue of climate change. this issue is what triggered the call for sustainability reporting which is a supplement of non-financial reporting. sustainability reporting is receiving much considerations even with current methodological problems and information gaps (hahn & kühnen 2013). sustainability reporting has been considered as one of the important concepts addressing this issue. global reporting initiative (gri) defined sustainability reporting as incorporating non-financial report that disclose the activities of an entity with regard to economic, social and environmental cost and benefit. it is a report prepared by an organization about economic, environmental and social cost and benefit of its activities. the report is used as tool for meeting the non-financial information need of the different stakeholders. there have been numerous efforts to render sustainable development down into a few definitional words or sentences in the context of few industries, such as mining and the likes. these frequently result in a reductionist approach that fails to capture complexity and scale. for example, sustainability has often been defined in the context of a mine location or community where such activity is taking place. nevertheless, it cuts across all industries, though some organizations are more environmentally sensitive than others, there is no organization that has no impact on environment. the concept of sustainability is often used to refer to corporate non-financial reports. several experts, however, claim that such reports overlook fundamental tenets of sustainable development (mudd, 2009). consequently, there is an increasing call for greater approaches to reporting, in which companies use extra all-inclusive and integrative frameworks to measure contributions to sustainability (henriques & richardson, 2004). gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 3 historically, continuing to focus on sustainability-related reporting has witnessed many changes. in the 1970s, the financial reporting in western countries was sometimes supplemented by additional social reports. in the 1980s, the focus was on environmental issues such as air and waste which often replaced the previous report. in the late 1990s, research and practice reports began to take a closer look at social and environmental issues at the same time in a joint report that was often published with a traditional financial report. this advancement can be directly connected to the development of voluntary standards through the global reporting initiative (gri) (kolk, 2010). gri is today the de facto global standard (kpmg, 2011) for sustainability reporting. it is currently the most widely used standard for sustainability reporting worldwide (marimon, alonso-almeida, rodrigez, & alejandro, 2012). it has evolved since its inception to adapt to the requirements of stakeholders and the market and to continue to build transparency and trust. however, despite standardization efforts, there are still significant differences between companies from different institutional environments regarding the content and quality of sustainability reports (fortanier et al., 2011), which implies differences in global academic interest as well. marimon et al. (2012) opined that, the objective of gri is to guide prefers in producing report that present and properly disclose a clearer vision of the human and ecological impacts of an organization or its activities. additionally, one of the gri’s main functions is to enable shareholders and other stakeholders make knowledgeable decisions regarding investments and other relationship with the company. thus, the gri is a framework that can be serve as benchmark that judge records of sustainability. in addition, the gri framework provides the opportunity to make information comparison and benchmarking among different organizations easier. ioannou and serafeim (2011) also noted that the gri uplifts sustainability reporting to the same thoroughness as financial reporting. stakeholders’ concerns accompanied the increase in sustainability reports based on the gri regarding their limitations and possible negative consequences. some analysts say that the introduction of non-integrated sustainability reporting frameworks, such as the gri, was important in that it helped organizations increase transparency and accountability for a range of social and environmental issues. many studies were being conducted in the area of sustainability reporting due to the ongoing weight attached to green consciousness. these produced a lot of gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 4 literature in the area. nevertheless, in emerging economies, the literature is still limited in quantity and no major reviews of the latest developments have been presented so far. in african countries, only few researches were conducted to bridge this gap. this research aimed to fill this gap by assessing the level of compliance with sustainability disclosure requirement among the listed nigerian oil and gas companies. 2. literature review gri is an autonomous international organization that first championed the founding of sustainability reporting guidelines. they are established in 1997 by group of companies who were members of the coalition for environmentally responsible economies (ceres) to assist stakeholders worldwide understand and communicate their impact on critical sustainability issues such as climate change, human rights, governance and social comfort (gri 2018). since from their inception, they have been undergoing serious improvement to accommodate global dynamic environment. gri standards are issued to symbolize global best practice in reporting sustainability for companies or organizations that want report its contribution towards achieving sustainable development. availability of effective sustainability reporting by organization is considered one of the keys for successful strategic management (perrini & tencati, 2006). this gives all the stakeholders window to see what exactly the activities of organization are. currently gri is the most suitable framework for reporting such activities as it incorporates all the sustainability dimensions in their guideline. prior studies conducted on sustainability reporting shows mixed results. some findings show significant level of compliance while others reveal otherwise. in a studied conducted by daizy & das (2014) where they examined the level of compliance with sustainability disclosure by indian mining sector, the finding shows that, the level of compliance with the requirement of gri framework was insignificant. another study conducted in sweden by hedberg & von malmborg (2003) investigated the compliance with corporate sustainability reporting (csr) specifically the requirement of gri guidelines. the finding shows that even though sustainability disclosure increases organizational legitimacy and credibility of organizations, the level of compliance is still insignificant. in the same way, folashade, akinwumi, dorcas, & uwalomwa (2016) in their study assessed the level of sustainability disclosure by listed nigerian industrial goods companies. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 5 the study was based on gri framework and used content analysis in collecting the data from annual report of the sampled companies. the result shows insignificant level of compliance with sustainability disclosure requirement. in the study, no disclosure was found in human rights in social dimension of the disclosure and only 3% under environmental dimension. sustainability reporting by listed nigerian food and beverages compnaies, concluded that there is significant level of disclosure. where environmental activities represent 20.40% of the total disclosures follow by product 19.75% and the least, human rights with 12.84% level of disclosure (isa, 2014). 3. methodology this study used secondary data extracted from the annual reports of the sampled companies. the population of the study comprises the entire companies listed on oil and gas sector of the main board of nigerian stock exchange (nse). two-point filter criteria were used to select the sampled companies used in the study. first, the company must have been listed on the market prior to 2012. second, the company must prepare and present its annual report to the market throughout the period under review. this is to enable the study to collect the necessary data to permit the generalization of the findings of the study. the period covered in the study is 2012 to 2016. the selection of 2012 as starting period was based on the fact that there are number of changes in reporting regime that have occurred in the year. for the purpose of this study, data were collected from the annual reports of eight (8) selected companies listed in oil and gas sector of nse for the period of five years (2012 – 2016), this based on the importance this sector in the development of nigerian economy and how sensitive this sector is in relation to environmental and social impact. secondly, the 2012 to 2016 are the period in which financial reporting atmosphere has underwent important regulatory changes. these development range from the mandatory compliance with code of corporate governance in 2011 as well as mandatory adoption of international financial reporting standard in 2012. the study used content analysis in collecting the data related to gri disclosure and weighted disclosure approach was adopted to capture the extent of disclosure among the selected companies. in this method the level of disclosure of a particular item was ranked 0, 1 and 2 points. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 6 two points was given to companies that fully disclosed an item of disclosure, one point was given for partial disclosure, while zero was given to companies that did not disclose an item of disclosure in their annual report and accounts. therefore, the score for each company is the proportion of the points scored to the total points essential to meet the voluntary disclosure requirement as stated in the formula below:       n i m i j dim dit cs 1 1 where: csj = total compliance scored by a company. t = total number of points scored. j = company under study. m = total points essential to meet the disclosure requirements. to test the level of compliance based on firm characteristics, the companies were portioned according to size, profitability and quality of audit. total assets were used to partition the companies into large and small. companies with the total assets above mean were considered large, while those with total assets below the mean were considered small. return on assets (roa) was used to partition the companies into high profitable and low profitable companies. companies with the roa above average were considered high profitable companies, while those with roa below the average were considered low profitable companies. regarding the quality of the audit, companies are considered as companies with high audit quality if been audited by big-4 auditing firms, while those audited by firms that are not big-4 are considered companies with low audit quality. 4. empirical results in this segment, data analyses and discussions related to the objective of the study were presented. descriptive statistics this study was aimed at assessing the level of compliance with the sustainability disclosure requirement by oil and gas listed companies in nigeria. table 2 presents descriptive analysis of sustainability disclosure compliance by the sampled gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 7 companies for the period of the study (2012 – 2016). the result shows that the minimum compliance was 0.500, while average and maximum compliance 0.996 and 1.417 respectively. table1: descriptive statistics of the sustainability disclosure compliance gri 2012 2013 2014 2015 2016 all mean 0.948 1.000 1.000 1.000 1.031 0.996 std. dev. 0.302 0.321 0.299 0.295 0.305 0.290 min 0.500 0.500 0.500 0.583 0.583 0.500 max 1.250 1.250 1.250 1.417 1.417 1.417 source: authors compilation, 2020 the yearly analyses of summary statistics reveal continuous improvement in the mean compliance for the period of study. the average compliance level with gri was 0.948 in 2012, 1.000 in 2013, 2014, 2015, and 1.031 for 2016. the average compliance level with gri for the period under review was 0.996. the maximum level of compliance with gri stands at 1.417 while the weakest level of compliance was 0.500. the standard deviation of 0.290 indicates lower variation of compliance across study period. table 2 compliance based on disclosure type disclosure type n mean std. dev. min max t-stat pvalue category a 40 1.188 0.563 0.00 0 1.50 0 3.757 8 0.0006 category b 40 0.958 0.250 0.60 0 1.40 0 category a = strategy and analysis based disclosure category b = company profile based disclosure table 2 presents the summary statistics analyses on extant of compliance with gri when the requirements are partitioned into strategy and analysis (category a) and organizational profile (category b). the results presented shows higher compliance with category a requirements than that of category b. that is to say, the average compliance of category a companies is 1.188, while that of category b is 0.958. the mean comparison test (t-test) conducted on the two categories reveals a significant difference in the level of compliance of the two categories. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 8 table 3: compliance based on company characteristics firm characteristics n=40 mean t-stat p-value size big 20 0.846 -3.793** 0.0005 small 20 1.146 profitability higher 20 1.025 0.631 0.532 lower 20 0.967 auditor type big 4 29 0.902 1.278 0.209 non-big 4 11 1.032 source: stata output, 2020 the extent of compliance with sustainability disclosure based on companies’ characteristics was tested and the result is presented in the table 4 above. the result of the means t-test reveals significant differences, at 1% statistical level of significance, in compliance between large and small companies. this means that there is significance difference in the level of compliance between big small companies. conversely, the result of the means t-test reveals insignificant differences in compliance between high profitable and low profitable companies. although the level of compliance of companies with high profitability is slightly high than that of companies with low profitability. similarly, the result of the means t-test reveals insignificant differences in compliance between companies with high quality audit and those with low quality audit. 5. conclusion the study was aimed at assessing the level of sustainability disclosure by listed oil and gas companies in nigeria from 2012 to 2016. the findings reveal that there is significance level of compliance with sustainability disclosure requirement by the companies. it also reveals yearly improvement in the means compliance across the study period. in addition, companies complied with the requirement under strategy and analyses than other categories of the disclosure requirement. it also shows that big companies complied more with the disclosure requirement than small companies. however, profitability and audit quality of the companies have no significance gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 9 difference in influencing level of disclosure. the findings of this study will add to the existing literature in the area of sustainability reporting. it will also guide regulators in nigeria in shaping the future of accounting reporting environment. the study suggested for future research examining the economic, environmental and social dimensions of the sustainability disclosure requirement in nigeria as well as determinants and value relevance of this disclosure. references belal, a., cooper, s., & robins, r. (2010). social and environmental accounting and reporting in emerging and less developed countries. british accounting review, 30(1), 1. campbell, d., moore, g., & shrives, p. (2006). cross-sectional effects in community disclosure. accounting, auditing & accountability journal, 19(1), 96–114. cormier, d., gordon, i. m., & magnan, m. (2004). corporate environmental disclosure: contrasting management’s perceptions with reality. journal of business ethics, 49(2), 143–165. dubbink, w., graafland, j., & liedekerke, l. (2008). csr, transparency and the role of intermediate organisations. journal of business ethics, 82,391–406. daizy and niladri das. (2014). disclosure of sustainability reporting by global reporting initiative framewaork in india mining sector. i j a b e r, 12(3), 683–707. fernández sánchez, j. l., luna sotorrío, l., & baraibar díez, e. (2011). the relationship between corporate governance and corporate social behavior: a structural equation model analysis. corporate social responsibility and environmental management, 18, 91–101. folashade, o., akinwumi, t., dorcas, a., & uwalomwa, u. (2016). assessment of sustainability reporting in nigerian industrial goods sector. 3rd international conference on african development, 3, 383–386. global reporting initiative (gri). 2002. http://www.globalreporting.org/aboutgri/gri_brochure–july2000.pdf [19 march 2002]. global reporting initiative (2006). g3 online boston usa: global reporting initiative. http://www.globalreporting.org. global reporting initiative (2018) https://www.globalreporting.org/information/about-gri/grihistory/pages/gri's%20history.aspx gurvitsh, n & sidorova, i. (2012). survey of sustainability reporting integrated into annual reports of estonian companies for the years 2007-2010: based on companies listed on tallinn stock exchange as of october 2011. procedia gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 10 economics and finance, 2: 26-34. hahn, rüdiger & kühnen, michael. (2013). determinants of sustainability reporting: a review of results, trends, and opportunities in an expanding field of research. journal of cleaner production. 59. 5-21. 10.1016/j.jclepro.2013.07.005. hedberg, c. j., & von malmborg, f. (2003). the global reporting initiative and corporate sustainability reporting in swedish companies. corporate social responsibility and environmental management, 10(3), 153–164. https://doi.org/10.1002/csr.38 isa, m. a. (2014). sustainability reporting among nigeria food and beverages firms muhammad. international journal of agriculture and economic development, 2(june), 1–9. isaksson, r., & steimle, u. (2009). what does gri-reporting tell us about corporate sustainability? the tqm journal, 21(2), 168–181. retrieved from https://doi.org/10.1108/17542730910938155 marimon, f., alonso-almeida, m. m., rodrigez, m. p., & alejandro, k. a. c. (2012). the worldwide diffusion. retreived from http://dx.doi.org/10.1016/j.jclepro.2012.04.017 of the global reporting initiative: what is the point?. journal of cleaner production prado-lorenzo, j.m., rodríguez-domínguez, l., gallego-álvarez, i. and garcíasánchez, i.m. (2009),“factors influencing the disclosure of greenhouse gas emissions in companies world-wide”,management decision, vol. 47 no. 7. rectrieved from perrini, f., & tencati, a. (2006). sustainability and stakeholder management: the need for new corporate performance evaluation and reporting systems. business strategy and the environment, 15(september 2005), 296–308. reverte, c. (2009). determinants of corporate social responsibility disclosure ratings by spanish listed firms. journal of business ethics, 88(2), 351–366. tsalavoutas, i., evans, l., & smith, m. (2010). comparison of two methods for measuring compliance with ifrs mandatory disclosure requirements. journal of applied accounting research, 11(3), 213–228. https://doi.org/10.1108/09675421011088143 yeoh, j. (2005). compliance with mandatory disclosure requirements by new zealand listed companies. advances in international accounting, 18(0), 245– 262. https://doi.org/http://dx.doi.org/10.1016/s0897-3660(05)18012-x 1 gusau journal of accounting and finance (gujaf) vol. 2 issue 4, october, 2021 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria 2 board diversity and financial performance of islamic banks in malaysia mustapha usman department of accounting al-qalam university katsina, nigeria mustapha_usman@auk.edu.ng isah umar kibiya department of accounting, yusuf maitama sule university kano, nigeria isahkibia@gmail.com abstract corporate governance of islamic banks (ibs) presents entirely unique and different complexities compared to conventional counterparts. despite these complexities and some reported cases of financial scandals involving the ibs, studies of the corporate governance of the ibs are still lacking. this paper examines the board aspect of islamic banks. the study specifically examined the impact of board diversity and financial performance ibs in malaysia. the sample of the study comprised of the 16 ibs operating in malaysia over six (6) years from 2015 to 2020. data was analysed with regression method of data analysis. the study also utilises t-test and perform robustness test for the predictor variables. the overall finding revealed that, diversity in the board of the ibs induces better financial performance. additionally, the research also found gender diversity and board directorships attributes of the board’s positive and significantly linked with the financial performance of the ibs. considering the result of the study we argue that more diverse board could not only guarantee proper monitoring and resource provision, but could also improve the independence of the board in its role as the trustee of shareholders, especially in complex institutions like ibs. by having a well inclusive board, ibs will benefit equally from valuable abilities across demographic, ethnic and religious groups in the society. furthermore, by ensuring very well inclusive boards, ibs can effectively contribute to enhancing social welfare of various segments in the society. this is the first study best known to the authors that provides empirical evidence on the influence of gender diversity, board national, board duality and board skills and expertise among board on the financial performance of ibs. this paper could be referred to by the shareholders and other stakeholders. keywords: board diversity, financial performance, islamic banks, malaysia 1. introduction islamic finance has recorded a remarkable increase for about half a century (chapra & ahmed, 2002). globally, the islamic financial institutions (ifis) are growing at the rate of 10% to 15% annually. not only that, ifis are growing in numbers as they also grow in size. islamic financial services board (ifsb, 2020) reported that, the total worth of the islamic financial servises industries (ifsi) globally across its three main segments (banking, capital markets and takāful) is mailto:mustapha_usman@auk.edu.ng mailto:isahkibia@gmail.com 3 estimated at usd 2.44 trillion in the year 2019, marking noticeable growth of 11.4% in assets in us dollar terms as agaisnt usd 2.19 trillion reported in 2018 the strength of ifis is commendable and among the few positive is how the ifis stand the test of global coronavirus pandemic. the broad resilience shown by the global financial system including the ifis has done much to assure the world that lessons from the 2008 global financial crisis (gfc) have been learnt. and among the various banking sectors that have stood tall through the period of the pandemic, islamic banks has arguably shone the brightest. the trend of ifis’ growth and development have not gone unnoticed in malaysia. islamic banks (ibs) who are the key players in islamic financial services, have seen a growing market share as a result of growing demand for islamic financial services. it is evident that ibs are increasing in number and at same time growing in size. yet, governance remains an issue of greater concern. just like their conventional counterparts as ibs are also victims of poor governance. corporate failures like ihlas finance house in turkey, financial scandal in the case of dubai islamic bank, the closure of the islamic bank of south africa, and islamic investment companies of egypt were all examples of governance concerns (hassan, 2006). in malaysia accordingly, the financial scandal of bank islam in 2005 was attributed to mismanagement due to poor governance as well as weak internal control mechanisms (parker, 2005). the fact that islamic banking is established mostly in the countries where the legal and regulatory framework necessary to enforce financial contracts are still growing could arguably be part of the concerns. that is, the financial environment characterized by a high degree of information asymmetry and moral hazard, which is supported by a high level of practical inefficiencies (haniffa & hudaib, 2006; uppal & mangla, 2014). hence, the development of proper governance mechanisms to monitor management’s action calls for proper investigation. apparently, governance raise greater concerns among shareholders, government, regulatory agencies, and other players in the market. the lack of regulatory standards in islamic finance, however, presents the industry with arguably its biggest immediate challenge. therefore, we argue that a larger and diversified board could be a better monitor that could ensure goal congruence and hence, better performance (almutairi & quttainah, 2017). this study is set to examine diversity in the board of ibs in malaysia, and examine the impact of board diversity on the financial performance of the ibs. diversity in the paper represent 4 board gender, board independence, board skills and expertise, and board nationality. 2. empirical review and hypotheses development 2.1 agency theory and resource dependency theory the inherent nature of banking industry is the diverse interests, ranging from shareholders, saving and investing public, and management. islamic banks (ibs) which are another aspect of banking industry attracts greater attention in its governance structure (grassa & matoussi, 2014;almutairi & quttainah, 2017). this is very glaring considering the conflicting goals of shariah compliance besides the issues of value creation for the investors. in this sense, investors refer to both investment account holders (iahs) and shareholders. due to these complexities, attention is drawn on how ibs strike balance between these conflicting needs, and at same time achieve long-term value for all, while remaining in consonant with shariah. most corporate governance researches are based on the agency theory approach which is defined as the relationship between shareholders and their agents (fama &jensen, 1983). the common assumption of agency theory is about how could the board be independent to serve as a good monitor of management for shareholder (terjesen et al., 2009). the paper compliment the agency theory with dependency theorist proponents who postulated that a people have different resource, attitude and aptitude (hillman & dalziel, 2003; nomran & haron, 2020). hence, larger and well diversified boards are better monitors of management and also minimise agency cost (almutairi & quttainah, 2017). 2.2 board gender ferreira (2014) cited adams and ferreira (2009) and revealed some of the interactions between gender and governance. they reported that female directors are more independent than male directors. specifically, they found women directors to have better attendance at board meetings, more likely to sit on monitoring committees, and are more likely to influence ceo withdrawals after poor performance. they conclude that, female board members are more likely to be tough monitors of managers. carter et. al. (2003) also found a positive relationship between the percentage of female gender on board and firm value. consistent with buss (2005), jabari and muhamad (2020) believed women to be different in personality, communication style, educational background, and career experience and expertise. hence, this will mean a unique resource to the board consistent with the assumptions of resource dependency theory, which will add to 5 another dimension of diversity to the board. in view this, jabari and muhamad (2020) examined gender diversity and performance of ibs of indonesia and malaysia where they found ibs with more gender diversity to have better financial performance. thus, the paper hypotheses that: ho1 there is a significant positive effect between female gender on the board and the financial performance of ibs. 2.3 board skills and expertise moreover, in line with resource dependency theory, board skills and expertise are exceptional and unique qualities that will improve their independence and better monitoring of a firm. it will also help their counselling to the management in the business operational sense (hillman & dalziel, 2003; nomran & haron, 2020; richard, 2000; ujunwa, 2012). therefore, the study proposes board skills and expertise to be another dimension of board diversity that will improve board’s function and resource provision, and thus, firm performance. hence, the study postulates that; ho2 there is a significant positive effect between board skills and expertise and financial performance of ibs. 2.4 board nationality almutairi and quttainah (2017) examined the corporate governance of 82 ibs from 15 countries including malaysia from 1993 to 2014. they concluded that larger boards tend to contain different personalities with different resource and hence more diversified. a decade earlier, ruigrok et al. (2007) revealed that foreign directors with strong networks, and without previous or current directorship experience on a particular board might introduce fresh ideas and initiate new discussions from their diverse knowledge and expertise to the board. they argued that, foreign directors tend to be free from any type of relationship to a firm which guarantees their independence. additionally, foreign directors can provide another dimension of diversity to the board as a result the board will benefit from their international experience to improve thereby improving the board quality. this is consistent with ujunwa (2012), who found foreign directors on the board to improve firms performance. hence, considering these unique features, the study hypotheses foreign directors to improve firm performance. ho3 there is a significant positive effect between board nationality and the financial performance of ibs. 6 2.5 board directorships hakimi et al. (2018) investigate the link between board characteristics and performance of 13 bahraini banks for seven-year period from 2005 to 2011. using random effect regression analysis, the study revealed board directorships as measured by multiple director role significant and positively related with the performance of the bahraini bank. consistently, ferris et al. (2003) contended that directors with multiples roles are normally old and corporate outsiders; majority of them are bankers, consultants, and executives. hence, ibs who are relatively lacking in terms of industry experience, might tend to extract the benefits of incorporating directors with multiple roles in their board structure. admittedly, the research proposed that; ho4 – there is a significant positive effect between board directorships and the financial performance of ibs. 3. methodology and data the population under study consists of all registered ibs with bank negara, malaysia (bnm). as at december 2020, there were sixteen (16) registered ibs operating in malaysia. using panel data, the study examines these banks for six (6) years period ranging from 2015 to 2020. the six years’ period have been determined based on the factors specific to the ibs in malaysia which include existence of the ibs and availability of data for all the years under consideration (grassa & matoussi, 2014). table 1: study variables and measurements variables definitions sources gender proportion of female members to overall board members proportion of female members to overall board members nationality dummy with value 1 represents foreign board members, and value of 0 if otherwise. (ruigrok et al., 2007; ujunwa, 2012) skills and expertise dummy value 1 for board member with professional qualification or phd qualification, and value of 0 if otherwise. (ma et al., 2019; ujunwa, 2012) directorships dummy value 1 for directorships and 0 if otherwise. (haniffa & hudaib, 2006; kathyayini & carol, 2016) roa measured as profit before interest and tax over total asset. (issa et al., 2021; kathyayini & carol, 2016) roe measured as profit after tax divided by owners’ equity (grassa et al., 2014 7 firm size measured as the log of total assets. (issa et al., 2021; ujunwa, 2012) leverage measured as a total debt divided by total assets. (wei & peng, 2014) source: compiled by the authors, 2021 3.1 t-test (independent t-test) in this regard, this study compared the mean differences of the board diversity variables (gender, nationality, skills and expertise, and directorship) of the ibs in order to examine the statistical significance of the variables (grassa et al., 2014). the results of the t-test are used by the researchers to determine the statistical significance of the variable for the study (appendix a). results from the t-test revealed board gender and directorships are statistically significant when the mean of board with female and foreign member are compared with those without respectively. additionally, the analysis also revealed roe is statistically significant compared to roa which is found insignificant (grassa et al., 2014), although this is common given that ibs by their nature tend to have higher rate of roe and smaller roa (ifsb, 2020). 3.2 multiple regression the functional relationship and regression models derived from board diversity and performance are stated below: performance = a + b1boardattributes + control variables + e……………………… i roe = a + b1bgen + b2bse + b3bnat + b4bdir + b5bsize + b6lev + e……….. ii where: bgen = board gender bse = board skills and expertise bnat = board nationality bdir = directorships roe = returns on equity control variables = bank size and leverage. a = overall intercept b1…b6 = beta coefficient of explanatory variables. note: the models above contained the modified regression models based on the study variables. 8 4. results and discussions 4.1 descriptive statistic table 2 below provides the descriptive statistics of board diversity attributes namely; gender, nationality, skills and expertise, and directorships. analysis on the board gender contained that, on the average, the board of the ibs is composed of at least 5% female genders. this depicts that, board of the ibs in malaysia are dominated by male members. the maximum percentage of female members on the board stood at 33% (0.33, sd = 0.78). likewise, the result of the descriptive statistic revealed the average percentage of foreign directors (nationality) on the board of ibs is 16% (sd = 0.25). this shows that, the board of ibs are dominated by local directors. however, there exists ibs with 100% foreign directors (maximum = 1.00), as they are foreign banks which have established offices in malaysia. moreover, from the board skills and expertise variable, which is represented by board members’ phd or professional qualification, the result revealed that, about 31% (sd = 0.23) of the board possess either phd or professional qualification. lastly, the table also revealed about 25% of the board members to have a multiple director role in other entities (sd = 0.21). table 2: descriptive statistics variables min max mean sd bgen 0.000 0.333 0.05243 0.078489 bnat 0.000 1.000 0.16019 0.246252 bse 0.000 0.857 0.30724 0.225065 bdir 0.000 0.750 0.24738 0.206670 roa -0.074 0.022 0.00823 0.010896 roe -0.497 0.350 0.12201 0.108100 sources: compiled by the authors, 2021 4.2 regression result table 3 contains the summary of the regression result. using the enter method of regression analysis, the research found board diversity attributes to explain a significant amount of variation in the roe (f = 3.583, p = .003). it holds that, about 15% of the variation in roe could be explained by diversity attributes (adjusted r 2 = .148). table 3: model summary model r r 2 adjusted r 2 std. error durbinwatson 1 0.454 0.206 0.148 0.101578 1.527 sources: compiled by the authors, 2021 9 table 4: anova model sum of squares df mean square f sig. 1 regression 0.222 6 0.037 3.583 0.003 residual 0.856 83 0.010 total 1.078 89 sources: compiled by the authors, 2021 table 5: coefficients b std. error beta t sig. tolerance vif constant 0.015 0.095 0.160 0.873 bgen 0.050 0.023 0.222 2.141 0.035 0.887 1.127 bnat -0.002 0.023 -0.008 -0.077 0.939 0.876 1.114 bse -0.033 0.017 -0.201 -1.888 0.062 0.842 1.187 bdir 0.056 0.028 0.215 1.981 0.051 0.813 1.230 bsie 0.001 0.001 0.196 1.889 0.062 0.890 1.124 lev 0.075 0.106 0.074 0.705 0.483 0.876 1.141 sources: compiled by the authors,2021 moreover, additional analysis as contained in table 5 regarding the contribution of each independent variable in the model revealed board gender and directorships to have a significant impact on performance of the ibs as measured by roe. this is the fact that gender (t = 2.141, p = .035) and board directorships (t = 1.981, p = .051) are statistically significant contributors in the model. the significant positive relation between (after holding other independent variables constant) gender and roe indicates that increase in one female gender in the board, will lead a positive increase in the performance of the ibs by 5% (b = .050). consistent with this finding are the studies of ujunwa (2012) and jabari and muhamad (2020). furthermore, in agreement with this, is the work of hakimi et al. (2018) who also found board nationality positive and significantly impacts ibs’ performance. this finding implies that, an introduction of one board member with directorships role will improve performance of the ibs by 6% (b = .056). on the contrary, the regression result revealed both board nationality and board skills and expertise to be negatively (statistically insignificant) related to roe. the also confirms the fitness and validity of the regression model. 10 5. conclusion and recommendation from analysis of the result, the study could establish that female board member has the most significant impact on the board of the ibs. thus, this shows support to resource dependency theory view and also support diversity argument about the unique qualities of female gender. also, this supports the present policy recommendations by various countries including malaysia that recommend for incorporating more female members in the decision making position and boardroom decisions (ahmad-zaluki, 2012; francoeur et al., 2008). therefore, the study concludes that, a higher percentage of female members in the board could improve the monitoring and advisory roles of the board. hence, the effort towards incorporating more female members in the top management decisions in malaysia is timely and relevant for better performance. although, considering the result of the study incorporating more diverse member on the board could not only guarantee proper monitoring and resource provision, but could also improve the independence of the board in its role as the trustee of shareholders who monitor management, especially in complex institutions like ibs. this might go a long way to help address the complex agency issues among stakeholders in the ibs. the research recommended that, “one rule might not fit all” or “there might not be an optimal solution for all”. this is the fact that, bigger and smaller companies are not the same in terms of profitability, asset base and complexities. hence, board composition should not be at random. the fact that larger and diverse boards might be beneficial for bigger companies, such instance could end up in exacerbating the agency problems of the smaller companies. this is because smaller companies might not have more complex issues to address. hence, larger and diversified board might tend to take more of their smaller profitability in form of salary which could ordinarily be used for further expansion and development projects. lastly, future studies might look into the impact of regulatory requirement on the performance of the ibs. one area could the practices of islamic banks before and after the issuance of shariah governance policy (2019). references ahmad-zaluki, n. a. (2012). the pre-and post-ipos gender composition of board of directors in malaysia. gender in management: an international journal, 27(7), 449–462. almutairi, a. r., & quttainah, m. a. (2017). corporate governance: evidence from islamic banks. social responsibility journal, 13(3), 601–624. 11 https://doi.org/https://doi.org/10.1108/srj-05-2016-0061 buss, d. m. (2005). the handbook of evolutionary psychology. john wiley & sons. carter, d. a., simkins, b. j., & simpson, w. g. (2003). corporate governance, board diversity, and firm value. financial review, 38(1), 33–53. chapra, m. u., & ahmed, h. (2002). corporate governance in islamic financial institutions. occasional paper no. 6, jeddah, irti/idb. ferreira, d. (2014). board diversity: should we trust research to inform policy? corporate governance: an international review, n/a-n/a. https://doi.org/10.1111/corg.12092 ferris, s. p., jagannathan, m., & pritchard, a. c. (2003). too busy to mind the business? monitoring by directors with multiple board appointments. journal of finance, 58(3), 1087–1111. https://doi.org/10.1111/1540-6261.00559 francoeur, c., labelle, r., & sinclair-desgagné, b. (2008). gender diversity in corporate governance and top management. journal of business ethics, 81(1), 83–95. grassa, r., & matoussi, h. (2014). is corporate governance different for islamic banks? a comparative analysis between the gulf cooperation council and southeast asian countries. international journal of business governance and ethics, 9(1), 27–51. grassa, r., matoussi, h., & hassan, m. k. (2014). corporate governance of islamic banks: a comparative study between gcc and southeast asia countries. international journal of islamic and middle eastern finance and management, 7(3). hakimi, a., rachdi, h., ben selma mokni, r., & hssini, h. (2018). do board characteristics affect bank performance? evidence from the bahrain islamic banks. journal of islamic accounting and business research, 9(2), 251–272. https://doi.org/https:// doi.org/10.1108/jiabr-06-2015-0029 permanent haniffa, r., & hudaib, m. (2006). corporate governance structure and performance of malaysian listed companies. journal of business finance & accounting, 33(7‐ 8), 1034–1062. hassan, k. m. (2006). the x-efficiency in islamic banks. islamic economic studies, 13(2), 50–78. hillman, a. j., & dalziel, t. (2003). boards of directors and firm performance: integrating agency and resource dependence perspectives. academy of management review, 28(3), 383–396. islamic financial services board. (2020). islamic financial services industry stability report. issa, s. o., yunusa, n., & hamman, a. m. (2021). board mechanisms and environmental disclosure quality of listed oil and gas firms in nigeria. gusau journal of accounting and finance, 2(2), 1–17. jabari, h. n., & muhamad, r. (2020). gender diversity and financial performance of islamic banks. journal of financial reporting and accounting, 19(3), 412–433. https://doi.org/10.1108/jfra-03-2020-0061 kathyayini, r., & carol, t. (2016). board diversity and csr reporting: an australian study. meditari accountancy research, 24(2). 12 ma, y., zhang, q., yin, q., & wang, b. (2019). the influence of top managers on environmental information disclosure: the moderating effect of company’s environmental performance. international journal of environmental research and public health. https://doi.org/10.3390/ijerph16071167 nomran, n., & haron, r. (2020). a systematic literature review on sharı’ah governance mechanism and firm performance in islamic banking. islamic economic studies, 27–2(2), 91–123. https://doi.org/10.1108/ies-06-2019-0013 parker, m. (2005). scandal-hit bank islam malaysia declares huge losses. www.arabnews.com/node/277580 ramon-llorens, m. c., garcia-meca, e., & pucheta-martínez, m. c. (2020). female directors on boards. the impact of faultlines on csr reporting boards. sustainability accounting, management and policy journal, 1–28. https://doi.org/10.1108/sampj-07-2019-0273 richard, o. c. (2000). racial diversity, business strategy, and firm performance: a resource-based view. academy of management journal, 43(2), 164–177. ruigrok, w., peck, s., & tacheva, s. (2007). nationality and gender diversity on swiss corporate boards. corporate governance: an international review, 15(4), 546–557. terjesen, s., sealy, r., & singh, v. (2009). women directors on corporate boards: a review and research agenda. corporate governance: an international review, 17(3), 320–337. ujunwa, a. (2012). board characteristics and the financial performance of nigerian quoted firms. corporate governance, 12(5), 656–674. uppal, j. y., & mangla, i. u. (2014). islamic banking and finance revised after forty years: some global challenges. journal of finance, 16, 36–51. wei, x. b., & peng, j. (2014). an empirical study on impacts of environmental regulation on environmental information disclosure of listed companies of china : based on researches on listed companies in nonferrous metal industry. canadian social science, 10(2), 113–123. https://doi.org/10.3968/4329 13 gusau journal of accounting and finance (gujaf) vol. 1 issue 2, october, 2020 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state –nigeria gusau journal of accounting and finance, vol. i, issue 2, october, 2020 1 aggregate demand and fiscal policy adjustment in nigeria: evidence from two stage least squared and simulation experience titus wuyah yunana, phd inzehty01@gmail.com department of economics and management science nigeria police academy, wudil-kano umar yunusa sa’id yunusaumar@yahoo.com department of economics federal college of education, zaria abstract this study examined the shocks in aggregate demand to fiscal policy adjustment in nigeria using time series annual data from 1986-2020.the study constructs simple structural macroeconomic models made up of two blocks: consumption and investment sectors that contain seven variables; four are behavioural equations and two are identities. the models were estimated and analyzed using two stage least square methods and a simulation experiment was also conducted on the simple structural macroeconomics models. the study finds that fiscal policy variables (tax, government spending and public debt) have significant influence on aggregated demand in nigeria during the period under investigation. similarly, the simulation shows magnificent tracking power of the actual from the baseline simulation as the nature of the movement suggested. the study, therefore, recommends that the government should encourage expansionary fiscal policy by expanding public spending channeled to infrastructure and other sectors of the economy like commercial farming and creation of utility. these have to been done through proper monitory as funds usually diverted to private pockets, decrease in taxes as it expands the purchasing power of the citizens which influence aggregate demand and output. keywords: aggregate demand, government spending, taxation, public debt, simulation 1. introduction fiscal policy tools are used in addressing demand shocks in the economy (cbn, 2017). fiscal policy instruments are used in manipulation of government spending, taxes, subsidy and debt to control total demand variables in the economy (ahmad, 2008). fiscal policy is implemented by the fiscal authorities, the ministry of finance (abdulazeez, 2016). on the basis of economic principles, fiscal policy is used to solve economic problems by expanding aggregate demand gusau journal of accounting and finance, vol. i, issue 2, october, 2020 2 components and consequently economic growth (khaysy& gang, 2017). fiscal policy involves the expansion or reduction in public spending and or taxation with the motives of adjusting aggregate demand (kibiwot & chernuyot, 2012). to embark on expansionary policy, there should be reduction in taxation which means contraction in either tax expenditure or personal income tax. these reductions in taxes will increase the disposable income and expand consumption. in the same vein, fall in corporate profit taxes will lead to more profit and reinvestment, hence, leading to investment growth, all other things remaining unchanged (ghulam, 2014). these will expand the aggregate demand. in a clearer form, reduction in taxes boost consumption, expand investment and finally increase aggregate demand (joab &daney, 2017). on the other hand, expansion in public spending will result in growth in total demand (lee & gordon, 2005; koeda, 2008; miron, 2013). public debt may negatively affect investment through rise in cost of borrowing resulting from government debts. the finances of government deficit through internal borrowing will decrease the loanable funds that should be channeled to private investment. this affects the request for loanable fund bigger than its supply (international monetary fund, 2009). the increased borrowing results in rise in cost of borrowing and decreases the level of private investment. in the same vein, foreign debt may negatively affect private investment. this happens mainly in countries where private sector is less dominant. increased government foreign debt decreases private sector opportunity for external borrowing because government foreign debt expands the danger of financing the private sector. it limits the accessibility to external credits, and reduces the price of accessing the external fund, thereby decreasing private access to foreign markets (international monetary fund, 2009). fiscal policy in nigeria is aimed at influencing aggregate demand to stabilize economic growth. various fiscal strategies have been adopted by the federal ministry of finance over the years to influence aggregate demand and economic growth. despite the manipulation of fiscal variables in nigeria, the problem affecting its total demand continues to expand. such problems include low investment, low consumption, and high unemployment rate, high importation of consumable and capital goods, and low exportation, among others. “these observed problems are responsible for the fast reduction in the total demand components (private investment, private consumption, government consumption and export-import) and consequently economic growth of nigeria”. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 3 in nigeria, the conflict over which tool to use is negatively affecting the economy in terms of stimulating macroeconomic variables such as individual consumption, individual investment, government consumption and export. finally, a decision in nigeria about using fiscal policy tools to achieve macroeconomic policy is, in part, a political decision rather than a purely economic one. these constitute low aggregate demand in nigeria. this study examined the magnitude of shocks in aggregate demand to fiscal policy adjustment in nigeria and performed simulation experiment. the paper is structure into five sections: the first section is the introduction, literature review in section two, methodology in section three and discussion and analysis of results in section four. the last section covers the conclusion and recommendations of the study. 2. literature review 2.1 conceptual issues: aggregate demand and fiscal policy o'sullivan and steven (2003) defined aggregate demand as the total demand by individual and group within a specific period of time. it can be in like manner being seen as the measure of authentic gross domestic product (gdp) mentioned at different worth levels (sexton, fortura & peter, 2005). all out premium (ad) is resolved with a comparable condition for evaluating an economy's all out national yield (gdp): ad = c + i + g + (x – m), where c = consumer spending on items and adventures; i = investment spending on business capital product; g = government spending on open product and endeavors; x = exports and m = imports. fiscal policy has to do with the use of revenue collected by the government (mainly taxes) and spending to expand economic activities (o'sullivan & steven, 2003). according to okonjo(2003), fiscal policy has to do with adjustment in public expenditure and taxes to expand economic growth. fiscal and monetary policies are connected and any adjustment in one will affect developments in the other. undoubtedly, fiscal policy is a key to the progress of any economy, as government’s authority to adjust tax and to spend affects the individual income of the people, corporations and business environment (okonjo, 2003). 2.2 empirical literature review joab and daney (2017) examine the impulse on the aggregate demand in bolivia through the coordination of the monetary and fiscal policy using the structure of a https://en.wikipedia.org/wiki/arthur_o%27sullivan_%28economist%29 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 4 dynamic stochastic general equilibrium model (dsge). the findings shows that cost push inflation, given that for exogenous inflationary effects, the monetary authorities' response is to raise the interest rate and by the fiscal policy with maintaining a public investment contractive to avoid even greater inflationary effects. emad (2017) analysed the short-term effects of fiscal policy shocks on real gross domestic product in egypt using structural vector autoregressive model and impulse response function spanning the period 1985-2015. the results show that public spending shock has a negative impact on real gross domestic product, taxation has a positive but weak impact on real gross domestic product and the impulse response functions were statistically insignificant. nursini (2017) evaluates the effect of fiscal policy and trade openness on economic growth in indonesia for the period 1990-2015 using vector autoregressive model. the results indicate that public expenditure on infrastructure and human resources has positive and significant effect on economic growth. routine public expenditure has negative and insignificant effect on economic growth. trade openness has positive and significant effect on economic growth. nwankwo, kalu, and chiekezie (2017) examine the impact of fiscal policy on economic growth in nigeria spanning the period of 1970-2014 using cointegration and error correction (ecm) models. the result of the unit root test shows that public capital spending, revenue from oil, gross domestic product and revenue from tax were stationary at first difference i(1), while public recurrent spending was stationary at levels at levels i(0). the co-integration result shows that there are 3 co integrating equations at 5 per cent level of significance. this indicates that there is a long-run equilibrium relationship between fiscal policy and economic growth. wissem (2016) examines the threshold effect of fiscal policy on private consumption in tunisia using a threshold regression model spanning the period 1975-2010. the results show that public spending and revenue from tax have effects on consumption, when private debt/gdp ratio is below 48 %. the study shows that private consumption reacts in non-linear fashion to changes in fiscal policy. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 5 joseph, tochi-nze, and ekundayo (2016) analysed the nexus between fiscal policy and private investment in five selected west african countries using fixed effect model for panel data ordinary least square model for the period 1993-2014. the findings show the existence of a significant crowding-in effect of public capital spending and revenue from tax while revenue from non-tax indicates a crowding out effect. recurrent spending and external debt also indicate crowdingout effects but were insignificant. the accelerator effect of output growth was also found to be insignificant across the countries over the study period. ejuvbekpokpo, sallahuddin and clark (2015) examine the impact of fiscal policy on investment expenditure in nigeria covering the period of 1970-2010 using ordinary least squares (ols) method. the findings show that fiscal policy has a significant impact on investment spending in nigeria while public spending and gross domestic product have significant impact on investment, but corporate income tax has a positive, instead of a negative impact on investment spending in nigeria. from the previous studies reviewed, most of the study uses ordinary least squared regression model for estimation and analysis, some studies used vector autoregressive and some structural vector autoregressive models which are more superior to the ordinary least squared regression model in terms of reliability of the result. in this study, two stages least squared regression model which permit corrected errors and does not need normal distribution and it is less sensitive to specification errors than are the full information estimator. therefore, it is not necessary to test for stationary and normality data before estimating the model. in addition, none of the studied reviewed performed simulation to test the reliability of the model in predicting the movement of the endogenous variables. 2.3 theoretical literature the keynesian theory keynes (1936) propounded the keynesian theory. this is a theory that says the government should increase demand to boost growth. keynes described his premise in “the general theory of employment, interest, and money.” it was revolutionary. first, it argued that government spending was a critical factor driving aggregate demand. that meant an increase in spending would increase demand. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 6 keynes (1936) believes consumer demand is the primary driving force in an economy. as a result, the theory supports the expansionary fiscal policy. its main tools are government spending on infrastructure, unemployment benefits, and education. a drawback is that overdoing keynesian policies increases inflation (keynes, 1936). the theory says that advocating for expansion in public spending leads to increase in local output. deficit expenditure moves the economy in the short-run by making family units feel better off, thus expanding total consumption by government and private sectors (keynes, 1936). as aggregate demand increases, fiscal deficit will have positive effect on macroeconomic activity, thereby expanding savings and capital formation. public spending in an underemployed economy add to aggregate demand at prevailing prices and interest rates with no calculation necessity for private family units to offset (displace or crowd-out) their own purchases as long as public goods are not close substitutes for private goods. the resulting speedy growth of nominal gdp would produce faster growth of real gdp and demand would thus create its own supply, in stark contrast to say’s law. keynes (1936) recognizes the possibilities of public spending crowding-out private (investment) spending through growth in cost of credit (interest rate), hence the suggestion for fiscal deficit to be implemented only during a depression. keynes (1936) further posit that fiscal deficits could have a negative impact on the external sector, reflected through trade deficit, but only if the domestic economy is unable to absorb the additional liquidity through an expansion in output. hence, if the supply of output does not expand in response to the deficit, the surplus spending would only add to the level of imports, thereby resulting in a trade deficit and subsequent decrease in the exchange rate: “the twin-deficits” hypothesis. one of the major criticisms of the keynesian theory was by the supply-side economists that increasing business growth, not consumer demand, will boost the economy. they agree the government has a role to play, but fiscal policy should target companies. they rely on tax cuts and deregulation (wanniski, 1978). despite the criticism of the keynesian theory, the theory better explained the linked between fiscal policy and aggregate demand that other theories such as the classical theory. 3. methodology the study used the macro-econometric model (mem) in analyses. this macroeconometric model has two types of equations that explain the economy. the gusau journal of accounting and finance, vol. i, issue 2, october, 2020 7 behavioural equations are estimated from time series data while the identities equations are hold by definition. 3.1 model specification the study constructs a model with two blocks, consumption block and the investment block which contains seven variables. the variables are connected with one another through four behavioural equations and two identities. general structure of the model is briefly explained here. 3.1.1 consumption sector block total consumption comprises of private consumption and government consumption ct = pt c+gt c…………………………………………………………………………….1 pt c= a0 + a1taxt + a2get + a3pdt + μt1 …………………………….…………...2 gt c= b0 + b1taxt + b2get + b3pdt + μt2………………………………….……..3 where c = total consumption, pc = private consumption, gc = government consumption ge = government expenditure, tax = taxation and pd = public debt. a priory expectation for consumption sector block parameters is: positive parameters: α2, b2, and negative parameters: α1, α3,b1,b3 3.1.2 investment sector block total investment consists of investment by private individuals (pi) and investment by the government (gi)it = pit + git…..............................................................4 pt i= a0 + a1taxt+ a2get+ a3pdt+ μt1……..…………………………………...5 gt i = b0 + b1taxt + b2get + b3pdt + μt2 …………………………………...…6 where i = total investment, pi = private investment, ge = government expenditure, tax = taxation, pd = public debt. a priory expectation for consumption sector block parameters is: positive parameters: α2, b2, and negative parameters: α1, α3,b1,b3, 3.2 sources of data annual time series data spanning the period 1986-2020 were used for the estimation. the detail of data description with respect to variables, signs and source are presented in table 1. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 8 table 1: data description s/n series signs source 1 government expenditure ge cbn 2 taxation tax cbn 3 private consumption pc cbn 4 private investment pi cbn 5 investment by the government gi cbn 6 consumption by the government gc cbn 7 public debt pd cbn source: author’s compilation, 2021 3.3 techniques of data analysis quantitative data were used in the study to address the objectives mentioned in the previous section. data were obtained from central bank of nigeria statistical bulletin only. two stage least square techniques were used in the estimation of the behavioural equations in the macro econometric models. the two stages least squared (2sls) permit corrected errors and does not need normal distribution and it is less sensitive to specification errors than are the full information estimator. therefore, it is not necessary to test for stationary and normality data before estimating the model. simulation exercise was performed after estimation of the macro econometric model. 4. discussion and analysis of result 4.1results of the structural model and analysis the behavioural equations specified in the previous section were estimated using two stages least squared regression model and the results are presented below: 4.1.1 consumption sector block result table 2: result for pc equation variables coefficient t.value tax -0.31 -0.54 ge 0.22 -2.21 pd 0.19 -3.40 r2=0.74 r-2= 0.71 dw=2.11 source: computed by the author (2021) gusau journal of accounting and finance, vol. i, issue 2, october, 2020 9 table 3: result for gc equation variables coefficient t.value tax 0.36 3.32 ge 0.013 2.19 pd 0.53 3.01 r2=0.58 r-2= 0.53 dw=2.32 source: computed by the author (2021) the result in table 2 indicates the adjusted coefficient of determination (r-2) is high. the r-2 value of 0.71 showed that over 71% of the contribution in the dependent variable (private consumption) is explained by the joint independent variables in the model. the estimated coefficients of the variables in table 2 were also very impressive as they fall within a-priori expectation of the study. tax variable showed a negative coefficient (-0.31). this shows that there is an inverse relationship between tax and private consumption. 1% increase in tax will lead to 31% decrease in private consumption. other variables that showed positive signs: ge (0.22) and pd (0.19). the values of t-statistics of all the explanatory variables in table 2 were statistically significant at 5% level except for tax. the dw value of 2.11means no autocorrelation among the variables. table 3 is the estimated result for government consumption (gc). the adjusted coefficient of determination is very high (0.53%), this implies that the function explains 53% linear movements in the dependent variable of gc. the result shows that tax, government expenditure and public debt have positive and significant relationship with government consumption (gc) as indicated by the tvalues of the respective variables which are greater than 2 in absolute terms. 4.1.2 investment sector block result table 4: result for pi equation variables coefficient t.value tax -0.81 -2.41 ge 0.23 3.74 pd -0.04 -2.32 r2=0.65 r-2= 0.62 dw=1.88 source: computed by the author (2021) gusau journal of accounting and finance, vol. i, issue 2, october, 2020 10 table 5: result for gi equation variables coefficient t.value tax 0.02 2.34 ge -0.13 2.98 pd 0.33 -1.42 r2=0.77 r-2= 0.72 dw=1.98 source: computed by the author (2021) table 4 reveals that the r-2 which is 0.65 implies that the function explains 65% linear movements in the dependent variable of pi. all the explanatory variables are statistically significant as their t-values are up to 2 in absolute terms. a percentage increase in ge would result to an increase in private investment (pi) by 23%, while a percentage increase in tax and pd would lead to decrease in pi by 81%, and 4% respectively. the dw value of 1.88 is within the rejection region. the study therefore concludes absence of autocorrelation among the variables. table 5 represents the government investment (gi) sub-sector in nigeria. the estimated result showed that r-2 adjusted is 72%. as expected, some of the coefficients exerted high positive significance impact on government investment (gi). the coefficients of tax (0.02) and pd (0.33) exert positive influence on the government investment (gi). the coefficient of ge (–0.13) exert negative influence on the government investment (gi). all the variables except pd (–1.42) are significant at 5% level. 4.2 simulation experiment simulations are conducted to test the reliability of the model in predicting the movement of the endogenous variables. figure 1 show the actual and simulated values of endogenous variables, provides body of facts for the good successful completion of the model. the graphs show the stochastic dynamic of actual and baseline simulation. government consumption (gc), private consumption (pc), government investment and private investment (pi) track their historical path well. a careful view of the graphs indicates that the model tracks the time long strip and turning points of the dependent variables significantly well. this is a good signer that the model entraps the bustling of nigeria’s economy with respect to the behaviour of the variables of interest thus, suggesting its suitability for policy simulation. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 11 figure 1: graphs of the stochastic dynamic baseline simulation -400000 0 400000 800000 1200000 1600000 2000000 2400000 2800000 3200000 1990 1995 2000 2005 2010 2015 actual pc (baseline mean) pc 0 40 80 120 160 200 240 1990 1995 2000 2005 2010 2015 actual pi (baseline mean) pi 0 200000 400000 600000 800000 1000000 1200000 1990 1995 2000 2005 2010 2015 actual gi (baseline mean) gi gusau journal of accounting and finance, vol. i, issue 2, october, 2020 12 4.3 discussion of results the results obtained after estimating equations show that fiscal policy is statistically significant in influencing aggregated demand. government expenditure (ge) and public debt (pd) are statistically significance in stimulating private consumption (pc) while tax is insignificance in show in table 2. the findings also show significant contribution of taxation (tax), government expenditure (ge) and public debt (pd) to government expenditure (ge). this can be seen in table 3 as the t-values are all greater than 2 in absolute terms. in the same vein, taxation (tax), government expenditure (ge) and public debt (pd) statistically influence private investment (pi) as show in table 4 while table 5 indicates the result for government investment (gi) equation. taxation (tax) and government expenditure (ge) are statistically significant while public debt (pd) is not. the results obtained are in line with a priori expectation and also with the works of ejuvbekpokpo, sallahuddin and clark (2015) and wissem (2016). the major difference is the simulation experience conducted and tests the reliability of the model in predicting the movement of the endogenous variables. similarly, the baseline simulation indicated good tracking power of the actual from the baseline simulation as the nature of the movement suggested. in conclusion, this study is different from other study in terms of variables of fiscal policy used, the aggregate demand components used and model and techniques of analysis used in examining the shocks in aggregate demand to fiscal policy adjustment in nigeria. 5. conclusion and recommendations the study applied macro-econometric model with structural equations which were estimated using two stages least square method (2sls) and simulation experiment was also performed. the main finding of the study shows that shocks in aggregate demand were as a result of adjustment in fiscal policy. the study concludes that fiscal policy is statistically significant in influencing private consumption, private investment, government consumption and government investment in nigeria during the period under investigation. finally, simulation experiment performed reveals that the model tracked the time paths and turning points of the dependent variables well. based on findings, the study suggests the implementation of the following recommendations: the study suggest that since government spending is found to be an aggregate demand stimulant, the government should change the nature of its spending by channeling more towards provision of capital projects especially in gusau journal of accounting and finance, vol. i, issue 2, october, 2020 13 the area of infrastructural development; this will have the effect of both stimulating individual consumption and investment consumption (aggregate demand) and consequently output growth. taxation has a negative impact on aggregate demand (private consumption and investment consumption). therefore, to fight the problem of low aggregate demand, tax rates should be lowered. decrease in taxes will expand the purchasing power of citizens and boost private consumption (aggregate demand). public debt crowd-out investment in the private sector in the short run, the government should strive to reduce her debt profile by improving its revenue base. reference abdulazeez, m. n. (2016). impact of monetary policy on the economy of nigeria.pyrex journal of business and finance management research, 2 (10), 163-179 ahmad, s. (2008). monetary transmission mechanism in fiji and png.international research journal of finance and economics, 15(1), 284-290 cbn (2017). annual statistical bulletin, 2017 chakraborty, p. and chakraborty, l.s. (2006) is fiscal policy contracyclical in india. ejuvbekpokpo, sallahuddin&clark (2015).the impact of fiscal policy on investment expenditure in nigeria. international journal of economics, commerce and management, united kingdom, 3(5) emad, a. m. o. (2017). the impact of fiscal policy on output: a case study of egypt. thesis submitted to school of business and governance department of economics and finance, tallinn university of technology ghulam, r. m. (2014). role of fiscal policy for private investment in pakistan. international journal of economic sciences and applied research,7 (2), 139-152 international monetary fund (2009). “the state of public finances: outlook and mediumterm policies after the 2008 crisis” (washington: international monetary fund). joab &daney (2017).the impulse on the aggregate demand in bolivia through the coordination of the monetary and fiscal policy in crisis time. journal of economics bibliography, 4(2) joseph, tochi-nze, &ekundayo (2016). fiscal policy and private investment in selected west african countries.cbn journal of applied statistics, 7(1) gusau journal of accounting and finance, vol. i, issue 2, october, 2020 14 keynes, j.m. (1936). the general theory of employment, interest and money, macmillan and co., ltd., london. khaysy, s. & gang, s. (2017). the impact of monetary policy on economic development: evidence from lao pdr. global journal of human-social science: e economics, 17 (2) kibiwot, m. i., and chernuyot, k. s. (2012). effects of fiscal policy on private investment and economic growth in kenya. journal of economics and sustainable development, vol.3, no.7: pp. 8 – 16. koeda, j. and kramarenko, v, (2008). impact of government expenditure on growth: the case of azerbaijan. international monetary fund, imf. no, 115. lee, y. and gordon r. h. (2005). tax structure and economic growth. journal of public economics, no. 89: 1027-1043. miron, j. (2013). should u.s. fiscal policy slow growth or the debt? a nondilemma. policy analysis, no. 718. monacelli, t. and r. perotti (2006) fiscal policy, the trade balance, and the real exchange rate. the economic journal, 437 – 461 neaime s. (2008) twin deficits in lebanon: a time series analysis, ife lecture and working paper series no 2 beirut institute of financial economics, american university of beirut nursini, n. (2017).effect of fiscal policy and trade openness on economic growth in indonesia. international journal of economics and financial issues, 7(1), 358-364. nwankwo, d.j., kalu, c.u., &chiekezie, m.o. (2017).fiscal policy-economic growth correlates: further evidence from nigeria economy. international journal of academic research in business and social sciences, 7 (1) okonjo, i. (2003). reforming the unreformable: lessons from nigeria. cambridge, ma and london: the mit press, 2013 okpanachi u.m and abimiku c.a (2007) fiscal deficit and macroeconomic performance: a survey of theory and empirical evidencein ogijip.ed. the nigerian economy: challenge and directors for growth in the next 25 years, makurdi, aboki publishers o'sullivan, a., steven, m. s. (2003).economics: principles in action. upper saddle river, new jersey 07458: pearson prentice hall, p. 307. sexton, r., &fortura, p. (2005). exploring economics. wanniski, jude (1978). the way the world works: how economies fail and succeed. new york: basic books. wissem, k. (2016). threshold effect of fiscal policy on private consumption: evidence from tunisia. the romanian economic journal, 17(59) https://en.wikipedia.org/wiki/arthur_o%27sullivan_%28economist%29 http://www.pearsonschool.com/index.cfm?locator=psz3r9&pmdbsiteid=2781&pmdbsolutionid=6724&pmdbcategoryid=&pmdbprogramid=12881&level=4 https://archive.org/details/wayworldworks00jude https://archive.org/details/wayworldworks00jude 1 gusau journal of accounting and finance (gujaf) vol. 2 issue 4, october, 2021 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria 2 board physiognomies and corporate social responsibility disclosure of listed oil and gas firms in nigeria munir aliyu saleh department of accounting, federal university wukari, nigeria salehmuniraliyu@gmail.com +2347038422454 abubakar abubakar department of accounting, federal university of kashere, nigeria abubakarabubakar2020@gmail.com +2347030072314 ibrahim adamu saleh phd department of business administration federal university of kashere, nigeria, ibrahimadamusaleh3@gmail.com +2348033977158 shehu usman hassan phd professor of accounting and finance department of accounting federal university of kashere, nigeria, shehu.hassanus.usman@gmail.com +2348067766435 abstract this study examines the impact of board characteristics on corporate social responsibility disclosure of listed oil and gas firms in nigeria for the period of ten years from 2010-2019. the study used census sampling technique to arrive at sample size of nine (9) oil and gas firms listed on the floor of nigerian stock exchange as at 2019. data were extracted from annual reports and accounts of the sampled firms, the data was analyzed by means of descriptive statistics, correlation and regression analysis using stata13. the multiple regressions result reveals that foreign directors on the board has positive insignificant impact on corporate social responsibility disclosure while board independence, board meetings and women director on the board have a positive and significant impact on corporate social responsibility disclosure of the sample firms. based on the findings, the study concludes that board independence, board meetings and women director on the board improved corporate social responsibility disclosure of listed oil and gas firms in nigeria. based on the findings and conclusion, its therefore recommends among others, that the management of listed oil and gas companies in nigeria should maintain proportions of board independence as this will increase their investment in corporate social responsibility. this is because the presence of independent directors on the board will increase the board’s objectivity and its ability to represent multiple points of view of the firm’s role. keywords: board independent, board meetings, women director and crsd. 1. introduction corporate social responsibility disclosure (csrd) can be considered a western phenomenon. many developed countries have implemented procedures to encourage companies‟ disclosure of mailto:salehmuniraliyu@gmail.com mailto:abubakarabubakar2020@gmail.com mailto:ibrahimadamusaleh3@gmail.com mailto:shehu.hassanus.usman@gmail.com 3 their csr strategies and practices. international organizations and standard setters has strongly emphasized that companies must pay close attention to every part of the society that is been affected by its activities which are economic, social and environmental aspect of the society. corporate social responsibility disclosure can be seen as a means of making available information about the relationship between companies and all stakeholders of the community. this entails providing reports with respect to environmental impact of the firms on the society, the welfare of firms‟ employees and the rate of customer satisfaction. it is also a process of providing both financial and non-financial information in the social and environment context (hackston & milne, 1996). the form by which companies disclose their csr activities depends on the discretion of the companies. some companies disclose their csr activities on their annual reports, while others publish it on their websites or issue separate csr report. cormier (2011) argued that the extra information of firm can bridge the gap between stakeholder and a firm and as a result affect the financial performance future. the primary objective for the establishment of corporate board is to protect the interest of the company owners (shareholders) and to save as a control tool or supervisory mechanism on the activities of managers to ensure that the decisions being taken by them are in the best interest of the company, shareholders, investors, employee and the entire community. their supervisory role is not only limited to checkmating the activities of managers but also includes, managing of business risk, as well as managing social and environmental liabilities. in this regards, companies are required by law to report their economic, social and environmental performances to the appropriate stakeholders periodically. as csrd is influenced by many factors, choices, motives and values of those involved in policy formulation and decision making processes of formal organizations, isa and muhammad (2015) argued in favor of considering the board mechanisms, such as board size, board independence and managerial ownership as essential pre-requisite or determinant factors of csrd. naseem riaz, rehman, ikram, and malik (2017) believed that the society plays a vital role in ensuring that companies are socially responsible and obscuring from irresponsible activities towards the society and the environment. by being socially responsible firms may gain competitive advantage over their contemporaries whom contribute less to their societies. therefore, companies involved in csr activities may want to reap the benefits of their practice since those practice come at a cost which also needs to be justified by managers to their shareholders. hence, the need to disclose their csr activities to inform their stakeholders of its contribution to the advancement of the society. the choice to either disclose or not to disclose more information with respect to csr activities largely depends on several factors like corporate and board characteristics (sheila et al., 2012). therefore, the code on corporate governance 2011 was introduced in nigeria to facilitate quality information presented by corporate entities in nigeria the financial scandals worldwide, the collapse of big companies and the global financial crisis have provided clear evidence on the need to strengthened good corporate governance practice. the fall of some big firms around the world such as enron (2001), worldcom and of recent the collapse of british homes stores (bhs), carillion and patisserie valerie in 2018 has resulted to loss of potential investors and lack of confidence in corporate accounting practices and standards. this area of study has also been given special interest by researchers in nigeria considering all sectors of the economy as a result of the evidence of financial scandals which led 4 to the collapse of some firms like oceanic bank, afri-bank, skye bank, diamond bank over the years. this has therefore necessitated the need to hold company managers responsible to their assigned duties by the shareholders. previously, there were several studies conducted on corporate governance and corporate social responsibility disclosure in public listed companies globally some of which are inconclusive while others produced an inconsistent result. some of these studies includes (shihping& yang(2014); zhang, zhang and seiler (2015), talha, christopher & karthikeyani (2016), naseem et al. 2017;jahid, ur rashid, hossain, haryono, & jatmiko 2020;ghabayen, mohamad & ahmad 2016:endrikat et al 2020). most of these studies however, were carried out in developed countries whereas few studies were conducted on developing countries (isa & muhammad, 2015), akinpelu et al., 2013). as a result of inconclusive findings regarding the impact of the board characteristics on csrd, it seems worthy to study those variables in a new environment because of their importance in ensuring societal development. this paper aimed to examine the impact of board physiognomies on corporate social responsibility disclosure of listed oil and gas firms in nigeria. the board characteristics used in the study is proxies by; foreign directors, board independence, board meetings and women directors. in line with the objective of the study, the following hypotheses are generated in null form: h01 foreign directors has no significant impact on corporate social responsibility disclosure h02 board independence has no significant impact on corporate social responsibility disclosure h03 board meetings has no significant impact on corporate social responsibility disclosure h04 women directors has no significant influence on corporate social responsibility disclosure the remaining part of the paper is divided into four sections; literature review and theoretical framework, methodology and model specification, discussion of empirical result and finally, conclusion and recommendation. 2. literature review and theoretical framework this section reviewed empirical studies that looked into board characteristics (foreign directors,board independence, board meetings and women directors) and how they react to corporate social responsibility disclosure. 2.1 review of related empirical literatures jahid, rashid, hossain, haryono, andjatmiko (2020) examined the impact of corporate governance mechanisms on corporate social responsibility disclosure of publicly-listed banks in bangladesh‟ using a sample of 30 publicly listed banks in bangladesh over a period of 6 years, from 2013-2018. the study used ols regression to analysis the data collected from the annual report and account of the sampled banks. their study revealed that board size, board independence, female board member, and foreign directors have a significant and positive impact on csrd. hosam, eko and salsabila (2019) investigated the impact of corporate social responsibility disclosure and board characteristics on corporate performance of global energy corporations over a period of 3 years. the study adopted a quantitative method of data collection which was analyzed using a partial least squares regression. corporate social responsibility disclosure index was used to represent csrd, while board independence, board size and gender diversity were used to proxy board characteristics. their study revealed that csrd and board 5 independence are not significant in impacting on corporate performance. the study however found board size and gender diversity to have a significant impact on corporate performance. ghabayen, mohamad and ahmad (2016) researched on the relationship between board characteristics and corporate social responsibility disclosure in the jordanian banks using a sample of 147 banks over the period of ten years (2004-2013). multiple regression was used to examined the hypotheses of the study. the findings of the study showed that the larger board size and higher level of disclosure are correlated. however, low level of disclosure is associated to higher proportion of independent directors and institutional directors. in addition, female director is found to negatively affect the level of disclosure. usman (2019) studied the relationship between board characteristics and corporate environmental reporting in nigeria using a sample of 24 non-financial firms in nigeria for the period of 2011-2015. board size, board independence, board meeting (bm), and risk management committee composition were used to represent the independent variable. the study revealed that, board independence and board meetings are positive and significant in influencing corporate environmental reporting. however, board size and risk management committee composition influence corporate environmental reporting insignificantly. naseem et al (2017) examined the impact of board characteristics on corporate social responsibility disclosure of listed pakistani companies. they used a sample of 179 companies from financial and non-financial sectors for periods from 2009 to 2015. multiple regression model was used while a binary logistic regression analysis was used to test the models. the results of their study revealed that board size, number of meetings and board independence are positive and significant in influencing corporate social responsibility disclosure. whereas, female directors on the board has an insignificant impact on corporate social responsibility disclosure. isa and muhammad (2015) asserted the impact of board characteristics on corporate social responsibility disclosure of listed food product firms in nigeria for a period of ten (10) years 2005-2014. six firms were selected as sample to represent the population. correlational research design was used in the study. board size, board independence, managerial ownership, and women on board were used as proxies of the independent variable, while csr disclosure index was used as the proxy of the dependent variable, firm size was also used to serve as the control variable of the study. the findings of the study revealed that board size and women on board have a significant positive association with corporate social responsibility disclosure, while managerial ownership has a significant negative relationship with csr disclosure. also, the result showed that board independence and firm size affects csr disclosure insignificantly. muhammad, naseem and lina (2019) conducted a study on the impact of board characteristics on the level of sustainability practices disclosure in jordanian commercial banks listed on the ase‟ during periods from 2008-2018. multiple linear regression was used the analyzed the relationship between the variables. board characteristics was represented by the size, independence, rewards and the board's activity, all of which were found to be significantly influencing the level of sustainability practices disclosure by jordanian commercial banks. the study recommends that; jordanian commercial banks should increase their level of disclosure of sustainability practices. also, regulators should expand the compulsory disclosure of such practice and compel companies to disclose additional information on their financial statement. 6 pantamee (2014) conducted a study to determine the relationship between corporate social responsibility disclosure and corporate governance characteristics in malaysian public listed companies for year (2011). 30 companies were taken as a sample; a content analysis and regression analysis were employed. board size, board independence, audit committee, ownership concentration and managerial ownership were used as a proxy of independent variable, while csr disclosure index was used as dependent variable. the study discovered that, board size, audit committee and managerial ownership had a negative relationship with the csr disclosure. also, the result showed that board independence and ownership concentration had a positive association with csr disclosure. another study by chan, watson, and woodliff (2014) investigated the link between corporate governance quality and corporate social responsibility disclosures. 222 companies listed in asx were sampled; an ordinary least square regression was employed to test the relationship. the result revealed that firms providing more csr information had a better corporate rating and were more highly leveraged. akinpelu et al., (2013) studied the interaction between corporate governance and corporate social responsibility disclosures, a sample of 135 manufacturing firms listed in dhaka stock exchange were studied. managerial ownership, public ownership, board independence, foreign ownership, ceo duality and audit committee were used as proxy for the independent variable while firm‟s age, size and return on assets (roa) were used as control variables. the finding of the study showed that csr disclosures generally had a negative association with managerial ownership. however, it was discovered that public ownership, foreign ownership, board independence and presence of audit committee had a positive significant impact on csr disclosures, but ceo duality was discovered to have no significant impact on csr disclosure. sufian and zahan (2013) studied the relationship between ownership structures with corporate social responsibility disclosure in bangladesh for the year 2010. samples of 70 non-financial companies listed in dhaka stock exchange were studied. a multivariate regression analysis using a statistical package of social sciences (spss) was employed for the study. foreign ownership, board size and number of outside shareholders were used as proxy for independent variable. the study revealed that ownership concentration of firm had a positive association with csr disclosure. but the study did not find any association with number of shareholders, foreign ownership and board size with csr disclosure. based on the literatures reviewed, it can be concluded that most of the studies examining the relationship between board characteristics and csr disclosure were conducted in foreign countries and these countries may have different environmental context and disclosure requirements from nigeria. therefore, the findings of these studies may not be of much relevance in nigeria, hence the need to carry out this research in the nigerian context. this study however aims to examine the impact of board characteristics on csr disclosure of listed oil and gas firms in nigeria. this study is underpinned using the most widely used theories adopted by researchers and in prior literatures when examining the relationship between corporate governance and corporate social responsibility. these theories include; agency theory, stakeholder theory and legitimacy theory.the agency theory talks about the relationship between owner and manager which is popularly referred to as principal-agent relationship. the principal appoints a person known as the agent to carry out some duties on his behalf for a commission. the agent is expected to carry 7 out this duty diligently and in the best interest of the principal. this is however not always the case because some mangers (agents) seem to pursue their personal interests rather the interest of the owner. the delegation of duties by the principal and separation of ownership result as well as the conflict of interest results in what is called agency cost problem. according to jensen and meckling (1976), agency costs that are being borne by managers may motivate them to voluntarily disclose corporate environmental information to reduce agency costs. larger information asymmetry would also exist between managers and shareholders if managers do not reveal more information that would benefit the stakeholders (gantyowati&nugraheni, 2014). the main aim of the agency theory is to reduce the agency cost by creating some internal control mechanisms. these internal control mechanisms could be forming a financial incentive scheme to align the interests of both the principal and the agent or form some governance structures that will enable the board of directors the audit the activities of the business and evaluate the performance of the agents (managers). stakeholder theory is a theory that looks at the core value and giving back to the environment as a rudiment of carrying out business. freeman (1984) defines stakeholder as “any group or individual who can affect or is affected by the achievement of the organization‟s objectives”. the management and the protection of the interest of these stakeholders are left in the hands of managers of the company. the managers should on one hand manage the corporation‟s activities by protecting the interest of the stakeholders and should on the other hand serve as agents of the shareholders, this is to ensure survival of the company and safeguard the interest of all groups. the implementation of stakeholder theory could assist firms in strengthening to their grasp of sustainability reporting activities, because to their high concentration on the social aspects of sustainability. stakeholder theory has been extremely used in csr studies, and because sustainability report and other disclosures are a two-way communication between the firm and its basic stakeholders (gray et al., 1995). legitimacy theory is seen as the most thriving theory that explains voluntary disclosure. it posits the existence of a relationship between firms and the society they operate. it expands the principal-agent relationship to cover other stakeholder. in order to maintain their claim on legitimacy, managers are willing to disclose their csr activities and other related information. also, legitimacy theory is significant in societal acceptance will help in the long term survival of the company. prior literatures (cormier & magnan, 2015; woodward, edwards & birkin, 1996) claimed that the main driver of csr disclosure on companies‟ financial statement is the legitimacy theory. 3. methodology and model specification the study adopted correlational and expost factor research design. the population of this study is made up of all twelve (12)oil and gas firms listed on the floor of the nigerian stock exchange as at 31 december 2019. the study used census sampling techniques after employed two-point filter, 9 listed firms emerge as samples, the data were extracted from annual reports and accounts of sampled firms for period of ten (10) years from (2010-2019). the study used multiple, descriptive and correlation analysis as a techniques analysis. 8 table 1: variablesmeasurement variables measurement source csr disclosure (csrd) csrdi using the score “1” if the company discloses its csr items, if otherwise “0” isa and muhammad (2015) foreign directors (fd) number of foreigners divided by total number of members on the board jahid et al (2020) abubakar, mazadu and yusuf (2020) board independence (bi) proportion of non-executive directors divided by total number of directors. ghabayen, mohamad & ahmad (2016). board meeting (bm) number of meetings held by members of board of directors in a year naseem et al, (2017). women directors (wd) number of women on the board divided by total number of members on the board naseem et al(2017), jahid et al (2020) and ghabayen, mohamad & ahmad (2016). source: authors, 2021 in order to ascertain the impact of board characteristics on csr disclosure of listed oil and gas firms in nigeria, a multiple regression model was built. below is the regression model generated: csrd =a +β1fdit +β2biit + β3bmit +β4wdit +β5fszeit+ β6prtitεit where: csrd = corporate social responsibility disclosure fd = foreign directors bi = board independence bm = board meeting wd = women directors fsize= firm size prt= profitability a =represent the fixed intercept element ε= error term 4. results and discussion 4.1 descriptive statistics the descriptive statistics of variables under study were analyzed. the description of mean, standard deviation, minimum, and maximum of dependent and independent variables were computed using stata version13. table 2: descriptive statistics variable obs mean std. dev min max cvd 90 0.1569 0.1891 0.3820 0.7630 fd 90 0.1770 0.0684 0.0000 0.6360 bi 90 0.4139 0.1670 0.0000 0.7778 bm 90 4.5354 0.2581 4.0000 7.0000 wd 90 0.1400 0.0840 0.0000 0.2860 fsize 90 9.4720 0.7702 8.1610 11.182 9 prt 90 0.0530 0.1620 -0.3400 0.6880 source: stata output, 2021 from the table2shows that the sampled oil and gas firms in nigeriahave an average corporate social responsibility of 16%, with minimum and maximum valuesof 38% and 76%. this shows a high variation in corporate social responsibility of the sampled of listed oil and gas companies as portrayed by the standard deviation of 18% which is much higher than the mean value. the minimum value indicates that, some of the sampled companies disclose a minimum of 38% information on corporate social responsibility in their annual report and accounts and maximum information disclosed in the annual reports and accounts was 76%. this means that some companies disclosed more information on corporate social responsibility. from the table 2 shows that foreign director on the board has an average value of 0.177 with a standard deviation of 0.0684, this indicates that there is no wide dispersion between mean and standard deviation. this implies that on average 18% of the board directors of listed oil and gas firms in nigeria are foreign directors during period under the review. the minimum and the maximum value of 0.000, 0.6360 respectively. from the table 2 also, shows that board independence has an average value of 0.4139 with a standard deviation of 0.1670%, this indicates that on average 41% of board members of nigerian listed oil and gas companies are no executive directors during the period under the review. the minimum of 0% and the maximum of 78%. however, the mean value of board meetings was 4.5354 with a standard deviation of 0.8368. this implies that on average listed oil and gas firms in nigeria sat a meetings 5 times within a year. the minimum and maximum value of 4, 7times respectively. this implies that listed oil and gas companies sat a minimum of 4 meetings and maximum of 7 meetings within a year so as keep up with the evolving business environment. besides, more board meetings reflect better monitoring by directors. table 2. shows that the female directors have a mean value of 0.14 which suggest that on average, 14% of board of directors in listed oil and gas firms in nigeria are woman with minimum and minimum values of 0, and 0.2860 respectively. 4.2. correlation matrix the correlation matrix is used to find out the degree of association between the dependent variable and independent variables used in the study presented in table 3. table 3 shows the correlation results, the association between corporate social responsibility disclosure with independent variables (i.e.foreign membership director, board independent, table 3: correlation matrix variable csd fd bi bm wd csd 1.0000 fd 0.2500 1.0000 bi -0.1655 0.2723 1.0000 bm 0.3138 0.2332 0.4080 1.0000 wd 0.3750 0.3450 0.3693 0.3132 1.0000 source: stata output, 2021 10 board meetings and women director on the board) indicated that foreign membership director on the board, board meetings and women director on the board are positively and strongly correlated with corporate social responsibility disclosure, while boardindependent has a negative and weak relationship with corporate social responsibility in the listed oil and gas companies in nigeria.from table 3 it can be observed that foreign membership director (fd) has a positive strong relationship with other explanatory variable. however, board independent has a positive strong relationship with other variables. from table 3 board meetings shows a positive strong relationship with women director. 4.3 regression results this constitutes the summary of the multiple regression results obtained from the model using ordinary least square regression. the results show individual impact between the independent variables (foreign membership director, board independent, board meetings and women director on the board) and finally the overall impact between the dependent variable and the independent variables. this is presented in table 4 below. table 4: summary of fixed effect regression result variable coefficient t-value p-value fd 0.3986 1.5200 0.1320 bi 0.8994 2.5500 0.0001 bm 0.5405 2.8000 0.0005 wd -0.0971 -2.8900 0.0004 constant 0.3733 0.6600 0.5140 prob >f 0.0005 adjusted r-sq. 0.1903 mean vif 1.49 hausman test 0.0002 source: stata output, 2021 from table 4 above, the results show an adjusted r square of (0.19), that is the coefficient of determination which represents the percentage of change in corporate social responsibility disclosure as explain by explanatory variables. this indicate that 19% changes in the corporate social responsibility disclosure is explain by explanatory variables used in the model; this shows that the independent variables cumulatively bring about 19% changes in nigerian listed oil and gas companies and 81% is explained by other factors not accounted for by the model. the f text results shows the p value of 0.0005, this indicates that the model is fit and the variables are appropriately selected. however, hausaman specification test was conducted to select between fixed and random effect, the results show that the fixed effect is more appropriate than random effect. in evaluating the model based on the regression results, foreign member on the board as indicate in table 4 has a positive and insignificant impact on corporate social responsibility disclosure of listed oil and gas companies in nigeria considering the coefficient value of 0.3986 and a p-value of 0.1320 which is not significant at all level of significance. 11 table 4 above shows that board independent has positive and significant impact on corporate social responsibility disclosure of listed oil and gas companies in nigeria from the coefficient of 0.8994 which is significance at 1% level of significance (pvalue of 0.0001). this shows that as board independent increase, corporate social responsibility disclosure decrease during the period under review. the findings are in line with stakeholder‟s theory which believed that board decisions regarding the activities of the firm they govern whether economic or social are considered more effective to all stakeholders concerned when there is a strong base of independent directors‟ opinion. similarly, the table 4 shows that board meetings have a positive and significant effect on corporate social responsibility disclosure of listed oil and gas companies in nigeria considering the coefficient of 0.5405 which is significance at 5% level of significance (pvalue of 0.0004). this implies that as the number of meetings increase the corporate social responsibility disclosure increase. the findings is in line with the legitimacy theory because the decision on how corporate organizations will respect the law of the land, prevent their physical environment from being damage and avoid unnecessary wastes dump were reach during the board meetings. however, table 4 discloses that women director on the board is positively and statistically significant with the extent of corporate social responsibility disclosure at 5% level of significance. the study‟s finding implies that an increase in women director on the board, other independent variables remain constant decreases the corporate social responsibility disclosure. 5. conclusion and recommendations this study has empirically provided evidence on the relationship between board characteristics proxies by foreign membership on the board, board independent, board meetings and women director on the board on corporate social responsibility disclosure of listed oil and gas firms in nigeria. based on the findings, it is therefore concluded that board meetings board independent and women directors on the board improve corporate social responsibility disclosure of listed oil and gas companies in nigeriaduring the period under review. however, foreign member on the board does not influencecorporate social responsibility disclosure of listed oil and gas companies in nigeria. in line with findings and conclusions drawn from the study, therefore, the study recommends that the management of listed oil and gas companiesin nigeria should maintain proportions of board independence as this will increase their investment in corporate social responsibility. this is because the presence of independent directors on the board will increase the board‟s objectivity and its ability to represent multiple points of view of the firm‟s role in the environment and among stakeholders. the management of listed oil and gas companies in nigeria should continue to hold minimum of four meetings and maximum of seven. perhaps regular board meetings might better familiarize them with the company and in turn assist them in making better and more informed decisions regard to corporate social responsibility activities. the management should maintain gender equilibrium while determining female directors‟ representation on the board as this will increase their investment in corporate social responsibility references abubakar, a. mazadu, s. a. & yusuf, a. m. (2020). audit quality and earnings management of listed insurance companies in nigeria. gusaujournal of accounting and finance, 1(1), 1-14. akinpelu, a., ogunbi, j., olaniran, y., & ogunseys, o. (2013). corporate social responsibility 12 activities disclosure by commercial banks in nigeria. european journal of business and management, 5(7), 173–185. chan, m. c. c., watson, j., & woodliff, d. (2014). corporate governance quality and csr disclosures. journal of business ethics, 125(1), 59–73. https://doi.org/10.1007/s10551 0131887-8 cormier, d., & magnan, m. (2015). the economic relevance of environmental disclosure and its impact on corporate legitimacy: an empirical investigation. business strategy and the environment, vol. 24 no. 6, pp. 431-450. cormier, d. (2011). the informational contribution of social and environmental disclosures for inverstors. management decision, vol. 49 no. 8, pp. 1276-1304. endrikat, j., charl, d. v, thomas, w. g, & edeltraud, m. g. (2020). board characteristics and corporate social responsibility: a meta analytic investigation, sage journal of business and society, pp. 1-37, available at: https://doi.org/10.1177/0007650320930638 freeman, r. e (1984) strategic management: a stakeholder approach, pitman series in business and public policy, pitman, boston, massachusetts. gantyowati, e., & nugraheni, r. l. (2014). the impact of financial distress status and corporate governance structure on level of voluntary disclosure within annual reports of firms (a case study of financial firms) journal of modern accounting and auditing 10(4). 234-247. ghabayen, m. a., mohamad, n. r., & ahmad, n. (2016). board characteristics and corporate social responsibility disclosure in the jordanian banks, corporate board: role, duties & composition, vol. 12, iss. 1, pp. 84-100. available at: https://www.researchgate.net/publication/301920920 gray, r., kouhy, r. and lavers, s. (1995), corporate social and environmental reporting: a review of the literature and a longitudinal study of uk disclosure, accounting, auditing & accountability journal vol.8no.2pp.47-77. hackston, d., & milne, m. j. (1996). some determinants of social and environmental disclosures in new zealand companies. accounting, auditing &accountability journal, 9(1), 77– 108. doi:10.1108/ 09513579610109987 hosam, a. r., eko, g. s., & salsabila, a. a. (2019). the impact of corporate social responsibility disclosure and board characteristics on corporate performance, cogent business & management, vol. 6 no. 1, 1647917, doi: 10.1080/23311975.2019.1647917 isa, m. a., & muhammad, s. (2015). the impact of board characteristics on corporate social responsibility disclosure: evidence from nigerian food product firms, international journal of management science and business administration, vol. 1 no. 12, pp. 34-45 jahid, a., ur rashid, h., hossain, s. z., haryono, s., & jatmiko, b. (2020). „impact of corporate governance mechanisms on corporate social responsibility disclosure of publiclylisted banks in bangladesh‟. journal of asian finance, economics and business vol. 7 no. 6, pp. 061 – 071. jensen, m.c. and meckling, w.h. (1976) theory of the firm: managerial behavior, agency costs and ownership structure, journal of financial economics, vol. 3 no. 4, pp. 305-360. mohammad, z. m. a, naseem , m. a, & lina, f.m.h. (2019). the impact of board characteristics on the level of sustainability practices disclosure in jordanian commercial banks listed on the ase, european journal of scientific research, vol. 153 no. 4, pp. 353363. naseem, m.a.; riaz, s.; rehman, r.u.; ikram, a.; malik, f. (2017) impact of board characteristics on corporate social responsibility disclosure. j. appl. bus. res. available at: http://dx.doi.org/10.19030/jabr.v33i4.10001 pantamee, a. . (2014). the effect of corporate governance on corporate social responsibility disclosure in the nigerian petroleum marketing industry. unpublished msc. thesis, (november). https://doi.org/10.1177/0007650320930638 https://www.researchgate.net/publication/301920920 http://dx.doi.org/10.19030/jabr.v33i4.10001 13 sheila, n.h., rashid, h.m., mohammad, a.a. and meera, a.k. (2012), “impact of corporate governance on social and environmental information disclosure of malaysian listed banks: panel data analysis”, asian journal of finance and accounting, vol. 4 no. 1, pp. 1-24. sufian, m. a., & zahan, m. (2013). ownership structure and corporate social responsibility disclosure in bangladesh. international journal of economics and financial issues, 3(4), 901-909. shihping, k.h & yang. c.l. (2014). corporate social performance: why it matters? case of taiwan. chinese management studies, vol. 8 no. 4, pp. 704 – 716. talha, m., christopher, b. & karthikeyani, j. (2016). determinants of corporate social reporting in india. in business challenges in the changing economic landscape 1, 7188. usman, s. a. (2019). board characteristic and corporate environmental reporting in nigeria. asian journal of accounting research, vol. 4 no. 1, pp. 2-17, available at :http://www.emeraldinsight.com/2443-4175.html woodward, d. g., edwards, p. & birkin, f. (1996). organizational legitimacy and stakeholder information provision. british journal of management, vol. 7 no. 4, pp. 329-347. zhang, y., zhang, h., & seiler, m. j. (2015). impact of information disclosure on prices, volume, and market volatility: an experimental approach. journal of behavioral finance, 16(1), 1219. http://www.emeraldinsight.com/2443-4175.html gusau journal of accounting and finance (gujaf) vol. 1 issue 2, october, 2020 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state –nigeria gusau journal of accounting and finance, vol. i, issue 2, october, 2020 1 agency banking strategies and financial inclusion of rural areas in kwara state, nigeria abdullahi, i. b. phd department of finance, university of ilorin, ilorin, kwara state, nigeria. ibrahimabdul2008@yahoo.com malik-abdulmajeed k. m. department of accounting & finance, kwara state university, malete, kwara state, nigeria. fakunmoju, s. k. phd department of accounting & finance, fountain university, osogbo, osun state, nigeria. +2347066063616, k.fakunmoju@gmail.com abstract the nexus between agency banking strategies and financial inclusion have been a debatable paradox for a long period of time due to the important role play by deposit money banks in finance inclusive economy functions. however, the goal of financial inclusion has not been achieved due to geographical distance of banks to rural area, poor bank innovation and technological advancement to rural settlement. the study investigates the effect of agency banking strategies (bank innovation strategy, geographical coverage strategy, and technological advancement strategy) on financial inclusion in rural areas in kwara state, nigeria. the study employed primary data obtained from respondents through administration of questionnaire within the period of 2019 and 2020. the data obtained were subjected to reliability and validity tests as well as tobit regression method of analysis. findings revealed that agency banking strategies such as bank innovation strategy, geographical coverage strategy and technological advancement strategy have positive and significant effect on financial inclusion of rural areas in kwara state, nigeria. the study concludes that agency banking strategies enhance financial inclusion of rural areas in kwara state, nigeria. the study recommends that deposit money banks management should extend bank innovative products or services and enlighten the rural segment entrepreneurs on bank inclusion strategies so as to increase inclusive financial services and economic activities for the rural segments. keywords: bank agency, bank innovation strategy, geographical coverage strategy, technological advancement strategy and financial inclusion mailto:ibrahimabdul2008@yahoo.com mailto:k.fakunmoju@gmail.com gusau journal of accounting and finance, vol. i, issue 2, october, 2020 2 1. introduction globally, it is believed that sound agency banking structure contribute a foremost part in the expansion of bank financial service and economic activities of stakeholder in the rural areas of any economy. through this agency banking model, commercial banks have inclusively extended their conventional financial services in enhancing rural areas’ economic activities without a financial capacity for a formal branch, though increasing economic activities performance (muthoka, oluoch, & muiruri, 2018). the major concern of authorities in the financial system across the globe is the high rate of financially excluded adults especially in the rural communities in africa economies; where in average of 24% of adults in sub-saharan africa, 11% in central africa to about 51% in southern africa have accounts in formal banks (world bank report, 2018). this high level of financial exclusion has prompted stakeholders such as policy makers and regulators to give the agency model attention even though banking regulations still stifles its growth. likewise in nigeria, the level of financial inclusion have raised concerns among regulatory stakeholders; as world bank report (2019) indicated that 73.2 million adults representing 41.6% of the adult population in nigeria are financially excluded. financial inclusion symbolizes distribution of financial facilities at an affordable cost to the deprived sections and low-income groups (nyota & muturi, 2019). these financial facilities form the basic function of financial institutions; for transferring resources from surplus to deficit units. this insinuates that the agency banking structure is critical in providing financial services to the unbanked segment in the rural areas especially in the developing economies (world bank report, 2018). dzombo, kilika and maingi (2017) emphasized that majority of developing economies lack sound agency banking strategies such as innovation strategy, geographical coverage strategy, and technological advancement strategy to cater for unbanked segment in the rural areas. akamavi (2018) pointed that without agency banking, extension of financial service to the rural segment cannot be achieved. nyota and muturi (2019) and nkiru, ofobruku and sidi (2018) asserted that the level of larger percentage of financial inclusion targeted by financial system regulators cannot be achieve by agency banking models; as most developing economies including nigeria were faced with the problem of uneconomically banking incomes, dispersed gusau journal of accounting and finance, vol. i, issue 2, october, 2020 3 population, distance lack of financial products and service knowledge, geographical distance of banks to rural areas and ignorance on issues relating to banking. furthermore, in nigeria the level of financial exclusion has not been accomplished due to geographical distance of banks to rural area, poor bank innovation and technological advancement to rural segment (national financial inclusion strategy (nfis) report, 2019). similarly, enhancing financial innovation and access (efina) report (2020) asserted that large number of people and households in nigeria were domiciled in the rural areas where infrastructure is either non-existent or in a sorry state and it is difficult for deposit money banks to bring them under conventional banking structure since most of the banks find it difficult to maintain presence in remote parts of the country owing to the problem of geographical remoteness, poor bank innovation, technological dilapidation, logistics and high cost of operations; these problems led to poor agency banking model in the rural segments, thus reduced level of financial inclusion in nigeria. despite past studies reviewed within and outside nigeria, no studies have investigated the problem of financial exclusion through unsound agency banking strategies (bank innovation strategy, geographical coverage strategy and technological advancement strategy) among rural area of kwara state, nigeria. therefore, this gap informed this current study on “effect of agency banking strategies on financial inclusion in rural area communities in kwara state, nigeria”. 2. literature review this sub-section focuses on the empirical review of relevant studies and underpinning theory to enable this study establish research gaps. 2.1 empirical review the studies of kemoli (2012), ngumi (2013), basu and ghosh (2016), nkiru, ofobruku and sidi (2018) examined the link between bank agency through information technology and bank performance. these studies found that bank agency strategy via information technology significantly improve bank performance. nyangosi, nyangau, nyariki, and nyangau, (2014), khadka and maharjan (2017), naseem (2017), ortstad and sonono (2017) examined banking agency through digital and innovation banking strategies on bank performance. these studies found that banking agency through digital and innovation banking strategies significantly enhance bank performance. similarly, aini (2014), gusau journal of accounting and finance, vol. i, issue 2, october, 2020 4 mbugua (2015), lotto (2016), munoru (2016), and dzombo, kilika and maingi (2017) investigated the link between agent banking services and financial inclusion. findings of these studies indicated that customers were inclined to forego the extra charge to procure banking facilities through agent banking outlets. in addition, further studies such as jayo, eduardo, felipe, and christopoulos (2012), okiro and ndungu (2013), dzombo, kilika and maingi (2017), muthoka, oluoch and muiruri (2018), chipeta and muthinja (2018), muoria and moronge (2018), among others examined the link between bank agency, bank innovation, customer retention and commercial bank performance. their studies found that bank agency and innovation positively affect bank performance and customer retention of banks. most of these past studies employed ordinary least square (ols) regression method of analysis to investigate the effect of bank agency and innovation on bank performance. this ols regression method of analysis employed was considered inappropriate for survey research design study. this study employed tobit regression method of analysis as the appropriate method to determine effect of agency banking strategies on financial inclusion among rural areas in kwara state, nigeria. similarly, ajide (2017), ndegwa (2017), tinevimbo, mawanza and muredzi (2017) and ojwang and otinga (2019) evaluate the link between financial inclusion and agency banking. their findings revealed that agency banking significantly expand bank geographic coverage which enhances increase in the bank customer base and positively affected financial performance of equity agency banking business. however, studies on the effect of agency banking strategies measured by bank innovation strategy, geographical coverage strategy and technology advancement strategy on financial inclusion among rural area segment in kwara state, nigeria are close to non-existence. based on these gaps, this study developed hypotheses in null form that; h01: there is no significant effect of bank innovation strategy on financial inclusion of rural segments in kwara state, nigeria h02: there is no significant effect of geographical coverage strategy on financial inclusion of rural segments in kwara state, nigeria; and gusau journal of accounting and finance, vol. i, issue 2, october, 2020 5 h03: there is no significant effect of technological advancement strategy on financial inclusion of rural segments in kwara state, nigeria 2.2 underpinned theory the anchored theory for this study was technology acceptance model theory which was explained below. 2.2.1 technology acceptance model theory the technology acceptance model (tam) theory was developed by davis (1989). the theory clarifies bank customer recognize and exploit bank rural development innovation and technology. the tam proclaims that bank customers were offered an alternative technological innovation which determined bank customer choices on the means of banking facilities used by the customers; as tam enhances technology accessibility and effectiveness to both banks and bank customers in their dealings and functions (davis, toxall & pallister, 2002). tam focused on the individuals’ customer behavioural intentions and ict users in the bank. tam argued that the individual or bank customer attitude towards banking technology depends on the intent and objective of bank and bank customers, thus influenced bank customer or user’s attitude toward and perceived usefulness of the bank technology (bagozzi, 2007). however, attitude and perceived usefulness are both determined by ease of use technology. embracing the tam theory necessitates the considerate of end-users desires vis-à-vis usefulness and user friendliness of banking technology (pedersen, leif, & thorbjørnsen, 2002). from this tam theory, utility and user friendliness affect users' attitudes towards any service (achugamonu, taiwo, ikpefan, olurinola, & okorie, 2016). technology acceptance model theory pointed that bank technology innovation help banks capacity functions and extension to rural areas which heighten financial function and system. pedersen, leif, and thorbjørnsen (2002) criticized tam theory as disposition to the technological/technical aspects of the banking technology ignoring other factors such as social aspect of the users, limited ability, time, environmental or organizational limits and unconscious habits will limit the freedom to use technology (pedersen, leif, & thorbjørnsen, 2002). despite tam theory being an anchored theory in the study of linking agency banking, financial inclusion through banking technology in rural areas, tam has shortcoming such as purposive designing the model with thrift and generality, poor consideration for gusau journal of accounting and finance, vol. i, issue 2, october, 2020 6 non-organizational setting (cicea & hincu, 2009; davis & venkatesh, 2000), and ignoring the factors which moderate the adoption of ict banking in rural areas (achugamonu et al., 2016). tam is extensively embraced and greatly contributes to the prediction of an individual’s usage of bank technological extension to rural areas (fishbein & ajzen, 2010). in this study, tam will be utilized to discover how the utilization of rural banking agency through rural banking technology to enhances financial inclusion in the rural segment. 3. methodology the study employed cross-sectional survey design with population of 3,192,900 comprised of residents in the rural and semi-urban areas across the 16 local governments in kwara state, nigeria (national bureau of statistic, 2016). the study adopted cochran’s sample size formula (1977) with multi-stage sampling technique so as to get more accurate and reflection of characteristics of the population for the study than simple random or systematic random sampling. the formula is shown below: nz2pq n=___________ d2 (n-1) +z2pq where: n = sample size n = total population (n=3,192,900) z = 95% confidence interval (z = 1.96), p = 0.5 q = 1 – p d = degree of accuracy or estimation (d = 0.04) therefore; 𝑛 = 3,192,900(1.96)2(0.5)(0.5) (0.04)2(3,192,900−1)+(1.96)2(0.5)(0.5) =625 model specification this study adapted the functional model of afande and mbugua (2015); as the model established the link between agency banking and financial inclusion. the model was specified below; fi = β0 + β1gcsi + ei ……………………………...... 3.1 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 7 where; gcs= geographical coverage strategy fi= financial inclusion β0 = constant term β1 = beta coefficient of variable x. ei = error term based on the objectives of this study, afande and mbugua (2015) model was modified as functional model for this study. the afande and mbugua (2015) model failed to include bank innovation strategy and technological advancement strategy as strategies for measuring agency banking strategy to model the link between agency banking strategy and financial inclusion. therefore, this study adapted afande and mbugua (2015) model by including bank innovation strategy and technological advancement strategy to suit the objective of the study. fi = f(bis, gcs, tas)…………………………………………………….. 3.2 for agency banking strategies (abs) abs = (bis, gcs, tas) the econometric model for the study was stated as; fi = β0 + β1bisi + β2gcsi + β3tasi + ei ……………………………...... 3.3 where: bis = bank innovation strategy gcs= geographical coverage strategy tas = technological advancement strategy fi = financial inclusion = y x= agency banking strategies (abs) x1 = bank innovation strategy (bis) x2 = geographical coverage strategy (gcs) x3 = technological advancement strategy (tas) β0 = constant term β1 – β3 = beta coefficient of variable x. ei = error term the a priori expectations for the study was β1 – β3 >0 validity of the research instrument the validity result for the study variable was shown in table 1. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 8 table 1: kmo and bartlet test for each variable in the research instrument source: authors’ compilation (2020) using spss version 24 from table 1, the results of kaiser-meyer-olkin measures (kmo) for all the variables were found to be greater than 0.5 and not above 1, hence acceptable indices. on the other side, the bartlett’s test of sphericity had p-values = 0.000 for all the variables which are less than 0.05. the results for unidimensional test revealed that all factors were unidimensional and thereafter confirmatory factor analysis proceeded. the average variance extracted (ave) for the latent variables were greater than 0.5 and composite reliability should be greater than 0.7. both ave and composite reliability showed that convergent and discriminant validity of the construct were acceptable, hence the instrument is valid. reliability of the instrument the research instrument is reliable since the coefficient of the cronbach alpha is greater than 0.7. the cronbach’s alpha reliability for the subscale is shown in table 2. s/n variables kmo measure of sampling adequacy bartlet test of sphericity average variance explained (ave) composite reliability (cr) remark 1 bank innovation strategy 0.855 854.742 (0.000) 0.592 0.70 accepted 2 geographical coverage strategy 0.823 724.005 (0.000) 0.653 0.762 accepted 3 technological advancement strategy 0.812 618.756 (0.000) 0.598 0.879 accepted 4 financial inclusion 0.897 642.236 (0.000) 0.501 0.71 accepted gusau journal of accounting and finance, vol. i, issue 2, october, 2020 9 table 2: reliability statistics source: researchers’ computation (2020) using spss version 24 4. findings and discussion table 3: normality test of the study variables variables n skewness kurtosis statistic statistic std. error statistic std. error financial inclusion (fi) 592 -0.564 0.111 0.458 0.222 bank innovation strategy (bis) 592 -0.335 0.111 0.239 0.222 geographical coverage strategy (gcs) 592 0.000 0.111 -0.482 0.222 technological advancement strategy (tas) 592 -0.181 0.111 -0.328 0.222 source: field survey (2020) using spss version 24 the results of the normality test of the dependent and independent variables indicated skewness and kurtosis in the range of -1 and +1 as shown in table 3. this implies that the assumption of normality was satisfied. therefore, the data was found to be suitable for inferential analysis. s/n variables number of items cronbach’s alpha remark 1 bank innovation strategy 6 0.945 reliable 2 geographical coverage strategy 6 0.721 reliable 3 technological advancement strategy 6 0.854 reliable 4 financial inclusion 6 0.914 reliable overall 30 0.954 reliable gusau journal of accounting and finance, vol. i, issue 2, october, 2020 10 table 4: multicolinearity test results variables tolerance vif remark bank innovation strategy (bis) 0.567 1.762 no multicolinearity geographical coverage strategy (gcs) 0.619 1.615 no multicolinearity technological advancement strategy (tas) 0.560 1.785 no multicolinearity source: field survey (2020) using spss version 24 table 4 shows that the variables have a vif that is less than 10 and tolerance value more than 0.1 rules out the possibility of multicolinearity. all the predictor variables had a vif of less than 10. the explanatory variables were not highly correlated since their values are more than 0.1 and therefore could not pose a serious problem. the data was thus suitable for hypotheses testing using tobit regression analysis. test of hypotheses table 5: tobit regression output variables coefficient std error marginal effect sig. constant 5.290 1.724 0.082 bank innovation strategy (bis) 0.188 0.049 0.172 0.001 geographical coverage strategy (gcs) 0.467 0.037 0.734 0.005 technological advancement strategy (tas) 0.562 0.051 1.743 0.000 number of observations f (3, 589) = 76.795 prob > f = 0.000 pseudo r2 = 0.683 log pseudo likelihood 22.229 source: field survey (2020) using spss version 24 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 11 table 5 depicts results of tobit multiple regression analysis for the effect of agency banking strategies on financial inclusion in rural areas in kwara state, nigeria. table 4 presents a model fit which establishes how fit the model equation fits the data. the pseudo r2 was used to establish the predictive power of the study’s model. from the results, agency banking components (bank innovation strategy, geographical coverage strategy and technological advancement strategy) have positive and significant effect on financial inclusion of rural segment in kwara state, nigeria. the adjusted pseudo r2 of 0.683 indicated that 68.3% of the variation in the financial inclusion is explained by the variations in the agency banking strategies components while 31.7% was explained by error terms. the table 4 also shown that the results of anova (overall model significance) of the tobit regression test which revealed that the joint independent variables of agency banking strategies components have a significant effect on financial inclusion of rural segment areas in kwara state, nigeria. this can be explained by the f value (76.795) and low p-value (0.000) which is statistically significant at 5% level. this implied that agency banking components adopted by commercial banks in kwara state was statistically significant. hence at 95% confidence level, agency banking components influenced financial inclusion. furthermore, table 5 shows the results of tobit regression coefficients through marginal effect output which reveal that a positive effect was reported for all the variables of agency banking components that is bank innovation strategy (β = 0.172, p<0.05), geographical coverage strategy (β = 0.734, p<0.05), while technological advancement strategy (β = 1.743, p<0.05) all at 0.05 level of significance. based on the regression output from table 5, this study therefore rejected the three null hypotheses that; h01: there is no significant effect of bank innovation strategy on financial inclusion of rural segments in kwara state, nigeria h02: there is no significant effect of geographical coverage strategy on financial inclusion of rural segments in kwara state, nigeria; and h03: there is no significant effect of technological advancement strategy on financial inclusion of rural segments in kwara state, nigeria discussion of findings the results of tobit regression analysis for the effect of agency banking components on financial inclusion of communities in kwara state, nigeria revealed that the joint independent components of agency banking have a gusau journal of accounting and finance, vol. i, issue 2, october, 2020 12 significant effect on financial inclusion of rural communities in kwara state, nigeria. the study findings were aligned with the apriori expectations of this study that banking agency strategies have positive and significant effect on financial inclusion especially in the rural areas. similarly, technology acceptance model theory also supported the study findings; as technology acceptance model theory pointed that bank technology innovation increase bank capacity functions and extension to rural areas which enhance financial inclusion in rural and urban areas. in addition, past studies such as abbasi and weigand (2017), gabor and brooks (2016), khadka and maharjan (2017), naseem (2017), nyangosi, nyangau, nyariki, and nyangau, (2014), ortstad and sonono (2017) were consistent with the study finding that agency banking enhances bank customer patronage and financial inclusion. khadka and maharjan (2017) also found that agency banking to rural communities through digital and innovation banking strategies significantly enhance bank activities coverage of most communities. in addition, aini (2014), dzombo, kilika and maingi (2017), lotto (2016), mbugua (2015), munoru (2016), lotto (2016) found that agent banking services enhance promotion of financial inclusion. based on the majority support of past studies on the study finding, this study therefore rejected the three null hypotheses. 5. conclusion and recommendations this study concludes that agency banking strategies (bank innovation strategy, geographical coverage strategy and technological advancement strategy) significantly affect financial inclusion among rural areas in kwara state, nigeria. the following policy recommendations are suggested based on the findings of this study: i. the management of deposit money banks should establish training centre that will enhance bank innovative ideas in rural areas where employees working as agent bankers will educate and enlighten the rural segment entrepreneurs on bank innovative products or services so as to increase inclusive financial services and economic activities for the rural segments. ii. the management of deposit money banks should increase the extension of level of technological advancement access and capability to the rural communities as this will enhance the level of financial inclusion in the rural communities gusau journal of accounting and finance, vol. i, issue 2, october, 2020 13 iii. the management of deposit money banks should extend the level of geographical coverage of bank activities to unbanked segments in order to increase the level of financial inclusion in kwara state, nigeria area of further study further study should focus on the effect of agency banking strategies on financial inclusion of rural communities in north central region, nigeria. references abbasi, t., & weigand, h. (2017). the impact of financial services on firms performance: a literature review. department of management, tilburg school of economics and management, tilburg university, neitherlands. achugamonu, b. u., taiwo, j. n., ikpefan, o. a., olurinola, i. o. & okorie, u. e. (2016). agent banking and financial inclusion: the nigerian experience. vision 2020: innovation management, development sustainability, and competitive economic growth. proceedings of the 28th international business information management association conference. afande, f., & mbugua s. (2015). role of agent banking services in promotion of financial inclusion in nyeri town, kenya. research journal of finance and accounting, 148173 aini, s. (2014). studying financial inclusion among commercial banks in united kingdom. international journal of bank marketing, 30(6), 465-484. basu, t., & ghosh, s. (2016). a study on changing role of money. international journal of commerce, business and management (ijcbm), 5(3), 321-342. bagozzi, r. p., (2007). the legacy of the technology acceptance model and a proposal for a paradigm shift. journal of the association for information systems, 4(8), 244– 254. chipeta, c., & muthinja, m. m. (2018). financial innovations and bank performance in kenya: evidence from branchless banking models. south african journal of economic and management sciences, 21(1), 16-81. cicea, c., & hincu, d. (2009). performance evaluation methods in commercial banks and associated risks for managing assets and liabilities. communications of the ibima. davis, f. d. (1989). perceived usefulness, perceived ease of use, and user acceptance of information technology. mis quarterly, 13(3), 319-340. davis, f. d., & venkatesh, v. (2000). a theoretical extension of the technology acceptance model: four longitudinal field studies. management science, 46(2), 186-204 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 14 davis, j., toxall, g. r., & pallister, j. (2002). beyond the intention-behaviour mythology. an integrated model of recycling. marketing theory, 2(1), 29113. dzombo, g., kilika, j. & maingi, j. (2017). the effect of branchless banking strategy on the financial performance of commercial banks in kenya. international journal of financial research, 8(4), 167-183. enhancing financial innovation & access (efina) (2020) innovation forum: deepening financial inclusion through agent banking, key findings from an agent banking project funded by efina, january 27, 2020. gabor, d., & brooks, s. (2016). the digital revolution in financial inclusion: international development in the fintech era. new political economy, 22(4), 423-436. jayo, m., eduardo, h., felipe z. d., & christopoulos, t. p. (2012). groups of services delivered by brazilian branchless banking and respective network integration models. electronic commerce research and applications, 11(5), 504-517. kemoli, p. (2012). the extent of implementation of agency banking among commercial banks in kenya. mba project, university of nairobi. khadka k., & maharjan, s. (2017). customer satisfaction and customer loyalty. jakobstad: centria university of applied sciences. lotto, j. (2016). the role of agency banking in promoting financial inclusion: descriptive analytical evidence from tanzania. european journal of business and management, 8(22), 231-240. mbugua, s. (2015). role of agent banking services in promotion of financial inclusion in nyeri town kenya. research journal of finance and accounting, 6(3), 2222-2847. muthoka, n. i., oluoch, o., & muiruri, p. m. (2018). the impact of agency banking financial innovation on market capitalization of commercial banks listed in nse, kenya. international journal of academic research in accounting, finance and management sciences, 8(4), 110-119. munoru, m. k. (2016). effect of agency banking on financial inclusion in kenya. international journal of science and research, 7, 6-14. muoria, e. t., & moronge, m. (2018). effect of agency banking adoption on customer retention in kcb bank: a case study of kiambu county, kenya. the strategic journal of business & change management, 5(4), 215-232. naseem, k. (2017). why digital banking services are vital to reduce poverty in the developing world. retrieved from medium: https://medium.com/@ifc_org/why-digital-banking-services-arevital-toreduce-poverty-in-the-developing-world-35ac35758f04. national bureau of statistic (2016). https://www.nigerianstat.gov.ng/ https://medium.com/@ifc_org/why-digital-banking-services-arevital-to-reduce-poverty-in-the-developing-world-35ac35758f04 https://medium.com/@ifc_org/why-digital-banking-services-arevital-to-reduce-poverty-in-the-developing-world-35ac35758f04 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 15 national financial inclusion strategy (nfis) report (2019). central bank of nigeria annual economic report – 2019. abuja: central bank of nigeria. ndegwa, p. (2017). an analysis of the effectiveness of agency banking as a financial inclusion strategy in commercial banks (a survey of selected commercial banks in kiambu town). international journal of business and management invention, 6(8), 67-75. ngumi, p. m. (2013). effect of bank innovations on financial performance of commercial banks in kenya (doctoral dissertation). nkiru, s. d., ofobruku, a. j., & sidi, m. a. (2018). effects of agency banking on bank performance: a case of equity bank meru branch, kenya. business and economic research, macrothink institute, 8(4), 100-108. nyangosi, r., nyangau, s. n., nyariki, k. o., & nyangau, a. s. (2014). digitizing banking services: an empirical analysis of customer’s adoption and usage. research journal of finance and accounting, 5(8), 47-53. nyota, j., & muturi, w. (2019). effect of agency banking features on the financial performance of commercial banks in kenya: a case of equity bank, kisii, nyamira and keroka branches – kenya. international journal of economics, commerce and management, 7(11), 646-662. ojwang, a. o., & otinga, h. n. (2019). effect of financial inclusion on financial performance of equity agency banking business in siaya town. the strategic journal of business & change management, 6(2), 55-65. okiro, k., & ndungu, j. (2013), the impact of mobile and internet banking on performance of financial institutions in kenya. european scientific journal, 9(13), 146-161. ortstad, r., & sonono, b. (2017). the effects of the digital transformation process on banks' relationship with customers: case study of a large swedish bank. research journal of finance and accounting, 5(8), 4753. saunders, m., lewis p., & thornhill, a. (2009). research methods for business students (5thedition). new jersey: prentice hall. tinevimbo. c. s., mawanza, w., & muredzi, v. (2017). an evaluation of the agency banking model adopted by zimbabwean commercial banks. journal of finance and bank management, 5(2), 58-66 world bank report (2018). financial systems and development: world development report. new york: oxford university press. world bank report (2019). financial systems and development: world development report. new york: oxford university press. https://ideas.repec.org/a/mth/ber888/v8y2018i4p100-108.html https://ideas.repec.org/a/mth/ber888/v8y2018i4p100-108.html https://ideas.repec.org/s/mth/ber888.html https://ideas.repec.org/s/mth/ber888.html gusau journal of accounting and finance (gujaf) vol. 4 issue 1, april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ii © department of accounting and finance vol. 4 issue 1 april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vi advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ix contents board characteristics and earnings management of listed consumer goods firms in nigeria benjamin gwabin joseph, murtala abdullahi phd, benjamin kumai gugong phd 1 dividend policy and value of listed non-financial companies in nigeria: the moderating effect of investment opportunity abubakar umar 18 trialability and observability of accrual basis international public sector accounting standards implementation in nigeria aliyu abdullahi ahmed phd, zakari usman 35 liquidity risk and performance of non-financial firms listed on the nigerian stockexchange muhammed alhaji abubakar, nurnaddia binti nordin phd, abubakar hamisu umar 54 board diversity, political connections and firm value: an empirical evidence from financial firms in nigeria rofiat oyetunji, isah shittu phd, ahmed bello phd. 75 moderating effect of bank size on the relationship between interest rate, liquidity, and profitability of commercial banks in nigeria shehu usman hassan, bello sabo (ph. d), ismai'l idris tijjani (ph. d), idris ahmed aliyu. (ph. d) 96 sources of health care financing among surgical patients seen at the dalhatu araf specialist hospital lafia nasarawa state nigeria ahmed mohammed yahaya, babatunde joseph kolawole, bello surajudeen oyeleke 121 transparency, compliance and sustainability of contributory pension scheme in nigeria olanrewaju atanda aliu (ph. d), mohamad ali abdul-hamid (ph. d), salami suleiman (ph. d), salam mudathir olanrewaju 135 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 x examining the impact of working capital management on the financial performance of listed industrial goods entities in nigeria 151 sani abdulrahman bala (ph. d), jamilu jibril, taophic olarewaju bakare corporate governance factors and tax avoidance of listed deposit money banks in nigeria 171 sani abdulrahman bala (ph. d), umar salim ibrahim, samaila dannana risk committee demographic traits: a study of the impact of expertise on risk disclosure quality of listed insurance firms in nigeria wada najib abbas, dandago, kabiru isa (ph. d), rabiu, naja’atu bala 192 moderating effect of audit committee on the relationship between audit quality and earnings management of listed non-financial services firms in nigeria ahmad muhammad ahmad, lubabah mansur kwanbo (ph.d.), shehu usman hassan (ph.d.) musa suleiman umar (ph.d.) 216 determinants of audit opinion of negative-book-value firms in nigeria: firm value and audit characteristics perspective asma’u mahmood baffa (ph. d), lawal mohammed (ph.d.), ahmed bello (ph.d.) umar farouk abdulkarim 237 intervention announcements and naira management: evidence from the nigerian foreign exchange market adedeji daniel gbadebo 254 is there earnings discontinuity after the implementation of ifrs in nigeria? adedeji daniel gbadebo 275 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 121 sources of health care financing among surgical patients seen at the dalhatu araf specialist hospital lafia nasarawa state nigeria ahmed mohammed yahaya account department dalhatu araf specialist hospital lafia nasarawa state babatunde joseph kolawole community health department dalhatu araf specialist hospital lafia nasarawa state paediatrics department bello surajudeen oyeleke department of paediatrics dalhatu araf specialist hospital lafia nasarawa state surajudeenbello4@gmail.com +2347064641540 abstract sources of healthcare financing especially among surgical patients in nasarawa state is presently unknown. sub-saharan african countries have introduced a number of methods to funding healthcare system. the nigerian government commenced implementation of a social health insurance scheme (national health insurance scheme; nhis) so as to improve on healthcare funding for its citizens. this study determined the sources of financing surgical cases, type of surgeries and compared the cost of treatment among patients attending the dalhatu araf specialist hospital and other health centers in nasarawa state. it was a hospital based cross-sectional descriptive study among 420 adults aged 18 years to 75 years in a study that lasted for two years. the data collected was analyzed using statistical package for the social science (spss) version 20.0. significant p was < 0.05. the average age of patient was 28.6 ± 11.9 years. there were more females (75.5%) with most (73.8) of our participants living in rural areas. majority (60.0%) had caesarean section and one-sixth had exploratory laparotomy respectively. most spending for healthcare needs was out-of-pocket (oop) with only a handful (6.7%) enjoying insurance coverage. the average cost of surgery was 41,337.73 naira and 28,426.47 naira among the low and high socio-economic class respectively. most of the participants in this study were on out-ofpocket healthcare financing with only one out of fifteen having health insurance coverage of the nhis. most of the surgical patients are from the rural areas, are females, do not attend tertiary level of education and are of low socio-economic status. caesarean section and exploratory laparatomy were the predominant indications for surgeries. those from the lower socio-economic status pay more for surgeries even though they earn less. we recommended that the state consider state health insurance agency and this should cater for people in both the formal ana the non-formal mailto:surajudeenbello4@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 122 sectors. in addition, rural dwellers and surgeries such as caesarean section and emergency laparatomies should not be left out. keywords: healthcare, financing, rural, sources. https://doi.org/10.57233/gujaf.v4i1.203 1. introduction government in developing countries including nigeria has difficulty funding health-care due to budget constraints, population size and competing demands for public expenditure (anyaehie and nwobodo, 2004). since independence, subsaharan african countries have introduced a number of methods to fund health care (shaw and griffin, 1995). an initial goal to provide free health care for all has never been achieved due to low and unstable tax revenue and subsequent nonsufficiency of public budgets due to rising population (wiesmann and jutting, 2000). with the level of poverty in rural areas, individuals who are ill rely on herbal remedies and/ or self-medication with orthodox drugs (inem, 2003). where selftreatment is unsuccessful, patients are compelled to seek and pay for expensive outpatient services from traditional healers, private practitioners and pharmacist (wiesmann and jutting 2000 & inem 2003). although direct payment for out-of pocket expenses is most common, this has been heavily criticized for its impact on health inequity and access, healthcare uptake or utilization, and the costeffectiveness of the health care system (shaw and griffin, 1995). to improve health care funding, the nigerian government commenced implementation of a social health insurance scheme (national health insurance scheme; nhis) in 1999 (akande and ogunrinola, 2000). in contrast to user fees, the nhis encompasses risk-sharing in an attempt to reduce unforeseeable or unaffordable healthcare costs to calculate, regularly paid premiums (shaw and griffin, 1995). despite the nhis advantages, most people in nigeria continue to rely on out of pocket to finance their healthcare needs because only a small segment of the population is covered by the scheme [mainly federal government public servant in urban areas] (akande and ogunrinola, 2000). the informal sector and those in rural (approximately 50% of the population), where 80% live below the poverty line, are not covered. unfortunately, high burden of disease is found in this population, and 11% to 15% is surgical. existing government hospitals in these rural areas are poorly equipped and sparsely staffed with qualified personnel (onwujekwe 2009). profit – oriented private clinics collect fees at the point of service in the form of out-off pocket payment, as a cost recovery strategy (creese 1997). in response to these persistent issues in the cost of health care, non-profit, gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 123 voluntary insurance schemes for urban and rural self-employed and informal-sector workers have recently emerged. is it properly established? is it well utilized? objectives of the study i. to determine the sources of financing among surgical patients from the masses attending the dalhatu araf specialist hospital and some selected health center in nasarawa state. ii. to determine the socio-demographic characteristics of these surgical patients iii. to determine the average cost of surgery among this population iv. to describe the pattern of surgical operation in this population 2. literature review healthcare financing can be defined as the pooling together of funds from the haves and have-nots for healthcare service delivery to all. in other word, it is the harnessing of resources from the rich and the poor according to earnings and for the benefit of everyone especially the lower economic statuses individuals (oyefabi, 2014). this is geared towards avoiding out-of-pockets (oops) spending and prevents catastrophic as well as embarrassing situations to the citizenry (oyefabi, 2014). many years post-independence, nigeria continue to battle with the provision of basic health care services for its teeming population (orimisan, 2013). this is largely contributed by limited resources in over-hauling and maintaining our primary healthcare services. (gbadeyan, 2016). the methods adopted by different countries in ensuring financial sustainability of its health care system is a critical determinant for meeting the universal health coverage [uhc], hence the challenges with healthcare delivery in nigeria (uzochukwu, 2015). the financing of healthcare by government in nigeria (just like across the world but worst in most developing countries) is complemented by contributions from the household, donor agencies, and the private sector (lawanson 2013). the government commitment on healthcare funding will have to increase in other to cater for the low-income earners and the down trodden masses who constituted a large chunk of the population, especially in the northern part of nigeria where nasarawa state belongs (lawanson, 2013). the conventional categorizations of financial sources for health care are taxation, social health insurance, private health insurance and out-of-pocket payments (adaji 2018). the out-of-pocket spending is the most common means of financing medical care in nigeria, this is worsened by poor resources allocation yearly to the health sector in our budget (adaji, 2018). there are increasing variations in the finance sources used to fund health care. differences in social health insurance are: implementation either at the national, state or at the community level (yu, 2008). gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 124 eligibility can be on a mandatory or voluntary basis, and contributions is either by the individual or the employer. variations in out-of-pocket payments are in its formality or informality and function either as co-payment, co-insurance or at full cost (yu, 2008). the nigerian national health insurance scheme (nhis) was established in 1999 but launched officially in 2005, to provide financial risk protection for citizens and reduce the high burden of out-of-pocket expenditures (oops) on individuals and families (onwujekwe, 2012). the all-inclusive programmes of the nhis includes social health insurance for formal sector employees, community-based health insurance, private health insurance, and voluntary health insurance (onwujekwe, 2012). the nhis’ objective of ensuring access to quality health services for all nigerians has also been viewed as a positive step towards achieving universal health coverage [uhc] (uzochukwu, 2015). there is presently no known published study on this subject in nasarawa state. this study is therefore timely as it will provide baseline knowledge gaps which can then be built upon. it will also unravel the burden of healthcare funding in the state especially as it concerns surgical cases. some socioeconomic factors are believed to have influence on the distribution of health resources within the country as well as the health outcome. such socioeconomic factors also vary within communities, states and geopolitical regions within the country (atobatele, 2022). the present study will also demonstrate the pattern of surgical operations, the average cost of such procedures and socio-demographic factors related to either the occurrence, timely presentation or the outcome. 3. methodology this section discussed the study participant’s eligibility criteria, sampling size determination, procedure followed in recruitment, ethical considerations, data analyses et cetera. the study was conducted among adult patients presenting to the dalhatu araf specialist hospital lafia with surgical conditions in nasarawa state from january 2019 to december 2020. patients were recruited from the casualty, general outpatient department (gopd), surgical outpatient department (sopd) as well as the male and female surgical wards. sample size was calculated using the formula: n= z2 pq d2 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 125 where n= sample size, z is standard normal deviation of 1.96, p is the prevalence which is 45.4%, q= 1-p and d is the degree of accuracy desired usually set at 5%. therefore n = 1.962 × 0.45 × 0.546 0.052 n = 380.9 n=381 non-response=10% = n = 381 100 x 10 1 = 38.1 final sample size n=n+nrr =381 + 38.1 = 419.1 = 420 the study was conducted using a sample size of 420. study design it was a hospital based cross-sectional descriptive study among adults aged 18 years to 75 years. procedure methodology adult participants were approached in surgical out-patient as well as casualty. the patients were informed about the study [appendix i] and consent form [appendix ii] was given to them after consenting to the study. self-administered questionnaire was given to them and those needing assistance or interpretation were assisted by the research assistant. ethical consideration ethical approval was sought from the research ethics committee of dalhatu araf specialist hospital lafia. nasarawa state, permission was also sought from the head of casualty, general outpatient department (gopd), surgical outpatient department (sopd) as well as the male and female surgical wards. 4. data analysis the data collected was entered into a microsoft excel sheet with the categorical variables are coded (where 1 = male and 2 = female) before transferring into a statistical package for the social science (spss) version 20.0. categorical variables (such as gender, place of residence, religion etc) were presented in tables of frequency distribution. mean and standard deviation of continuous variables (such as age and cost of surgeries etc) calculated. the association between two gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 126 means will be calculated using student t test, while categorical variables will be calculated using chi square. the significant p value was< 0.05. funding the research work was funded by the researchers with technical assistance from the hospital research unit. results table 1: socio-demographic characteristics of the study participants variables frequencies (%) age (years) 0 – 17 18–25 26-35 36-50 51-60 >60 41 (9.7%) 132 (31.4%) 167 (39.8%) 60 (14.3%) 8 (1.9%) 12 (2.9%) sex male female 103 (24.5%) 317 (75.5%) level of education primary secondary tertiary 152 (36.2%) 132 (31.4%) 136 (32.4%) religion christianity islam 149 (35.5%) 271 (64.5%) marital status single married divorce/separated widowed 71 (16.9%) 336 (80.0%) 7 (1.7%) 6 (1.4%) number of wives 1 2 3 4 47 (45.6%) 33 (32.0%) 14 (13.6%) 7 (6.8%) >4 2 (2.0%) gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 127 occupation business unemployed civil servant farmer housewife retiree students cattle rearing artisans 160 (38.1%) 36 (8.6%) 46 (11.0%) 38 (9.0%) 52 (12.4%) 1 (0.2%) 11 (2.6%) 3 (0.7%) 73 (17.4%) place of residence rural urban 310 (73.8%) 110 (26.2%) mean age (sd) = 28.6 (11.9) years socio-demographic characteristics of the study participants the average age of patient was 28.6 ± 11.9 years with majority of patients, 167 (39.8%) from the age group 26 – 35 years. there were more female, 317 (75.5%) in this study when compared to male. level of education varied as most participants 152 (36.1%) in this study, had primary education only. islamic religion was the most 271 (64.5%) practiced in this study population. most 336 (80.6%) participants were married, and of the 103 male participants, 47 (45.6%) had one wife while 9 (8.8%) had four or more wives. occupation of the participants revealed majority 160(38.1%) were involved in various businesses. most 310 (73.8) of our study participants lived in rural areas table 1. table 2: type of surgery and treatment outcome variables frequency (%) type of hospital facility secondary tertiary 59 (14.0%) 361 (86.0%) nhis user yes 28 (6.7%) no 392 (93.3%) type of surgery appendectomy amputation urethroplasty arthrotomy 26 (6.1%) 8 (1.9%) 2 (0.5%) 4 (1.0%) gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 128 caesarean section cervical cerclage exploratory laparotomy excision biopsy facial repair herniorraphy hysterectomy hydrocelectomy herniotomy intussusception reduction myomectomy nasal packing prostatectomy removal of implant scrotal exploration tah wound debridement with pop osteotomy 252 (60.0%) 3 (0.7%) 70 (16.7%) 5 (1.2%) 4 (1.0%) 9 (2.1%) 4 (1.0%) 2 (0.5%) 3 (0.7%) 1 (0.2%) 5 (1.2%) 1 (0.2%) 3 (0.7%) 4 (1.0%) 3 (0.7%) 6 (1.4%) 3 (0.7%) 2 (0.5%) surgical outcome successful not successful (death) 418 (99.5%) 2 (0.5%) type of surgery and treatment outcome type of health facility attended by patients before referral to our facility revealed that most patients 361 (88.3%) attended tertiary health facility. only a handful of the total patients, 28 (6.7%) had health insurance coverage (nhis). type of surgery performed among the patients revealed majority 252 (60.0%) had caesarean section and 70 (15.7%) had exploratory laparotomy as evident by the age of most patients being within the reproductive age. outcome of surgeries showed that 418 (99.5%) had successful outcome while 2 (0.4%) cases were not successful as they resulted in deaths table 2. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 129 table3: sources of financing in this study population variables rural (%) urban (%) total (%) p-value source of healthcare financing nhis 11 (39.3) 17 (60.7) 28 (6.7) 0.037 personal 203 (71.5) 81 (28.5) 284 (67.6) siblings/parents 36 (92.3) 3 (7.7) 39 (9.3) spouse/children 35 (67.3) 17 (32.7) 52 (12.4) other relatives 14 (82.4) 3 (17.6) 17 (4.0) total 299 (100.0) 121 (100.0) 420 (100.0) sources of financing in this study population majority of the patients spent out of the pocket for healthcare as only 28 (6.7%) had insurance coverage. a breakdown of source of funding reveal 284 (67.6%) depended on personal out of pocket spending for healthcare needs. more rural dwellers 203 (71.5%) spent personal out of pocket/personal while in the urban areas, 81(68.6%) spent personal out of pocket. more siblings, parents and or children are however supportive in the rural area out of pocket spending compared with the urban dwellers and this is significant. association between source of finance for surgery and location of patients showed statistically significant difference with p-value = 0.037 table 3. table 4: cost of surgery among rural surgical patients rural urban p-value patients with low economic status patients with fair/high economic status cost of surgery 32,551.10 26,455.56 0.006 average annual income 144,900.66 408,581.25 0.000 cost of surgery 41337.73 28426.47 0.000 cost of surgery among rural surgical patients difference in the average cost of surgery and socio-economic status was assessed using a t-test test and was found to be statistically significant with p-value of 0.001. the average cost of surgery was 41,337.73 naira and 28,426.47 naira among the low and high socio-economic class. the cost of surgery differed significantly between rural patients and urban patients with p-value of 0.006 implying that the average cost of surgery in the rural area which is 32,551.10 differed from those of urban area which is 26,455.56. similarly, the average annual income of the patients gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 130 and the location of surgical patients were assessed for difference. it was found to be statistically significant with p-value < 0.001 indicating that the average annual income of rural surgical patients (144,990.66) naira differed profoundly from the average annual income of urban surgical patients (408,581.25) naira table 4. discussion the mean age of participants in this study was 28.6 ± 11.9 years with majority being from the age-group 26 – 35 years. this is understandable as this is an active agegroup for the work-force as a good number of people who belong to these agegroups are probably earning a living and can afford hospital services. most participants are females (three-quarter) as they are vulnerable member of the society and are known to take their healthcare needs more seriously. most participants were from the rural areas, did not attain tertiary level of education and are either into small businesses, farming or are housewives without any means of livelihood (inem 2003 and akande 2000). majority of the surgical patients in this study population spending were out of the pocket for healthcare needs as only a handful of participants (one out of every fifteen) had insurance coverage through the nhis platform. a further breakdown of sources of funding revealed that two-third depended on personal out of pocket spending for healthcare needs. this is particularly more among the rural dwellers in comparison with the urban dwellers. more siblings, parents and or children are however supportive in the rural area out of pocket spending compared with the urban areas. this is not surprising as communal living with the extended families is predominant at this level unlike the urban areas where the type of housing, the marital types (monogamous as against polygamous), level of education and occupation creates artificial barriers between people as there is higher tendencies to live in isolation from others (inem 2003). the low nhis coverage (6.7%) could be attributed to its focus on the formal sector at the federal level only. the state health insurance was yet to take off as at the time of this study. if this trend is allowed to continue, it will hinder the attainment of universal health coverage [uhc] (onwujekwe, 2019). this is a major challenge as it is known that some of the issues confronting the health care financing includes; poor funding by government, high out of pocket payment and inadequate implementation of health care financing policy (yunusa, 2014). earlier studies have reported a high out – of – pocket (oop) financing model in our societies (uzochukwu 2015 & onisanwa 2018). participants from the lower socio-economic status were found to pay more in the hospital. this implies that the cost of surgery differed among patients with different gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 131 socio-economic status, as patients from lower socio-economic strata paid higher for surgery than those with high or medium socio-economic status. a probable reason may be due to variation of illnesses at these locations as lack of access to clean water, poor hygiene and lack of adequate environmental sanitation which will make some diseases more common are likely to be bedeviling the rural communities, hence the variation in the cost of their surgeries (inem 2003). another possible explanation may be due to delayed presentation as they would have patronized the over the counter, traditional medicines etc and will only come to the hospital when all these fails, thereby presenting with possible complications that will cost more as they stay longer on the ward, may require surgeries, may require more expensive drugs etc. those at the urban areas also will end up spending less for treatment as they will be required to pay only a meager percentage (10%) for those on nhis (eboh 2016). type of surgery performed among the patients revealed that majority had caesarean section (cs) with exploratory laparatomy being the next most common indication for surgery. the high cs rates are understandable as evident by the age of most patients being within the reproductive age-group. a number of these women may be attending primary healthcare or traditional birth attendants or might not even book their pregnancies at all (gbadeyan 2016). they will then present to the tertiary facilities like ours when things have gone wrong. outcome of surgeries was however encouraging as two deaths (0.4%) was recorded within the study period. the average cost of surgery was 41,337.73 naira and 28,426.47 naira among the low and high socio-economic class. the cost of surgery differed significantly between rural and urban patients implying that the average cost of surgery in the rural area differed from those of urban area. similarly, the average annual income of the patients and the location of surgical patients were found to be statistically significant indicating that the average annual income of rural surgical patients differed profoundly from the average annual income of urban surgical patients (yu 2008). the probable reason may be attributed to the delay in presentation to the hospital, attempt at cutting corners through an initial patronage of patent chemist or sometimes herbal medications before eventually landing in the hospital when all these fails and with possible complications leading to longer hospital stay and use of expensive medications. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 132 5. conclusions i. most of the participants in this study populations spends out-of-pocket (oop) as their source of healthcare financing with only one out of fifteen having health insurance coverage of the nhis. ii. most of the surgical patients are from the rural areas, are females, do not attend tertiary level of education and are of lower socio-economic status. iii. caesarean section and exploratory laparatomy were the predominant indications for surgeries iv. paradoxically, those from the lower socio-economic status and the rural dwellers pay more for surgeries even though they earn less. recommendation i. we recommend that the state consider establishing state health insurance agency and this should cater for people in both the formal and non-formal sectors for an improved and all-inclusive coverage. ii. the social health insurance should cover those in the rural areas and surgeries such as the caesarean sections and emergency exploratory laparatomies. reference akande, t. m, & ogunrinola e. o. (2000). health care financing among inpatients of a tertiary health facility in ilorin nigeria. nigeria journal of clinical practice 2(1):1-4. anyaehie ub, & nwobodo ed. (2004). administrative responsibilities of community-funded health insurance scheme in nigeria. nigeria medical practitioner, 45(3):26-28. atobatele s, omeje o, ayodeji o, oisagbai f & sampson s. (2022). situational analysis of access to essential healthcare services in nigeria: implication for trans-sectorial policy considerations in addressing health inequities. health; 14: 553 – 575. creese a, & bennett s. (1997). rural risk-sharing strategies. in: g schieber (ed); proceedings, innovations in health care financing; world bank conference; 10-11,washington, dc;1997. eboh a, akpata g, oremeyi a & akinwole e. (2016). health care financing in nigeria: an assessment of the national health insurance scheme (nhis). european journal of business and management, vol.8, no.27, :24 – 29. gbadeyan ra, aremu ma & adeoti jo. (2016). a study on sources of health financing in nigeria: implications for healthcare marketers and planners. journal of economics and business research, 90 – 109. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 133 inem av, fatayi williams aa, & ayankogbe oo. (2003). a short history of rural health services development in nigeria. a tribute to dr. andrew pearson. nigeria medical practitioner, 90-95. lawanson ao & olaniyan o. (2013). health expenditure and health status in northern and southern nigeria: a comparative analysis using national health account framework. africanjournal of health economics, 2 (1): 31 – 46. obansa saj & orimisan a. (2013). health care financing in nigeria: prospects and challenges. mediterranean journal of social sciences, 4 (1): 221 – 236. onisanwa id, shido-ikwu bs & adaji mo. (2018). healthcare financing and health status analysis in nigeria. amity journal of healthcare management, 3 (2): 31–42. onwujekwe o, ezumah n, mbachu c, obi f, ichoku h, & uzochukwu b (2019). exploring effectiveness of different health financing mechanisms in nigeria; what needs to change and how can it happen? bmc health service research, 19:661–673. https://doi.org/10.1186/s12913-019-4512-4 onwujekwe o, hanson k, & uzochukwu b. (2012) examining inequities in incidence of catastrophic health expenditures on different healthcare services and health facilities in nigeria. plos one. 7(7):e40811 onwujekwe o, okereke e, onoka c, uzochukwu b, kiriga j, & petu a. (2009). willingness to pay for community-based health insurance in nigeria: do economic status and place of residence matter? health policy and planning, 25(2):155-161. oyefabi, ao., aliyu, aa. & idris, a. (2014). sources of healthcare financing among patients at the ahmadu bello university teaching hospital, zaria, nigeria. journal of medicine in the tropics. 16(1):27-31. shaw pr, & griffin pc. (1995). financing health care in sub-saharan africa through users’ fees and insurance. washington, dc: world bank, 1995; 1330. uzochukwu bsc, ughasoro md, etiaba e, okwuosa c, envuladu e, & onwujekwe oe (2015). health care financing in nigeria: implications for achieving universal health coverage. nigerian journal of clinical practice. 2015; 18 (4): 437 – 444. uzochukwu bsc, ughasoro md, etiaba e, okwuosa c, envuladu e, & onwujekwe oe. (2015). health care financing in nigeria: implications for achieving universal health coverage. nigeria journal of clinical practice;18(4):437–44. https://doi. org/10.4103/11193077.154196. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 134 wiesmann d, & jutting j. (2000). the emerging movement of community-based health insurance in sub-saharan africa: experience and lessons learned. afrika spectrum, 35(2): 193-210. yu cp, whynes dk & sach th. (2008). equity in health care financing: the case of malaysia. international journal for equity in health; 7:15 – 19. doi:10.1186/1475-9276-715 yunusa u, irinoye o, suberu a, garba a, timothy g, dalhatu a & ahmed s. (2014). trends and challenges of public health care financing system in nigeria: the way forward. iosr journal of economics and finance (iosr-jef). 2014; volume 4, issue 3: 28-34 www.iosrjournals.org www.iosrjournals.org gusau journal of accounting and finance (gujaf) vol. 1 issue 2, october, 2020 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state –nigeria gusau journal of accounting and finance, vol. i, issue 2, october, 2020 1 corporate attributes and audit fee of listed deposit money banks in nigeria munir aliyu saleh department of accounting federal university wukari, taraba state, nigeria salehmuniraliyu@gmail.com +2347038422454 abubakar abubakar department of accounting federal university of kashere-nigeria abubakarabubakar2020@gmail.com +2347030072314 shehu usman hassan phd professor of accounting and finance department of accounting federal university of kasherenigeria shehu.hassan@fukashere.edu.ng, shehu.hassanus.usman@gmail.com +234(0)8067766435, +234(0)8057777085 abstract the objective of the study is to examine the effect of firm characteristics on audit fee of listed deposit money banks (dmbs) in nigeria. correlational research design was used for this study with an extensive reliance on secondary data. the population of the study consists of all dmbs listed on the nigerian stock exchange. however, the study utilizes a sample of 10 dmbs in nigeria selected using certain criteria. multiple regression analysis using the ordinary least square (ols) technique was employed as the method of data analysis. diagnostic analysis indicated that the regression assumptions tests such as heteroskedasticity, hausman and the lagrangian multiplier (lm) test for the higher order autocorrelation and the study showed that the model satisfied the ols criterion. the findings indicated that; firstly, there is positive and significant relationship between profitability and audit fees. secondly, there is no significant relationship between complexity and audit fees. thirdly, study reveals that there is positive and significant relationship between audit size and audit fees. fourthly, the study also shows that there no significant relationship between audit risk and audit fees. this shows that bank with higher performance is expected to pay higher audit remuneration. also, bank with higher capital base is expected to pay less audit fee. the study recommends that there is need for the government to regulate audit fees within dmbs in nigeria keyword: firm, characteristics, audit fees, banks mailto:salehmuniraliyu@gmail.com mailto:abubakarabubakar2020@gmail.com mailto:shehu.hassan@fukashere.edu.ng mailto:shehu.hassanus.usman@gmail.com gusau journal of accounting and finance, vol. i, issue 2, october, 2020 2 1. introduction audit fee determination has further become a fundamental issue of audit research in recent times especially following after the classical cases of audit failure experiences as a result of massive corporate scandals; these brought a lot of pressure on auditors for ensuring standard and reliable audit exercise to the shareholders. companies are statutorily required to have their financial statements audited and want the audit fees they pay to be reasonable, auditors provide such service and want to ensure that fees they charge are sufficient to enable a satisfactory service to be provided (gist & gist, 2012). furthermore, the amount of audit fees and how they are determined are significant matters to both national and international. professional accounting bodies to indicate the basis on which audit fees should be determined the cost which should be recovered by an audit fees, and the factors which should be taken into consideration when determining audit fees. in addition, these statements were also designed to restrict auditors from charging their fees on a basis which might be incompatible with ethical value associated with the audit profession. consequently, they seek to protect the auditors from losing their objectivity and effectiveness as independent auditors. although audit fee is not clearly defined in any of the recognized professional accounting body, but aspects regarding audit fees are extensively analyzed from the point of view of their effects on auditor’s independence. the audit fees can thus be simply described as the sums payable paid to the auditors for the audit services offered to the audit (client). the methodology for arriving at an appropriate audit fees is still ongoing, especially in the developing countries where researchers in this area are very scanty and mostly in the financial sector such as banks. moreover, simunic (1980) explicitly saw the audit pricing as the determination of fees and initiated the use of the demand and supply functions to identify the determinants of audit pricing and hence the audit fees. this market theory covers both the demand side and supply side determinants such determinants representing features from clients that demand audit and from auditors that supply audit service. following the audit fees literature, several determinants of audit fees has been identified by different researchers around the world, each with divergent and inconsistent result. however, this study focuses on the effect of corporate profitability, complexity, size and risk on audit fees in listed deposit money banks in nigeria. divergent views concerning the factors that determine the amount of audit fee create a serious debate in developed and developing economy as there are gusau journal of accounting and finance, vol. i, issue 2, october, 2020 3 differences in technology, economic system, market condition, the type of industries, production, the environment as well as the government policies. and these factors may have impact on firm’s characteristics. however, the argument raised above indicates that, there is need to empirically examine the impact of firm’s characteristics on the audit fee of listed deposit money bank in nigeria. also, a number of researches have argued that among the profitability, complexity, audit size and audit risk which one is the most important determinant of audit fees of listed deposit money banks in nigeria. urhoghide & izedonmi (2015), otemu (2019) opined that profitability is considered as the major determinant of audit fee. does profitability affect audit fee of listed deposit money banks in nigeria? likewise, hasan (2017), and immanuel & nur (2014) argued and examined that complexity is the most important determinant of audit fee of an entity. how does complexity impact on audit fee of listed deposit money banks in nigeria? also, aronmwan & okafor (2014), haque, afroze & fatematuz-zohra (2019) are of the view that audit size is considered as the vital determinant of audit fee. how can audit size affect audit fee of listed deposit money banks in nigeria? while in the study of santhosh & ganesh (2020), indira & mutiara (2018) considered audit risk as a major determinant of audit fee of a firm. to what extent can the audit risk affect audit fee of listed deposit money banks in nigeria? finally, most of the study had been focused on the market for audit profession and services in developed and developing countries. but few studies have been conducted in uk and arabic world and they provided an evidence of presence of mixed and inconsistencies of findings in the literature which suggest the issue of auditor remuneration are far from been settle empirically. the current study extended previous studies by presenting new evidence such as inclusion of other variables, environment and area of the study. in line with the research questions above, the main objective of this study is to examine the impact of firm characteristics and audit fee of listed deposit money banks in nigeria. other specific objectives are to; i. examine the influence of profitability on audit fee of listed deposit money banks in nigeria. ii. determine the effect of complexity on audit fee of listed deposit money banks in nigeria. iii. evaluate the impact of audit size on audit fee of listed deposit money banks in nigeria. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 4 vi. access the bearing of audit risk on audit fee of listed deposit money banks in nigeria. furthermore, various parties including shareholders, audit firms, financial regulatory bodies, deposit money banks, potential researchers in this field are expected to benefit from this study in one way or the other. in order to examine the impact of firm characteristics on audit fee of listed deposit money banks in nigeria, the study will cover a period of 6 years (2014 to 2019). the dependent variable of the study is audit fee and the independent variables of the study are; profitability, complexity, audit size and audit risk. 2. literature review and theoretical framework audit fee determination refers to the determination of auditor’s remuneration. the audit fee has in extent literature been divided into two categories; audit fees and non-audit fees. while audit fee refers directly to payments made to the auditor that relates directly to the audit function, non-audit fees is concerned with payments for other non-audit service rendered by the auditor. generally, the audit fees should cover audit costs and provide a reasonable profit. therefore, the audit fees can be seen as a combination of two items: audit cost and profit or auditor’s reward. one of the first theories regarding the determinants of the audit fees was developed by simunic (1980). he proves that the level of the audit fee depends firstly on the auditor’s effort. the connection between the “price” of the audit and the effort for its accomplishing is a natural one, because any audit mission is carried out according to some compulsory standards and rules established by professional audit organizations. simunic (1980) also proved the direct connection between the level of audit fees and the subsequent litigation risk. referring to this statement, pratt and stice (1994) underlined that the auditor’s evaluation in terms of possible losses in future litigations may result in an increase of the audit effort in order to reduce this litigation risk, and consequently to a raise of the audit fee. in more contemporary literature (aronmwan & okafor, 2014; haque et al 2019; gist & gist, 2012; otemu, 2019) several factors have been identified as important considerations in the audit pricing process. among the factors mentioned are the following; the audit’s size, and the geographical dispersion, financial performance of the client, audit’s risk among others. moreover, it has been argued that the impact of these factors on the level of audit fees is quite contradictory (shiyi & jeyaraj (2017), akpom (2016). gusau journal of accounting and finance, vol. i, issue 2, october, 2020 5 prior researches aronmwan & okafor (2014), and haque, afroze & fatema-tuzzohra (2019) documented empirical results indicating that audit fees are significantly influence on the level of the audit client’s complexity. hypothetically, we would expect that as the audit client becomes more complex, more time and effort are needed to apply in performing the audit work. this is true because a more complex audit client means a more diverse organizational structure, and harder to review transactions. this increase in audit effort is expected to lead to an increase in the level of audit fee. (ahmed & goyal, 2005; otemu, 2019 and olutokunbo, yisa & abdullahi, 2020) concluded that complexity has positive and significant effect on audit fees. olutokunbo, yisa & abdullahi (2020) researched on the relationship between corporate characteristics, audit fees and the nigerian corporate environment. the findings of their study revealed that, firm size, profitability, board independence, and audit firm are positive and significant in influencing audit fee while leverage and board size were found to be negative and significantly influencing audit fee. indira & mutiara (2018) in their research studied the relationship between size, profitability, risk, complexity, and independent audit committee on audit fee. the results showed that the size of the company, profitability, complexity of the company has a positive n significant effect on audit fees. while, company risk and independent audit committee have no effect on audit fees. otemu (2019) found that while profitability and complexity were found to be significant determinants of auditor pricing, client size, leverage, and fiscal year end date were found to be insignificant. in brazil, walther, ivam, & glauco (2015) found that client size, risk and complexity positively and significantly impact on audit fee. as for the relationship between corporate governance and audit fees, they found an insignificant relationship with respect to small companies and a significant and positive relationship with respect to large firms in brazil. however, ohidoa & omokhudu (2018) found that, auditor type, client’s firm size, client’s complexity, client’s firm risk and audit committee independence have significant effect on audit fees, while firm’s profitability has no significant effect on audit fees. 2.1.1 profitability and audit fees corporate profitability is seen as an indicator of management performance and its efficiency in allocating available resources. hence the direction of the relationship gusau journal of accounting and finance, vol. i, issue 2, october, 2020 6 between audit fee and profitability can be positive or negative. some might argue that companies reporting high levels of profit will be rigorous audit testing to relate revenues and expenses and this entails more audit fees (santhosh & ganesh (2020). others make the point that under-performing companies are more likely to control their over-heads and this would result in less audit work chan et al (1993). in practice, difference variables have been used in previous researches to proxy corporate performance (profitability). a number of studies used profit or loss figures e.g. olutokunbo et al. (2020), urhoghide & izedonmi (2015), santhosh & ganesh (2020). other studies like; aronmwan & okafor (2014), otemu (2019), indira & mutiara (2018) have used different profitability ratios such as: return on assets (roa), return on equity (roe), and return on capital employed (roce). however, this study used roa as a proxy of profitability. furthermore, these studies (urhoghide & izedonmi, 2015; santhosh & ganesh, 2020; otemu, 2019; indira & mutiara, 2018) found a significant relationship between profitability and audit fee. in line with the findings of prior studies, we state the hypothesis of this study as follows: h01 profitability has no significant influence on audit fee 2.1.2 complexity and audit fee firm complexity has been defined differently by researchers in the field of firm characteristics and audit fee determination. prior studies proxied complexity as the number branches or subsidiaries a company has both within and outside the country the parent company is located, the number of industries the company operates in, the total remuneration of the board of directors and asset composition. it can be assumed that the quantum of audit work will increase as the complexity of the client firm increases. therefore, audit fee depends on time spent by auditors in examining the books of its client, the volume for an audit engagement and the number of audit staff the audit firm assigns to the auditee company. this means that the complexity of a firm determines the audit fee to be charged. however, loughran & mcdonald (2019) sees complexity as the list of words produced by examining actual word usage in u.s. annual reports. they believe that any word most likely to imply business or information complexity is placed on the word list. some of these words includes: subsidiaries, lease, acquisition, foreign, impairment, contracts etc the research conducted by indira & mutiara (2018), otemu (2019), hasan (2017), immanuel & nur (2014), and hassan & naser (2013) shows that gusau journal of accounting and finance, vol. i, issue 2, october, 2020 7 complexity is one of the factors that influence the determination of audit fee. therefore, we hypothesize that; h02 complexity has no significant impact on audit fee of dmbs in nigeria 2.1.3 audit size and audit fee audit size is considered an important factor in determining the audit fee. it refers to how big or small the audit firm is. the number of hours needed to complete the audit work mainly determines the amount of external audit fee. according to steward and munro (2017), auditing large firms requires the spending of time and effort than auditing small firms. generally, it can be hypothesized that the larger the company size, the longer the audit process, and consequently the higher the audit cost. in other word, large client will have more transactions, therefore, requires the auditor to perform more detailed audit processes and procedures, and thus the auditors have to be more attentive and diligent to audit and review their clients business, which results in higher audit fees simunic (1980). generally, company size can be measured by the balance sheet items, which give certain dimensions of size, such as, total assets, stocks, debtors, creditors, etc. these measures of size might indicate the items where the auditing work load is heaviest, and which major efforts could be expended. size can also be measured by the profit and loss account items, such as turnover, profit, and total employment costs. the size of total assets was the factor most often used in previous studies to represent company size (otemu, 2019; aronmwan & okafor, 2014; urhoghide and izedonmi, 2015). this study however, measures audit size as the natural logarithm of the auditee total asset. based on the above discussion, this study suggests the following hypothesis; h03 audit size has no significant effect on audit fee of dmbs in nigeria 2.1.4 audit risk and audit fee the degree of the risk involved in the audit work could be a consideration when determining the audit fee, as it could affect the auditor's responsibility. audit risk as used by prior studies (simunic, 1980; sun & liu, 2011; indira & mutiara, 2018; olutokunbo, yisa & abdullahi, 2020) can take different forms. it could be the risk associated with the audit responsibility assigned to the auditor or the risk associated with a client failing which will consequently expose the auditor to some losses. therefore, the more risk involved in the audit work the greater the responsibility which deserves a higher fee to compensate the external auditor for gusau journal of accounting and finance, vol. i, issue 2, october, 2020 8 taking such risk. in general, the degree of risk involved in the audit work differs depending on the nature of the company's business. however, the higher audit risk, obviously, causes more efforts exerted by auditors to lower future litigation risks. a study conducted aronmwan & okafor (2014) pointed out that the more the client risk, the more the audit fees paid. also, an increase in audit effort gives birth to high audit fees because auditors will have to either spend more time, staff and effort or will have to insure against possible litigations in the future. moreover, a risky company is expected to run the risk of audit failure; this would require an intensive audit testing which result in increase in audit fees simunic (1980). however, the following hypothesis has been developed to test this association. h04 audit risk has no significant impact on audit fee of dmbs in nigeria the theoretical explanation of this study is agency theory which deals with the contractual relationship between the agent (manager) and the principal (shareholders) under which shareholders delegate responsibilities to the manager to run their business. this theory argues that when both parties are expected to maximize their utility, there is a good reason to believe that the agent may engage in opportunistic behaviour at the expense of the principal’s interest. jensen and mecklin (1976) modeled this condition as an agency relationship where the ability of the principal to directly observe the agent’s action could lead to moral hazard, thus increasing agency cost. how does the determination of audit pricing fall within the context of the agency theory? this question is answered when we consider clearly the contributions of jensen mecklin (1976) a component of the agency cost is represented by the monitoring costs supported by shareholders for the monitoring of the manager’s actions. the audit fees are an important component of these costs, as long as auditors have to make sure that managers act according to the shareholders’ interests, while also auditors have the required task to inspect the accounts of the company. it may hence be supposed that auditors will spend more time inspecting the managers’ activity if the agency problems are big. consequently, (gist & gist, 2012) suggest that, in the case of the companies whose capital is mainly owned by managers, the agency costs are low, because it is more probable that the managers’ interest coincide with the shareholders; when managers are also majority shareholders. therefore, the monitoring costs, gusau journal of accounting and finance, vol. i, issue 2, october, 2020 9 including the audit fees, will be higher in the case of the companies whose managers own an insignificant part of the capital. 3. methods and models the study empirically examines the impact of firm’s characteristics on audit fee using multiple regression analysis due to the fact that it is correlation in nature. the population of the study comprise of all deposit money banks listed in the nigerian stock exchange as at 2019 annual fact book. the basis for sampling size is justified where by certain criterion was used in selecting the 10 out of 15 listed deposit money banks in nigeria for the period of 2014 through 2019. the study utilized secondary source of data extensively. however, the study employed a ordinary least square regression analysis as the technique of data analysis. the deterring factors considered are: profitability, complexity, audit size, and audit risk as the independent variables while the dependent variable is audit fee. ols regression model will be estimated using stata 11 as the tool of analysis. other test will be conducted ranging from multicollinearity test, normality test, heterokedasticity test and other test if possible. these techniques and tools are more informative. the data used will be analyzed using multiple regression technique. table 1: variable measurement and definition dependent variable: measurement source audit fee (audf) actual fee recorded in the financial statement olutokunbo, yisa & abdullahi (2020) independent variables: profitability (prof) pat/total assets hassan, (2014) complexity (compl) number of branches otemu (2019) audit size (audsz) natural log of total assets urhoghide & izedonmi (2015) audit risk (audrsk) total debt / total assets otemu (2019) computed by the author, 2020 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 10 the model that test the hypotheses of the study is specified as follows: audfit = α +β1profit + β2complit + β3audszit + β4audrskit + ᶓit where audf = audit fee α =constant prof = profitability compl = complexity audsz = auditee size audrsk = audit risk ᶓit = error term β1β4= coefficient of independent variables i=firms t=time 4. result and discussion this section presents the descriptive statistics describing the trends of the variables within the period covered by the study, followed by the correlation matrix which analyzes the association between dependent and each independent variable individually and cumulatively. furthermore, the regression result which examine the model that capture the dependent variable (audit fee) and all the independent variables of the study (profitability, complexity, audit size and audit risk). table 2: descriptive statistics statistics audf prof compl audsz audrsk mean 134.0972 5.4746 371.8611 7.7011 10.2048 std. dev 54.9371 21.8451 226.0932 1.2831 37.9395 minimum 46.001 -5.4315 145.010 5.6375 -43.6936 maximum 391.010 179.5268 880.001 9.3276 215.0311 skewness 1.8174 7.2124 0.9556 -0.2110 4.0921 kurtosis 10.0468 57.6095 2.6087 1.2826 19.9914 source: stata 11 outputs gusau journal of accounting and finance, vol. i, issue 2, october, 2020 11 table 1 show that audit fee of the nigerian deposit money banks has a mean value of 134.0972 with standard deviation of 54.9371, and minimum and maximum values of 46 and 391 respectively. this implies that the average efficiency of deposit money banks is 134.09 to 391, and the deviation from both sides of the mean is 54.937. this suggests that the model is fit because the standard deviation is lower than the mean value. the peak of the data is indicated by the kurtosis value of 10.0468, suggesting that some of the values are higher than mean, hence the data do meet a normal distribution assumption. the coefficient of skewness of 1.8174 implies that the data is positively skewed (that is, most of the data are on the right side of the normal curve). the table indicates that the average profitability is 5.4746 with a standard deviation of 21.845, and minimum and maximum of -5.4315 and 197.52 respectively. this suggests a wide dispersion of the data from the mean because the standard deviation is higher than the mean value. the peak of the profitability data is indicated by the kurtosis value of 7.2124, suggesting that most of the values are higher than mean, and the data did not meet a normal distribution assumption. the coefficient of skewness of 57.6095 implies that the data is positively skewed (that is, most of the data are on the right side of the normal curve). the table also indicates an average complexity of 371.86 with standard deviation of 226.09, with minimum and maximum of 145 and 880 respectively. this also suggests that the data is normal because the standard deviation is less than the mean value. the peak of the complexity data is indicated by the kurtosis value of 2.6087, suggesting that most of the values are closer to mean, and the data did not meet a normal distribution assumption. the coefficient of skewness of 0.9556 implies that the data is positively skewed (that is, most of the data are on the left side of the normal curve). moreover, an average audit size of 7.7011 with standard deviation of 1.2834 and minimum and maximum of 5.6375 and 9.3276 respectively. the result also indicates that the audit risk has a mean of 10.204 with standard deviation of 37.9395, minimum and maximum of -43.6936 and 255.0311 respectively. table 3: correlation matrix audf prof compl audsz audrsk audf 1.0000 prof 0.2696 1.0000 compl 0.0157 (0.0892) 1.0000 audsz (0.3053) (0.2669) (0.1294) 1.0000 audrsk 0.0543 0.1621 (0.0878) (0.3100) 1.0000 source: stata 11 outputs gusau journal of accounting and finance, vol. i, issue 2, october, 2020 12 table 2 is a correlation matrix table, which shows the relationship between all pairs of variables in the regression model. the result reveals a positive correlation between audit fee (audf), profitability (prof), complexity (compl), and audit risk (audrsk), while is negatively correlated with audit size (audsz). more so, to further check for collinearity another robustness test was conducted. the test for multicollinearity using the variance inflation factor (vif) and tolerance value (tv) reveals the absence of multicollinearity as all vif values above 1.0 and tolerance values are below 1.0, see the appendix. table 4: summary of regression result: variables coefficient t-values p-values tolerance values vif constant 227.9551 4.97 0.000 prof 0.5728 1.89 0.063 0.9086 1.10 compl -0.0047 -0.17 0.865 0.9513 1.05 audsz -12.1485 -2.27 0.027 0.8252 1.21 audrsk -0.1634 -0.92 0.362 0.8828 1.31 hettest 6.24 (0.0125) r2 0.1330 adjusted r2 0.0376 f-stat 2.91 f-sig 0.0284 source: stata 11 outputs the result in table 3 shows that there is no presence of heteroskedasticity in the panel as indicated by the breuch pagan/cook-weisberg test for heteroskedasticity chi2 of 6.24 with p-value of 0.0125. these suggest that the panel data are homogenous. considering the relationship between prof and audf of dmbs in nigeria, the regression result in table 3 indicates that prof has positive influence on the audf of listed dmbs in nigeria. this was proved by the coefficient value of 0.573 which is significant at 10%. this result did not contradict researchers expectation and it may be as a result of the expectation that the larger the prof the higher the audf. the result forms the basis for the rejection of the first null hypothesis which states that there is no significance relationship between profitability and firm audit fee. the finding supports the findings of olutokunbo, yisa & abdullahi (2020), santhosh & ganesh (2020), and ndukwe (2014 ). gusau journal of accounting and finance, vol. i, issue 2, october, 2020 13 in order to test the hypothesis that says complexity has no significant impact on the audit fee of listed dmbs in nigeria. the regression result gives a t-value of 0.17 with a coefficient of -0.0047556 which is not significant. this signifies that complexity is negatively and insignificantly influencing the audit fee paid by listed dmbs in nigeria. this further indicates that the higher the ratio of audit fee, the lower the complexity. this result is surprising as the researcher expect that complexity is one of the most important determine of audit fee as the higher the number of firms branches the higher the audit fee expected to be paid. base on this result, the second null hypothesis which said that complexity has no significant impact on audit fee is hereby failed to reject. this result is confirming the work of ahmed and goyal (2005) and is in contrary to the studies of simunic (1980), walther, ivam, & glauco (2015), aronmwan & okafor (2014), otemu (2019) and olutokunbo, yisa & abdullahi (2020). regarding audit size and audit fee, a negative and strongly significant relationship was established between them with a coefficient of -12.15 and a p-value of 0.027. this study also goes in anchor with the study of simunic (1980). it is however contrary to the findings of otemu (2019), olutokunbo, yisa & abdullahi (2020) and aronmwan & okafor (2014) who found a positive and significant relationship between the audit size and audit fee. this is also surprising because the researcher’s prior expectation was that audit size should have positive contribution to audit fee. finally, in examining the impact of audit risk and audit fee of dmbs in nigeria, tvalue of -0.92 and a -0.1634 coefficient was given by the regression result and is statistically not significant. this signifies that the more the audit risk in a given financial year will have less impact on the audit fee of the selected banks. this result is highly surprising as it contradicts the researcher expectations but this result was in line with the studies of otemu (2019), santhosh & ganesh (2020) and walther, ivam, & glauco (2015) but contrary to the study of indira & mutiara (2018). this result serves as an evidence to failed to reject the fourth hypothesis which states as audit risk has no impact on audit fee of listed deposit money banks in nigeria. the cumulative adjusted r2 (0.13) which is the multiple coefficient of determination gives the proportion or percentage of the total variation in the dependent variable as explained by the explanatory variables jointly. hence, it gusau journal of accounting and finance, vol. i, issue 2, october, 2020 14 signifies that 13% of the total variation in audit fee of dmbs in nigeria is caused by the proxies of firm’s characteristics used in this study. this indicates that the model is fit and the explanatory variables are properly selected, combined and used, as proved by the f-statistics of 2.61 at 5% significance level. the findings have several theoretical, practical and regulatory implications. these implications represent the contributions of the study which are expected to benefit the existing body of knowledge within the accounting research, regulators and providers of accounting services. the findings have important policy implications since they suggest the need to encourage applying corporate governance principles in deposit money banks. this suggests that similar efforts in other sectors especially food and beverages would be rewarding in controlling the management of reported financial manipulations, to enhance the reliability and transparency of reported financial statement in order to promote economic efficiency. 5. conclusion and recommendations conclusively, the study has provided both statistical as well as empirical evidence on the contribution of profitability, complexity, audit size and audit risk proxies from 12 deposit money banks in explaining and predicting audit fee of nigerian listed deposit money banks. thus, firm characteristics as proxies by profitability, complexity, audit size, and audit risk are predicting the audit fee of dmbs in nigeria. the study revealed that profitability has positive and significant influence on audit fee while audit size has negative and significant impact on audit fee of listed deposit money banks in nigeria. this implies that an increase in the financial performance of the bank will result in higher audit price and also an increase in capital base will lead to decrease in audit fee. while complexity and audit risk has negative and insignificant relationship with audit fee of listed deposit money banks in nigeria. based on these findings that auditors will prefer to audit banks with higher profitability and discourage to audit banks with high capital base. consequently, there is need for the regulatory body to regulate audit prices of dmbs in nigeria. references ahmed, k. & goyal, m.k. (2005). a comparative study of pricing of audit services in emerging economies. international journal of auditing, 9; 103–116. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 15 akpom u. (2016). multiple regression analysis of company and audit firm characteristics to predict audit fees in nigeria. phd dissertation manuscript. aronmwan, e. j. & okafor c. a. (2014). auditee characteristics and audit fees: an analysis of nigerian quoted companies, unpublished journal. available at http://ssrn.com/abstract=2642727. chan, p., ezzamel, m., & gwilliam, d. (1993). determinants of audit fees for quoted uk companies. journal of business finance & accounting, 20(6), 765-786. gist, w. e., & gist, w. e. (2012). explaining variability in external audit fees explaining variability in external audit fees, (january 2015), 37–41. haque, t., afroze, s. & fatema-tuz-zohra (2019). impact of corporate governance on audit fee and audit quality: a stud in the insurance industry of bangladesh. the cost and management, vol. 47 no.2. hasan, m.a. (2017). pengaruh kompleksitas audit, profitabilitas klien, ukuran perusahaan dan ukuran kantor akuntan publik terhadap audit fee. publik jurnal. vol. 9, no. 3, 214230. hassan. m., & naser, k.(2013). determinants of audit fees: evidence from an emerging economy. international business research, 6(8), 13-25. immanuel & nur, e.a.y. (2014). analisis faktor-faktor yang mempengaruhi penetapan audit fees (studi empirik pada perusahaan manufaktur yang terdaftar di bei tahun 20112013). diponegoro journal of accounting, volume 3, nomor 3, 1-12 indira, j. & mutiara, s. w. (2018). the effect of size, profitability, risk, and independent audit committee on audit fee, jurnal dinamika akuntansi, vol. 10 no. 2, pp. 136-145. jensen, m. c., &meckling, w. h. (1976). theory of the firm: managerial behavior, agency costs and ownership structure. journal of financial economics. 3(4), 305–360. loughran, t. & mcdonald, b. (2019). measuring firm complexity, journal of finance, vol. 69 1643-1671. ndukwe, o. d. (2014). impact of corporate profitability and complexity on audit fee in nigeria. managerial auditing journal, 26 (4), 300-316. ohidoa t. & omokhudu, o. o. o. (2018). firm attributes and audit fees in nigeria quoted firms. international journal of academic research in business and social sciences. vol. 8 no. 3. pp.685–699. http://ssrn.com/abstract=2642727 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 16 olutokunbo, o. t., yisa, a., & abdullahi j. s. (2020). corporate characteristics, audit fees and the nigerian corporate environment: a panel data approach, european journal of accounting, auditing and finance research, vol. 8 no. 9, pp. 78-97. otemu, e. (2019). corporate attributes and audit pricing. international journal of social sciences and management research, vol. 5 no. 2. pratt, j. & stice, j .d. (1994). the effects of client characteristics on auditor litigation risk judgments, required audit evidence, and recommended audit fees. the accounting review. vol. 69 no. 4,pp 639-656. santhosh, n. & ganesh, r. s. (2020). determinants of audit fees: evidence from companies listed in the industrial sector of muscat securities market, journal of critical reviews, vol. 7 no. 3. pp. 33-36. shiyi, s. & jeyaraj, s. s. (2017). relation between audit risk and audit fees evidence from listed firms in the us. european journal of accounting, auditing and finance research, vol.5, no.5, pp.78-110. simunic, d. a. (1980). the pricing of audit services: theory and evidence. journal of accounting research. 18(1), 161–190. steward, j. and munro, l. (2007). the impact of audit committee existence and audit committee meeting frequency on the external audit: perceptions of australian auditors. international journal of auditing. vol. 1, pp 51– 69. sun j. and liu, g. (2011).client-specific litigation risk and audit quality differentiation.the official journal of the institute of chartered accountants of nigeria 47(4) 27-33 urhoghide, r. o & izedonmi, f.o.i. (2015). an empirical investigation of audit fee determinants in nigeria, international journal of business and social research, vol. 5 no. 8, pp. 48-58. walther, b. l. c., ivam, r. p. & glauco, p. s. (2015). determinants of audit fees; a study in the companies listed on the bm &fbovespa, brazil. usp, são paulo, vol. 26, no. 69, pp. 261-273 gusau journal of accounting and finance (gujaf) vol. 1 issue 2, october, 2020 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state –nigeria gusau journal of accounting and finance, vol. i, issue 2, october, 2020 1 dividend policy and share price volatility: evidence from listed deposit money banks in nigeria isiaka olalekan lasisi department of accounting, air force institute of technology, nigeria air force base, kaduna lasmanyk30@gmail.com, +2348037322585 james george apochi bursary department, air force institute of technology, nigeria airforce base, kaduna afitpayoffice2014@gmail.com +2348036455513 asma’u mahmood baffa, phd department of accounting, air force institute of technology, nigeria air force base, kaduna kabiru badawiyu department of banking and finance, air force institute of technology, nigeria air force base, kaduna muhammadahmadbadawiy@gmail.com +2348035996403 abstract this study examines the impact of dividend policy on share price volatility of listed deposit money banks in nigeria. data for the study were extracted from the annual reports and accounts of twelve (12) deposit money banks in nigeria from 2014-2018. the study uses share price volatility as dependent variable and dividend per share, earnings per share and bank size as explanatory variables. descriptive analysis, correlation analysis and regression model were used to perform the data analysis. random effect regression analysis was utilized to confirm the empirical finding of the study. the results show that dividend per share and earnings per share have a positive and significant impact on share price volatility of listed deposit money banks in nigeria. the finding of mailto:lasmanyk30@gmail.com mailto:afitpayoffice2014@gmail.com mailto:muhammadahmadbadawiy@gmail.com gusau journal of accounting and finance, vol. i, issue 2, october, 2020 2 the study revealed that dividends were relevant to investors, indicating that the signaling theory was relevant, and investors believed in information being transferred in the dividend policy decision. the study recommends that the board and management of banks should ensure that good dividend policy is put in place and earnings per share policies are maintained because it has been empirically proven to improve share price movement. keywords: dividend per share, earnings per share, share price volatility, banks, nigeria 1. introduction the global economic crisis of 2008 affected all major sectors of the economy and the nigerian banking sector was not immune to this effect. the aftermath of the crisis and resultant economic depression in 2016 also resulted in the volatility of the banks’ financial assets. similarly, the fall in the price of crude oil worldwide due to the global health crises of covid 19 pandemic further increased the exposure of emerging economies to shocks in financial assets, particularly share prices (fasanya & akinde, 2019). share price volatility (spv) is a persistent floatation in the price of a share, relative to its average value. spv is used to explain the risk of a common share, whereby, the greater the volatility of a common share, the greater its risk ((hieu, anh, chung & lien, 2020). the problem of high instability of the financial sector has adversely affected the proper functioning of the market, thereby making it difficult to predict the future share price (jahfer & mulafara, 2016). furthermore, the dividend policy decision is an avenue through which companies can achieve its objective of wealth maximization it creates for its shareholders (pelcher, 2019). investors consider dividend policy as one of the main factors in deciding their investment decision as they may perform more accurate financial analysis on the firm if they have a better information on dividend yield and dividend payout ratio (hooi, albaity & ibrahimy, 2015). thus, the impact of dividend policy on share price volatility is considered a crucial investment decision for investors. according to neelanjana and hassan (2019), share price volatility is the degree of price change in share or stock for a certain period of time. therefore, a higher volatility, will lead to higher risk of substantial loss or gain. consequently, this will make forecast of a company future share price more difficult. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 3 the theoretical framework of this study is the signalling theory linked to the contentious issue of two school of thoughts; dividend relevance and dividend irrelevance. lintner (1956); erasmus (2013); and wolmarans (2000) as cited in (pelcher, 2019) posit that investors are of the belief that a company paying dividends, signals good information about the company to the investors, this view suggests that dividend decisions certainly have an impact on share prices, because payments of dividend signal information to investors, which causes a resultant reaction. on the other hand, the second school of thought pioneered by miller and modigliani (m&m) is of the view that, if a consistent dividend policy is implemented by a company, it would make no difference to shareholders’ wealth because the profit belongs to the shareholders, thereby, rendering dividend payouts, and ultimately dividend policy, irrelevant. contemporary studies of rashid and rahman, (2008); and kamyabi and nazemi (2014) support the dividend irrelevance school of thought. the relevance of dividend or otherwise on share prices has contentiously been discussed for long, however, rational investors make investment decisions considering the risks attached to the prospected investment with the expectation of making a profit. therefore, fluctuations in share prices will definitely be of special interest to investors. the impact of dividend policy on share price volatility is therefore an important consideration for the investment decision of investors. however, even though a lot of empirical researches on the impact of dividend policy on share prices have been conducted in nigeria and other countries dalyop et al., (2020). venugopal and jampala, (2019), premathilaka and karunarathne, (2019) adesina et al., (2017), şamiloğlu et al., (2017) uses share price and proxy by market price per share (mps) of closing price of the firm’s share at the end of year while the study ntui et al., (2015) proxy share price by price volume (venugopal & jampala, 2019) use share price and proxy by equity market price. therefore, there are very few studies that have been conducted taking the risks of share price volatility into consideration, especially in nigeria, such as the studies of ahmad et al., (2019) consider the average of low and high market prices of the share in a year while this study is different by considering the average of all share price in a year. also, the earning per share (eps) was use as independent variable gusau journal of accounting and finance, vol. i, issue 2, october, 2020 4 in the study as against dividend yield considered by most studies because the share price and its volatility determine ordinary shareholders ownership value and investors intentions toward the company. therefore, to the best of the researchers’ knowledge, there is no study conducted in nigeria on dividend policy and earning per share and share price volatility, and this study aims to fill that gap. the study is further justified by providing adequate knowledge to the policy makers, investors, managers of companies and financial institutions by examining the impact of dividend policy measures on share price volatility (spv). in order to achieve the objective of the study, the following null hypotheses will be tested: h01: there is no significant relationship between dividend pay-out (dp) and share price volatility (spv) of listed dmbs in nigeria. h02: there is no significant relationship between earnings per share (eps) and share price volatility (spv) of listed dmbs in nigeria. 2. literature review conceptual and theoretical framework dividend policy refers to a firm’s policy which indicates that what proportion of earning or profit should be distributed among shareholders and what proportion or percentage of earning should be retained for reinvestment opportunity (ahmad et al., 2019), dividend is distribution of money to investors from the profit of the bank. it is expected that banks with better resource management and higher revenues have higher dividend payout. dividend policy as firm’s dividend payout policy that mangers follow in deciding the pattern and size of cash distribution to shareholders in the form of dividend (kolawole et al., 2018). dividend policy is one of the important company financial decisions and this policy guides banks on methods to adopt in paying dividends to its shareholders, which is considered as a major return by the shareholders on their investments (raza, ramakrishnan, gillani, & ahmad, 2018). theories have revealed the relationship between dividend policy and share price. for instance, the theory of dividend irrelevance asserts that in an efficient and perfect market where there are no information asymmetry or taxes and transaction costs, the company’s dividend policy has no influence on its market value reflected through company’s share price, and that the company has no appropriate dividend policy (raza et al., 2018). gusau journal of accounting and finance, vol. i, issue 2, october, 2020 5 share price volatility is the degree of change in the share or stock price relative to its average value of company. the share price volatility is seen to explain the risk of a common stock, thus, the greater the volatility of a stock, the higher the risk (hieu et al., 2020). the finance literature comprises of different theories underpinning dividend policy such as the theory of bird in hand, signaling theory, agency theory and clientele effect theory, dividend irrelevance and relevance theory. modigliani and miller (1961) proposed the irrelevance theory as proposition more than 50 years ago. m&m argued that the dividend payout policy does not have an influence on firm value in a perfect capital market. the theory assumed that the firm's investment and financing decisions are determined independently of the dividend policy (priya & mohanasundari, 2016). furthermore, the relevant theory is explained by two main theories; bird-in-the-hand theory and signaling theory. the bird-in-the-hand theory argued that investors prefer dividend income to capital gains. on the other hand, the signaling theory evealed that decisions on dividend payout provide information to investors about the firm's future value (jakata and nyamugure, 2014). however, the clientele effect theory shows that the company has different customer groups and these customer groups have different interests, so changes in dividend policy can cause a group of customers to host (hieu et al., 2020). agency theory states that when managers are assigned responsibility to maximize the wealth of shareholder, then the shareholder can scrutinize mangers economically. thus, the conflict of interest originates between shareholders (principals) and management (agents). therefore, paying dividends to investorsmay reduce the possibilities of managers acting selfishly because dividend payment increases the accountability and transparency of managers to the stakeholders. however, raza et al., (2018) argued that firm value influence by dividend payout and ultimately obliged managers to sources for external financing through the capital market. empirical studies several studies have been conducted on dividend policy by different researchers at different periods. hieu et al., (2020) examine the effect of dividend policy on share price volatility of 260 companies listed on hochiminh stock exchange (hose) in vietnam from 2009 to 2018. the findings show a negative relationship gusau journal of accounting and finance, vol. i, issue 2, october, 2020 6 between dividend payout ratio and stock price volatility. in addition, it found that earnings volatility had positive influences on share price volatility while firm’s size had negative effect on share price volatility. additionally, manaseer (2019) analyzed the impact of dividend policy on share price volatility of 20 insurance companies listed in the amman stock exchange. the result of the regression model revealed that payout ratio is significant and negative influencing share price volatility. neelanjana and hassan (2019) examining the influence of dividend policy on share price volatility of 35 manufacturing companies in malaysia for the time period starting 2008 to 2017 used multiple linear regression, and the results showed that dividend payout, firm size and earning volatility had a significant negative influence on share price volatility, while dividend was found to be insignificant on share price volatility. on the other hand, pelcher, (2019) analyzed the influence of dividend policy on share price volatility of listed firms on the johannesburg stock exchange limited (jse)from 2007 to 2016. the results of the study indicate that the influence of dividend payout ratio is positive and insignificant on share price volatility. also, the study of sugathadasa, (2019) examined the relationship between dividend policy and share price volatility of 30 selected companies listed in colombo stock exchange in sri lanka, from 2014 to 2017. findings of this study indicate that dividend payout ratio and dividend yield have negative impact on share price volatility. more so, sew et al. (2015) examine the 319 companies from various sectors listed on the kuala lumpur stock exchange. the study indicated that dividend payout was strongly related to the volatility of stock prices, with a negative sign of relationship. ahmad et al., (2019) examines the influence of dividend policy on share price volatility of commercial banks listed at pakistan stock exchange. the sample of study is 17 for the time period 2014 to 2017. multiple regression analysis was applied. the finding of the study shows that eps shows a highly significant positive impact on the share mp and the dividend show a significant but negative impact on the share mp. haque et al. (2019) investigated the impact of dividend policy on stock price volatility based on 11 years’ (from 2004 to 2014) data collected from 35 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 7 manufacturing companies listed in dhaka stock exchange (dse) of bangladesh. multiple regression analysis was used to analyse the data. the findings of the study suggest that, among predictive variables, dividend yield and size of the firm had major impacts on share price volatility. also, zainudin et al. (2018) analysed the impact of dividend policy on stock price volatility of industrial products firms listed on bursa malaysia. the sample of 166 industrial products public-listed firms from the year 2003 to 2012. using baskin’s framework, the empirical results indicate that dividend policy was a strong predictor of stock price volatility of industrial products firms in malaysia, particularly during the post-crisis period. jahfer and mulafara, (2016) examined the effect of dividend policy on share price volatility of colombo stock market (spv) sri lanka, for the period 2009–2013. regression results indicate that dpr is insignificant and positive effect on the movement of stock prices. further, size is significantly negatively affecting price volatility, suggesting that the larger the firm, the less volatile the stock price. on the other hand, hooi, albaity, and ibrahimy (2015) examine the influence of dividend policy on share price volatility of 319 companies from kuala lumpur stock exchange, malaysian. dividend yield and dividend payout were found to be negatively affecting share price volatility and were statistically significant. firm size and share price were negatively affected. positive and statistically significant earnings volatility and long-term debt on price volatility were also found. 3. methodology in order to analyze the impact of dividend policy on share price volatility, relevant data were collected from annual reports and accounts of the sampled banks listed on the nigeria stock exchange during the period 2014 to 2018. the target population consists of deposit money banks listed on the nigeria stock exchange. banks that do not have complete data during the period of the study were excluded. consequently, a sample of 12 listed deposit money banks were selected using convenience random sampling method. the data were analyzed using random effect gls regression. the descriptive statistical methods such as calculation of mean, variance and standard deviation were used. correlation matrix and multiple regression analyses were also used to analyze the impact of dividend policy (independent variable) on share price volatility (dependent variable). in line with previous studies, bank size was included as a control to account for differences in the size of banks for the study. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 8 therefore, the following equation is tested including control variable in the model: spvit= β0it+ β1dpsit+ β2epsit + β3bsit+e where: spv stands for the share price volatility, dps stands for dividend per share, eps stands for earning per share and bs stands for bank size. 4 results and discussions descriptive statistics table 1 provides a descriptive statistic of the variables that were used in the study from 2014 to 2018. the spv is 9.04% for the dmb listed in nse during study period. dps shows a mean value of 0.26, while the average mean value of earnings per share and firm size are 1.78% and 21% respectively. table 1 shows that dps has the lowest mean value and standard deviation, where bank size has the highest mean and spv has the highest standard deviation between the variables. the dps has the lowest minimum value and spv has the highest maximum value. table1: summary of descriptive statistics variables n mean std dev. minimum maximum spv 60 9.04 10.29 0.50 46.05 dps 60 0.26 0.21 0 1.03 eps 60 1.78 1.87 -1.27 7.04 bs 60 21.29 0.79 18.87 22.51 pairwise correlation analysis table 2 below represents the results of the correlation coefficient to measure any correlation between the variables of the study at any level during the period of the study. the table reveals that there is a positive and significant relationship between spv and dps out of (r= 0.3309; p-value=0.0098) and this agrees with the studies which assured the positive influence of dps on share price(sugathadasa, 2019). eps revealed a positive and significant relationship with spv with (r=0.86 and p-value=0.00), similarly, this result conforms to the gusau journal of accounting and finance, vol. i, issue 2, october, 2020 9 results in(ahmad et al., 2019). finally, bank size shows a positive and significant relationship with spv with a (r=0.35 and p-value=0.00) this result is consistent with the study of (jahfer & mulafara, 2016). furthermore, dps revealed a positive and significant relationship with eps and bank size and, eps shows a positive and significant relationship with bank size. table1: table 2. pairwise correlation variables spv dps eps bs spv 1.0000 dps 0.3309* 1.0000 0.0098 eps 0.8586* 0.3171 1.0000 0.0000 0.0073 bs 0.3519* 0.3430* 0.5630* 1.0000 0.0058 0.0073 0.0000 robustness tests variance inflators factor (vif) to further substantiate the absence of multicolinearity between the exogenous variables, multicolinearity diagnostics tests were conducted using the tolerance value and the variance inflators (vif). the mean value of vif coefficient is 1.40 which is less than 10, indicating absence of multi-collinearity phenomenon. hetetroscedasticity test the breush – pagan test suggests the possible pressure of heteroskedasticity in the study model. a large chi-square would indicate that there is present of heteroscedasticity. in the result obtained from the heteroscedasticity test conducted in this study, chi-square value was 18.94 and the p-value was 0.0000 indicating the presence of heteroscedasticity. therefore, the study conducted fixed and random effect test to take care of the individual differences within units. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 10 hausman test and breusch-pagan lagrangria multiplier test for random effects the hausman test was used to determine the fixed or random effects of the crosssection method. the result of this test was significant at 0.3022, indicating random effects in the model. furthermore, the breusch-pagan lagrangian multiplier test for random effect is significant with a p-value 0.0207. hence, the regression model of the hypothesis was fitted using the panel data with random effects. table 3: robustness tests variables chi2 value p-value mean vif 1.40 hettest 18.94 0.0000 hausman test 3.65 0.3022 lagrangian multiplier test 4.16 0.0207 regression analysis the findings from the regression analysis for the sampled banks is presented in table 4, which shows r2 (coefficient of determination) of 0.77. the r-square which equally measures the overall fitness of the model indicates that the model explains about 77% of the variability of the systematic variation in share price volatility. suggesting that about 23% is accounted for by other variables not captured by the model. similarly, findings from the fishers ratio (f-statistics which is a proof of the validity of the estimated model) as reflected in table (4), presents a p-value that is less than 0.05 (p-value < 0.05); this invariably suggests clearly that simultaneously the explanatory variables (i.e. dps, eps and bank size) are significantly associated with the dependent variable, share price volatility. table 4: random effect gls regression model . variables coefficient value p-value dps 6.24 0.05 eps 4.86 0.00 bs -2.69 0.04 constant 58.20 0.04 r2 0.771 f-statistics (107.15) 0.000 sources: stata 13 software gusau journal of accounting and finance, vol. i, issue 2, october, 2020 11 the regression result in table 4 reveals that dividend per share has a significant positive impact on the share price volatility with a coefficient value of 6.24 and pvalue of 0.05, which indicates that 1% increase in dividend per share will lead to an increase in the share price volatility by 6.24%. the finding shows that dividend per share and price volatility have a significant positive relationship. this means that the null hypothesis will be rejected, and the alternative hypothesis is accepted, suggesting that dividend per share impacts positively and significantly to share price movements. the finding signifies that the higher the dividend per share, higher will be the movement of share prices. dividend per share could be an indication to the market that is likely to influence fluctuations in share prices, influencing managers to be vigilant before changing dividend policies concerning dividend per share. the finding is in accordance with premathilaka and karunarathne, (2019), venugopal and jampala, (2019) who supported that dividend per share continues to remain significant determinant of forecasting price volatility. the result in table (4) presents that earnings per share has a significant and positive impact on share price volatility. this is evident in the coefficient value of 4.86 and a p-value = 0.000. this outcome implies that the more a bank makes or generates more earnings from operations, the more the share value will be enhanced. to this end, the study hypothesis which states that there is no significance relationship between eps and spv is rejected and the alternate hypothesis is accepted. this result is in tandem with the submission of adesina et al. (2017). finally, bank size has a coefficient value of -2.69 and p-value of 0.048 which shows that the bank size has a negative and significant influence on the volatility of share price. the bigger the size of the study, the more significant it could influence the volatility of the share price, the findings is in line with the research work of (jahfer & mulafara, 2016). 5. conclusion and recommendation the findings from the study shows that dividend per share and earnings per share have a positive impact and significant on share price volatility, on the other hand, bank size had a significant negative impact on the volatility of share price of the sampled deposit money banks in nigeria. this outcome suggests that the dividend policy of banks operating in nigeria should favor high payout ratio for their share value to be enhanced. this will invariably shore up the fundamental and technical performance of their shares which will position them for improved performance gusau journal of accounting and finance, vol. i, issue 2, october, 2020 12 with resultant higher profit. the board and management of banks should ensure that good dividend policy is put in place because it has been empirically proven to improve share price movement. listed nigerian deposit money banks directors and management should maintain the earnings per share policies because it has enhanced the valuation of their banks. finally, bank size had a significant negative influence on price volatility, suggesting that the larger the firm, the less volatile the share price, therefore, banks should maintain their current asset size or improve on it. hence, the dividend policy is relevant in determining share price changes in the nigeria stock market and board of directors and management of banks may change the volatility of their share prices by changing the dividend policy. further, both management and investors are concerned about the volatility of share prices, this research provides a light on the pathway in discovering what determines share price and important factors to be considered by investors before making investment decisions, and management in formulating dividend policies. the finding of the study revealed that the dividends were relevant to investors, indicating that the signaling theory was relevant, and investors believed in information being transferred in the dividend policy decision. the study considered variables such as dividend per share (dps), earnings per share (eps) and bank size to measure their impact on share prices volatility. though, there are other variables that affect share price volatility of banks with their attendant consequences on the share prices changes. the influence of other factors such as the dividend yield, profitability, capital structure of a company, taxation and inflation, on the dividend policy could be explored in the subsequent research with the attendant effects on the share price volatility. reference adesina, k., uwuigbe, u., uwuigbe, o. r., asiriuwa, o., & oriabe, s. (2017). dividend policy and share price valuation in nigerian banks. e u r o e c o n o m i c a, 1 (36), 185–195. ahmad, l., iftikhar, y., ejaz, s., baig, w., nadeem, k., & shahid, r. (2019). dividend policy and share price volatility : evidence from pakistan stock exchange of listed commercial banks. international economics and business, 5(1), 35–44. https://doi.org/10.5296/ieb.v5i1.14769 alali, m. s., al-yatama, s. k., alshamali, n. m., & alawadhi, k. m. (2019). https://doi.org/10.5296/ieb.v5i1.14769 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 13 the impact of dividend policy on kuwaiti insurance companies share prices. world journal of finance and investment research, 4(1), 34–39. dalyop, l. m., sunday, r. u., & bereh, m. n. (2020). the impact of dividend policy on share prices of listed commercial banks in the impact of dividend policy on share prices of listed commercial banks in nigeria. tax academy research journal, 1(1), 115–124. haque, r., jahiruddin, a. t. m., & mishu, f. (2019). dividend policy and share price volatility: a study on dhaka stock exchange. australian academy of accounting and finance review, 4(3), 89-99. hieu, t., anh, h., chung, q., & lien, q. (2020). dividend policy and share price volatility : empirical evidence from vietnam. accounting homepage: national economics university, vietnam. www.growingscience.com/ac/ac.html, 6, 67–78. https://doi.org/10.5267/j.ac.2019.12.006 hooi, s. e., albaity, m., & ibrahimy, a. i. (2015). dividend policy and share price volatility. investment management and financial innovations, 12(1), 88–96. jahfer, a., & mulafara, a. h. (2016). dividend policy and share price volatility : evidence from colombo stock market dividend policy and share price volatility : evidence from colombo stock market athambawa jahfer * abdul hameed mulafara. int. j. managerial and financial accounting, 8(2), 97–108. https://doi.org/10.1504/ijmfa.2016.077947 jakata, o. and nyamugure, p. (2014). the effects of dividend policy on share prices: empirical evidence from the zimbabwe stock exchange. international journal of science and research,4(10), 674 – 683. jones, c., & williams,j (1999). too much of a good thing? the economics of investment in r&d. cambridge, ma: national bureau of economic research. https://doi.org/10.3386/w7283 kolawole, e., sadiq, m. s., & lucky, o. (2018). effect of dividend policy on the performance of listed oil and gas firms in nigeria. international journal of scientific and research publications, 8(6), 289–302. https://doi.org/10.29322/ijsrp.8.6.2018.p7836 miller, m. h., & modigliani, f. (1961). dividend policy, growth, and the valuation of shares. https://doi.org/10.5267/j.ac.2019.12.006 https://doi.org/10.1504/ijmfa.2016.077947 https://doi.org/10.3386/w7283 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 14 the journal of business, 411-433 manaseer, s. (2019). dividend policy and share price volatility : evidence from jordan dividend policy and share price volatility : evidence from jordan. accounting and finance research, 8(2), 75–85. https://doi.org/10.5430/afr.v8n2p75 neelanjana, b. h., & hassan, h. h. (2019). the impact of dividend policy on the volatility of share price of manufacturing companies in malaysia. international journal of recent technology and engineering, 7(5), 212– 224. ntui, p., kawiche, p., yuda, t., & samwel, g. (2015). relationship between dividend policy and share price. archieves of business research, 3(3), 11–20. https://doi.org/10.14738/abr.33.1118 pelcher, l. (2019). the role of dividend policy in share price volatility. journal of economic and financial sciences, 12 (1), 1–10. premathilaka, p., & karunarathne, w. (2019). the impact of dividend policy on share price of banking sector in sri lanka. 3rd international conference for accounting researchers and educators (icare-2017), 3, 1. priya m, mohanasundari m. dividend (2016). policy and its impact on firm value: a review of theories and empirical evidence. journal of management sciences and technology. 3(3)raza, h., ramakrishnan, s., gillani, s. m. a. h., & ahmad4, h. (2018). the effect of dividend policy on share price : a conceptual review. international journal of engineering & technology, 7(4), 34–39. https://doi.org/10.14419/ijet.v7i4.28.22386 raza, h., ramakrishnan, s., gillani, s. m. a. h., & ahmad4, h. (2018). the effect of dividend policy on share price : a conceptual review. international journal of engineering & technology, 7(4), 34–39. https://doi.org/10.14419/ijet.v7i4.28.22386 şamiloğlu, f., bağcı, h., öztop, a. o., & kahramanv, y. e. (2017). impact of dividend policy on share price : a case study in istanbul stock exchange ( bist ). iosr journal of economics and finance, 8(4), 49–53. https://doi.org/10.9790/5933-0804024953 sew, e.h., albaity, m., & ibrahimy, a.i. (2015). dividend policy and share price volatility. investment management and financial innovations, 12(1), 226234 sugathadasa, k. (2019). the impact of dividend policy on share price volatility : empirical evidence the impact of dividend policy on share price https://doi.org/10.14419/ijet.v7i4.28.22386 https://doi.org/10.9790/5933-0804024953 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 15 volatility : empirical evidence with colombo stock exchange in sri lanka. venugopal, p. r., & jampala, r. c. (2019). “ impact of dividend policy on share prices : a study on select indian pharma companies .” the journal of indian management & strategy, 24(2), 4–11. https://doi.org/10.5958/0973-9343.2019.00010.3 zainudin, r., mahdzan, n., & yet, c. (2018). dividend policy and stock price volatility of industrial products firms in malaysia. international journal of emerging markets, 13(1), 203-217 https://doi.org/10.5958/0973-9343.2019.00010.3 gusau journal of accounting and finance (gujaf) vol. 1 issue 2, october, 2020 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state –nigeria gusau journal of accounting and finance, vol. i, issue 2, october, 2020 1 determinants of social and environmental accountability of nigerian firms sani damamisau mohammed1 ruqayya tijjani ibrahim muhammad2 muhammad sallau3 aishatudanjuma4 adam yusuf abdu gimba5 bashir ali sulaiman6 &yusra musa muhammad 7 department of taxation federal university dutse, jigawa state, nigeria. sdmshira86@yahoo.com, +2348032921734 abstract corporate organisations are following legal and illegal means to avoid and evade payment of corporate taxes considered as corporate burdens that erode profits as the main motive of businesses. conversely, activities of corporate organisations are associated with depletion and destruction of natural resources and negative impacts on the society and environment and there are increasing pressure on corporate organisations to render social and environmental accountability. however, rendering such accountability is capable of further eroding profits; thus, corporate organisations may render less accountability with payment of corporate taxes. therefore, the aim of this paper is to evaluate the relationship between corporate tax, size, profitability and leverage, and social and environmental accountability by listed nigerian construction and building materials and pharmaceutical and healthcare companies from 2009 to 2018. data on annual social and environmental disclosure are collected from the annual reports and accounts of 5purposively selected companies each as samples from population of 9 companies in the construction and 10 companies in the pharmaceutical industries. social and environmental accountability is evaluated by obtaining quantity of disclosure using modified words count content analysis while panel regression analysis is conducted to determine the influence of chosen variables on the disclosure. results from the study indicated that corporate size statistically explain csed by construction companies while leverage is significant in pharmaceutical companies. corporate tax is negatively related with csed in construction industry while other variables are not significant. stakeholder theory explain the disclosure practices which have the policy implications requiring more csed by the two industries while public policy makers may regulate csed in the two industries. keywords: corporate tax, social and environmental disclosure, modified word counts, stakeholder theory. mailto:sdmshira86@yahoo.com gusau journal of accounting and finance, vol. i, issue 2, october, 2020 2 1. introduction corporate social and environmental disclosure (sed) regarded as an informative accountability (hassan & kouhy, 2015) which is satisfying stakeholders interested in corporate social and environmental accountability and to corporate organizations. on one hand, social and environmental disclosure by corporate organizations is satisfying stakeholders interested in social and environmental accountability by corporations (mohammed, 2016). on the other hand, corporate organizations are found deriving such benefits as enhancing corporate image and clout; increasing sales and market share; increasing corporate appeal to investors and financial analysts; strengthening brand position; attracting, motivating and retaining employees and decreasing operating costs (mohammed, 2016; kotler and lee 2005). despite these benefits accruing to corporate organizations, sed is regarded as burden capable of eroding corporate profits (mohammed, hassan & bala, 2020; michel & buler, 2016); thus, corporate organizations especially in developing countries are not adequately accounting for their interactions with the society and environment (mohammed, 2016; hassan & kouhy, 2015). while corporate organizations are perceiving sed as burden, payments of corporate tax that raises finances for public expenditures, assist in income redistribution and regulation of economic activities (mclure, neumark& cox, 2020; avi-yonah, 2006) is also considered as additional burden which is being legally avoided and even illegally evaded despite its importance. however, while corporate organizations are following legal and illegal means to reduce their burden of taxes and enhance their profits, they are facing increasing public pressure to render accountability on their interactions with the society and the environment. rendering such accountability which could be discharged through corporate social and environmental disclosure (csed) means further eroding of corporate profits (hamidu, haron&amran, 2018; mohammed, hassan &bala, 2020; michel &buler, 2016). consequently, this study argue that corporate organizations may tend to provide less social and environmental accountability regarded as additional burden on profits on payment of corporate taxes. therefore, the aim of this paper is to investigate the effects of corporate tax, size, profitability and leverage on csed practices by listed nigerian construction and building materials and pharmaceutical and healthcare companies 2009 – 2018.this study may perhaps contribute to emerging studies on the effect of corporate tax and the other chosen variables on their influence on social and environmental disclosure (sed) practices of corporate organisations. two, the gusau journal of accounting and finance, vol. i, issue 2, october, 2020 3 study will contribute to the call for more studies on social and environmental accountability by listed nigerian construction and building materials and pharmaceutical and healthcare companies. three, the use of modified word count content analysis in collecting data for the study may be another contribution. this is section one of the paper; section two is literature review; section three is methodologyof the study; section four isresults and discussions while section five is conclusion and recommendations of the study. 2.1 literature review this section reviewed existing literature relevant to this study with a view to demonstrating the conduct of studies in the area, identifying research gaps that the study attempts to fill and its possible contributions to the area. mohammed, gimba, sulaiman, adam and muhammad (2020) evaluated the social and environmental accountability practices of sampled listed companies in the nigerian construction and building materials industry 2009 to 2018. modified words count content analysis of annual reports and accounts of sampled ten companies was conducted to evaluate the disclosure practices which were benchmarked on gri reporting guidelines. descriptive statistics are utilized to present collected and analysed data while legitimacy theory underpinned the study. findings indicated that construction and building materials companies are not rendering proper accountability through disclosing their social and environmental impacts in the annual reports and accounts. likewise, the few disclosures made are to satisfy the needs of strong legitimacy conferring groups to maintain legitimacy rather than to render accountability. the study recommends conduct of more empirical investigations in the industry to assist in better understanding of the social and environmental accountability of companies in the industry. mohammed, adamu, mohammed, garba, and sulaiman (2020) descriptively evaluated the performance of the nigerian pharmaceutical industry on its social and environmental accountability 2009 to 2018. data for the study was obtained from online annual reports and accounts of sampled companies by means of modified word count content analysis of social and environmental disclosure of sampled companies. the collected data are then analysed and presented by means of descriptive statistics and results indicated low level of social accountability devoted to issues of interest to primary stakeholders in the industry and absence gusau journal of accounting and finance, vol. i, issue 2, october, 2020 4 of environmental accountability. the study suggested more studies in the industry to get further insights on social and environmental accountability in the industry. handoyo (2020) examined the influence of firm size, age, profitability, stock price, and industry type on corporate social responsibility disclosure practices of listed firms in indonesia for the year 2017. content analysis of sustainability reporting of sampled companies that included the property, real estate, & building construction industry benchmarked on global reporting initiative (gri) standard was conducted to measure the disclosure. multiple regression analysis was conducted to determine the influence of selected corporate variables on the disclosure. results revealed that corporate size is negatively associated with disclosure; age of the firm is insignificant while profitability, stock price and industry type are found having significant association with disclosure. mohammed, hassan and bala (2020) investigated whether corporate size, profitability, leverage, management efficiency, liquidity and tax can explain the quantity and quality of social and environmental disclosure (sed) in the nigerian oil and gas industry 2004 2013. word count, compliance oriented content analysis, pooled ordinary least squares (ols) with panel corrected standard errors regression analyses were used to analyse collected data. the study is guided by legitimacy and vulnerability and exploitability theoretical frameworks. results revealed listed companies in the nigerian oil and gas industry making low disclosure which is of low quality on few items. corporate variables of size, management efficiency and liquidity were found statistically significant with disclosure while profitability, leverage and tax are insignificant. consequently, the paper recommends for more empirical studies in the industry to cover longer period of time to give further insights. joshi and hyderabad (2019) investigated the effects of size, profitability, leverage, board size and age of firms on csr disclosure practices of listed indian firms that included samples from construction and building material and pharmaceutical industries from 2011 to 2017. to evaluate the disclosure practices, a 20-item csr index was designed from content analysis of annual reports and accounts of 199 companies forming part of nifty large midcap 250 index. to determine the influence of selected variables, ordinary least squares (ols) regression analysis was conducted on collected data and results indicated positive and significant association between firm size, board size and age of firm and gusau journal of accounting and finance, vol. i, issue 2, october, 2020 5 csrd. however, negative and insignificant relationships were found between profitability, leverage and csrd. kansal, joshi and batra (2014) examined the relationships between firm size, profitability, industry type, firm age, leverage, and corporate reputation on the level of social responsibility disclosure practices of sampled top indian companies which included the construction and building materials and the pharmaceutical industries. annual reports and accounts of sampled companies were analysed by means of content analysis to evaluate csr disclosure while simple regression analyses were conducted to determine the influence of selected corporate variables on the disclosure. corporate size, profitability, firms age, industry type arestatistically significant in explaining csr disclosure by sampled companies. conversely, corporate leverage and reputation are statistically insignificant in explaining csr by sampled companies. mohammed et al. (2020a) and mohammed et al. (2020b) evaluated social and environmental accountability of construction and building materials and pharmaceutical companies separately and called for more studies in the two industries. this current study is focusing on comparing the determinants of social and environmental accountability in the two industries on which there are perhaps no existing literature focusing on these two industries. similarly, the incorporation of tax as a variable that could determine disclosure is an emerging phenomenon; thus, its application in the two industries could be insightful. handoyo (2020), joshi and hydrabad (2019) and kansal, joshi and batra (2014) included samples of construction and building materials and pharmaceutical companies among studied industries. therefore, this study focusing only on these two industries may lead to obtaining new knowledge or confirm what are already known on determinants of disclosure in these two industries. mohammed, hassan and bala (2020) incorporated corporate tax as a determinant of disclosure in the nigerian oil and gas industry; thus, results in this current study may confirm or dispute findings by these authors which will enhance existing knowledge. 2.1.1 corporate size corporate size is regarded as a significant variable that could determine the csed practices of corporate organisations based on their public visibility that exposed them to public and political pressure which they can assuage by disclosure (banikhalid, kouhy& hassan, 2017). sales volume (mohammed, hassan &bala, gusau journal of accounting and finance, vol. i, issue 2, october, 2020 6 2020), total asset value (juhmani, 2014), and number of employees (tagesson, blank, broberg& collin, 2009) are used to measure corporate size. significant relationship was established between corporate size and csed (mohammed, hassan and bala, 2020), although (hassan &kouhy, 2015) found no significant relationship between size and csed. therefore, this study will test these null hypotheses: ho: there is no significant relationship between corporate size and csed by listed companies in the nigerian construction and building materials firms. ho: there is no significant relationship between corporate size and csed by listed companies in the nigerian pharmaceutical and healthcare firms. 2.1.2 corporate profitability anentity’s efficiency to obtain profit from the available funds is termed as profitability (achim&borlea, 2018). thus, profitable companies have economic resources which are sources of public and political pressure and scrutiny which could however, be mitigated by disclosure (tagesson, blank, broberg& collin, 2009). return on asset (bala, raja &dandago, 2019); net profit (nandi & ghosh, 2012) and return on equity (andriana & anisykurlillah, 2019) areemployed as proxies of profitability. positive association is found between profitability and csed (abdullahi, ali & abdulrazaq, 2018) while mohammed, hassan &bala (2020) found no association between the two. this study makes further contribution by testing the following null hypotheses. ho: there is no significant relationship between profitability and csed by listed companies in the nigerian construction and building materials industry. ho: there is no significant relationship between profitability and csed by listed companies in the nigerian pharmaceutical and healthcare industry. 2.1.3 corporate leverage the extent to which borrowed funds are used to increase gains or reduce losses of corporate organizations over or below those that could otherwise be incurred if the organization resorts to using its own funds is regarded as leverage (d’hulster, 2009). thus, high leveraged companiesare likely to employmore disclosure to reduce agency costs (mohammed, hassan &bala, 2020). mohammed, hassan &bala, (2020) found positive relationship between leverage and csed while gusau journal of accounting and finance, vol. i, issue 2, october, 2020 7 dibiaand onwuchekwa (2015) found no relationship between leverage and csed. thus, we contribute to the debate by testing the following null hypotheses: ho: there is no significant relationship between profitability and csed by listed companies in the nigerian construction and building materials industry. ho: there is no significant relationship between profitability and csed by listed companies in the nigerian pharmaceutical and healthcare industry 2.1.4 corporate tax payments of taxes by corporate organizations are depicting goodcitizenship that ensures good relationship with government and the general public (lanis& richardson, 2013). but, corporate taxes erode profits; thus, corporate organizations are often reluctant to pay taxes through avoidance and even evasion (price water house coopers, 2013; lanis& richardson, 2013). consequently, this study argues that corporate organisations are likely to provide less social and environmental information on payment of corporate tax (umobong&agburuga, 2018). although testing for the effects of this corporate variable is an emerging phenomenon, mohammed, hassan and bala (2020) found no relationship between tax and csed. we therefore null hypothesize that ho: there is no significant relationship between profitability and csed by listed companies in the nigerian construction and building materials industry. ho: there is no significant relationship between profitability and csed by listed companies in the nigerian pharmaceutical and healthcare industry 2.2 stakeholder theoretical framework the definition of stakeholders by freeman as “any group or individual that can affect or is affected by the achievement of an organisation’s objectives’’ is widely accepted in the literature (freeman 1984, p.46). instrumental, normative and descriptive variants of stakeholders are discussed; however, the first two are the most widely used in csed studies (berman, wicks, kotha and jones, 1999). consumers; employees; stockholders, customers; suppliers, local community; corporate managers and the public including government are identified as corporate stakeholders (key, 1999). the principal assumption of the instrumental stakeholder variant is that stakeholders are part of the business environment; thus, organisations should identify their key stakeholders to effectively manage them including through corporate reporting such as csed (gray, owen & adams, gusau journal of accounting and finance, vol. i, issue 2, october, 2020 8 1996). therefore, this theory is employed in this study to assist in explaining csed by sampled companies and the effects of chosen variables on the disclosure 3. methods and techniques there are nine (9) listed construction and building materials companies on the nigerian stock exchange (nse) website as at december 2020 which constitute the population of the study. however, out of the 9, only five (5) companies satisfy the inclusion and exclusion criteria of having full online annual reports and accounts 2009– 2018. therefore, these five (5) companies are purposively selected as the sample of the study. there are ten (10) listed pharmaceutical and healthcare companies; however, five (5) companies are purposively selected as sample of the study. data for this study is collected by means of modified word counts content analysis in which only words conveying meaningful social or environmental information are counted. hence, the study relied on data of past events presented and collected in form of annual reports and accounts; thus, expost factor research design is adopted (bilyaminu, mohammed, dandago& musa, 2020). data collected in the study is for ten (10) years 2009 – 2018; thus, it is a time series data; however, the data was collected for five companies each from the two industries; thus, it is cross sectional; therefore, the data for this study is simply panel data. estimating this type of data set is associated problems which are extensively discussed (see, podestà, 2002). first, there could be serial correlation; second, there might be contemporaneous correlation; third, there might be panel heteroskedasticity; fourth, errors may contain both cross sectional and temporal effects, thus concealing unit and period effects. fourth, there is the possibility that although data might be homoscedastic and not auto-correlated, but could result in producing regression that is heteroskedastic and auto correlated across panels (stimson 1985, podestà 2002). fifth, errors may reflect some causal heterogeneity across space, time, or both (hicks 1994, podestà 2002). panel corrected standard errors regression (pcser) analysis is designed to overcome the problems and is argued as most suitable for panel data regression analysis (see, barako, hancock &izan, 2006b; beck & katz, 1995; beck & katz, 2006; biorn, 2013; mohammed, 2018). therefore, while quantity of csed in this study is obtained by means of word counts content analysis, selected corporate variables as determinants of the disclosure are evaluated by means of pcser analysis. table 3.1 specify the type of variables employed in the study followed by pcser models specified for the study. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 9 table 1 specifications and measurement of variables regression variables specified by measurement corporate size employ measured by number of employees corporate liquidity liq measured by liquidity ratio corporate leverage lev measured by debt to equity ratio. corporate tax log_tax measured by the natural logarithm of corporation tax paid in the year. 𝒀𝒊𝒕 = 𝜷𝟎 + 𝜷𝟏𝑳𝑶𝑮_𝑺𝑰𝒁𝑬𝒊𝒕 + 𝜷𝟐𝑷𝑹𝑶𝑭𝒊𝒕 + 𝜷𝟑𝑳𝑬𝑽𝒊𝒕 + 𝜷4𝑳𝑶𝑮_𝑻𝑨𝑿𝒊𝒕+ ........................(𝟏) re-written as: 𝑳𝑶𝑮_𝑪𝑺𝑬𝑫𝒊𝒕= 𝜷𝟎 + 𝜷𝟏𝑳𝑶𝑮_𝑺𝑰𝒁𝑬𝒊𝒕 + 𝜷𝟐𝑷𝑹𝑶𝑭𝒊𝒕 + 𝜷3𝑳ev𝒊𝒕 + 𝜷4𝑳𝑶𝑮_𝑻𝑨𝑿𝒊𝒕 + 𝝐𝒊𝒕……......... (2) where: log_csed = quantity of sed 𝛽0 = the intercept log_size = corporate size measured by sales (turnover) prof = corporate profitability measured by earnings per share lev = corporate leverage measured by total leverage log_tax = corporate tax ɛ = the error term i = cross-section (5 companies each from the two industries) and t = time-dimension (10 years) 4. results and discussions this section discusses results obtained in the study in the light of literature, theory and practice confirming what is known or bringing out new findings that might be useful in the field of knowledge. tables 2 and 3 are multicollinearity and pcser results for construction and building material industry gusau journal of accounting and finance, vol. i, issue 2, october, 2020 10 table 2: variance inflation factor (multicollinearity results) for construction and building materials companies variable vif 1/vif employees 2.26 0.4426 log_tax 2.25 0.4442 lev 1.66 0.6022 roe 1.16 0.8638 mean vif 1.83 source: output of stata, 2020 the variance inflation factor (vif) is one of the most widely technique of detecting multicollinearity; however, vif of 1.83 indicates that the variables are suitable (akinwande, dikko& samson, 2015); table 3 is pcser results. table 3: pcser analysis results for nigerian construction and building materials companies group variable: comp number of obs = 50 time variable: year number of groups = 5 panels: correlated (balanced) obs per group = 10 autocorrelation: no autocorrelation estimated covariances = 15 r-squared = 0.3310 estimated autocorrelations = 0 wald chi2(4) = 44.20 estimated coefficients = 5 prob> chi2 = 0.0000 panel-corrected log_ csed coef std. err z p>|z| [95% conf. interval] employ .00042 .0000 4.89 0.000 .0003 .0006 roe -.0519 .0280 -1.85 0.064 -.1068 .0030 lev -1.20451 .6139 -0.75 0.455 -4.3676 1.9586 log_tax -.6745 .2862 -2.36 0.018 -1.2354 -.1135 cons 19.0119 6.5320 2.91 0.004 6.209431 .8144 source: output of stata, 2020 results from table 3 indicated that size measured by number of employees is found statistically positive and significant at chosen 5% significance level with coefficient of .0004197 andp-value of 0.000. thus, large sized companies in the sample tend to provide more csed perhaps to satisfy the needs of their geographically wide spread stakeholders and reduce likely pressure from these stakeholders perhaps better explained by stakeholder theory. the result is gusau journal of accounting and finance, vol. i, issue 2, october, 2020 11 consistent with the findings by mohammed, hassan and bala (2020) and joshi and hyderabad (2019). however, the result contradicts findings by handoyo (2020) and hassand and kouhy (2015) that found no relationship between size and csed. in practice large sized firm are more visible and exposed to public pressure and scrutiny and csed could reduce such pressure. corporate tax is statistically significant with a p-value of 0.018 but negatively related with csed with coefficient of -.6744668. thus, on paying large amount of tax, sampled companies still provide more csed. the result is inconsistent with mohammed, hassan and bala (2020) that reported no significant relationship between corporate tax and csed. this result is indicating that sampled companies in an attempt to maintain harmony with their stakeholders provide more csed even when they paid large amount of taxes. in practice, the expectation is providing less csed on payment of large amount of taxes; thus, the influence of this variable on csed needs to be investigated further. corporate profitability measured by returns on equity showed no relationship with csed which is consistent with mohammed, hassan and bala (2020). the result is however inconsistent with abdullahi, ali & abdulrazaq, (2018) and kansal, joshi and batra (2014) that found the variable significant. thus, profitable companies may probably be satisfying the interest of shareholders interested in sharing generated profits as dividends than using it for csed. corporate leverage also showed no statistical significance with csed in this study which is in consonance with findings by dibia and onwuchekwa (2015); kansal, joshi and batra (2014). this obtained result contradicts findings by mohammed, hassan &bala, (2020) that found positive relationship between leverage and csed. therefore, leveraged firms in this study are perhaps focusing on paying creditors as primary stakeholders rather than providing csed; thus, the result is better explained by stakeholder theory. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 12 table 4: varian inflation factor multicollinearity results for nigerian pharmaceutical and healthcare companies variable vif 1/vif log_tax 1.92 0.5205 roe 1.60 0.6244 employ 1.49 0.6610 lev 1.05 0.9521 mean vif 1.52 source: output of stata, 2020 the mean of vif in table 4 is 1.52 indicating the suitability of the variables (akinwande, dikko& samson, 2015); table 4.4 is results of the regression table 5: results of pcser analysis on tested determinants of csed for nigerian pharmaceutical and healthcare companies group variable: comp number of obs = 50 time variable: year number of groups = 5 panels: correlated (balanced) obs per group = 10 autocorrelation: no autocorrelation estimated covariances = 15 r-squared = 0.1424 estimated autocorrelations = 0 wald chi2(4) = 11.45 estimated coefficients = 5 prob> chi2 = 0.0220 panel-corrected log_ csed coef. std. err. z p>|z| [95% conf. interval] employ -.0008 .0040 -0.21 0.834 -.0087 .0070 roe -.6940 .4667 -1.49 0.137 -1.609 0.2207 lev 4.8019 2.299 12.09 0.037 .2957 9.3081 log_tax .4137 .2767 1.50 0.135 -.1286 .9559 _cons -3.87994 .3702 -0.89 0.375 -12.4452 4.6855 source: output of stata, 2020 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 13 results in table 5 indicated that leverage is statistically significant in explaining csed by sampled nigerian pharmaceutical and healthcare companies with coefficient of 4.801889 and p-value of 0.037. thus, highly leveraged companies in this industry are using csed to satisfy their creditors. the result is consistent with findings by mohammed, hassan &bala (2020) that found positive relationship between leverage and csed. it however contradicts findings by dibia and onwuchekwa (2015) and kansal, joshi and batra (2014) that reported significant relationship between leverage and csed. the variables of size, profitability and tax showed no statistical significance with csed. 5. conclusions and recommendations this evaluated the influence of corporate variables of size, profitability, leverage and tax on csed practices by sampled companies in the nigerian construction and building materials and pharmaceutical and healthcare industries. corporate size measured by number of employees was found statistically significant in explaining csed by construction and building materials companies; thus, it is concluded that size is an important determinant of disclosure in this industry. corporate leverage was found statistically significant in explaining csed disclosure by companies in the nigerian pharmaceutical and healthcare industry. consequently, it is concluded that leveraged companies in this industry provides more csed. corporate tax is found statistically but negatively significant in explaining csed by sampled companies in the nigerian construction and building materials industry. thus, it could be concluded that corporate tax does not inhibit csed disclosure in the industry rather, it enhances the practice. the variable of profitability is found insignificant in explaining csed in the two industries; thus, it could be concluded that profitability of companies in these industries is of no effect on csed. it is recommended that more studies be conducted especially on the effect of corporate tax and other tested variables on csed. policy makers in the two industries should embrace csed more while regulators of these two industries should come up with regulatory policies that will enhance csed. references abdullahi, m. s., ali, a. a. &abdulrazaq, z. (2018). determinants of corporate social responsibility in nigerian cement industry. asian people journal, 1(1), 164-178. achim, m.v. &borlea, s. n. (2016). business performances: between profitability, return and growth. retrieved 12/12/2020 from gusau journal of accounting and finance, vol. i, issue 2, october, 2020 14 https://www.researchgate.net/publication/227367581_business_performan ces_between_profitability_return_and_growth. akinwande, m.o., dikko, h.g., samson, a. (2015). variance inflation factor: as a condition for the inclusion of suppressor variable(s) in regression analysis. open journal of statistics, 5(), 754-767. andriana, a. e., & anisykurlillah, i. (2019). the effects of environmental perfor mance,profit margin, firm size, and environmental disclosure on economic performance. accounting analysis journal, 8(2), 143–150. avi-yonah, r.s. (2016). the three goals of taxation. school university of michigan law school scholarship repository articles. retrieved 07/12/2020 from https://repository.law.umich.edu/do/search/?q=the%20three%20goals% 20of%20t xation&start=0&context=3275985&facet= bala, a.j, raja, a. s., & dandago, k. i. (2019). the mediating effect ofintellectu al capita on corporate governance and performance of conglomerates in nigeria. seisense journal of management, 2(3), 16–29. khalid, t., kouhy, r., & hassan, a. (2017). the impact of corporate characteris ticson social and environmental disclosure (csed): the case of jordan. journal of accounting and auditing: research & practice, 2017(2017), 1–29. beck, n. & katz, j. n. (2006). random coefficient models for time-series– cross-section data: monte carlo experiments. society for political methodology. pp.21 may, 201514. beck, n. (2006). time-series–cross-section methods. beck, n. and katz, j. n. (1995). what to do (and not to do) with time-series cross-section data. the american political science review, 89(3), 634 647. berman, s.l., wicks, a.c., kotha, s., & jones, t.m. (1999). does stakeholder orientation matter? the relationship between stakeholder management models and firm financial performance. the academy of management journal, 42(5), 488-506. biorn, e. (2013). introductory econometrics: on models and data types in econometrics.retrieved20/06/2016from:http://www.uio.no/studier/emner/ sv/oekonomi/econ4150/ v13/undervisningsmateriale/econ3150_v12_note01.pdf. bilyaminu, y,h., mohammed, s.d., dandago, k.i., and musa, h. (2020). the impact of tax identification number on internally generated revenue of https://www.researchgate.net/publication/227367581_business_performan%09ces_between_profitability_return_and_growth https://www.researchgate.net/publication/227367581_business_performan%09ces_between_profitability_return_and_growth https://repository.law.umich.edu/do/search/?q=the%20three%20goals%25%20%0920of%20t%09xation&start=0&context=3275985&facet https://repository.law.umich.edu/do/search/?q=the%20three%20goals%25%20%0920of%20t%09xation&start=0&context=3275985&facet http://www.uio.no/studier/emner/%20%09sv/oekonomi/econ4150/%09v13/undervisningsmateriale/econ3150_v12_note01.pdf http://www.uio.no/studier/emner/%20%09sv/oekonomi/econ4150/%09v13/undervisningsmateriale/econ3150_v12_note01.pdf http://www.uio.no/studier/emner/%20%09sv/oekonomi/econ4150/%09v13/undervisningsmateriale/econ3150_v12_note01.pdf gusau journal of accounting and finance, vol. i, issue 2, october, 2020 15 adamawa state, nigeria, federal university wukari journal of accounting and finance, 1(2), 74-93. d’hulster, k. (2009). the leverage ratio: a new binding limit on banks. business. dibia, n.o. &onwuchekwa, j.c. (2015). determinants of environmental disclosures in nigeria: a case study of oil and gas companies.international journal of finance and accounting, 4(3), 145 152. freeman, r. e. (1984). strategic management: a stakeholder approach. 1st ed. boston: pitman. gray, r. h., owen, d. l. & adams, c. (1996). accounting and accountability: changes and challenges in corporate social and environmental reporting. 1st ed. london: prenticehall. hamidu, a.a., haron, m.h. &amran, a. (2018) profit motive, stakeholder needs and economic dimension of csr: analysis on the moderating role of religiosity.indonesian journal of sustainability accounting and management, 2(1), 1–14. handoyo, s. (2020). the determinants of corporate social responsibility disclosure: empirical evidence from indonesia listed firms. journal of accounting auditing and business 3(1), 147-160. hassan, a., & kouhy, r. (2015). from environmentalism to corporate environme ntalaccountability in the nigerian petroleum industry do green stakeholder s matter? international journal of energy sector management, 9(2), 204 226. joshi, g.s & hyderabad, r.l. (2019). determinants of corporate social responsibility reporting in india. journal of management, 6(1), 1-10. juhmani, o. (2014). determinants of corporate social and environmental disclosur e on websites: the case of bahrain. universal journal of accounting and finance, 2(4), 77– 87. lanis, r. and richardson, g. (2013). corporate social responsibility and tax aggressiveness: a test of legitimacy theory. accounting, auditing & accountability journal. 26(1), 75100. key, s. (1999). toward a new theory of the firm: a critique of stakeholder ``theory''. management decision, 37(4), 317328. kotler, p. & lee, n. (2005). corporate social responsibility. doing the most good for your company and your cause. hoboken: john wiley & sons. mclure, c.e., neumark, f., & cox, m.s. (2020). taxation. retrieved 07/12/2020 from https://www.britannica.com/topic/taxation. https://www.britannica.com/contributor/fritz-neumark/2131 https://www.britannica.com/topic/taxation gusau journal of accounting and finance, vol. i, issue 2, october, 2020 16 michel, n. &buler, s. a. (2016). maximizing the benefits of corporate social responsibility. how companies can derive benefits from corporate social responsibility. european scientific journal, 12(10), 499-506. mohammed, s. d. (2016). social and environmental disclosures: a comparative analysis of listed nigerian and uk oil and gas companies. phd thesis, abertay university dundee, uk. mohammed, s.d., gimba, y, a., sulaiman, b.a., adam, a.d. and muhammad, m.s. (2020). an evaluation of corporate social and environmental accountability by listed nigerian construction and building materials companies. international journal of advanced research, 8(03), 21-35. mohammed, s.d., adamu, a.m., mohammed, a.i., garba, s. and sulaiman, b.a. (2020). nigerian pharmaceutical industry: an evaluation of social and environmental accountability. american international journal of business management, 3(7), 131151. mohammed, s. d. (2018). mandatory social and environmental disclosure: a performance evaluation of listed nigerian oil and gas companies pre and post-mandatory disclosure requirements. journal of finance and accounting, 6(2), 56-68. mohammed, s.d., hassan, a. &bala, a.j. (2020). the determinants of corporate social and environmental disclosure in the nigerian oil and gas industry: an empirical investigation. international journal of auditing and accounting studies, 2(2), 129153. nnenna, o.v. & carol, n. (2018). the effect of tax evasion and avoidance on nigeria’s economic growth. european journal of business and management, 8(24), 158-166. pirie, m. (2019). death and taxes. adam smith institute. retrieved 26/11/2020 from https://www.adamsmith.org/blog/death-and-taxes podestà, f. (2002). recent developments in quantitative comparative methodology: the case of pooled time series cross-section analysis. decision support system, (soc 302), 144. pricewaterhousecoopers. (2013). financial transaction tax: the impacts and arguments a literature review. retrieved 13/12/2020 from https://www.isda.org/a/atide/fttliterature-review-final.pdf. tagesson, t., blank, v., broberg, p., & collin, s.o. (2009). what explains the extent and content of social disclosures on corporate websites? https://www.adamsmith.org/blog/death-and-taxes https://www.isda.org/a/atide/ftt-%09literature-review-final.pdf gusau journal of accounting and finance, vol. i, issue 2, october, 2020 17 corporate social responsibility and environmental management, 16(6), 352–364. umobong, a.a. &agburuga, u.t. (2018). corporate tax and corporate social responsibility of firms in nigeria. research journal of finance and accounting, 9(10), 8-25. whalen, j. (2020). tax cheats deprive governments worldwide of $427 billion a year, crippling pandemic response: study. retrieved 07/12/2020 from https://www.washingtonpost .com/us-policy/2020/11/19/global-tax evasion-data/. world economic forum (2019). countries lose an estimated $125 billion in tax revenue each year. this is why. retrieved 07/12/2020 from https://www.weforum.org/agenda/2019/10/ multinationals-billions-tax/. https://www.weforum.org/agenda/2019/10/%20multinationals-billions-tax/ 1 gusau journal of accounting and finance (gujaf) vol. 2 issue 4, october, 2021 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria 2 financial forensic analysis and fraud deterrence in listed deposit money banks in nigeria daniel nduka anowu department of accounting faculty of management sciences nigerian defense academy, kaduna. danielanowu@yahoo.com terzungwenyor department of accounting faculty of management sciences nigerian defence academy terzungwenyor@gmail.com samuel eniolaagbi department of accounting faculty of management sciences nigerian defence academy samagbi@yahoo.com anowuifeanyinchukwu nelson accountancy department enugu state university of science and technology anowunelson07@gmail.com adebola naomi saliu department of economics faculty of management sciences nigerian defence academy saliu.adebola@yahoo.com abstract this study was carried out to investigate how financial forensics, influences fraud deterrence in the listed deposit money banks in nigeria. a total number of 619 top management staff from the antifraud department, internal control department, compliance unit and the internal audit department of the deposit money banks (dmbs) listed on the floor of the nigerian stock exchange as at the 31 st of december 2020 were considered for this study. since this study indicated the cumulative impact of the independent variables against the dependent variable, multiple regression was considered to be the most appropriate form of data analysis. the adjusted r 2 was 0.51, indicating that the financial forensics variables (investigative accounting service, litigation support service and expert witness) can explain 51% of changes in fraud deterrence by nigeria's listed deposit money banks. the fstat-chi2 value of the model was 76.80, with a p-value of 0.000. this study recommends that listed deposit money banks should engage mailto:danielanowu@yahoo.com mailto:samagbi@yahoo.com mailto:anowunelson07@gmail.com 3 in financial forensics, which will ensure an unbiased workplace inquiry and interrogation in suspicions of wrongdoings, or discovery of fraud, not minding the magnitude, position, individual or group of individuals involved. keywords: expert witness, financial forensics, fraud, investigation, litigation support. 1. introduction when a company's fraud attempts suddenly increase, it's called a fraud 'earthquake.' these earthquakes have the potential to destroy a company's reputation with consumers while also stealing revenue from organizations. in recent years, the frequency and severity of fraud attacks have increased. fraud leads to reputational harm, loss of client confidence, and regulatory violation. the association of certified fraud examiners (acfe, 2020) stated that one of the costliest forms of financial crime is the fraud committed by individuals against the organizations that employs them. the intentional and premeditated use of one's position for self-enrichment through conscious mis-use and misappropriation of resources and assets of the employing firm, is likely to have huge impact on the organization. according to the corporate finance institute (cfi) top accounting scandals 2021, the past decade has recorded notable corporate fraud scandals such as the enron bankruptcy (2001), worldcom fraud (2002), the lehman brothers (2008), and bernard madoff's $65 billion ponzi scam (2009), all in the united states of america (cfi, 2020). also, cable news network (cnn, 2019) reported the case of capital one bank (2019), which had more than 100 million credit card applications and customer accounts compromised. in africa, there’s the case of steinhoff (2019), where pricewaterhousecoopers (pwc) carried out an investigation and discovered $7.4 billion accounting fraud. when fraud is suspected or identified in an organization, investigative accounting services are expected to be embarked upon. investigative services can help in conducting interviews, record reviews, and evidence collection. additionally, when whistle blowers signal unethical behaviors and suspected wrong dealings, immediate punishable or legal actions are to be taken. when no litigation process is designed to help businesses, and when no form of investigation is carried out after a fraudulent act, organizations will not be able to build a strong case and present meaningful evidence in court. most times, evidences gathered aren’t sufficient enough to punish a perpetrator, an expert in accounting or fraud matters may be involved to help build up more evidences. the testimony and knowledge of an expert witness is usually sufficient, causing others to officially and legally rely upon the experts’ witness opinion. the expert opinion may provide more background information and clarifying scientific concepts, while litigation support services and investigations can create a contextual understanding of a fraudulent event that may have aroused within organizations such as banks. as demonstrated by the continuous increase in fraud cases, events of corporate failure have placed greater responsibility on management and accountants to equip themselves with the expertise needed to recognize, act on signs of poor corporate governance, mismanagement, unethical and other wrongdoings. the failure on the part of management, regulators and organizational c-suite in tackling incidences of fraud, puts the credibility of financial statements 4 and corporate governance processes in jeopardy. accounting professionals, most especially, must possess the necessary expertise and experience needed for detecting, and preserving evidence of all types of financial records, activities and irregularities. in nigeria, there are some cases of fraud, such as the case reported by the british broadcasting corporation (bbc, 2010) of oceanic bank (2010), where the guilty party was fined over one hundred and fifty billion naira (n150 billion) for fraud and mismanagement. also, according to dailypost.ng, (2019) there is the case of staff fraud in diamond bank nigeria (2019), money laundering offences of the defunct syke bank plc now polaris bank, (daily trust, 2019), and zenith bank (2019) alleged n700 million staff frauds (the guardian, 2019). all of these fraud cases have occurred despite efforts to ensure that banks adhered adequately to the respective corporate governance policies to protect depositor funds and to protect the banks from distress. questions are being asked, when fraud is committed by top management, how will it be detected and deterred in the future? notwithstanding the efforts aimed at preventing fraud in the banking sector in nigeria, the nigerian inter-bank settlement system (nibss, 2020) ―report on fraud in the nigerian financial services‖, states that fraud in nigeria peaked the highest in 2020 with over 180% increase against previous years. fraudsters attempts increased to 46,126 attacks from 16,128 attempts in 2019 and were successful in 41,979 of the attempts, giving a 91% success rate. the nigeria financial services firms of which the listed deposit money banks are categorised under, have been reported to have lost 5.2billion naira to fraud between january and september (nbis, 2020). this reveals that, individual’s no longer need access to a structured organizational building to perpetrate fraud. in light of the aforementioned problems, as well as the many unreliable opinions that abound, the following hypotheses were tested in the null form: h01: investigative accounting service has no significant effect on fraud deterrence in listed deposit money banks in nigeria. h02: litigation support service has no significant effect on fraud deterrence in listed deposit money banks in nigeria. h03: expert witness service has no significant effect on fraud deterrence in listed deposit money banks in nigeria. the result of this research will help shareholders, management and potential investors of listed dmbs in nigeria in understanding the importance of financial forensics in deterring fraud as this will avail a springboard for growth opportunities in the financial sector. the remainder of this paper is organised and presented as follows: the review of related literature which centres on financial forensics and its components, vis-à-vis investigative accounting service, litigation support service, expert witness service and the theoretical framework underpinning the study; the research methodology; analysis and discussion of result; conclusion and recommendation. 2. literature review financial forensics otherwise known as forensic accounting, according to peloubet (1964), is the application of accounting expertise and investigative skills to locate and address legal issues. financial forensic is the ―application of investigative and analytical skills for the purpose of resolving financial and accounting matters in a way that the outcome can be used in a court of law‖ (hopwood et al., 2012). financial forensics (ff) has also been defined as the action of identifying, recording, extracting, sorting, reporting and verifying past financial data or other 5 accounting activities for settling current or prospective legal disputes or using such past financial data for projecting future financial data to settle legal disputes (oyedokun, 2019). financial forensics can be classified into three main lines of activities vis-à-vis financial investigative accounting service, litigation support service, expert witness service (hopwood et al., 2012). according to the corporate finance institute (cfi 2021), financial investigative service is an aspect of financial forensic that refers to the practical steps’ professional fraud examiners or certified accountants take in order to gather evidence relevant to alleged fraudulent deeds. investigations are usually carried out, to ascertain who, how, when and where a fraud or error may have occurred and the reason behind such occurrences. the use of advanced forensic skills in carrying out financial investigations in such a way that the results can be used in a court of law is known as investigative accounting service (ias) (bassey, 2018). american bar association (aba, 2021) states that litigation support service (lls) refers to the rules and practices, involved in resolving disputes in the court of law. lss involves preparing, researching and reviewing litigation documents, which assist lawyers in managing court cases or lawsuits to settle fraud and other related matters (olowo, 2019). fraud according to sas 110 paragraph 4, is defined as the use of deception to obtain unfair or illegal financial advantage and intentionally misrepresentation that affect the financial statement, carried out by one or more individual among manage management, employees or other parties. corporate frauds refer to political and business scandals that stems from the engagement of malpractices by trusted executives of corporate corporations (pinkasovitch, 2016). corporate fraud consists of illegal, unethical and deceptive actions committed either by a company or an individual acting in their capacity as an employee of the company (olowo 2019). the economic and financial crimes commission (efcc, 2004), defines fraud is any nonviolent criminal and unauthorized behavior conducted with the aim of unlawfully gaining wealth, either individually or in a collective or coordinated manner, thus breaching established laws regulating the civil and corporate administration's economic activities. many businesses have been harmed as a result of fraudulent activities, as a result, many aspects of modern society are focused on maintaining an environment of fair dealing and fraud deterrence through the passage of laws, and the establishment of agencies such as the independent and corrupt practices commission (icpc) and the efcc in nigeria, which are meant to enforce laws through the legal and judicial systems that can help curb the menace of fraud through deterrence, detection or preventive measures. fraud deterrence according to cendrowski et al., (2007), is the proactive identification and removal of the casual and enabling factors of fraud. frd involves acts and processes of discouraging actions or procedures that instills fear, doubt and hesitation which stops fraud from occurring in an organization. in the bank, deterrence is a protective measure that makes bank workers less enthusiastic about doing something wrong by making it unpleasant for the employees by threatening negative consequences. fraud deterrence being a preventative measure, lowers the number of input variables of fraud's causal and facilitating factors (cendrowski et al., 2007). 6 combating fraud before it happens is critical to an organization’s survival. fraud deterrence is a component of fraud management that sways people away from committing fraud due to the likelihood of detection and punishment (isa, 240). fraud deterrence applies to all of the requirements and processes that must be in place to discourage fraud (cendrowski, 2020). the cost of deterring fraud is a fraction of the cost of detecting and recovering from fraud. fraud deterrence is a systematic and comprehensive methodology that has been suggested for professionals tasked with the responsibility of fraud management in corporate firms (skalak &sellito, 2006; cendrowski et al 2007). according to skalak &sellito, (2006), fd comprises of corporate governance, transaction level controls, whistleblowing, remediation,retrospective examination of an organization’s processes and transactions called the fraud deterrence cycle. figure 1: the fraud deterrence cycle source: skalak, alas and sellitto (2006). this paper is anchored on the dorminey model because the theory closely relates to the objective of this study. the dorminey model is based on the theory of fraud triangle with the addition of interventions between the perpetrator and the crime. dorminey et al., (2012) published "evolution of fraud theory" in 2012, which juxtaposed the traditional fraud triangle with the triangle of fraud action in what has become known as the "meta-model of fraud." pre-fraud, interventions, and post-fraud are the three parts of the model. on the model’s left side, the perpetrator is defined as the initial decision maker, the one who must analyze his or her personal and professional situation, as well as the deterrent, prevention, and detection strategies in place, to determine whether a fraudulent act can be performed and concealed successfully. the model discusses the post-fraud state on the far right, focusing on the basic elements of the fraud or financial crime known as the triangle of fraud intervention, which involves the fraudulent act, attempts to hide the act, and an identification of whether and how profits accrue to the victim, also known as conversion. the act denotes how the crime was carried out, such as embezzlement, check kiting, or materially false financial statements. concealment refers to the act of making fake journal entries, falsifying bank reconciliations, or deleting files in order to conceal the fraud. the method of transforming ill-gotten profits into something usable by the victim in a way that seems legal is known as conversion. 7 figure 2: meta model (2012) source: dorminey et al., meta model (2012). organizational and social interventions, such as internal controls, wider aspects of corporate governance, legal and regulatory environments, and other preventive strategies, stand between the victim and the criminal act, reducing the occurrence and effect of fraudulent actions. deterrence, prevention, and the understanding of identification have also become key components of these measures. these factors are partially outside the perpetrator's control, but they influence the perpetrator's assessment of the probability of completing and concealing the criminal act. recent works have attempted to analyze financial forensics and fraud management. therefore, this paper highlights the results of a few empirical studies. ehioghiren (2016), investigated financial forensics and fraud management evidenced from nigeria. administering 572 questionnaires, the researcher used spss 21 to test the hypotheses and to determine the f-value.findings revealed that financial forensics significantly influences fraud detection and control, and also, there’s a significant difference between the duties of qualified forensic accountants and that of traditional external auditors. hamdam (2018), studied the role of financial forensics in discovering financial fraud in philadelphia, jordan. simple random sample of 630 accountants were selected randomly from various accounting offices. differential statistics including t-test and analysis of variance (anova) were used to test the effect of demographic characteristics on the evaluation of financial forensics variables, while linear regression was used to test the effect of financial forensics variables on discovering fraud. confirmatory factor analysis was used as a tool to figure out the contribution of different items to financial forensics variables and its contribution in discovering fraud. the results showed that financial forensics is an effective tool to find fraud if the general requirements were available to prepare professional forensic accountants. eme et al., (2016) investigated the effectiveness of the mechanisms of fraud prevention and detection in nigeria. to achieve the study’s objective, data was collected fro m accounting practitioners in nigeria through the use of the survey instrument, questionnaire. the result found internal controls, operational audits, and corporate code of audit, financial forensics techniques, and many other fraud prevention and detection mechanisms used in nigeria. the result of the study, however, revealed that the most effective mechanism is the financial forensics techniques, although the least used in nigeria. 8 3. methodology and variable measurement regression was considered to be the most appropriate because the study shows the combined effect of the independent variables (iss, lss, and ews) against the dependent variable (frd). the research used statistical product for services solution (spss) software to conduct a quantitative data analysis. e-questionnaire was used due to the covid-19 protocols that were put in place by the government of the fedreal republic of nigeria, restricting movements and the gathering of individuals in public and corporate places. this study comprised of the banks listed on the floor of the nigeria stock exchange as at the 31 th of december, 2020. due to the inability of the researcher to obtain the exact number of the management staff of ecobank plc and first bank plc as at the time of this study, these banks were filtered out. the total population for this study consists of 619 top management staff, disclosed in the annual reports of 12 out of 14 listed deposit money banks considered in this study. sample size of 242 respondents comprising of the management staff of the internal control department, antifraud unit, internal audit department and the compliance department. response were gathered using a 5-point likert scale consisting of strongly agree (sa), agree (a), undecided (ud), disagree (d) and strongly disagree (sd). the taro yamane formula was used to calculate the total sample size for this study: -----------------------------------(1) where n = desired sample size n = population of the study e = precision of sampling error (0.05) therefore: n = 619 1 + 619 (0.05) 2 -------------------(2) 619 1 + 1.5475 = 242.9822. however, to compensate for non-response probability; 30% of the sample was added to the study sample to increase the sample base as suggested by bassey, (2018). therefore 30% of 242 = 72. hence the sample size is given as n = 242 + 72 = 314 n = 314. all decimal places were ignored, reason being that scientifically, there’s no such thing as a fractional human being. table 1: population and sample size s/n bank names top management (target population) sample size allocation 1 access bank plc 60 31 2 fcmb plc 66 34 3 fidelity bank plc 44 22 9 4 gtb plc 56 28 5 jaiz bank 10 5 6 stanbic ibtc bank 80 40 7 sterling bank plc 48 25 8 united bank for africa 99 50 9 union bank plc 40 20 10 unity bank plc 29 15 11 wema bank plc 28 14 12 zenith bank plc 59 30 total 619 314 source:researcher’s compilation, 2021 this study adopted the following proxies and regression models from ehioghiren and atu (2016), dada, owolabi and okwu (2013). the mathematical expression is given as: y = f(x) ----------------------------------------------------i hence, the mathematical expression was substituted to suit this study aas follows: frd = f(ff)---------------------------------------ii where: ff =financial forensic frd = fraud deterrence y = fraud deterrence (dependent variable) and x = financial forensics (independent variable) x = (x1, x2, x3,) where: x1 = expert witness saervice (ews) x2 = investigative accounting service (iss) x3 = litigation support service(lss) functional relationship frd = f(ff)……………………………….………………………….iii frd = β0 + β1 ews + β2 iss + β3 lss + μ ………….…………….. iv 4. results and discussion of findings the gender, age, educational qualification, professional qualification, and length of service of respondents were stated in the section. multiple linear regression was used to evaluate hypotheses. 316 questionnaires links were shared, with 242 completed responded to. this equates to 76% response rate. manning (2010) noted that for analysis and publication, 50% return rates are reasonable, 60% is fine, and 70 % is very good. a response rate of 76 % for this study is deemed appropriate for making inferences and drawing conclusions based on these assertions from renowned scholars. 10 table 2:distribution of questionnaire/response rate categories frequency percentage % no of questionnaires distributed 316 100 no of questionnaires returned 242 76.58 no of questionnaire not returned 74 23.41 invalid questionnaire return 3 0.94 valid questionnaire return 239 75.63 source: field survey, 2021 as shown in table 2, that the number of questionnaires distributed by the researcher to the respondents’ amounted to 316 questionnaires. among which, 242 questionnaires replies were returned and the researcher revoked the access to the e-questionnaire link from the google forms. out of the 242 responses, 239 were valid and used in the analysis, amounting to a total response rate of 75.6%. analysis of the variables table 3:fraud deterrence analysis s/n items sa(%) a(%) ud(%) d(%) sd(%) 1. banks have mechanisms that checks against fraud 49.1 47.7 1.4 1.8 2. conducting background checks helps against employing fraudulent individuals 34.5 62.3 .9 1.8 .5 3. employees are encouraged to report fraud cases 40 57.3 .9 1.8 4. effective monitoring controls identifies red flags 45.9 50.9 1.8 1.4 5. third party like forensic accountants do verify organizations transactions and activities 43.2 52.7 1.8 2.3 6. conviction of perpetrators can discourage fraudulent acts 36.8 60 2.3 .9 source: field survey, 2021 with respect to table 3, question 1 relating to fraud deterrence, 49.1% of the respondents strongly agree that banks have an established and functional system which measures and monitors internal control effectiveness and external reporting activities. 47.7% agree with the statement, 1.4% were undecided while the remaining 1.8% disagree. the majority of respondents (96.8%) believed that banks have a well-established and functional framework in place to assess and track internal control effectiveness and external reporting activities. question 2, revealed that 34.5% of the respondents strongly agree that conducting employees' background checks before recruitment can help against employing fraudulent individuals.62.3% 11 agreed with the claim, 0.9% were undecided.1.8% disagree, while the remaining 0.5% strongly disagree. this revealed that the majority of the respondents (96.9%) were positive that conducting employees' background checks before recruitment could help against employing fraudulent individuals. in addition, question 3 disclosed that 40% of respondents strongly agree that workers are encouraged to disclose any alleged or observed fraud cases by their colleagues in good faith with valid evidence (i.e., whistleblowing), 57.3 percent agree, 0.9 percent are undecided, and the remaining 1.8 percent disagree to the argument. this revealed that most of the respondents, which account for 97.3%, are of the view that employees are encouraged to report, in good faith with relevant proof of any suspected or observed fraud cases from their peers (i.e. whistleblowing). on question 4, 45.9% of the respondents strongly agree that effective monitoring controls and it gadgets are in place to identify red flags for fraud, should they occur.50.9% agree with the claim, 1.8% were undecided while the remaining 1.4% strongly disagree. this revealed that the majority of the respondents (96.8%) were positive that effective monitoring controls and it gadgets are in place to identify red flags for fraud, should they occur.in addition, question 5 revealed that 43.2% of the respondents strongly agree that management usually brings in a third party like external auditor, forensic accountants or certified fraud examiners to verify organizations' transactions and activities.52.7% agree, 1.8% were undecided, while the remaining 2.3% disagree. nevertheless, the claims were overwhelmingly positive, with 95.9% of respondents claiming that management typically employs a third party to check an organization's transactions and operations, such as an external auditor, forensic accountants, or certified fraud examiners. finally, on fraud deterrence, question 6 revealed that 36.8% of the respondents strongly agree that conviction of perpetrators brought about by forensic audit can discourage others from committing fraudulent acts. 60% agree with the claim, 2.3% were undecided while the remaining 0.9% strongly disagree. this revealed that the majority of the respondents (96.8%) were positive that conviction of perpetrators brought about by forensic audit could discourage others from committing fraudulent acts. table 4:investigating accounting service analysis s/n o investigative support service sa( %) a( %) ud( %) d( %) sd( %) 1. investigation support helps in the search for evidence. 44.5 51. 4 2.7 1.4 2. investigative knowledge uncovers fraudulent events. 39.5 57. 7 2.7 3 investigative support assists in internal cases of fraud. 32.3 60. 5 4.1 3.2 4. sophisticated electronic gadgets used during investigations can discourage fraud. 39.5 53. 6 5 1.8 source: field survey, 2021 12 question 1 on table 4 confirmed that 44.5 percent of respondents strongly agreed that an investigative support service assists in the search for evidence to support a court case. 51.4 percent of those polled agreed with the assertion, 2.7 percent were undecided, and 1.4 percent disagreed. this revealed that the majority of the respondents (95.9%) were of the opinion that banks' investigation support service helps in the search for evidence that supports a court case. question 2, reveals that 39.5% of the respondents strongly agree that investigative knowledge such as surveillance tactics, interviewing and interrogation skills can assist the forensic accountant in uncovering fraudulent events not exposed by external auditors 57.7% agreed with the claim, while the remaining 2.7% were undecided. this revealed that the majority of the respondents (97.2%) were positive that investigative knowledge such as surveillance tactics, interviewing and interrogation skills could assist the forensic accountant in uncovering fraudulent events not exposed by external auditors. further, question 3 revealed that 32.3% of the respondents strongly agree that investigative support service can be used for internal cases of fraud within the bank, 60.5% agree, 0.9% were undecided and the remaining 1.8% disagree with the claim. this revealed that most of the respondents, which account for 92.8%, are of the view that investigative support services can be used for internal cases of fraud within the bank. finally, ias in question 4 illustrates that 39.5% of the respondents strongly agree that knowing that sophisticated electronic gadgets can be used during investigations can discourage one from committing fraud. 53.6% agree with the claim, 2.3% were undecided while the remaining 0.9% disagree. this revealed that the majority of the respondents (93.1%) were positive that knowing that sophisticated electronic gadgets can be used during investigations can discourage one from committing fraud. table 5:litigation support service analysis s/no litigation support service sa(%) a(%) ud(%) d(%) sd(%) 1. litigation support assists equitable judgement. 30 62.7 3.6 3.6 2. charging a guilty individual discourages fraud. 24.5 71.4 3.2 .9 3 litigation support can establish legal patterns for resolving future fraud cases. 34.1 59.1 5 1.8 4. knowledge of the law can assist in identifying evidence needed in court. 34.1 61.8 2.3 1.8 source: field survey, 2021 in table 5, 30.1 % of respondents strongly agree that litigation support services can assist the court in determining an equitable judgment. 62.7 % agreed with the statement, 3.6 % were undecided, and 3.6 % disagreed, 24.5 % of respondents strongly agree that charging a guilty individual in court for a fraudulent act and making the individual pay for the crime can deter people from committing fraud. 71.4 % agreed with the claim, 32% were unsure, and the remaining 9 % of people disagree. further, question 3 shows that 34.1% of the respondents strongly agree that the use of litigation support in financial forensics can establish legal patterns 13 which can prevent legal disputes or set standards for resolving future fraud cases 59.1% agree, 5% were undecided and the remaining 1.8% disagree to the claim. this revealed that most of the respondent which account for 93.2% are of the viewed that the use of litigation support in financial forensics can establish legal patterns which can prevent legal disputes. finally, on lss, question 4 revealed that 34.1% of respondents strongly agree that knowledge of laws and court procedures can assist the forensic accountant in identifying the type of evidence required to meet court requirements, 61.8% agree, 2.3% are undecided, and the remaining 1.8% disagree. table 6:expert witness service analysis s/no expert witness service sa(%) a(%) ud(%) d(%) sd(%) 1. availability of an expert can hinder fraud occurrences 21.4 65.5 9.1 3.6 .5 2. expert witness can identify manipulated transactions 21.8 65.9 10 1.8 .5 3 expert witness can provide information which can lead to the prosecution of perpetrator 27.1 59.4 9.2 4.1 4. mistakes and omission can affect trail outcome 27.7 59.5 9.5 3.2 source: field survey, 2021 with regard to expert witness, question 1 on table 6 showed that 21.4% of the respondents strongly agree that knowing that an expert of a particular field is likely to give an opinion on a fraudulent act can hinder an individual from committing fraud, 65.5% agree to the statement, 9.1% were undecided, 3.6% were undecided while the remaining .5% strongly disagree. this showed that the majority of respondents (86.9%) believe that knowing that an expert in a specific field is likely to give an opinion on a fraudulent act will prevent anyone from committing fraud. on question 2, 21.8 % of the respondents strongly agree that expert witness services can be used in identifying manipulated transactions within the bank. 65.9% agree to the claim, 10% were undecided, 1.8% disagree while the remaining 0.5% strongly disagree. this revealed that majority of the respondents (87.7%) were positive that expert witness services can be used in identifying manipulated transactions within the bank. further, question 3 revealed that 27.1% of the respondents strongly agree that an expert witness can provide reliability on matters related to fraud through supporting facts and this can lead to the prosecution of a fraud perpetrator, 59.4% agree, 9.2% were undecided and the remaining 4.1% disagree to the claim. this revealed that most of the respondents which account for 86.5% are of the viewed that an expert witness can provide reliability on matters related to fraud through supporting facts and this can lead to the prosecution of a fraud perpetrator. finally, question 4 on ews showed that 27.7% of respondents strongly agree that expert witness errors and omissions would damage credibility in a court agreement or trial. 59.5 percent agree with the statement, 9.5 percent are undecided, and 3.2 percent strongly disagree. this revealed that majority of the respondents (87.2%) were positive that mistakes and omissions by the expert witness can damage credibility in a court negotiation or trail. 14 descriptive statistics of variables of the study this section provides descriptive statistics of the variables of the study, using mean and standard deviation. the result is presented in table 7. table 7:descriptive statistics of variables variables sample mean std. deviation frd 220 4.38 0.45 is 220 4.32 0.37 ls 220 4.23 0.45 ew 220 4.08 0.51 source: spss output, 2021 all constructs were evaluated using a five-point likert scale. the mean response on fraud deterrence (frd) was 4.38, with a standard deviation of 0.45. a mean response of 4.32 on ias with a standard deviation of 0.38 indicated that staff respondents are also developing a positive perception of the banks' investigating accounting service (ias). 4.23 mean response on (lss) revealed that staff in banks are becoming more positive about litigation support service of financial forensics. finally, the mean response of 4.08 on expert witness indicates that the sampled banks have a positive perception of the expert witness function. diagnostic test ordinary least demand the satisfaction of some basic assumption for better inference. to this effect, the study conducted normality test and multicollinearity test. figure 4:normality of residual source: spss output, 2021 the study used a histogram to check for the normality of the residual. the figure above reveals a bell-shaped and symmetric about the mean. this indicated that the residual is normally distributed. 15 multicollinearity test the presence of multicollinearity between independent variables can result in a disputed result, necessitating testing. to check for multicollinearity, this paper used the variance inflation factor (vif). a vif figure of more than 5 indicates severe multicollinearity (kothari & garg, 2014). there was no issue with multicollinearity since all of the vif figures in table 8 are less than 5. table 8:test for multicollinearity vif tv ias 1.68 0.60 lss 2.24 0.45 ew 1.83 0.55 spss output, 2021. regression analysis the regression results of this study financial forensics on fraud deterrence in nigeria's listed deposit money banks are presented in the table 8. table 9:regression analysis output variable coefficients d t-value p-value ias .22 .07 2.99 0.003* lss .38 .07 5.18 0.000* ews .25 .06 4.33 0.000* const .84 .26 3.27 0.001* adjusted r2 0.51 f-statistic 76.80 p-value 0.000 * significant at 5%. source: spss output, 2021. the adjusted r2 revealed a value of 0.51, indicating that the financial forensics variables (investigating accounting service, litigation support, and expert witness) can explain 51 % of changes in fraud deterrence by nigeria's listed deposit money banks, with the remaining percent explained by other factors not captured in the model. the model's f-statistic value was 76.80, with a p-value of 0.000 showing that the financial forensics variables have joint effect on fraud deterrence by the listed deposit money banks in nigeria. test of hypotheses regression analysis shows that ias has a p-value of 0.003 which is significant at less than 5% level of significance, showing that investigating accounting services has a significant effect on fraud deterrence of the sampled banks. thus (h01) is rejected. for lss p-value of 0.000 was significant at 5% level of significance, indicating that lss had a significant effect on fraud deterrence of the sampled firms. as a result, the study's null hypothesis (h02) was rejected, which reported that litigation support services have no significant impact on fraud deterrence in 16 nigeria's listed deposit money banks. finally, regression result revealed that expert witness (ew) had a p-value of 0.000 which was significant at less than 5%, indicating that ew had a significant effect on fraud deterrence of the sampled firms. therefore, the study rejected the null hypothesis (h03) of the study that stated that expert witness has no significant effect on fraud deterrence in listed deposit money banks in nigeria. 5. conclusion and recommendation from the findings, the study concludes that financial forensics has a significant positive impact of fraud deterrence. the fraud deterrence cycle was used to explain fraud deterrence. based on the findings and conclusions of this study, the study recommends thatlisted deposit money banks should engage in financial forensics, which will ensure an unbiased workplace inquiry and interrogation in suspicions of wrongdoings, or discovery of fraud, not minding the magnitude, position, individual or group of individuals involved. references adeyemo, kingsley, a. (2012). frauds in nigerian banks: nature, deep-seated causes, aftermaths and probable remedies. mediterranean journal of social sciences, 3(2), 279-289. agbaje, w. h., & adeniran, b. g. (2017). effect of financial forensics services on fraud reduction in the nigerian banking industry. advances in social sciences research journal, 4(12), 53-64. association of certified fraud examiner, (2010). report to the nation on occupational fraud and abuse. http://www.acfe.com association of certified fraud examiners, acfe (2014). report to the nations on occupational fraud and abuse, austin: association of certified fraud examiners. association of certified fraud examiners, acfe, (2018). report to the nations on occupational fraud and abuse, austin: association of certified fraud examiners association of certified fraud examiners, acfe, (2020). 2020report to the nations on occupational fraud and abuse, austin: association of certified fraud examiners, inc. banking fraud investigation department (2013). internal audit’s role in modern corporate governance. http://www.bfid.org.co bassey, e. b. (2018). effect of financial forensics on the management of fraud in microfinance institutions in cross river state. journal of economics and finance, 9(4), 78-89. bbc http://www.pcaobus.org/rules/sarbanes _oxley_act_of_2002.pdf. berg, j., hilal, a., el, s., & horne, r. (2021). world employment and social outlook: trends 2021. bhasin, m. (2007). financial forensics: a new paradigm for niche consulting. research journal bloomberg https://www.bloomberg.com/news/articles/2019-03-15/steinhoff-forensic-probe-shows-exexecutives-inflated-profits cendrowski, h., martin, j. p., & petro, l. w. (2007). the handbook of fraudd derrence. new jersey: john wiley & sons, inc. centre for forensic studies (2010). nigerian institute of advanced legal studies lagos, nigeria round table on the role of forensic and investigative accounting: challenges for the banking industry 19 th july 2010. (distributor). essentials series. chartered institute of management accountants (2008). fraud risk management a guide to good practice. http://www.thenationsnewspaper.ng chepngeno, k. f., & fred, s. (2020). effect of litigation support services on fraud mitigation in firms listed at the nairobi securities exchange, kenya. iosr journal of economics and finance, 11(4):43-51 http://www.acfe.com/ http://www.bfid.org.co/ http://www.pcaobus.org/rules/sarbanes%20_oxley_act_of_2002.pdf https://www.bloomberg.com/news/articles/2019-03-15/steinhoff-forensic-probe-shows-ex-executives-inflated-profits https://www.bloomberg.com/news/articles/2019-03-15/steinhoff-forensic-probe-shows-ex-executives-inflated-profits http://www.thenationsnewspaper.ng/ 17 committee of sponsoring organizations of the treadway commission (coso), internal control— integrated framework (new york: committee of sponsoring organizations of the treadway commission, 1994), 23. note: commonly referred to as the coso report companies and allied matters act (cama) (2004). http://www.new.cac.gov.ng corporate_finance_institutehttps://corporatefinanceinstitute.com/resources/knowledge/other/enronscandal/ dada, s. o. (2014) financial forensics technique: a means of successful eradication of corruption through fraud prevention, bribery prevention and embezzlement prevention in nigeria. kuwait chapter of the arabian journal of business and management review 4(1), 176–186. dada, s. o., enyi, p. e., & owolabi, s. a. (2013). financial forensics: a relevant tool for effective investigation of bribery cases in nigeria. unique journal of business management research, 1(5), 095-099. dada, s. o., owolabi, s. a., & okwu, a. t. (2013). financial forensics a panacea to alleviation of fraudulent practices in nigeria. international journal of business, management and economics research, 4(5), 787-792. daily trust https://dailytrust.com/alleged-money-laundering-ex-skye-bank-boss-md-gets-n100m-baileach deliema, m., deevy, m., lusardi, a., & mitchell, o. s. (2020). financial fraud among older americans: evidence and implications. the journals of gerontology: series b, 75(4), 861-868. di gabriele, j. a., (2010). an empirical view of the transparent objectivity of financial forensics expert witnesses. http://ssrn.com/abstract1534705 digabriele, j. a. (2008). an empirical investigation of the relevant skills of forensic accountants. journal of education for business, 83(6), 331-338. dorminey, j., fleming, a. s., kranacher, m., & riley, r. a. (2012). the evolution of fraud theory. issues in accounting education, 27(2), 555-579. economic and financial crimes commission establishment act (2004) section 46. abuja: efcc ehioghiren, e. e., &atu, o. e (2016). forensic accointing and fraud management: evidence from nigeria.igbinedion university journal of accounting (2), 254 – 308. enofe, a., okpako, p., &atube, e. (2013). the impact of financial forensics services on fraud detection and prevention among commercial. unpublished thesis. federal bureau of investigation (2001). financial crimes report to the public. u. s: department of justice. forbes stowell, n., pacini, c., crain, j. m., schmidt, m., & wadlinger, n. (2019). investigating healthcare fraud: its scope, applicable laws, and regulations. wm. & mary bus. l. rev., 11, 479. godwin, o. e. (2020). fundamentals of financial forensics and investigation. (f. prof muhammaed akaro mainoma, ed.) lagos, 16, thomas salako street, ogba, lagos nigeria, nigeria: aaron & hur publishing (a member of the bsa group). hopwood, c. j., thomas, k. m., markon, k. e., wright, a. g., & krueger, r. f. (2012). dsm-5 personality traits and dsm–iv personality disorders. journal of abnormal psychology, 121(2), 424. hopwood, w. s., leiner, j. j., & young, g. r. (2009). financial forensics. international edition. ny: mcgraw-hill. hopwood, w. s., leiner, j. j., & young, g. r. (2012). financial forensics and fraud examination. new york, ny: mcgraw-hill. international monetary fund (2011) nigeria staff report for the 2010 article iv consultation, prepared by staff representatives for the 2010 consultation with nigeria approved by sean. http://www.highbeam.com/doc/1p3-821992191.html international monetary fund (imf) (2001). financial system abuse, financial crime and money laundering. monetary and exchange affairs and policy development and review departments, 141. http://www.highbeam.com/doc/1p3-821992191.html http://www.new.cac.gov.ng/ https://corporatefinanceinstitute.com/resources/knowledge/other/enron-scandal/ https://corporatefinanceinstitute.com/resources/knowledge/other/enron-scandal/ https://dailytrust.com/alleged-money-laundering-ex-skye-bank-boss-md-gets-n100m-bail-each https://dailytrust.com/alleged-money-laundering-ex-skye-bank-boss-md-gets-n100m-bail-each http://ssrn.com/abstract1534705 http://www.highbeam.com/doc/1p3-821992191.html http://www.highbeam.com/doc/1p3-821992191.html 18 john, i. o., &eiya, o. (2013). combating corruption in nigeria: the role of the public sector auditors. research journal of finance and accounting, 4(4), 122-131. kpmg. (2003). internal audit’s role in modern corporate governance. hong kong. http://www.researchscience.org lowe, d., geiger, m., & pany, k. (1999). the effects of internal audit outsourcing on perceived external auditor independence. a journal of practice & theory, 18(6), 7-26. manning, g. a. (2010). financial investigation and financial forensics. (5 th ed.) usa: crc press. new york stock exchange (2004). corporate governance rules. www.ajol.info ng’ang’a, j. k. (2015). the effect of financial forensics services on fraud prevention in the insurance companies of kenya, (doctoral dissertation) university of nairobi. nigerian deposit insurance corporation (ndic) annual report (2018). nigerian deposit insurance corporation report on fraud and forgery. http://www.ndic.gov.ng nigerian deposit insurance corporation (ndic) annual report (2019). ndic act, no.16 of 2006. http://www.ndic.gov.ng. ojaide, f. (2000). fraud detection and prevention: the case of pension accounts. http://www.globalacedemicgroup.com owho, o. (2005), bank frauds, causes, and prevention: an empirical analysis. ibadan: att books. owolabi, m. s., ogundajo, a., yusuf, k. o., lajide, l., villanueva, h. e., tuten, j. a., & setzer, w. n. (2010). chemical composition and bioactivity of the essential oil of chromolaena odorata from nigeria. records of natural products, 4(1), 72. owolabi, s. a., dada, s. o., & olaoye, s. a. (2013). application of financial forensics technique ineffective investigation and detection of embezzlement to combat corruption in nigeria. unique journal of business management research 1(4), 65-70. oyedokun, g. e. (2019). financial forensics : curbing fradulent activities. association of financial forensics ressearchers, 1-49. oyedokun, g.e. (2013). audit, investigation and financial forensics: similarities and differences. being a lecture delivered at the institute of chartered accountants of nigeria’s financial forensics certification programme peloubet, m. e. (1964). the measurement of property, plant, and equipment in financial statements; harvard business school accounting round table, summary of proceedings. journal of accountancy (pre-1986), 118(000006), 88. pinkasovitch, a. (2016). detecting financial statement fraud. http://www.investopedia.com/articles/financial-theory/11/detecting-financial-fraud.asp pricewaterhousecoopers, ―financial fraud—understanding root causes,‖ investigations & forensic services report (2002), principal focus of pcaob auditing standard no. 2 (as2). public company accounting oversight board, sarbanes–oxley act of 2002, sarbanes-oxley act of 2002, public law 107–204, 107th cong., 2d sess. (january 23, 2002), (from statute’s official title: ―an act to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes‖). skalak, s. & golden, t. w. 2004, 'independence, objectivity, skepticism', in a guide to financial forensics investigation, john wiley & sons, hoboken, pp. 87-107. skalak, s., alas, m. & sellitto, g. 2004, 'fraud: an introduction', in a guide to financial forensics investigation, pp. 1-20. thi, p., & nga, h. (2016). the effect of financial restructuring on the financial performance of commercial banks in vietnam. journal of business management and economics, 4(3), 32–37 http://www.researchscience.org/ http://www.ajol.info/ http://www.ndic.gov.ng/ http://www.ndic.gov.ng/ http://www.globalacedemicgroup.com/ http://www.investopedia.com/articles/financial-theory/11/detecting-financial-fraud.asp gusau journal of accounting and finance (gujaf) vol. 1 issue 2, october, 2020 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state –nigeria gusau journal of accounting and finance, vol. i, issue 2, october, 2020 1 corporate social responsibility and profitability of quoted nigerian firms: the mediating effect of firm size anthony idoko onoja1 evelyn iember ashiko2 department of accounting benue state university makurdi, nigeria comfort shakpande3 department of business management benue state university makurdi, nigeria abstract the study examines the link between corporate social responsibility (csr) and profitability with emphasis on the role of firm size. the population consists of 106 quoted nigerian non-financial firms, out of which a sample of 86 firms was selected based on data availability. using hierarchical linear regression analysis, the study found evidence that firm size has significant effect on the csr-profitability link; confirming that larger firms have the capacity to invest in csr activities more than their smaller counterparts. it is also found that corporate donations and employee relations have significant positive effect on profitability of the firms and that this effect is significantly improved by the mediating variable. the results are consistent with stakeholders theory and suggest that responsible business practices towards primary stakeholders can be profitable and beneficial to nigerian firms. these results justify the existing corporate investments in csr activities. therefore, the study recommends that nigerian firms should adopt csr strategy for creating shared value (csv); mitigating risks (of corruption, scandals and environmental accidents); attracting and retaining quality workforce; gaining competitive advantage and improving financial performance. regulatory authorities on their part should evolve measures that monitor corporate investment in csr to promote an honest culture of sustainable economic development. keywords: corporate social responsibility, profitability, stakeholders theory, sustainable economic development 1. introduction profitability is the main focus that drives most companies. however, for business to be sustainable in the long term, a strategy of corporate social responsibility (csr) activities is needed to meet shareholder demands, respect ethical values and give appropriate answers to organizational stakeholders. in nigeria, the issue of csr cannot be separated from the social and environmental concerns in the gusau journal of accounting and finance, vol. i, issue 2, october, 2020 2 country. poverty, infrastructural deficit and environmental pollution are possible issues that necessitate the need for companies to play active role in the society. with an increasing global concern for the harmful long-term impact of industrial activities, csr activities cannot afford to be charitable affairs but one of the tools for addressing critical ecological challenges on the planet. the impacts of industrial activities on the environment have not only aggravated phenomena like climate change, ozone depletion, over-exploitation of natural resources, air pollution but also increased radioactive water pollution which has resulted to the continued destruction of water marines thereby disrupting sustainable development (finavante, 2010). these phenomena have invariably increased external pressure from stakeholders such as government, socially-responsible investors, civil societies and most especially community lobby groups whose activities have constantly created social unrest. regrettably, this unrest according to uwuigbe, (2011) has led to continuous decrease in the operating performance of nigerian companies financially while increasing their cost of production due to increase in environmental cost and liabilities associated with corporate sustainability issues. following uwuigbe (2011), it is uncertain whether csr activities enhance profitability of nigerian firms. previously, some research supports the notion that csr activities lead to better profit, many studies suggest the opposite, most likely because of firm size differential. firms of all sizes and types aspire to become socially responsible, ecologically sustainable and economically competitive. nonetheless, larger firms are thought to have better operational impact, greater visibility, and more resources to expend on csr than their smaller counterparts. firm-level attributes such as size is expected to affect firm csr participation, and understanding its effect is essential, as firms attempt to derive strategic value from csr. according to world business council for sustainable development (wbcsd, 2002), csr is the continuing commitment of a business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life. a company’s csr towards employees is portrayed by its proactive policies and practices regarding union relations, remuneration policy, employees’ participation in decision making, working conditions, and elimination of forced/child labour. by adhering to such policies, companies can satisfy employees, enhance their job performance, and improve financial performance. the working conditions that respect human dignity, equality, and social protection can result in a productive gusau journal of accounting and finance, vol. i, issue 2, october, 2020 3 workplace. according to turban and greening, (2000), social responsibility of a company is a reputation factor and is an attractive force for potential and current employees. ethical reputation contributes to job satisfaction and lower employee turnover by evoking positive reactions from employees’ families and friends and; because satisfied employees have higher morale and job motivation, they will work more effectively and efficiently and contribute to higher levels of organizational effectiveness (riordan, gatewood & bill, 1997). analysis of prior research shown that better human resource management practices such as training and development of employees, their participation in problem solving, progressive remuneration policies, and grievance procedures reduce employee turnover, increases their productivity and financial performance. similarly, a typical business involvement with the local community can be seen in areas of education, health, and income generation. csr towards community mostly take the form of philanthropic giving, public–private partnerships, community relationships, and participation in social and economic development issues. these days, companies are pursuing meaningful partnerships with nongovernmental organizations (ngos) to empower their host communities. when companies focus their social actions on communities in and around their area of operation, they reap the benefits of a socially responsible image among their employees and the local community (husted, 2003). whereas some prior studies have suggested a negative relation between csr towards the community and firm performance, it is pertinent to note that investment in community development activities help a firm to obtain competitive advantages through tax savings, decreased regulatory burden, and improvements in the quality of local labour, reduced attacks on facilities and hostility in the form of kidnapping of personnel. accordingly, the motive for participating in csr using carroll’s (1991) pyramid of csr illustrates how different levels of commitment to csr are related to motives and outcomes. carroll (1991) describes that a company’s csr philosophy can be profit driven, compliance driven, driven by caring, synergetic or holistic. in the first stage of csr category, which is called the economic stage, companies use csr as a strategy to create a competitive advantage and gain improved financial performance. in the legal stage, companies engage in csr as it is their duty and obligation to follow laws and regulations. the ethical and philanthropic stages have the aim to attain a balance between profit, people and planet. in these stages, the company does not only focus on profit but also on gusau journal of accounting and finance, vol. i, issue 2, october, 2020 4 social welfare. one aspect of csr of interest to many financial economists, academics and researchers alike is the economic domain; examining the financial impact of csr for profit-making corporations. focusing attention on the economic domain is as a result of the claim by economist milton friedman that csr is bunk. friedman (1970) sparked decades of controversy by arguing that the only responsibility of publicly held companies is to increase profit – the efficiency paradigm of organizational excellence. some today laud his sentiments, and indeed many empirical tests have not found a positive relationship between csr activities and major corporate financial performance indicators such as profit. thus far, the question of whether the cost of achieving csr decrease, increase or have no effect on profitability, remains largely unanswered with regard to nonfinancial firms in nigeria. this is because most previous empirical tests in the country are concentrated on specific sectors – banking, oil and gas and telecommunications. thus, while the controversy on the influence of csr on profitability is still an open debate, a research gap exists in the literature in respect of nigerian non-financial firms taken as whole. despite that these firms vary in size, investigating the mediating effect of firm size on csr-profitability link is scarce requiring further research. the current study fills the knowledge gap by empirically examining the effect of size on the link between csr proxied by employee relations (emr) and philanthropic donations (dnt) and profitability measured by return on assets (roa) of non-financial firms in nigeria. based on this objective, the following null hypotheses are formulated: ho1: csr towards employees does not significantly influence profitability of quoted non-financial firms in nigeria ho2: csr towards host community does not significantly influence profitability of quoted non-financial firms in nigeria. ho3: firm size does not significantly determine csr influence on profitability of quoted non-financial firms in nigeria. 2. review of related literature one of the earliest pieces of literature on csr was a book by bowen, titled “social responsibilities of the businessman” which was published in 1953. according to bowen (1953), social responsibilities are “the obligations of businessmen to pursue those policies, make those decisions, or follow those lines of action which are desirable in terms of the objectives and values of our society”. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 5 carroll (1991), defined “csr as the conduct of a business so that it is economically profitable, law abiding, ethical and socially supportive”. according to the european foundation for quality management (efqm, 2004), csr involves a wide range of basics that organizations are expected to recognize and to reflect in their actions, which includes among other things, the respect for human rights, fair treatment of the workers, clients and dealers, being good corporate citizens of the host communities of the corporation and conservation of the natural environment. the world business council for sustainable development (wbcsd, 2002), defined csr as “the continuing commitment of a business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life”. these definitions reflect concerns for moral, ethical, philanthropic, social, economic, and environmental obligations expected from a corporation. thus, csr involves the way organizations make business decisions, the products and services they offer, their efforts to achieve an open and honest culture, the way they manage the social, environmental and economic impacts of business activities and their relationships with their employees, customers and other key stakeholders having interest in the business and its operations. profitability on the other hand is the firm’s ability to produce returns on investment based on its resources in comparison with alternative investment. it is the measurement of efficiency and shows how well the firm utilizes its assets to produce profit and value to shareholders. return on assets (roa) is acknowledged as the best measure of profitability. roa shows the percentage of net earnings relative to the firm’s total assets. the roa specifically reveals how much after-tax profit a firm generates for every one naira of assets it holds. theoretical underpinnings for this study include the stakeholder theory and legitimacy theory. the stakeholder theory of csr is based on the notion that there are many groups in society besides owners to whom the corporation is responsible. the stakeholder theory originated from the management discipline and has developed to include corporate accountability to broad range of stakeholders. a stakeholder according to freeman, (1984) is any group or individual who can affect, or is affected by, the achievement of a corporation's purpose. this theory posits that corporate bodies have a wide coverage of gusau journal of accounting and finance, vol. i, issue 2, october, 2020 6 accountability to the stakeholders including employees, customers, suppliers, shareholders, banks, environmentalists, government and other groups who can help or hurt the corporation. the objectives of a corporation can only be achieved by balancing the often conflicting interests of these different groups and by incorporating the participation of stakeholders in decision making, corporations are likely to respond to the interests of society as a whole. another theory from which csr stems is the legitimacy theory. the theory posits that business are bound by the social contract in which the firms agree to perform various socially desired actions in return for approval of its objectives and other rewards and this ultimately generates its continued existence (suchman, 1995). legitimacy is defined as a generalized perception or assumption that the action of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions. this theory implies that there is interaction between groups and society (deegan, rankin & tobin, 2002). corporations are one part of society and they exist if they are considered legitimate by groups in society. friedman, (1970) argued that managements are selected by the shareholders as agents and their sole responsibility is acting on behalf of the principals’ best interests. from friedman’s perspective, the one and only social responsibility of business is to use its resources and engage in activities designed to increase profits and wealth of owners. any other activities disturbing the optimal allocation of resources to alternative uses exert an adverse influence on firm performance. however, perspective of stakeholder’s theory (freeman, 1984), csr is a concept whereby companies integrate economic, environmental and social concerns, usually called the triple bottom line. the triple bottom line is considering that companies do not only have one objective-profitability, but that they also have objectives of adding environmental and social value to society (mirfazli, 2008). the seeming contradictory themes between friedman’s (1970) viewpoint and the stakeholder theory arise from the assumption that csr which considers the interests of a broad spectrum of stakeholders (suggested by stakeholder theory), is in fact detrimental to value maximization activities of the firm (asserted by friedman). however, jensen (2001) attempted to reconcile the potential conflict between these two viewpoints by proposing enlightened stakeholder theory, gusau journal of accounting and finance, vol. i, issue 2, october, 2020 7 which asserts that a firm cannot maximize its long-term value if it ignores the interests of diverse stakeholders. thus, a company’s capacity to generate sustainable wealth over time and its long-term value are determined by the relationship with both internal and external stakeholders. csr, if it contributes to enhancing firm value, can be an appropriate corporate strategy as the stakeholder theory suggests, not an exploitation of shareholders’ wealth to benefit other parties. the following empirical studies are reviewed. firstly, orlitzky, schmidt and rynes, (2003) conducted a meta-analysis of 52 studies (which represent the population of prior quantitative inquiry) yielding a total sample size of 33,878observations. the meta-analytic findings suggest that corporate virtue in the form of social responsibility and, to a lesser extent, environmental responsibility, is likely to payoff…corporate social performance appears to be more highly correlated with accounting-based measures of corporate financial performance than with market-based indicators, and corporate social performance reputation indices are more highly correlated with corporate financial performance than are other indicators of corporate social performance. the study generally indicates that csr does offer potential benefit to corporate profits. in the study of corporate social responsibility and financial performance, tsoutsoura (2004) used data over a period of five years, (1996-2000). the relationship was tested using regression analysis. the results indicate that the sign of relationship is positive and statistically significant; supporting the view that socially responsible corporate performance can be associated with series of bottom-line benefits. also, ngwakwe (2008) examined the relationship between sustainable business practice and firm performance. the survey of sixty manufacturing companies in nigeria selected three indicators of sustainable business practice: employee health and safety (ehs), waste management (wm), and community development (cd). this study revealed that the sustainable practices of the firms are significantly related with firm performance. the study concludes that within the nigerian setting at least, sustainability affects corporate performance. researching on the impact of corporate social responsibility on profitability of the nigerian banking sector, a case study of first bank of nigeria plc, olawale (2010) used the pearson product moment correlation to establish and test the gusau journal of accounting and finance, vol. i, issue 2, october, 2020 8 hypothesis that csr has a significant impact on profitability of first bank plc. the result of the study confirms that there is a positive relationship between csr and profitability. while, research conducted by burhan & rahmanti (2012) ascertained the relationship between sustainability reporting and company performance using a sample of thirty-two companies listed on the indonesian stock exchange during the period 2006 – 2009. the study uses linear regression model as well as multiple regression and the researchers shows that sustainability reports does have an association with company performance, however, partially as only social performance disclosure influences the company performance. adeyanju, (2012) assessed the impact of csr on nigerian society using survey approach and served questionnaires on banking and telecommunication industries. the study found strong correlation between csr activities and development particularly in the area of health care delivery. also, effiong, usang, inyang and effiong, (2013) studied csr practices amongst smes in the tourism and hospitality industry in cross river state using survey design. the study revealed that csr by hotels have insignificant effect on social and environmental issues. again, servaes and tamayo (2013) examined the impact of csr on firm value with emphasis on the role of customer awareness in the uk. the result of regression analysis showed that csr and firm value are positively related for firms with high customer awareness as proxied by advertising expenditures. ozcelik, ozturk and gursakal (2014) investigated the relationship between csr and financial performance of 81 companies in turkey. the study covers 2010 and 2012. using logistic regression analysis, it is found that large firms engaged in sustainable practices as philanthropic donations, safety working conditions and recycling to gain reputation, increase sales and meet stakeholders’ expectations. in the same vein, hirigoyen and poulain-rehm (2015) investigated the causal relationships between various dimensions of csr (human resources, human rights in the workplace, social commitment, respect for the environment, market behavior and governance) and financial performance. the study used linear regression analysis and the granger causality test for data obtained from a sample of 329 companies across us, europe and asia. the study acknowledged the relation that companies create economic value by creating social value; suggesting the need for companies to take stakeholders seriously and form alliances with local actors. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 9 nag and bhattacharyya (2015) examined csr strategies and activities of firms as disclosed in annual reports and explored its link to accounting and market performance of firms in india. using a sample of 30 firms over five year period from 2007 – 2011, the study employed content analysis to determine csr disclosure. results obtained from the pooled regression model showed that csr spending has negative effects in the short term. similarly, atsukwei, onoja and laka (2016) sought to know if csr leads to superior earnings of listed consumer goods firms in nigeria. using content analysis method and multiple linear regression analysis, the study found significant and positive relationship between csr and performance measures eps and roa. the study urged corporate entities in nigeria to invest in csr in all ramifications to boost their financial performance. amiolemen, uwuigbe, uwuigbe, osiregbemhe and opeyemi (2018) investigated corporate social, environmental reporting and its association with stock price of 50 quoted nigerian firms for the period of five years from 2011-2015. panel data regression analysis did not find significant association between corporate social and environmental expenditure and the market price of the firm. also, hategan, sirghi, curea-pitorac and hategan, (2018) carried out a study “doing well or doing good: the relationship between csr and profit in romanian companies”. their empirical research consisted of panel data econometric model using logistics regressions and feasible generalized least squares (fgls) regressions. the main results revealed that the companies implementing csr activities in a greater extent were more profitable in economic terms. finally, sani, bakare and nurudeen, (2019) evaluate the effect of csr on financial performance of quoted conglomerates in nigeria. using data obtained from 5 companies for period of 9 years; analyzed with panel regression techniques, it is found that csr to employees and community have significant positive effects on roa, roe and pat. the review of prior studies shows that results of studies so far, are inconclusive as to the impact of csr activities on corporate profitability. such inconclusiveness creates ground for further investigation. also, most of the available research findings are from developed economies indicating paucity of empirical evidence from nigeria. thus, while controversy on the influence of csr on profitability still constitutes a research problem, a research gap exists in the literature in gusau journal of accounting and finance, vol. i, issue 2, october, 2020 10 respect of nigeria. empirical evidence from an emerging economy like nigeria is necessary to fill the existing research gap. 3. methodology the population of the study consists of 106non-financialfirmsquoted on the nigerian stock exchange as at 31st december, 2018. however, using filtering approach based on availability of audited financial reports, 86 firms were selected, representing 81 percent of the population. the variables of the study consists of the dependent variable (profitability) and independent variable (csr) and moderating variable (size).secondary data were collected from the firms’ audited annual reports; these relate to csr expenditure philanthropic donations and employee relation costs, profitability return on assets and firm size – total assets. the study adopts content analysis of annual reports to determine the level of csr disclosure of the various reporting firms, while pearson correlation analysis; descriptive statistics and hierarchical regression analyses were employed using statistical package for social sciences (spss, 21). in order to establish the cause-effects relationship between the independent variable (csr expenditure) and the dependent variable measure (roa), taking note of the mediator variable, the study constructs a simple mediation model thus: figure 1: mediating effect of firm size on csr-profitability link accordingly, the regression models for 3-step analyses are specified below following baron and kenny, (1986): prof = β0 + β1dnt + β2emr + ε…………………………………………... (i) fsiz = β0 + β1dnt + β2emr + ε……………………………………………. (ii) prof = β0 + β1dnt + β2emr + β3fsiz + ε……………….………………. (iii) firm size csr profitability gusau journal of accounting and finance, vol. i, issue 2, october, 2020 11 where: prof = profitability measured by roa; β0 =intercept coefficient; β1 β2 β3 = coefficient for each independent & control variable; dnt = donations; emr = employee relation; fsiz = firm size ε = estimated error margin 4. results to ensure that results obtained through regression are reliable and valid, multicollinearity checks were carried out. table1: correlation matrix and collinearity statistics variable dnt emr fsiz collinearity statistics tolerance vif dnt 1.000 0.845 1.183 emr 0.512 1.000 0.684 1.461 fsiz 0.299 0.589 1.000 0.761 1.314 source: spss output, 2020 table 1 presents a summary of correlation between independent variables and the moderating variable as well as the collinearity statistics. the highest correlation is between employee relations (emr) and firm size (size) (pearson correlation = 0.589). this is less than 0.7 therefore all variables are retained (tabachnick & fidell, 2001). the collinearity statistics obtained from the regression result reveals tolerance values greater than 0.1 and vif less than two (2) which indicates the absence of multicollinearity problem among the independent variables under investigation (berenson & levine, 1999). this technique ensures that the independent variables are not so correlated to the point of distorting the result and assist in filtering out those ones which are likely to impede the robustness of the model. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 12 table 2: descriptive statistics variables n minimum maximum sum mean std. deviation prof dnt emr fsiz valid n (listwise) 86 86 86 86 86 -3.89 4.54 7.04 8.48 1.64 8.27 9.83 12.96 -59.694 546.186 727.818 846.498 -0.694 6.351 8.463 9.843 0.857 0.952 0.831 0.609 source: spss output, 2020 from the table, the return on assets represents the dependent variable. the average return on asset is n-0.694 with a standard deviation of n0.86 which means that return on assets can increase or decrease by n0.86. the highest return on assets recorded was n1.64 while the lowest was n-3.89.for the independent variables (philanthropic donation, employee relation and firm size), the average donation is n6.35 with standard deviation of n0.95 which means that donation can increase or decrease by n0.95. the highest donation was n8.27 while the lowest is n4.54. the average employees relation cost is n8.46 with standard deviation of n0.83 which means that this variable can increase or decrease by n0.83. the highest employee relation cost is n9.83 while the lowest value is n7.04. the average firm size is valued at n9.84 with standard deviation of n0.61 which means that total assets of the firms can increase or decrease by n0.61. the highest value of total assets is n12.96 while the lowest value is n8.48. table 3: model i: regression results variables prof standardized coefficients t-values sig. beta (constant) dnt emr 0.132 0.261 .945 1.036* 2.582* 0.018 0.052 0.013 adjusted r square 0.245 f-statistic 15.346* 0.041 *significant at 5%level. source: spss output, 2020 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 13 table 3 shows the explanatory power of model i, the adjusted r square is 24.5%. it shows that donation and employees’ relation is accountable for 24.5% variation in return on assetswhile the remaining 75.5% of the variation in the return on assets is explained by factors not captured in the model. it further reveals that an increase in donation and employee relation by one unit will significantly increase return on assets by 0.13 units and 0.26 units respectively. the result shows that the two independent variables (donation and employees relation) significantly affect the return on assets providing the ground to proceed to step 2 (baron & kenny, 1986). table 4: model ii: regression results variables fsiz standardized coefficients t-values sig. beta (constant) dnt emr 0.637 0.018 -.006 1.182* .315* 0.206 0.029 0.038 adjusted r square 0.383 f-statistic 35.503* 0.002 source: spss output, 2020 table 4 shows that model ii has explanatory power of38.3% meaning that donation and employees’ relation is accountable for 38.2% variation in firm size. the remaining 61.8% of the variation in firm size is explained by factors not captured in the model. it further reveals that an increase in donation and employee relation by one unit will significantly increase the firm size by 0.64 units and 0.02 units respectively. the result shows significant effect hence, the studyproceeds to running regression model iii (baron & kenny, 1986). gusau journal of accounting and finance, vol. i, issue 2, october, 2020 14 table 5: model iii: regression results variables prof standardized coefficients t-values sig. beta (constant) dnt emr fsiz 0.261 0.362 0.411 -6.628 3.112* 3.687* 4.604* 0.000 0.003 0.001 0.000 adjusted r square 0.596 f-statistic 48.341* 0.000 source: spss output, 2020 table 5 shows the explanatory power of the regression model iii, the adjusted r square is 59.6%. it shows that with the mediating effect of firm size on donation and employees’ relation is accountable for 59.6% variation in profitability (roa) indicating that csr is important in achieving effective financial performance of corporate organizations in nigeria while the remaining 40.4% of the variation in the roa is explained by factors not captured in the model. the f-statistics which measures the reliability of the model is significant at 5% suggesting that the model is a reliable predictor of the relationship betweencsr and profitability.table 5further reveals that dnt and emr have positive coefficients for profitability and shows that an increase in donation and employees relation by one unit will significantly increase return on assets by 0.26 units and by 0.36 units respectively. similarly, a unit change in firm size will significantly increase prof (measured by roa) by 0.41 units. the result shows that the independent variables (donation and employees relation) significantly affect the return on assets of non-financial firms in nigeria while, the mediator variable, firm size is an important characteristic to take into account. clearly, larger firms have a better operational impact, greater visibility, and resources to spend more on csr to get a socially responsible rating. hypotheses testing: the results of the regression model iii for firm size, csr and profitability were reported in table 5. coefficient of philanthropic donation (dnt) is statistically significant at 5% degree of significance, and positive (β = 0.261, t = 3.112, p<0.05) meaning corporate success and social welfare are interdependent. in terms of employee’s relations (emr), the coefficient is gusau journal of accounting and finance, vol. i, issue 2, october, 2020 15 positive and significant (i.e. β = 0.362, t = 3.687, p<0.05); meaning increased employee engagement leads to more loyalty, improved recruitment, increased retention, higher productivity and profitability. this result consistent with a priori expectation, confirms previous empirical evidence that csr towards primary stakeholder’s influences profitability. these results reinforce the accumulating body of empirical support for the positive effect of csr on profitability (tsoutsoura, 2004; olawale, 2010; adeyanju, 2012; servaes & tamayo, 2013; astukwei et al., 2016; hategan et al., 2018). regarding firm size (fsiz), the coefficient is positively significant (β = 0.411, t = 4.604, p<0.05); confirming that larger firms investing csr activities more often than smaller counterparts. on the whole, the findings did not support our hypotheses and goes to confirm that csr enhances profitability of the sampled firms relative to their sizes. the findings showed that csr expenditure in the long run provides better returns on the next marginal naira, thus every non-financial firms in nigeria regardless of size should integrate csr into their spending culture. 5. conclusion and recommendations there has been an extensive debate concerning the legitimacy and value of being a socially responsible business. there are different views of the role of a firm in society and disagreement as to whether wealth maximization should be the sole goal of a corporation. most people identify certain benefits for a business being socially responsible, but most of these benefits are still hard to quantify and measure. this study addresses the question of whether csr is linked to profitability and if so, whether firm size has effect on such relationship. the study concludes that csr activities are significantly related to profitability of quoted non-financial firms in nigeria even though the effect will be higher in large firms. therefore, it is recommended that corporate nigeria should invest more in csr activities in its entire ramifications to boost their profitability. to do this, the firms should adopt csr strategy for creating shared value (csv), mitigating risks of corruption, scandals and environmental accidents, attracting and retaining quality workforce, gaining competitive advantage and improving profitability. also, regulatory authorities should evolve measures that monitor corporate investment in csr to discourage propaganda by some managers who record high csr costs on paper to avert/reduce tax burden and cultivate an honest culture of sustainable economic development. an important contribution of the study is that it bridges research gap in the local literature; extends the frontiers of knowledge by opening research path on the mediating effect of firm size. the study provides gusau journal of accounting and finance, vol. i, issue 2, october, 2020 16 evidence that corporate donation and employees’ relation are relevant in improving the return on assets of non-financial firms in nigeria. this study, like any other, is subject to limitations. the first limitation concerns the development of csr measures. csr is, as servaes and tamayo (2013) admit, a poorly defined concept thus, whether data from the annual reports sufficiently quantify the firms’ csr strategy is inherently open to debate. to mitigate this quantification problem, future research should explore measures that reflect alternative definitions of csr, as well as data sources other than the nigerian stock exchange. another limitation is that the study utilized data covering single financial year, 2018 and so, future research should consider the use of panel data for analysis. thus, the results of this study should be generalized with caution in view of these limitations. references adeyanju, o. (2012). an assessment of the impact of corporate social responsibility on nigerian society: the examples of banking and communication industries. universal journal of marketing and business research, 1 (1), 17-43 amiolemen, o. o, uwuigbe, u, uwuigbe, o. r, osiregbemhe, i. s. & opeyemi, a. (2018). corporate social environmental reporting and stock prices: an analysis of listed firms in nigeria. investment management and financial innovations, 15 (3), 318-328 atsukwei, m. e, onoja, a. i. & laka, d. t. (2016). does corporate social responsibility lead to superior financial performance? journal of leadership, accounting development and investigation research, 2 (2), 240-252 baron, r. m., & kenny, d. a. (1986). the moderator-mediator variable distinction in social psychological research: conceptual, strategic and statistical considerations. journal of personality and social psychology, 5, 1173-1182 berenson, i & levine, m. (1999). basic business statistics: concepts and applications. new delhi: prentice hall of india pvt ltd bowen, h. r. (1953). social responsibilities of the businessman. new york: harper and row gusau journal of accounting and finance, vol. i, issue 2, october, 2020 17 burhan, a. h. & rahmanti, a. (2012). the impact of sustainability reporting on company performance. journal of economics, business and accountancy, 15 (2), 35-43 carroll, a. b. (1991). the pyramid of corporate social responsibility: toward the moral management of organizational stakeholders. business horizons, 34, 39 48. deegan, c., rankin, m. & tobin, j. (2002). an examination of the corporate social and environmental disclosure of bhp from 1983-1997: a test of legitimacy theory. accounting, auditing & accountability journal. available at: https://doi.org/10.1108/09513570210435861 effiong, e. j., usang, o., inyang, i. o. & effiong , c. (2013). corporate social responsibility in small and medium scale enterprices in nigeria: an example from the hotel industry. international journal of business and management, 8 (4), 119-126 enahoro, j.a., akinyomi, o.j. & olutoye, a.e. (2013). corporate social responsibility and financial performance: evidence from nigerian manufacturing sector. asian journal of management research, 4 (1): 153163 finavante, p. l. (2010). corporate philanthropy: a strategic marketing consideration. journal of applied business and economics, 2 (3), 91-96 freeman, r. e. (1984). strategic management: a stakeholder perspective. englewood cliffs. u.s.a: prentice hall. friedman, m. (1970). the social responsibility of business is to increase its profits. the new york times magazine, 31-32. hategan, c, sirgi, n, curea-pitorac, r. & hategan, v. (2018). doing well or doing good: the relationship between corporate social responsibility and profit in romanian companies. sustainability, 10, 1-23 hirigoyen, g. & poulain-rehm, t. (2015). relationships between corporate social responsibility and financial performance: what is the causality? journal of business and management, 4 (1), 18-43 husted, b. w. (2003). governance choices for corporate social responsibility: to contribute, collaborate or internalize? long range planning, 36(5), 481–498. jensen, m.(2001). value maximization, stakeholder theory, and the corporate objective function. journal of applied corporate finance, 14, 3-12. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 18 milne, m. j. & alder, r. w. (1990). exploring the reliability of social and environmental disclosures content analysis. accounting, auditing and accountability journal, 12 (2), 237-256. mirfazli, e. (2008).corporate social responsibility (csr) information disclosure by annual reports of public companies listed at indonesia stock exchange (idx). international journal of islamic and middle eastern finance and management, 1(4), 275-284. nag, t. & bhattarcharyya, a. k. (2015).corporate social responsibility reporting in india: exploring linkage with firm performance and development linkages with firm performance and development kolkata, india ngwakwe, c. c. (2008). environmental responsibility and firm performance: evidence from nigeria. international journal of social, behavioral, educational, economic, business and industrial engineering, 2 (10), olawale, a. s. (2010). the impact of corporate social responsibility on the profitability of the nigerian banking sector: a case study of first bank of nigeria plc. available on: http/www.ediaro.com orlitzky, m., schmidt, f. & rynes, s. (2003). corporate social and financial performance: a meta-analysis. organization studies, 24 (3), 403–411. ozcelik, f., ozturk, b. a. & gursakal, s. (2014). investigating the relationship between corporate social responsibility and financial performance in turkey. ataturk universitesi iktisadi ve idari bilimler dergisi, 28 (3), 189-203 riordan, c. m., gatewood, r. d& bill, j. b. (1997). corporate image: employee reactions and implications for managing corporate social performance’, journal of business ethics, 16(4), 401–412. sani, a. b., bakare, t. o. & nurudeen, a. o. (2019). corporate social responsibility and financial performance of conglomerates companies in nigeria. journal of accounting and management, 2 (1), 18-25 servaes, h. & tamayo, a. (2013). the impact of corporate social responsibility on firm value: the role of customer awareness. management science, 59 (5), 1045-1061 suchman, m. c. (1995). managing legitimacy: strategic and institutional approaches. academy of management journal, 20 (3), 571 610. turban, d. b. & greening, d. w. (2000). corporate social performance as a competitive advantage in attracting a quality workforce. business & society, 39, (3), 254-280 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 19 uwuigbe, u. (2011). an investigation of the association between social envrionmental reporting and the financial performance of firms in nigeria. nigerian accounting horizon, 4(1),154-164. gusau journal of accounting and finance (gujaf) vol. 1 issue 2, october, 2020 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state –nigeria gusau journal of accounting and finance, vol. i, issue 2, october, 2020 1 firm specific attributes and financial performance of listed insurance companies in nigeria agboola muslimat opeyemi department of accounting nigerian defence academy kaduna muslimaty@gmail.com/08038214118 abiodun popoola phd department of economics ahmadu bello university zaria. onipe adabenege yahaya phd department of accounting nigerian defence academy kaduna abstract the financial performance of nigerian insurance firms has been seen as weak and poor. owing to the weakness of the insurance sector, the study therefore examined the effect of insurance specific attributes on financial performance of listed insurance firms in nigeria. the study covered a period of eleven years from 2008 to 2018. the research used correlation research design and secondary data obtained from the annual reports and accounts of firms from 2008-2018. the population of the study is all the 27 insurance firms listed on the nigerian stock exchange as at 31 st december 2018, eighteen (18) of these firms were selected as sample. multiple regression analysis was used in estimating the research model. the result of the study shows that underwriting risk and operating expenses have negative and significant impacts on financial performance and premium growth reveal a positive and significant impact on financial performance of the study firms. the study concludes that underwriting risk and operating expenses inversely affect the financial performance of listed insurance firms. the study recommends among others that the management of the listed insurance firm should focus more on reducing the level of their underwriting operation and cut their present level of operational cost drastically to improve financial performance. keyword: financial performance, underwriting risk, premium growth, operating expenses, re-insurance risk 1. introduction insurance plays very important role in the development of the economy, efficient allocation of resources, reduction of transaction costs, creating liquidity, gusau journal of accounting and finance, vol. i, issue 2, october, 2020 2 promoting investments and distribution of financial losses. it also plays a prominent role in the country’s economy through risk bearing and payment of taxes (hamadu & mojekwu, 2010). insurance business is arguably the lead player in the nigeria’s risk management system. aside ensuring financial security, the insurance industry contributes significantly to the financial intermediation chain, and offers a ready source of long term capital for infrastructural projects (augustine & nwameka, 2011). the risk businesses include the insurance companies and as such encompass all sorts of risks ranging from individuals, businesses and companies. in order to avoid losses due to the compensation claims made by the insured, it is necessary that insurance companies manage their likelihood of negative outcome and conduct the right analysis to avoid losses due to the compensation claims made by the insured. however, saeed and khurram (2015) argued that the role of insurance companies and other financial institutions is to create an effective and efficient monetary framework through risk transfer, intermediation and mobilization of savings in the economy. there are factors that influence firm’s performance which includes firm’s specific factors. insurance firm’s specific factors are those attributes that are peculiar to insurance firms that have effect on the performance of a firm. firm characteristics affect insurance companies’ financial performance. these characteristics are underwriting, re-insurance, operating costs, premium growth, firm size, loss ratio and leverage among others which plays vital roles on performance. this specific characteristic is peculiar to a specific asset or company. according to naicom, before 2005 the nigerian insurance industry was undercapitalized, weak and indeed not performing its exact roles for economic transformation. adeosun, (2016) stated that insurance firms contribute lower than 1.5% to gdp annually of what it should and by implication 70,000 employment opportunity is being loss annually and the sector is due for recapitalization. these necessitate a better understanding of the financial risk exposure of these firms to their performance to prevent the future reoccurrence of these problems. literature reviewed reveal that most of the previous studies carried out on determinants of financial performance of listed firms in nigeria, akindele (2012), olusanmi, uwuigbe and uwuigbe (2015) and other countries of the world, arif and anees (2012), khidmat and rehman (2014), otieno & nyagol, 2016 focuses gusau journal of accounting and finance, vol. i, issue 2, october, 2020 3 more attention on the banking and other sector while neglecting the strategic importance of insurance firms to the nigeria economy. also, the previous studies in nigeria on financial performance such as, soyemi, (2014), epetimehin and obafemi (2015) used solvency and liquidity as a proxy without including reinsurance and underwriting as variables to proxy determinants of financial performance as an independent variable of the study. the only few studies found are foreign based studies such as the work of patrick (2015) and suheyli (2015). these creates a gap for further study in nigeria by including re-insurance and underwriting as a proxy of insurance specific attribute on financial performance using insurance firms as a domain of the study. the following section is structured into four. the first part is the literature review which provide review on related studies and theory. it is followed by methodology adopted in the study. the fourth deals with the result and discussion of finding and the final part deals with conclusion and recommendation. 2. literature review underwriting and financial performance daare (2016) identified factors that determine non-life insurance companies performance in india. the result of the study revealed loss ratio found statistically insignificant and negative impact on performance of insurance companies` in india. saeed and khurram (2015) in their study indicated that the loss ratio has a significant and negative impact on the profitability of insurance companies in pakistan. this research is confined to the context of international relations. in addition, ijaz (2015) study found that underwriting risk is significantly related to financial performance of insurance firms and the relationship is negative. the researcher concluded that underwriting has negative significant effect on performance. this study was on pakistan economy and need to be localized, the period of the study was 2014 which has left some period gap for research. arif and showket (2015) conducted a research on effect of financial risk and financial performance of24 life insurance companies in indian from 2005 to 2013. the result of the study revealed a negative and insignificant impact between underwriting risk and financial performance of the firms. finally, a research carried out by mehari and aemiro (2013) on firm unique features that decide the outcome of the results of insurance companies in ethiopia. the findings of the regression analysis showed that the loss ratio for insurance firms in ethiopia was statistically important and negatively linked to the roa. fali et al. (2020) added gusau journal of accounting and finance, vol. i, issue 2, october, 2020 4 to the current empirical evidence that the underwriting of risks decreases the low profitability of nigerian-listed insurance firms. premium growth and financial performance lasisi (2018) has selected twelve (12) insurance companies listed in nigeria for the period 2011-2015 to determine how liquidity risk affects the firm's results. the random findings showed that premium growth does not influence firm performance of the insurance companies listed in nigeria. saeed and khurram (2015) found that premium growth is negligible and negatively impacts the performance of pakistani non-life insurance companies. the firm-specific factors affecting the profitability of non-life insurance companies operating in turkey were discussed by kaya (2015). for the period 2006-2013 using 192 panel data sets. the study discovered that premium growth has had a clear and substantial impact on the profitability of insurance companies. in their work on firm specific factors that decide the success of insurance companies in ethiopia, mehari and aemiro (2013) have found that growth in the written premium has a statistically insignificant relationship with roa. a research by sumaria and amjad (2013) revealed a favorable and insignificant relationship between premium growth and the financial performance of insurance companies. although daniel and tilahun (2012) concluded that there is a favorable and insignificant relationship between premium growth and the financial performance of insurance companies in ethiopia. reinsurance and financial performance pavic et al. (2017) the study employing static panel model and the results of the analysis reveal that reinsurance has a negative and insignificant effect on performance when measured with both roa and roe. suheyli (2015) investigated the determinants of insurance companies’ profitability using firms in ethiopia. the period of the study was from 2004 to 2014. the study concluded that financial performance and re-insurance have negative relation and their relationship is significant. this study uses just 9 firms, the study period only covered 2004 to 2014 and was not conducted in nigeria. mistre (2015) examined the determinants of profitability in insurance firms in ethiopia. regression analysis was used to analyze the data, the result of the study illustrated re-insurance ratio to be positively related to performance, though not significant. the research concluded that re-insurance impact is positive to performance though the impact is insignificant on financial performance. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 5 operational expenses and financial performance lasisi et al. (2017) the results of the study show that the productivity of operating costs has shown an insignificant negative impact on profitability. odunga (2016) conducted a report on basic performance metrics, market share and operating efficiency of commercial banks in kenya. as a consequence, the bank's operating efficiency is well illustrated by the bank 's unique performance metrics. never less so, market share is a matter of assessing the operating performance of the bank. the research was conducted in the banking sector in kenya and the findings of the study do not apply to other sectors in nigeria. saeed and khurram (2015) revealed that expense ratio proved insignificant on the performance of the insurance companies. the study reveals that insurance company is maintaining a good operating expense. lasisi and nuhu (2015) in their study found that the problem of the manufacturing industry is the high level of overhead costs incurred by the company. warganegar et al. (2014) found evidence of the impact of sticky operating expenses (sg&a) on the profitability of firms. they study concludes that sticky costs have a detrimental effect on results and therefore companies should be versatile in designing the cost structure of their companies. in addition, oluwagbemiga, olugbenga and zaccheaus (2014) study showed a positive and important relationship between operating costs and the output of firms. 3. methodology correlational research design is adopted for the study this because the researcher attempts to measure the effect of insurance firm’s specific attributes on financial performance of listed insurance firms in nigeria over the period of 2008 to 2018. the choice for this design was informed by the research paradigm which is of the positivist philosophical research paradigm. the population for the study is all the twenty-seven (27) insurance firms trading on nigerian stock exchange as at december 31st 2018. the sample size is eighteen (18) drawn from the total population of twenty-seven (27) listed insurance firms by 31st december 2018. the size of the sample covers 67% of the population. the sample size consists of firms that were listed on or before 31st december 2008 and remain listed till the end of 31st december 2018. model specification in bid to ascertain the effect of insurance firm’s specific attributes on financial performance of listed insurance firms in nigeria, a multiple linear regression mode was built. the model encapsulates the contribution of underwriting, gusau journal of accounting and finance, vol. i, issue 2, october, 2020 6 premium growth, reinsurance and operating expenses on financial performance of listed insurance firms in nigeria. fpit = ∞ + βfcit + εit fpit = ( roait, ) insurance firms specific attributes it = (uwit + pgit + riit + opeit ) roait= β0it + β1uwit+ β2pgit + β3riit + β4opeit + εitwhere, fp = financial performance fc = firm characteistics roa = return on assets uw = underwriting pg = premium growth ri = reinsurance ope = operating expenses i= 18firms t= 11years e= error term and β0= intercept of the model “constant” table1: variables, definitions and measurements s/no variables measurement variable specification source 1 return on assets profit after tax divided by total assets dependent daare (2016) 2 underwriting risk loss or claim incurred /premium earned independent dey et al. (2015) 3 premium growth current premium–previous premium/previous premium independent lasisi (2018) 4. reinsurance premium cede/ total assets independent ana-maria and ghiorghe, (2014) 5. firm size log of total asset independent kaya (2015) 6 operating expenses operating expenses / gross premium earned independent krishnan (2006) source: researcher’s computation, 2020 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 7 result and discussion table 2 descriptive statistics variables obs mean std dev. minimum maximum roa 198 0.01 0.11 -0.78 0.259 uwr 198 0.37 0.24 0.78 1.70 rir 198 0.11 0.11 0.000 0.51 ope 198 0.87 0.50 0.17 5.27 pg 198 0.30 1.32 -1.00 14.17 sources: output generated using stata 13 table 2 shows a mean value of 0.01 it indicates that the sample of insurance firm performance measured by return on asset achieved 1% on average after tax profit in the last 11 years from 2008 to 2018 and the return on asset value deviate from the average by 0.11 is wide as the standard deviation is higher. the minimum and maximum value of return on assets (roa) is -0.78 and 0.26 respectively from the sample. this means that the most profitable of the sample realized 22% profit after tax on 1naira investment in the firm’s asset, while the firm that did not make profit had the least loss of 78% of 1 naira invested the asset of the firms. the underwriting risk has an average value of 0.37, this indicate that on average the sampled firms paid 37% claim out of their total premium within that period, the minimum claim paid to earn premium was 7.84% and highest loss incurred to earn premium was 170% to earn a premium of 1 naira. reinsurance risk has a minimum and maximum value of 0.000 and 0.51 respectively. this mean that the least premium ceded to insurance to their asset among the sampled is insignificant due to approximation to two decimal place and the highest is 51%. the average value of the re-insurance risk is 0.11. this implies that the sampled insurance firms ceded 11% of their premium to re-insurance, and the standard deviation from the mean is 11%, this implies deviation level of the data to the mean is relatively moderate. operational expense has a minimum and maximum value of 0.17 and 5.27 respectively, this means that the firm with the least operational cost to gross premium earn was 17%, while the firm that has the highest operational expense to gross premium earn was 527%. the mean operational cost of the sampled firm to gusau journal of accounting and finance, vol. i, issue 2, october, 2020 8 gross premium was 87%. this implies that most of the insurance firms have high operating cost compare to gross premium earned (87%). the average mean value of the premium growth is 0.30 this indicates that on average the premium grows by 30%. the standard deviation is 1.32, this signifies a wide deviation from the mean. the sample firm’s premium does not grow in similar pattern. the premium growth has a minimum and maximum value of –1.000 and 14.17 respectively. robustness test table 3 multicolinearity test variables vif 1/vif uwr 1.03 0.97 rir 1.11 0.90 ope 1.11 0.90 pg 1.02 0.98 1.07 high multi-coleanrity may lead to distortion of inferences to be made. the vif of one (1) show that there is no correlation among the predictors and hence the variance is not inflated and vifs more than 10 indicates serious multi-collinearity needing further adjustment (guajarati, 2014). table 4 test for heteroskedasticity white test chi-square p-value roa 13.41 0.495 source: stata output, (2020) the study tested for another assumption of least square regression referred to homokedasticity. this assumption stated that the variance of error terms is the same across the values of the independent variables. the study used the cameron & trivedi's decomposition of imtest also refers to as white general test for heteroscedasticity. the null hypothesis for the test was "constant variance" (presence of homokedasticity) at 5% level of significance. if the p-value is at 5% or less, the null hypothesis is rejecting indicating heteroscedasticity. the result of gusau journal of accounting and finance, vol. i, issue 2, october, 2020 9 roa model revealed that the residuals are homokedastic as the roa p-value is 0.495 this shows that the assumption is satisfied. panel effect test table 5 panel effect test lm-test roa chi2 58.55 prob > chi2 0.000 source: stata output, (2020) furthermore, the study carried out panel effect test using breusch and pagan lagrangian multiplier test for random effects to check if there was a panel effect. the null hypothesis states that there is a panel effect at 5% level of signifcance. the result both models reveals of p-value < 0.000 which is less than 5% level. this shows that there is a panel effect hausman specification test due to the presence of panel effect, hausman specification test was conducted table 6 hausman specification test roa chi2 5.11 prob > chi2 .276 source: stata output, (2020) the table 8 shows the result of hausman test conducted to select between fixed effect or random effect regression. the null hypothesis is that there is a random effect at 5% level of significance. the result the hausman fixed and random effect test revealed a p-value of 0.276 and 0.311 for roa and roe which is insignificant at 5% level. this means random effect is preferred as the most appropriate estimator for the study. however, due to non-normality of the residual and to improve the inference to be made, the study interpreted and test the hypotheses using the random effect regression with robust standard error. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 10 presentation and interpretation of regression results table 7 roa robust random effect regression * significant at 5%. source: stata output, 2020 interpretation table 7 presented the random effect regression result of the variables used in the study based on the hausman test for roa. the result of the robust random effect regression in table 7 shows that the wald chi-square is 182.95 and is statistically significant at less than 5% (0.000) indicating that the model for the study is fit. further it also shows that the variables selected for this study jointly have effect on financial performance of listed insurance firms in nigeria. also, the table shows that the r2 value is 0.291 indicating that the firm characteristic variables selected in this study is able to explain the changes in roa to a tune of 29.1 %, while the remaining is explained by other factors that are not included in the model. hypothesis testing and discussion of findings underwriting risk and financial performance the study findings show negative and significant impact of underwriting risk on roa of the insurance firms on nigeria stock market. in table 7, underwriting risk beta coefficient is -0.01 and p-value of 0.000. this reveals that underwriting risk has a significant impact on roa. therefore, the study rejected the null hypothesis (h01) of the study that stated that underwriting risk has no significant impact on financial performance of listed insurance firms in nigeria. random-model 1 roa variables coeff rbt. std error t-value p-value uwr -.01 .00 -6.45 0.000* rir .05 .04 1.36 0.174 ope -.01 .00 -6.80 0.000* pg .02 .01 2.86 0.004* constant .02 .02 0.93 0.351 r2 .291 f-stat 182.95 0.000 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 11 this implies that an increase in underwriting risk will lead to a decrease in roa by 0.01. this means when loss or claim incurred increase against premium earned, insurance firm may not get enough revenue from premium that can take care of claims which will deteriorate financial performance. the reality is that the inefficient underwriting risk taken may affect the performance of the study firm negatively. underwriting of the firms affects the financial performance of insurance firms in nigeria. the study is supported by extreme value theory. extreme value theory watches out for risk with small probability of occurrence and underwriting different risks with little probabilities. the result supports the findings of ijaz (2015) and saeed and khurram (2015) and daniel and tilahun, (2013) who provide evidence that underwriting risk reduces financial performance. the finding is contrary to the study of daare (2016) who found that loss ratio does not affect financial performance. premium growth and financial performance table 10 shows that premium growth has a positive coefficient of 0.02 and a pvalue of 0.004 which significant at 5% level of significance. this reveals that premium growth (pg) has a positive and significant impact on return on assets. this assumes that a 1% rise in premium growth would result in an increase in return on assets of 2 percent. this means that the greater the growth of the premium over the study period, the greater the roa. the study thus rejects the study's null hypothesis (h02) that claimed that premium growth did not have an impact on the financial performance of nigeria's listed insurance companies. this further suggests that financial performance increases when the insurance firms have high revenue (premium) to settle policy holder when due, to boost client confidence which is one of the major drawback of the sector. this suggests that premium growth enhance the financial performance of the listed insurance firms in nigeria. the result is in line with extreme value theory and also conforms to the findings prior studies by hussanie and joo (2019) and kay (2015) . the result is also contrary to prior studies by lasisi (2018) and mehari and aemiro, (2013) who provide evidence that premium dos not affect financial performance. re-insurance risk and financial performance re-insurance risk revealed a positive and insignificant impact on return on assets with a coefficient value of -0.05 and p-value of 0.173. this means that any increase or decrease in re-insurance will not affect return on asset of listed insurance firms. hence, re-insurance risk has no significant impact on financial performance. this shows that re-insurance risk does not determine the financial gusau journal of accounting and finance, vol. i, issue 2, october, 2020 12 performance of listed insurance firms in nigeria. however, the study does conform to extreme value theory, but it corroborated with the findings of pavic et al. (2017), mistre (2015) and falli, et al. (2020) who discovered that reinsurance firms does not impact on financial performance. however, the study contradicts the studies by suheyli (2015) and lee (2012) who found that reinsurance risk adversely affects financial performance. operating expenses and financial performance finally, the operational expense has a beta coefficient of -0.01 and a p-value of 0.000 which is significant at less than 5% level of significance. the finding shows that operational expense has a negative and significant impact on financial performance (roa) of listed insurance firms in nigeria. this means that onepoint increase in operational expense will lead to 1% decrease in roa. therefore, a high operational cost incurred by the firm to the gross premium earned reduces the return on asset on the firms. the expectation is high operational expense will have negative effect on performance. increased operating expenses, unless followed by a rise in net premium will lead to a decrease financial performance in the listed insurance firms in nigeria. the study is supported by extreme value theory and also in line with the studies of hasibuan et al. (2020) and odunga (2016) which which revealed that operating cost affect performance negatively but contradict the study of saeed and khurram,(2015) who found that operating cost improve financial performance. conclusion and recommendations the research reviews the effect of insurance firm specific attributes on financial performance proxy by roa of insurance firms listed on nigerian stock exchange for the period of 2008-2018. the study employed a sample of 18 firms using random effect regression. the study found that underwriting risk and operating cost has negative and significant effect on financial performance, premium growth has positive and significant effect on financial performance while reinsurance risk has insignificant effect on financial performance of listed insurance firms in nigeria. the study concludes that underwriting risk, operating cost and premium growth influence financial performance of listed insurance firms in nigeria while re-insurance risk does not determine the financial performance of listed insurance firms in nigeria. based on the research findings and the conclusion that followed, the following recommendations were made: gusau journal of accounting and finance, vol. i, issue 2, october, 2020 13 i. the management of the listed insurance firm in nigeria should focus more on reducing the level of their underwriting operations. they are too selective in their underwriting business; they should be more risk taker to earn more profit. the current level of their net claim to premium is contributing negatively to their performance measured by return on asset at insignificant level. they should reduce their risk by reducing their underwriting operation. ii. the management of listed insurance firm is advice to see how they can cut their present level of operational cost drastically. the firms are operating at a very high cost. iii. the management of listed insurance firms in nigeria should increase their marketing strategies to encourage premium growth and invest idle cash in more profitable investment to increase their return on asset position. references akindele, r, (2012). 'risk management and cooperate governance performance – empirical evidence from nigerian banking sector', ife psychology ia, 106. arif, a. & showket, a. (2015). relationship between financial risk and financial performance: an insight of indian insurance industry. international journal of science and research, 4(11), 1424-1433. augustine, u.,& nwanneka j. m. (2011). repositioning insurance industry for operational efficiency: the nigerian case. journal of applied finance & banking. 1(3). daare, w. j. (2016). determinants of non-life insurance companies profitability: an empirical study in india. international journal of innovative research and advanced studies, 3(13). daniel, m. and tilahun, a. (2013). firm specific factors that determine insurance companies’ in ethiopia. european scientific journal, 9(10), 245-255. dey, n. b., adhikari, k., & bardhan, m. r. (2015). factor determining financing performance of life insurance companies of india-an empirical study. epra international journal of economic and business review, 2(8), 42–48. epetimehin f. & obafemi f. (2015). operation risk management and the financial sector: an overview. international journal of economics, commerce and management, 3(3). hamadu, d., & mojekwu, j. n. (2010). an investigation of nigerian insurance stock option prices. medwell journals of international business management, 4(1), pp 1-8. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 14 fali, i.m., nyor, terzungwe, mustapha, l.o. (2020). insurance specific risk and profitability of listed insurance firms in nigeria. international journal of accounting, finance and risk management. 5(3), 141-148 ijaz, h. (2015). macro economy and profitability of insurance companies: a post crisis scenario in pakistan. pakistan business review, 243-263. kaya, e. ö. (2015). the effects of firm-specific factors on the profitability of non-life insurance companies in turkey. international journal of financial studies, 3, 510–529. https://doi.org/10.3390/ijfs3040510 khidmat, w. b. & rehman, m. u. (2014). impact of liquidity & solvency on profitability chemical sector of pakistan. economics management innovation journal emi, 6, issue 3, issn: 1804-1299 pp. 3-13 krishnan, a. (2006). an application of activity based costing in higher learning institution: a l ocal case study. contemporary management research, 2(2); 75-90 lasisi, o. i. (2018). effect of liquidity risk , premium growth on the performance of quoted insurance firms in nigeria : a panel data analysis. american finance & banking review, 2(1), 42–51. lasisi i.o & nuhu f.t. (2015). cost control and its impact on the survival of nigeria firms : a case study of nigeria bottling company plc. international journal of management, accounting and economics2(4), 312–324. lee, h. (2012). an analysis of reinsurance and firm performance, evidence from the taiwan property-liability insurance industry: a comparison of logic and hazard models’, journal of risk and insurance 63(1): 121–130. odunga, r. m. (2016). specific performance indicators , market share and operating efficiency for commercial banks in kenya. international journal of finance and accounting, 5(3), 135–145. https://doi.org/10.5923/j.ijfa.20160503.01 otieno, s., & nyagol, m. (2016). empirical analysis on relationship between liquidity risk management and financial performance of microfinance banks in kenya. research journal of finance and accounting, 7(6), 115– 142. oluwagbemiga, o.e., olugbenga, o.m. & zaccheaus, s.a. (2014). cost management practices and firm’s performance of manufacturing organizations .international journal of economics and finance, 6(6),234239. olusanmi .o, uwuigbe .u and uwuigbe .o (2015) effect of risk management on bank’s financial performance in nigeria. journal of accounting and https://doi.org/10.3390/ijfs3040510 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 15 auditing: research & practice http://www.ibimapublishing.com/journals/jaarp/jaarp.html vol. 2015 (2015), article id 239854, 7 pages doi: 10.5171/2015.239854 mehari, d., & aemiro, t. (2013). firm specific factors that determine insurance companies’performance in ethiopia. european scientific journal, 9(10), 245–255. retrieved from http://eujournal.org/index.php/esj/article/view/961 mistre, s. (2015). determinants of profitability on insurance companies in ethiopia. unpublished master’s thesis. department of accounting and finance addis ababa university. patrick, a. (2015). influence of risk management of life assurance firms in kenya: a survey study of kisii country. international journal of economics, commerce and management, 3(5), 978-996. pavic kramaric, t., miletic, m., & pavic, i. (2017). profitability determinants of insurance markets in selected central and eastern european countries. international journal of economic sciences, vi(2), 100–123. https://doi.org/10.20472/es.2017.6.2.006 saeed, u., & khurram, n. (2015). factors influencing the financial performance of non-life insurance companies of pakistan. international journal of empirical finance, 4(6), 354–361. soyemi, k. a. (2014). risk management practices and financial performance : evidence from the nigerian deposit money banks ( dmbs ). the business & management review, 4(4), 345–354.89888888. suheyli, r. (2015). determinants of profitability on insurance companies in ethiopia. unpublished master’s thesis. department of accounting and finance addis ababa university. sumaira, b., & amjad, t. (2013). determinants of profitability panel data evidence from insurance sector of pakistan. elixir financial management international journal, pakistan. warganegara, d. l., & tamara, d. (2014). the impacts of cost stickiness on the profitability of indonesian firms. international journal of social, behavioral, educational, economic, business and industrial engineering, 8(11), 3606–3609 http://eujournal.org/index.php/esj/article/view/961 https://doi.org/10.20472/es.2017.6.2.006 gusau journal of accounting and finance (gujaf) vol. 4 issue 1, april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ii © department of accounting and finance vol. 4 issue 1 april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vi advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ix contents board characteristics and earnings management of listed consumer goods firms in nigeria benjamin gwabin joseph, murtala abdullahi phd, benjamin kumai gugong phd 1 dividend policy and value of listed non-financial companies in nigeria: the moderating effect of investment opportunity abubakar umar 18 trialability and observability of accrual basis international public sector accounting standards implementation in nigeria aliyu abdullahi ahmed phd, zakari usman 35 liquidity risk and performance of non-financial firms listed on the nigerian stockexchange muhammed alhaji abubakar, nurnaddia binti nordin phd, abubakar hamisu umar 54 board diversity, political connections and firm value: an empirical evidence from financial firms in nigeria rofiat oyetunji, isah shittu phd, ahmed bello phd. 75 moderating effect of bank size on the relationship between interest rate, liquidity, and profitability of commercial banks in nigeria shehu usman hassan, bello sabo (ph. d), ismai'l idris tijjani (ph. d), idris ahmed aliyu. (ph. d) 96 sources of health care financing among surgical patients seen at the dalhatu araf specialist hospital lafia nasarawa state nigeria ahmed mohammed yahaya, babatunde joseph kolawole, bello surajudeen oyeleke 121 transparency, compliance and sustainability of contributory pension scheme in nigeria olanrewaju atanda aliu (ph. d), mohamad ali abdul-hamid (ph. d), salami suleiman (ph. d), salam mudathir olanrewaju 135 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 x examining the impact of working capital management on the financial performance of listed industrial goods entities in nigeria 151 sani abdulrahman bala (ph. d), jamilu jibril, taophic olarewaju bakare corporate governance factors and tax avoidance of listed deposit money banks in nigeria 171 sani abdulrahman bala (ph. d), umar salim ibrahim, samaila dannana risk committee demographic traits: a study of the impact of expertise on risk disclosure quality of listed insurance firms in nigeria wada najib abbas, dandago, kabiru isa (ph. d), rabiu, naja’atu bala 192 moderating effect of audit committee on the relationship between audit quality and earnings management of listed non-financial services firms in nigeria ahmad muhammad ahmad, lubabah mansur kwanbo (ph.d.), shehu usman hassan (ph.d.) musa suleiman umar (ph.d.) 216 determinants of audit opinion of negative-book-value firms in nigeria: firm value and audit characteristics perspective asma’u mahmood baffa (ph. d), lawal mohammed (ph.d.), ahmed bello (ph.d.) umar farouk abdulkarim 237 intervention announcements and naira management: evidence from the nigerian foreign exchange market adedeji daniel gbadebo 254 is there earnings discontinuity after the implementation of ifrs in nigeria? adedeji daniel gbadebo 275 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 135 transparency, compliance and sustainability of contributory pension scheme in nigeria olanrewaju atanda aliu department of accounting university of ilorin, p. m. b. 1515. ilorin nigeria. lanre@unilorin.edu.ng mohamad ali abdul-hamid ca (m) professor, putra business school, upm serdang, malaysia. salami suleiman department of accounting a.b.u business school ahmadu bello university, p. m. b. 1013, zaria, nigeria. ssalami@abu.edu.ng salam mudathir olanrewaju federal inland revenue service, nigeria. abstract policymakers have taken cognisance of necessity to improve the transparency and compliance level among parameters of pension reforms. empirical literature found positive roles of transparency and compliance toward the achievement of pension reform objectives such as sustainability. however, the level of transparency and compliance of pension fund managers and employers of labour under the contributory pension scheme in nigeria leaves much to be desired. thus, this study examined the effects of transparency and compliance on the sustainability of the nigerian contributory pension scheme. data was collected with the use of survey questionnaires administered on purposive sampling method on the managerial level staff of contributory pension operators and active participants enrolled in the scheme. the data collected was analysed using partial least square structural equation modelling with the aid of smart pls statistical application. the results showed that transparency has positively significant effect on the sustainability of contributory pension scheme in nigeria while compliance has positive but insignificant effect. the study recommends the need for national pension commission as the regulator of the contributory pension scheme to strengthen its capacity to enforce adequate transparency and compliance level among the operators and employers of labour in contributory pension scheme in order to achieve not only the sustainability but other objectives of contributory pension reform. key words: compliance, transparency, contributory pension scheme, nigeria. https://doi.org/10.57233/gujaf.v4i1.204 mailto:lanre@unilorin.edu.ng mailto:ssalami@abu.edu.ng gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 136 1. introduction in 2004, the nigerian pension system was reformed via a transition to the contributory pension scheme (cps). among the objectives of cps is to provide a sustainable funded pension scheme (pension reform act, 2014-thereafter referred to as the act). this objective is similar to the recommendation of the world bank (1994) that stipulates that any pension reform must achieve sustainability criterion. the act empowers pension fund administrators to manage the accumulated cps fund to the optimal benefit of the cps participants. while discharging their roles, operators of cps are charged to perform with a high level of transparency and compliance with provisions of the act to facilitate the achievement of sustainable cps. mol (2015) asserted that the more transparency and compliance level is, the more the sustainability of social policies such as pension reforms. scholarly evidence showed low level of transparency and compliance among pension plan managers and employers of labour as a lingering challenge facing plan plans (gerrard et al., 2019). in nigeria , low level of transparency and compliance had been reported among operators of nigerian cps. for instance, studies (babatunde, 2012; imhanlahimi & joseph, 2011) have reported low transparency level among nigerian cps operators, while ayegba, james and odoh (2013), kantudu (2005; 2008), oladipo and fashagba (2012) and oluwatoyin (2013) have also found low compliance with cps regulations. the studies documented unsatisfactory level of transparency and compliance among cps operators and employers of labor in nigeria. for instance, only about 45% of participants get adequate information on their retirement saving accounts (imhanlahimi & joseph, 2011) from their pension fund administrators pfas and only 1.5% small and medium enterprises duly deducted and remitted employees’ cps contributions (ayegba et al., 2013). this buttressed report on the observance of standards and codes (rosc) (2004) that ranks nigeria weak in institutional regulation compliance and transparency. policymakers have taken cognisance of necessity to improve the transparency and compliance level among parameters of pension reforms. studies (gerrard et al., 2019; hess, 2005) have shown positive roles of transparency and compliance toward the achievement of pension reform objectives, major of which is sustainability. yet, the level of transparency and compliance of cps fund managers and employers of labour in nigeria still leaves much to be desired (ayegba et al., 2013; imhanlahimi & joseph, 2011). the peculiar weak regulatory enforcement and compliance in nigeria raises a serious concern on the potential of the regulatory frameworks on the activities of the cps industry stakeholders (ahmad, 2010). gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 137 despite the level of transparency and compliance reported by scholars and anecdotal reports, no study has examined the effects of transparency and compliance on cps sustainability in nigeria. the study fills this gap by assessing the effects of transparency and compliance on the sustainability of cps in nigeria with survey data obtained from the cps operators and the active participants. the remaining sections after the introduction were presented as follow. the literature review and hypothesis development, the methodology, the results presentation and discussions and the conclusion in that order. 2. literature review and hypotheses development occupational pension sustainability (contributory pension scheme sustainability) occupational pension sustainability has been defined by scholars. dorfman et al. (2013) define occupational pension sustainability as the tendency of a pension plan to secure availability of enough resources to honour current and future pension commitments to retirees. asher and bali (2013) define occupational pension sustainability as the capability of the pension system to provide an adequate level of funding both currently and into the future to redeem pension obligations. the sustainability of the occupational pension system represents the social component of sustainable development. thus, occupational pension sustainability has been attracting the attention of policymakers in both developed and developing economies. in most developed economies, the main threat to occupation pension sustainability is largely attributed to the ageing population due to decreasing birth rates and increasing life expectancy (giang & nguyen, 2017). the shifting of the demographic structure towards older ages puts enormous pressure on the sustainability of the occupational pension system. empirical studies have investigated other determinants of occupational pension. in a comparative analysis of factors that sustained the pension system in the netherland and finland to stand the test of time, sorsa and van der zwan (2022) found that regular assessment of pension sustainability by experts and scholars takes into consideration the design of pension plan and the ability and willingness of policymakers to maintain a pension plan by averting pressure to replace the scheme from other stakeholders are the major factors. in nigeria, oloruntoba and jimoh (2021) examined 15 cps fund administrators’ data using fixed-effect regression panels. they found that age and size of pension funds have a significant positive influence on the sustainability of the nigerian cps while inflation has an insignificant negative influence. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 138 transparency transparency focuses on communication to enhance the relationship between the stakeholders and the company (fernandez-feijoo, romero, & ruiz, 2014). pension transparency is the extent to which information disclosure reflects the state of the pension assets under the management of pension managers (anantharaman & chuk, 2017). undoubtedly, transparency is one of the determinants of a successful pension scheme implementation (rocha et al., 2001). akeni (2009) stated that the integration of transparency in the operations of pension plans facilitates vital information accessibility to contributors of cps in nigeria. akeni (2009) stated that the integration of transparency in the operation of pension plans facilitates vital information accessibility to contributors of cps in nigeria. as established by mol (2015), the more transparent, the better it is for the sustainability of social policies such as pension reforms. crowther and seifi (2011) argue that transparency has become necessary for the proper flow of relevant and timely information to those who are affected by a decision. transparency imposes discipline on those entrusted with the administration and management of a pension in a manner that leads to sustainable interest in serving the primary stakeholders (plan participants) (hess, 2005). this is attributed to the role of transparency in reducing secrecy to a minimal level on the part of the fund managers as it facilitates scrutiny of their performance. designing an effective transparency process for pension system is essential to allow plan participants to assess the value creation performance and management of risks to avert sustainability risks (tomassettis, 2022). thus, transparency improves public trust in the activities of pension fund operators. hess (2005) found that transparency has a positive effect on the growth of pension funds while lack of transparency leads to poor growth of pension fund and causes inequalities and distortions in the allocation of pension funds (hess, 2005). doménech and melguizo (2008) found that lack of transparency in most pension reforms is one of the rationales for the low level of support among the targeted participants of different age and political affiliation. thus, ensuring transparency through adequate regulatory frameworks is vital to the sustainability of pension plans. dolls et al. (2018) conducted an experimental event-based study on the effects of transparency on pension savings over 20022004 among german pension plan participants. copies of experimental “information letter” which stated more detailed pension information compared to the normal pension statements were sent to participants above 27 years. the results showed a significant increase in pension savings among recipients of the information letter compared with those receiving normal pension statements with no crowding-out effect on other personal savings. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 139 while studies outside nigerian on transparency revealed conclusive evidence of high level of transparency, nigerian studies have established the potential positive effect of transparency on cps industry. however, empirical findings document a dismal level of transparency among operators of nigerian cps. for instance, imhanlahimi and joseph (2011) undertook a survey of 1350 civil servants enrolled in cps in south south-south and south-west geopolitical regions of nigeria. they found that 55 percent of the respondents did not receive regular information from their pfas on their retirement saving accounts (rsas). in another survey of 187 participants, babatunde (2012) examined the transparency level of cps operators. the data found that 124 (61%) were not receiving adequate information on their rsas from cps operators. ojiaku et al. (2020) examined the influence of transparency on customers’ loyalty to cps operators in anambra south-east, nigeria. they reported positive and significant influence of transparency on customers’ loyalty of cps participants to cps operators. studies are yet to be conducted on the effect of transparency on sustainability of cps in nigerian. in view of the gap, this study further examined the link between transparency and cps sustainability. thus, the following hypothesis was proposed: h1: transparency in reporting and communication by operators to pencom and participants has a positive relationship with contributory pension scheme sustainability in nigeria. compliance compliance is the process of obeying and applying the rules and regulations governing business operations (bejide, 2019). compliance has been identified as one of the significant elements in the management of pension plans (baker, logue & rader, 2005). compliance in pension management requires that the managers of occupational pension funds and other stakeholders conform to various rules and regulations which change from time to time in line with emerging operational and managerial challenges. section 68 of the act (2004) mandates the pension fund administrators (pfas) and pension fund custodians (pfcs) to appoint a compliance officer (co) who would be accountable towards ensuring compliance with the provisions on rules and regulations stipulated in the act (2004). the co is also charged with compliance with the internal rules and regulations made to regulate the pension fund operators (pfas and pfcs). further effort to strengthen the function of co was made by pencom in 2009 with the issuance of “regulations for compliance officers” as the responsible officer for ensuring compliance with relevant regulations on pension matters such as investment regulation, internal controls, accounting disclosure and making required returns on the management of gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 140 the pension assets to the pencom and the plan participants. the regulations on compliance with cps seek to minimise the concerns of stakeholder arising from business failures associated with non-compliance with rules and regulations by industry players. besides, compliance regulation of cps seeks to achieve the set goals of providing sustainable pension to deserving retired employees by ensuring operators adhere to the business continuity plan (pencom, 2009b). a strand of literature has examined compliance with accounting standards in the preparation of the pension-related annual report and financial statements. valderrama (2017) examined the financial reporting practices of the large private employee occupational pension plans in the philippines. the study reported significant non-compliance practices with financial reporting standards based on a content review of the 2014 financial statements. this is manifested by widespread insufficient information provided in the financial statements. in a study of five big corporations in the us, bepristis and xu (2006) reveal that accounting reporting of defined benefits plans of the sampled companies do not show reasonableness and clarity in their disclosure of pension accounting in their financial statements in line with the accounting standards and the guidelines such as the sfas no. 87. in nigeria, kantudu (2006) examined the impact of auditors’ reputation on the level of compliance with statement of accounting standard 8 on employee retirement (sas 8) issued by the nigerian accounting standard board (nasb). results from a sample of 30 listed firms on the nigerian stock exchange revealed a weak correlation between auditors’ reputations and the level of compliance. contrarily. a follow-up study by kantudu (2008) investigated the impact of the act (2004) on compliance with local accounting standard on employee benefits (sas 8). based on pre-and postperiods of the act (2004) implementation, analysed with annual accounts data of 30 listed firms, the results of the t-test showed that the act (2004) had a significant improvement on compliance with sas 8 in the postcps implementation period. however, the study noted a significant variation in the level of compliance with the act (2004) among employers in nigeria. similar to kantudu (2004), sule and ezugwu (2009) also assessed the impact of cps implementation on compliance with the disclosure requirement of employees’ retirement benefits. using data over 10 year-period, separated into pre and post cps implementation, t-test analyses showed a significant improvement in the level of compliance with the disclosure requirement of employees’ retirement benefits among nigerian listed companies after the implementation of cps. however, variation was noted among firms in compliance with the regulations of cps. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 141 oluwatoyin (2013) examined the impact of cps implementation on compliance with employee retirement benefits payment of quoted firms in nigeria using a pre and post cps analysis over 1998-2007. t-test results showed a positive impact of cps implementation on compliance with employee retirement benefits payments based on data obtained from ten sampled firms. ayegba et al. (2013) examined compliance with cps among small and medium enterprises (smes). records of pencom on complying smes revealed a low level (1.5%) of compliance among smes with cps requirements. ugwoke and onyeanu (2013) also examined the level of compliance with the provision of cps. chi-square and t-test analyses of survey data and records of complying and non-complying employers with cps also indicate a weak level of compliance among all categories of employers. similarly, ovbiagele (2015) assessed the level of compliance with the new cps using questionnaires administered to 21 employers that enrolled their workers in cps and pfas employees. the results of chi-square technique showed a low level of employers’ compliance. the result was attributed to the low level of awareness among workers enrolled in cps. thus, to examine the effect of compliance on cps sustainability, this study thus hypothesised as follows: h2: compliance with rules, regulations, and standards has a positive relationship with contributory pension scheme sustainability in nigeria. 3. methodology. to obtain data for the study, a crosssectional questionnaire survey was carried out once at a point in time. cross-sectional administration of surveys reduces the time and resources committed to data collection and facilitates a higher rate of response and generalisation of the results about the entire population under study (rea & parker, 2005). the questionnaires were administered on 710 respondents drawn from managerial staff of unit/departmental of 31 cps operators and active participants (employees) enrolled in cps in nigeria. ten respondents each were purposively selected from 31 operators totalling 310 and 400 active participants in cps following previous studies (ijeoma & nwufo, 2015; imhanlahimi & joseph, 2011). the operational items used to measure cpss were adapted from cong, frank, gianakis, and guo (2015) and ijeoma and nwufo (2015). eight items employed to measure transparency and five items for compliance were adapted from njuguna (2012). partial least squares structural equation modelling (plssem) was employed for testing the hypotheses using smartpls 4.0 statistical package because of its capability to obtain the best model fit (ringle, wende, & becker, 2022) gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 142 profile of respondents a total of 578 respondents returned valid questionnaires to the researchers. 212 (36.68%) were staff of cps operators, while 366 (63.32%) were active participants in cps. among the cps operator staff, 74 (34.9%) were in managerial positions, while 138 were assistant managers. 155 (78.1) respondents from cps operators were in the employment of open pfas, 42 (19.8) in closed pfas and 159(7.1%). among the cps participants, 547 (94.64%) were enrolled with openpfas and the remaining 31(5.36%) were enrolled with closed pfas. 309 (53.46%) were male while 269 (46.54%) were female. in terms of educational qualification, 45 (7.79%) respondentsall cps participantshad senior school certificates. 77 (13.32%), 323 (55.88%) and 133 (23%) obtained diploma, bachelor’s degree/hnd and postgraduate degree respectively. the mean tenure of respondents drawn from cps operators was 3.88 years in managerial positions, while the mean tenure of cps enrolment for cps participants was 9.56 years 4. measurement model assessment based on pls-sem algorithm model in figure 1, the outer loading of all the items is above the minimum threshold of 0.5 recommended by (hair jr. et al. (2017). the internal consistency of the construct was assessed with cronbach’s alpha and composite reliability estimates which all reported above 0.7 recommended by hair jr. et al (see table 1). the convergent validity of items to measure the constructs was also found to be acceptable with average variance explained (ave) above minimum estimate of 0.5 recommended by bagozzi and yi (1998). the discriminant validity of the constructs was assessed using cross-loading (appendix 1), fornell lackeker (table 2) and heterotrait-monotrait ratio (htmt) (appendix 2) criteria which all confirmed the constructs were free from discriminant validity threat. table 1: outer loading, cronbach’s alpha, composite reliability and average variance explained outer loading range cronbach's alpha composite reliability (rho_a) composite reliability (rho_c) average variance extracted (ave) cpss 0.7690.839 0.869 0.885 0.904 0.653 trans 0.6130.866 0.909 0.924 0.922 0.600 comp 0.9140.952 0.860 0.812 0.971 0.868 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 143 table 2 fornell-larcker criterion comp cpss trans comp 0.932 cpss 0.089 0.808 trans 0.135 0.328 0.775 structural model assessment the multicollinearity of the endogenous variables was assessed using variance inflation factor (vif) and tolerance level estimates. trans and comp reported vif of 1.019 and 1.034 with tolerance level of 0.981 and 0.967 respectively. according to (tabachnick & fidell, 2013), a vif of less than 5 and tolerance level of greater than 0.2 indicate no multicollinearity threat among exogenous constructs of a model. therefore, no threat of multicollinearity in our model. the model reported r-square of 0.109 and adjusted r-square of 0.106 indicating minimal effect of tran comp on the cpss. both tran and comp have small effect sizes with f-square of 0.022 and 0.025 respectively. stone-geisser (q2) of 0.07 which is above zero also showed that the model has predictive validity. table 3: variance inflation factor (vif) and tolerance level estimates constructs variance inflation factor tolerance level trans comp 1.019 1.034 0.981 1.034 figure 1: pls-sem algorithm model gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 144 hypothesis testing and discussion of findings transparency and contributory pension scheme sustainability in table 4, the results of h1 were shown on the path trans to cpss. the path results (β= 0.322, t=4.840, p= .000) showed that the hypothesis was supported. thus, h1 is positive and significant. the positive finding of the study is consistent with previous studies (doménech & melguizo, 2008; hess, 2005) that also report a positive and significant effect of transparency. the finding is also in line with the submission of rocha et al. (2001) that transparency is a vital regulatory factor for the successful implementation of a pension scheme. transparency facilitates communication among the stakeholders in a firm to allow a free flow of relevant and timely information to those who are affected by the operations of the firms (crowther & seifi 2011; fernandez-feijoo et al. 2014). the finding also asserts that transparency forces discipline on trustees of a pension by facilitating scrutiny of the pension manager’s performance which leads to sustainable interest in serving the primary stakeholders especially plan participants (hess, 2005). thus, the flow of information improves the level of the trust reposed in operators of pension plans by the public. the finding of the study is also consistent with that of anantharaman and chuk (2017) that also found that a good pension reform that delivers timely maximal information to plan participants on their accounts, details of the flows in and out of the account, fees, and rates of return improves the performance of the pension plans. this keeps the plan participant informed on the financial worth of their pension contributions. dolls et al. (2018) also stated that transparent information allows plan participants to get feedback and updates about historical, current and forecasted returns on their pension assets and how they are allocated to various investments. in nigeria, the act (2004) mandates pfas to render information on their activities to both the enrollees and pencomthe regulatory agencyby rendering various returns. thus, ensuring transparency through adequate regulatory frameworks is vital to the sustainability of pension plans. compliance and contributory pension scheme sustainability as shown in table, h2 on path comp to cpss with results (β= 0.045, t=0.701, p= .484) showed the hypothesis was not supported. thus, the h2 was positive but not significant. the findings is in line with kantudu (2005, 2008) and bepristis and xu (2006). the findings is contrary that of sule and ezugwu (2009) that compliance with the disclosure requirement of employee retirement benefits significantly improves at post cps implementation years among nigerian listed companies with variations among firms on compliance with the regulations of cps. the gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 145 insignificant results may have been the case for a number of reasons. empirical evidence affirmed low level of compliance with the provisions of the act (2004) at the level of employers and cps operators with failures to address complaints for years. for instance, ayegba et al. (2013) found that compliance level with cps among small and medium enterprises was low. with respect to the public sector, by the end of the first quarter of 2022, the problem has continued unabated as pencoms’ report indicated that only four states and the federal governments have commenced remittance of their employees cps contributions (thecable, 2022). thus, non-remittance of deductions and/or remittances of pension contribution by private and public organisations enrolled under cps has become one of the greatest cps challenges. in order to boost the remittance of contributions, pencom recruited the services of 173 firms as recovery agents in june 2012. between june 2012 to june 2022, the agents recovered a total of n11.44 billion which is a paltry sum of the unremitted contributions (thecable, 2022). reports of non-compliance by pfas on investment limits; delay in the payment of retirement benefits; receipt of pension contributions without appropriate schedules; unresolved customer complaints; and non-implementation of disaster recovery plans weigh down cps (thisday (2022).). pencom revealed cases of non-compliance. for instance, non-compliance on the part of cps operators has led to court cases such as that instituted by cps pensioners of union bank of nigeria to challenge the bank and pfas on gross violation of the cps (reports of non-compliance by pfas on investment limits; delay in the payment of retirement benefits; receipt of pension contributions without appropriate schedules; unresolved customer complaints; and nonimplementation of disaster recovery plans weigh down cps (thisday (2022). another petition of non-compliance was lodged by delta state government against the failure of pfas to duly pay the employees of the state government who retired under the cps. table 4: path coefficient estimates beta standard deviation tstatistics pvalue decision trans -> cpss comp -> cpss 0.322 0.045 0.036 0.065 9.062 0.701 0.000 0.484 significant not significant gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 146 figure 2 bootstrap model 5. conclusion and recommendation in consistent with global trend of assessing the sustainability of national pension funds, this study examined the effects of transparency and compliance on the sustainability of the contributory pension scheme in nigeria. the study obtained data using questionnaire survey administered on the managerial level staff of cps operators and active participants enrolled in the cps. data was collected from the two sample groups in order to have a balanced view from the cps operators acting in the capacity of agents managing the pension funds and the participants who are the principal and owners of the pension funds in the stewardship of the cps operators. based on the results from the data analyses, it was found that transparency has significantly positive effect on the sustainability of the cps in nigeria. the effect of compliance was also found to be positive but insignificant. after discussions of the results in line with previous related literature, plausible reasons were provided for the results. the results imply the need for national pension commission (pencom) to strive to strengthen its capacity to enforce adequate transparency and compliance among the cps operators and employers of labour to ensure the cps sustainability in the interest the employees enrolled in cps and the nation. the management of cps operators also needs to ensure that high level of transparency and compliance is followed in their operations to ensure the sustainability of the cps industry. similarly, the organised labour unions should carry out awareness rallies, workshops, seminars etc to sensitise employees who are participants in the cps on the need to seek adequate information on their retirement saving accounts and compliance with laid down rules and regulations by operators of cps. this would also strengthen the achievement sustainability of cps reform. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 147 references ahmad, m. k. (2008). pension reform process in nigeria: transition from defined benefits to defined contribution. paper presented at the iops workshop on pension supervision, 5th february, dakar. akeni, p. o. (2009). pension fund administration in nigeria: problems and prospects of implementation, a conference paper presentation at university of benin. anantharaman, d., & chuk, e. (2017). standards or incentives: what determines financial reporting transparency for defined benefit pension assets?. available at ssrn 3010009. asher, m. g., & bali, a. s. (2013). fairness and sustainability of pension arrangements in singapore: an assessment. malaysian journal of economic studies, 50(2), 175-191. ayegba, o., james, i., & odoh, l. (2013). an evaluation of pension administration in nigeria. british journal of arts and social sciences, 15(2), 97-108. babatunde, m. a. (2012). the impact of contributory pension scheme on workers’ savings in nigeria. the social sciences, 7(3), 464-470. bagozzi, r., & yi, y. (1988). on the evaluation of structural equation models. journal of the academy of marketing science, 16, 74-94. baker, a. j., logue, d. e., & rader, j. s. (2005). managing pension and retirement plans: a guide for employers, administrators and other fiduciaries. oxford: oxford university press. bejide, a. o. (2019). compliance with regulations: path to adequate corporate governance in the nigerian banking industry for business sustainability and enhanced financial performance. journal of business, 7(1), 31-58 bepristis, m., & xu, y. (2006). defined benefit fund accounting: relevancy, clarity and consistency. journal of american academy of business 9(2), 294-299. cong, y. c., frank, h. a., gianakis, g. j., & guo, h. d. (2014). critical issues in the transition from the defined benefit to the defined contribution pension model perceptions from florida municipal finance and human resource directors. review of public personnel administration, 35(4), 333-351. crowther, d., & seifi, s. (2011). corporate governance and international business. bookboon dolls, m., doerrenberg, p., peichl, a., & stichnoth, h. (2018). do retirement savings increase in response to information about retirement and expected pensions?. journal of public economics, 158, 168-179. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 148 doménech, r., & melguizo, á. (2008). projecting pension expenditures in spain: on uncertainty, communication and transparency. fiscal sustainability: analytical developments and emerging policy issues. banca d’italia, roma. dorfman, m. c., holzmann, r., o'keefe, p., wang, d., sin, y., & hinz, r. (2013). china's pension system: a vision: world bank publications. fernandez-feijoo, b., romero, s., & ruiz, s. (2014). effect of stakeholders’ pressure on transparency of sustainability reports within the gri framework. journal of business ethics, 122(1), 53-63. gerrard, r., hiabu, m., kyriakou, i., & nielsen, j. p. (2019). communication and personal selection of pension saver’s financial risk. european journal of operational research, 274(3), 11021111. giang, l. t., & nguyen, c. v. (2017). the aging population and sustainability of the pension scheme: simulations of policy options for vietnam. journal of economics and development, 19(3), 40-51. hair jr, j. f., hult, g. t. m., ringle, c., & sarstedt, m. (2017). a primer on partial least squares structural equation modeling (pls-sem). sage publications. hess, d. (2005). protecting and politicizing public pension fund assets: empirical evidence on the effects of governance structures and practices. uc davis labour review, 39, 187-227. ijeoma, n. b., & nwufo, c. i. (2015). sustainability of the contributory pension scheme in nigeria. journal of business & management studies, 1(1), 1-15. imhanlahimi, j. e., & joseph, e. (2011). pension reform, public workers' productivity and welfare in nigeria: lessons for some other african countries. indian journal of economics and business, 10(2), 173-202 kantudu a. s. (2005). the impact of auditor’s reputation on compliance with accounting standard on employee retirement benefit by listed firms in nigeria. journal of social and management sciences. 10, 71-100, available at: http://ssrn.com/abstract=1112505. kantudu, a. s. (2008). impact of pension reform act 2004 on compliance with accounting standard on employee retirement benefits in nigeria, available at: http://ssrn.com/abstract=1106462. mol, a. p. (2015). transparency and value chain sustainability. journal of cleaner production, 107, 154-161. ojiaku, o. c., nwatu, b. c., & aghara, v. n. (2020). using the dart model of value co-creation to predict customer loyalty in pension fund administration in nigeria. asian journal of economics and business, 1(2), 121-137. http://ssrn.com/abstract=1112505 http://ssrn.com/abstract=1106462 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 149 oladipo, j. a., & fashagba, m. o. (2012). evaluation of compliance with the stipulations of the contributory pension scheme: a case study of quasi-government institutions in nigeria. african research review, 6(4), 59-75. oloruntoba, a. d., & ojo, j. i. (2021) finacial sustainability and pension fund performance in nigeria: the effects of inflation rates. umaru musa yaradua university journal of accounting and finance research, 2 (2), 54-67 oluwatoyin, s. i. k. (2013). an impact assessment of the contributory pension scheme on employee retirement benefits of quoted firms in nigeria, elixir finance management, 55, 12802-12809. ovbiagele, a. o. (2015). management of pension schemes in africa: nigeria’s experience, challenges, and the way forward. global journal of interdisciplinary social sciences, 4(2), 33-34. pension reform act [pra] (2004). pension reform act 2004: federal government of nigeria. report on the observance of standards and codes (rosc) (2004). nigeria. available at:http://documents.worldbank.org/curated/en/109681468288617735/pdf/3 51680uni0accoun ting0rosc1aa1nga.pdf.pdf. ringle, c. m., wende, s., and becker, j.-m. 2022. "smartpls 4." oststeinbek: smartpls gmbh, http://www.smartpls.com. rocha, r., hinz, r., & gutierre, j. (2001). improving the regulation and supervision of pension funds: are there lessons from the banking sector? in: r. holzmann & j. e. stiglitz (eds), new ideas about old age security toward sustainable pension systems in the 21st century, (pp171212). the world bank. washington, d. c. sorsa, v. p., & van der zwan, n. (2022). sustaining the unsustainable? the political sustainability of pensions in finland and the netherlands. journal of european social policy, 32(1), 91-104. sule, o., & ezugwu, c. i. (2009). evaluation of the application of the contributory pension scheme on employee retirement benefits of quoted firms in nigeria. african journal of accounting, economics, finance and banking research, 4(4). 47-60. tabachnick, b. g., & fidell, l. s. (2013). using multivariate statistics. boston: pearson. thecable (2022). pencom: only four states, fct remitting pension contributions to workers under cps, retrieved from http://documents.worldbank.org/curated/en/109681468288617735/pdf/351680uni0accoun%09ting0rosc1aa1nga.pdf.pdf http://documents.worldbank.org/curated/en/109681468288617735/pdf/351680uni0accoun%09ting0rosc1aa1nga.pdf.pdf http://www.smartpls.com/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 150 https://www.thecable.ng/pencom-only-four-states-fct-remitting-pensioncontributions-to-workers-under-cps thisday (2022). how pencom recovers outstanding pension contributions from employers, https://www.thisdaylive.com/index.php/2022/08/22/howpencom-recovers-outstanding-pension-contributions-from-employers/ tomassetti, p. (2023). between stakeholders and shareholders: pension funds and labour solidarity in the age of sustainability. european labour law journal, 14(1), 73-91. ugwoke, r. o., & onyeanu, e. o. (2013). determination of the level of acceptance and compliance to the new pension scheme in nigeria. research journal of finance and accounting, 4(1), 815. valderrama, h. a. s. (2017). the quality of financial reporting of the social security system. philippine management review, 24, 1-16. world bank. (1994). averting the old age crisis: policies to protect the old and promote growth. new york: oxford university press. https://www.thecable.ng/pencom-only-four-states-fct-remitting-pension-contributions-to-workers-under-cps https://www.thecable.ng/pencom-only-four-states-fct-remitting-pension-contributions-to-workers-under-cps https://www.thisdaylive.com/index.php/2022/08/22/how-pencom-recovers-outstanding-pension-contributions-from-employers/ https://www.thisdaylive.com/index.php/2022/08/22/how-pencom-recovers-outstanding-pension-contributions-from-employers/ 1 gusau journal of accounting and finance (gujaf) vol. 2 issue 4, october, 2021 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria 2 interactive effect of audit firm and audit committee mediated by audit process on fraudulent financial reporting risks of listed firms in nigeria kabiru sani aminu department of accounting abu business school ahmadu bello university zaria kabiusaniaminu@gmail.com, +2348038841007 chechet, i. l. prof. of accounting and finance department of accounting abu business school ahmadu bello university zaria ishiachechet@yahoo.com, +2348034526234 ibrahim yusuf (phd) department of accounting abu business school ahmadu bello university zaria ibrash78@gmail.com, +2348036023501 tijjani bashir musa(phd) department of finance abu business school ahmadu bello university zaria dokaje@yahoo.com, +23480334726599 abstract the study examines the interactive effect of audit firm and audit committee mediated by audit process on fraudulent financial reporting risks of listed firms in nigeria. the population of staff working in audit firms in nigeria is unknown. therefore, sample size of unknown population for this survey study is calculated using g*power which minimum sample size is 384 respondents. a model of questionnaire is adopted from research conducted and 500 copies of adopted questionnaire which contains 31 items were administered to audit staff and 391 copies were returned. the questionnaire was the main instrument for data collection and adopted a nine-point scale. the study is multivariate in nature so structural equation modelling is employed and smartpls 3 is used for the analysis. however, the result shows that audit firm and audit committee have significant positive effect on fraudulent financial reporting of listed firms in nigeria. in addition, audit firm has significant positive effect on audit process of listed firms in nigeria similarly, audit process has significant mediating effect on the relationship between audit committee and fraudulent financial reporting of listed firms in nigeria.and audit committee has significant positive moderating effect on the relationship between audit firm and fraudulent financial reporting risks of listed firms in nigeria.however, audit committee has significant negative effect on audit process of listed firms in nigeria. in addition,audit process has significant negative mediating effect on the relationship between audit firm and fraudulent financial reporting of listed firms in nigeria. similarly, audit committee has significant negative moderating effect on the relationship between audit firm and audit process of listed firms in nigeria. base on the conclusion, the study recommends that both the audit committee and external auditors should focus their attention on improving the audit process which in turn will significantly curb the fraudulent financial reporting risks of listed firms in nigeria. mailto:kabiusaniaminu@gmail.com mailto:ishiachechet@yahoo.com mailto:ibrash78@gmail.com mailto:dokaje@yahoo.com 3 key words: audit firm, audit committee, audit process, fraudulent financial reporting risks and listed firms 1. introduction fraud has become a central issue in the 21 st century global economy, for both professionals and scholars to research. fraud is an intentional deception committed by an individual or group of people to gain advantage over other. however, a survey established that about one third of organizations operating globally were victims of fraud (pricewaterhousecoopers, 2010). the survey conducted in 2018 on 49 percent of global organizations reported that they had been a victim of fraud and economic crime (pricewaterhousecoopers 2018). similarly, the association of certified fraud examiners (acfe) projected that annual fraud losses are almost 5% of the yearly revenues of organizations which translates to about $4 trillion (acfe, 2018). moreover, fraud tends to adversely affect a very broad range of stakeholders including audit committee, auditors, creditors, shareholders, among others (dyck, morse & zingales, 2010; kaplan et al., 2010). despite the effort made by regulatory and professional bodies (pcaob 2010) when issuing standards outlining the responsibilities of auditors to detect fraud after corporate failures and scandals of some world giant corporate bodies like enron, worldcom, global crossing, pamalat, tyco among others, in the last decade; external auditors’ fraud detection remains as low as 4% and even declining (acfe 2018). furthermore, financial reporting fraud include deliberate misstatements, such as omissions of numbers or disclosures in financial statements, with the purpose of deceiving financial statement users (elder, beasley & arens 2011). in addition, it is more likely to be committed by management (goel &gangolly, 2012). however, fraud committed by management requires the efforts of board of directors, the audit committee, top management, internal auditors, and external auditors to be detected (dorminey, fleming, kranacher& riley 2012). external auditors are also likely to be blamed if a case of financial reporting fraud goes uncovered. (cooper & fargher, 2011; kassem & higson, 2016). furthermore, while external auditors are not directly accountable for detecting fraud, they are expected to play a substantial part in it. this is due to the fact that external audit serves a key role in creating and strengthening trust in financial information supplied by businesses. (the institute of chartered accountants in england & wales, 2005; chen, cumming, hou & lee 2013). however, the capacity of auditors or audit firms to deliver high audit quality capable of providing high financial reporting quality is related to specific audit firm characteristics, which include auditor independence, audit compensation, audit firm type and size, and joint audit services. (deangelo, 1981). in the agency relationship and in reaction to management excesses, the audit committee plays a significant role in supervising financial policy execution and auditing firms. (bédard & gendron, 2010; ghafran & o’sullivan, 2013; dezoort, 1998; hayes, 2014; spira, 1998; 1999). in the process of supervising financial reporting and auditing, the audit committee effectively holds auditors accountable for their judgment and decision-making procedures addressing important accounting matters. (pricewaterhouse coopers 2013). 4 audit process could be express as any methods or technique used by the auditors in the process of performing their duties as auditors as express by asare, wright and zimbelman (2015). these process or techniques include and not limited to: understanding the business of the client, the assessment of the risk associated with the fraud, the designation as well as the execution of audit test, the solving of issues surrounding the audit, and finally, the consultations of experts which include forensic auditors. these are key elements of fraud detection found in the literature t hus, they are seen as very paramount in auditors’ detection of fraud (asare, wright & zimbelman 2015). on practical perspective, however, corporate giants’ failures and scandals are widespread due to fraudulent financial reporting, affecting not only advanced nations but developing nations as well (omoyele, 2010; fodio, ibikunle & oba, 2013; ogbonna &ebimobowei, 2012). however, fraudulent financial reporting in africa is among the worst cases of fraud in the world. in subafrica, association of certified fraud examiners (2016 &2018) shows from 2014 to 2018, south africa, nigeria and kenya had 174, 125, and 75 cases of fraudulent financial reporting in listed firms respectively. in addition, fraud committed by owner/executive increased from $400,000.00 to $2,716,000 from 2016 to 2018 (association of certified fraud examiners, 2016 &2018). in nigeria, there were 73 listed firms that were delisted by nigerian stock exchange from 2010 to 2019 (nigerian stock exchange, 2019). most or 53 cases out of 73 were alleged to be fraudulent financial reporting. such as intercontinental bank and oceanic bank plc and issues of syke bank plc and diamond bank plc before merger that happened in 2018 and 2019 respectively. moreover, some stated circumstances of fraudulent financial reporting such as cadbury (nig) plc, african petroleum (nig) plc lever brother nigeria plc, stanbic ibtc bank were among well-known fraud cases (ogbonna &ebimobowei, 2011; okoye &gbegi, 2013). likewise, fraudulent financial reporting appears to adversely affect a very wide range of stakeholders including audit committee, auditors, among others (dyck et al., 2010; kaplan et al., 2010). in an ideal situation, external auditors through audit process and audit committee should reduce fraudulent financial reporting to a minimum level, but the association of certified fraud examiners (acfe) report shows that fraudulent financial reporting is on the rise (association of certified fraud examiners, 2018). on theoretical perspective, several previous researchers, wilks & zimbelman, (2004), cohen, ding, lesage &stolowy, (2010), trompeter, carpenter, desai, jones & riley, (2013), faveremarchesi, (2013), morales, gendron &guénin-paracini(2014), trompeter, carpenter, jones & riley (2014), mui and mailley, (2015), andon, free &scard, (2015), lokanan, (2015), schechter & levi,(2015), rodgers, söderbom& guiral (2015), haefele &stiegeler, (2016), chen,. cumming, hou & lee (2016), reinstein and taylor, (2017) and machado & gartner, (2017) used fraud triangle to study fraudulent financial reporting. other researchers from nigeria, such as everette (2012), odunayo (2014) investigated financial statement fraud related to earnings control, cash flow change and unexpected substantial sales resulting from false income, secret expenditures, third-party related transactions and inappropriate asset valuation. everette (2012), odunayo (2014) presented empirical analyses of finding the ' red flag ' as effective strategies for detecting any financial statement anomalies. but little or no attention has been paid to interaction of audit firm and audit committee to prevent, deter, and detect fraudulent financial reporting. 5 hence, the main question designed to be answered by this study is: do the interaction of audit firm and audit committee has significant effect on fraudulent financial reporting which is transmitted through audit process of listed firms in nigeria? 2. literature review and theoretical framework international standard on auditing (isa) 240 – the auditor's responsibilities relating to fraud in an audit of financial statements (fraudulent financial reporting) as a deliberate action by single or many persons among management, those responsible for governance, staff, or third parties, involving the use of deceit to achieve an unfair or illegal advantage. financial statement deception (false financial reporting) is the malicious distortion of an enterprise's financial status by the intentional misstatement or deletion of sums or disclosures of financial records in order to mislead financial statement users. likewise, a intentional misrepresentation of data with the intent to mislead information consumers, reap expected profits, cover up inefficiency, or cover up other frauds such as wealth misappropriation and unethical schemes is known as fraudulent financial reporting. that is the intentional misrepresentation of amounts, either by the recording of fraudulent accounting entries or the application of accounting laws incorrectly (acfe 2010).fraudulent financial reporting happens when management use accounting procedures that do not adhere to gaap to adjust financial records to either deceive other creditors about the company's underlying economic success or to manipulate contractual results that depend on published accounting numbers (perols and lougee, 2011). 2.1 audit firm and fraudulent financial reporting asare, wright & zimbelman (2015) conducted study on challenges facing auditors in detecting financial statement fraud: insights from fraud investigations. the thesis performed an experimental survey in which we gathered responses from 65 fraud examiners on their involvement in the latest fraud investigation. for analysis, a sample t test was used. this research makes four contributions. first, create a system that defines four general factors and elements within each factor that can hinder the detection of fraud by the auditor. the four considerations are: (1) the audit process, (2) the institutional forces, (3) incentives for auditors and (4) the kte auditor. the audit process is the technique used to investigate and prevent fraud. the feasibility of the approach depends on the three other considerations in our context. however, the thesis did not have a theory that was aligned with the research. zagera, malisa, &novaka, (2016) conducted study on the role and responsibility of auditors in prevention and detection of fraudulent financial reporting in croatian companies. a questionnaire survey was administered to external auditors and descriptive statistics was used for analysis. the respondents, external auditors, assessed how frequently they face situations that indicate the risk of fraud. in compliance with the research carried out, the most prevalent method used for false financial statements concerned overstatement of assets. however, the questionnaire is not available to public and no theory was aligned to the research. al-sorihi (2018) conducted study on the relationship between auditor’s independence and financial reporting fraud risk assessment (frfra) in the yemeni context. a quantitative instrument was used to measure financial reporting fraud risk assessment and external auditor’s independence factors and multiple regression analysis was employed for analysis. this 6 review was attended by 254 external auditors. results have shown that social ties and the hiring and changing of auditors are positively and substantially related to frfrfa, whereas economic relations and audit fees are negligible. mukhlasin (2018) conducted study on auditor tenure and auditor industry specialization as a signal to detect fraudulent financial reporting in companies listed on the indonesia stock exchange for the period 2012 to 2015. logistic regression with paired sampling methods was used to demonstrate the study goals. the survey consisted of 46 dishonest companies and 46 non-fraudulent companies. the findings of the test have not shown that longer-term audits will weaken the discretion of the firm such that it becomes exhaustion for the company to conduct financial reporting fraud. in the meantime, the audit of the specialization sector has been successfully proven in this report. industry specialization auditors are in a position to spot false financial statements. azibi (2018) conducted study on joint audit and financial scandal in french context. the research analyses the stock market response of sbf 250 following the announcement of the financial scandal in the presence of a joint audit. the sample consists of 140 french listed companies. methods of measurement are the method of case study and ols regression. empirical findings show that the stock market of non-big four customers does not respond greatly relative to the companies audited by at least one big four in france. contrarily to this result, the stock-market reactions of the companies audited by two big four have responded dramatically relative to those audited by one big at least in france. these findings show that the joint audit with at least one non-big facilitated and, in particular, during the financial scandal times and resolved the problems connected with the concentration of the audit sector. however, the study was not conducted on fraudulent financial reporting and it was also not aligning with any theory. khersiat, (2020) conducted research on the impact of joint audit on fraud detection in financial statements from the point of view of auditors in financial industry in jordan. the study administered questionnaire which comprised two axes; the first axis contains 69 questions and the second 16 questions. the simple linear regression analysis was employed which (r 2 ) amounted to (0.12) and p value derived from this relationship was (0.965). the study finds that there is no statistically significant impact of joint audit on detecting fraud in financial statements. however, the study did not include sample size and the questionnaire is not available to public. 2.2 audit committee and fraudulent financial reporting kamarudin & wan ismail (2014) the effects of the audit committee (independence of the audit committee, financial experience, number of meetings, gender balance and ethnic composition) and the potential for misleading financial statements are both qualities. the collection includes 116 fraudulent and non-fraudulent companies listed on bursa malaysia from 2005 to 2010. the method of analysis used was logistic regression. the findings of this analysis show that the integrity of the audit committee is positively linked to false financial statements. the higher the number of independent or non-commissioned directors, the higher the risk of financial misconduct, and vice versa. the findings further reveal that the expertise of the audit committee members is adversely linked to corporate crime. this means that since members of the audit 7 committee are financially literate, they are more able to curb dishonest financial statements. however, reports on the number of meetings of the audit committee, gender and race suggest that there is no association between these factors and corporate fraud. the outcome of this analysis is stable after monitoring for other firm-specific impacts. marzuki1, haji-abdullah, othman, abdulwahab &harymawan (2019) conducted study on audit committee characteristics, board diversity, and fraudulent financial reporting. based on a paired pair of 64 findings for the years 2002–2014, the report followed two-stage least squares. the report considers little data suggesting that the features of the audit committee matter. however, the report found that there was a negative association between the number of female directors and the risk of fraud. the results show the relevance of the success of the audit committee and the relative importance of female directors in malaysia. uwuigbe, olorunshe, uwuigbe, ozordi, asiriuwa, asaolu& erin(2019) conducted study on corporate governance and financial statement fraud among listed firms in nigeria. for the period 2012-2016, the population of 122 non-financial companies registered on nigeria's stock exchange was reduced to 20 firms using the rule of thumb based on stratified and basic random technique. the data analysis approach is the regression of the panel. the contingent variable, deception in the financial statement, was calculated using the beneish m-score formula, while the independent variable was measured using the independence of the audit committee, the board structure. the findings indicate that there is a negligible correlation between the discretion of the audit committee, the makeup of the board and the wrongdoing in the financial statements. 2.3 audit process and fraudulent financial reporting audit process could be express as any methods or technique used by the auditors in the process of performing their duties as auditors as express by asare, wright and zimbelman (2015). these process or techniques include and not limited to: understanding the business of the client, the assessment of the risk associated with the fraud, the designation as well as the execution of audit test, the solving of issues surrounding the audit, and finally, the consultations of experts which include forensic auditors (asare, wright & zimbelman 2015). these are key elements of fraud detection found in the literature thus, they are seen as very paramount in auditors’ detection of fraud. thus, this study reviewed literature on each of the said elements considering their relationship in respect of fraud detection. some researchers argued that understanding of client’s business could have an influence on audit failure. among those that are in some of that argument include erickson et al. (2006) where argued that, failure to understand client business could result to prominent audit failure. this could be true as the professional standards also outline the importance of understanding an audit client’s business (e.g., aicpa sas 109 2006) this is generally explained within the audit approaches adopted by major audit firms some decades (bell et al. 1997; winograd et al. 2000). according to loebbecke et al. (1989), when fraud risk signs are present, it is difficult to diagnose them, and brainstorming can help auditors in the risk assessment process (carpenter 2007). auditors' judgments of fraud risk are biased (see, e.g., hoffman and patton 1997). auditors struggle to respond effectively to risk variables from the other aspects of the fraud triangle 8 because they are preoccupied with attitude and rationalization (wilks and zimbelman 2004b). risk assessment disintegration can assist auditors in being more sensitive to areas of fraud risk (zimbelman 1997 and wilks& zimbelman 2004b). furthermore, brazel et al. (2009) show that inconsistencies between financial and non-financial performance might assist detect fraud risk when such indicators are available. auditors frequently fail to devise appropriate tests for identifying fraud. (e.g., zimbelman 1997, glover et al. 2003, asare and wright 2004, hammersley et al. 2011). according to some researches, auditors appear to respond to elevated fraud risks by using more traditional audit techniques that are often regarded as ineffective in identifying concealed fraud. more recent research has looked at how approaches like strategic rationale may assist auditors respond successfully to rising fraud risk by changing the concerns underpinning audit tests by auditors (hoffman and zimbelman 2009). some studies argued that consultation of experts could have an influence on audit failure as argued by asare and wright (2004) where they indicated that auditors are usually hesitant to contact fraud experts for assistance, even when assessing high risk of fraud. however, asare and wright (2014) argued that audits there are high consideration of forensic specialists recently so as to address the problems of forensic expertise. moreover, boritz et al. (2011) sees the need for specialist on fraud detection where they argued that fraud specialist’s assistance to auditors in terms of the process of audit planning is important which could likely bring positive changes to the audit plan which could also be as effective as possible than been efficient in line with the auditor’s recommendation. one of the determinants of audit fraud is resolving audit issues as argued by brown and wright (2008). these processes include many parties where communicating is paramount among the members of the audit team thus is in addition to the client information (brown & wright 2008; gibbins et al. 2001). thus, many studies seen lower-level auditors as the people who have inadequacy of requisite knowledge associated to fraud, consequently, they seem to fall as victims of circumstances as they are exposed to fraud (kerr & murthy 2004; knapp & knapp 2001). furthermore, previous studies on auditing revealed the underlying forces that could exist on the team of auditors where they see it as the challenges as the senior auditors always reviewed the work their subordinate auditors (e.g. rich et al. 1997) even though they reviewed their colleagues however, they tend to considered the process as one this is because the lower-level auditors, could in the process of the audit, attempt to persuade higher-level auditors. the theories that underpin this study are the fraud triangle theory, the fraud diamond theory, fraud pentagon theory and the agency theory 9 3.methodological analysis the study is adopts survey research design. the population of audit staff working in audit firms in nigeria is unknown and so the sample size of unknown population for survey study is calculated using g*power (www.gpower.com) which minimum sample size is 384 respondents. the sample size of 384 is also adequate based on 10 times rule (barclay,higgins, &thompson, 1995) when using structural equation modelling for data analysis. a model of questionnaire is adopted from research conducted and 500 copies of adopted questionnaire which contains 31 items were administered to audit staff and 391 copies were returned. the questionnaire was the main instrument for data collection and adopted a nine-point scale ranging from 1 (disagree) to 9 (agree). moreover, the study examines the interactive effect of audit firm and audit committee mediated by audit process on fraudulent financial reporting risks of listed firms in nigeria. the study is multivariate in nature so structural equation modelling is employed and smartpls 3 is used for the analysis. the study used reflective measurement model and its mode of presentation of sem result (hair et al 2017). 4.results and discussion this section presents the results of measurement model and structural model analysed using smartpls 3.0 then followed by discussions hierarchical component analysis table 1: outer loadings ag cp op pr rt ag1 0.863 ag2 0.800 ag3 0.811 ag4 0.821 ag5 0.548 cp1 0.630 cp2 0.823 cp3 0.888 cp4 0.915 http://www.gpower.com/ 10 cp5 0.865 op1 0.650 op2 0.806 op3 0.878 op4 0.911 op5 0.831 pr1 0.874 pr2 0.901 pr3 0.935 pr4 0.893 pr5 0.920 rt1 0.883 rt2 0.934 rt3 0.846 rt4 0.777 source:smartpls output, 2021 fromtable1 above,the indicators’ outer loadings are higher than 0.70 except indicators ag5, cp1and op1 are considered and retained. table 2: construct reliability and validity cronbach's rho_a composite average variance alpha reliability extracted (ave) ag 0.829 0.855 0.881 0.603 cp 0.883 0.902 0.916 0.689 ffrr 0.973 0.976 0.975 0.622 op 0.875 0.891 0.910 0.673 pr 0.944 0.946 0.958 0.819 rt 0.883 0.888 0.920 0.743 source:smartpls output, 2021 an indication of high standard reliability is the coefficient of 0.70 cronbach's alpha or higher (hair jr. et al., 2019). all constructs have cronbach's alpha higher than 0.70. this study’s composite reliability is above the minimum acceptable level of 0.7 as recommended (hair jr. et al., 2019) which implies that there is adequate internal consistence reliability of the measurement of the study.average variance extracted (ave) of each of the latent construct must not be less than 0.50 (hair jr. et al., 2019). the ave found on this study is adequate enough for the analysis are all have more than 0.50. hierarchical component analysis for audit firm table 3: outer loadings (hierarchical component analysis for audit firm) af aq at az ja na af1 0.912 af2 0.935 11 af3 0.841 af4 0.878 aq1 0.834 aq2 0.911 aq3 0.865 aq4 0.680 at1 0.951 at2 0.832 at3 0.886 at4 0.927 az1 0.896 az2 0.864 az3 0.872 az4 0.758 ja1 0.867 ja2 0.907 ja3 0.895 ja4 0.867 na1 0.945 na2 0.971 na3 0.958 na4 0.968 source:smartpls output, 2021 fromtable 3 above,the indicators’ outer loadings all are higher than 0.70 as recommended (hair jr. et al., 2019). table 4.4: construct reliability and validity cronbach's rho_a composite average variance alpha reliability extracted (ave) af 0.914 0.916 0.940 0.796 afc 0.967 0.970 0.970 0.574 aq_ 0.843 0.868 0.895 0.684 at 0.921 0.928 0.945 0.810 az 0.871 0.879 0.911 0.721 ja 0.907 0.908 0.935 0.782 na 0.972 0.973 0.980 0.923 source:smartpls output, 2021 an indication of high standard reliability is the coefficient of 0.70 cronbach's alpha or higher (hair jr. et al., 2019). all constructs have cronbach's alpha higher than 0.70. this study’s composite reliability is above the minimum acceptable level of 0.7 which implies that there is 12 adequate internal consistence reliability of the measurement of the study. average variance extracted (ave) of each of the latent construct must not be less than 0.50 (hair jr. et al., 2019). the ave found on this study is adequate enough for the analysis are all have more than 0.50. measurement model table 4.5: outer loading ac ac*afc ac*afc2 afc ap ffrr ac5 0.860 ac6 0.932 ac7 0.914 ac8 0.801 af 0.864 afc * ac 1.029 afc * ac 1.029 ag 0.953 ap1 0.922 ap2 0.663 ap3 0.968 aq 0.841 at 0.935 az 0.881 cp 0.961 ja 0.877 na 0.743 op 0.960 pr 0.907 rt 0.928 source:smartpls output, 2021 the indicators’ outer loadings are higher than 0.70 except indicators acc1 to acc5 are removed. internal consistency reliability figure 1. source: smartpls output, 2021 13 all constructs have cronbach's alpha higher than 0.70. source: smartpls output, 2021 the composite reliability of this report is greater than the minimum suitable standard of 0.7, indicating that the study's measurement has satisfactory internal consistency reliability. convergent validity figure 3. source: smartpls output, 2021 average variance extracted (ave) of each of the latent construct must not be less than 0.50 (hair jr. et al., 2017). the ave found on this study is adequate enough for the analysis are all have more than 0.50. discriminant validity figure 4. source: smartpls output, 2021 the htmt statistical confidence interval should not include the value 1 for all construct combinations (hair jr. et al., 2019). htmt found on this study are adequate enough for the analysis as all constructs have less than 1. however, the results of the evaluation of the reflective measurement model suggest that the reliability and validity levels of all construct measures are satisfactory. therefore, the study can proceed with the structural model evaluation. 14 structural model the determination coefficient (r 2 ), the path coefficient (b value) and the t-statistical value, the effect size (f 2 ) and the model's predictive validity (q 2 ) are the main criteria for the internal structural model evaluation. table 3: collinearity statistics (vif) source: smartpls output, 2021 the tolerance value of each predictor construct (vif) should be less than 5 (hair jr. et al., 2017). from table 3 above all structural model predictors in this study have less than 5 colinearity statistics (vif). figure5. source: smartpls output, 2021 generally, r 2 values of 0.75, 0.50, or 0.25 can be described as substantial, moderate, and weak for the endogenous construct (hair jr. et al., 2017). the r 2 is (0.6….) for this study and considered moderate. figure 6.source: smartpls output, 2021 the effect size f 2 values of 0.02, 0.15 and 0.35 reflect the low, medium or large effect of an exogenous construct on an endogenous construct respectively (hair jr. et al., 2017). ac to ffrr, ac*afc to ffrr and afc to ap have large effect and the remaining have medium effect. 15 structural equation modelling for predicting figure 7.source: smartpls output, 2021 bootstrapping figure 8.source: smartpls output, 2021 16 table 5: path coefficients source: smartpls output, 2021 to evaluate the importance of path coefficients, the research applies bootstrapping. the number of bootstrap samples must be at least as high as the number of valid observations, but no less than 5,000. in applications, it should usually assume a 5% significance level (hair jr. et al., 2017). from table 4 bootstrapped result which shows all path coefficient are significant at 1%. table 6: total effects source: smartpls output, 2021 from the above table 6, the result of shows that all the total effects are significant at 1%, therefore, there is the need to check the mediating effects. table 7: mediating effects source: smartpls output, 2021 17 from the above table 7, mediating or specific effects show indirect effects, and in this study all mediating effects are significant at 1% figure 9.source: smartpls output, 2021 from figure 9 above, it shows the moderating effect of audit committee on the relationship between afc and ffrr. the moderating effect is significant. figure 10.source: smartpls output, 2021 from figure 10 above, it shows the moderating effect of audit committee on the relationship between afc and ap. the moderating effect is significant. 18 table 9: construct cross validated redundancy source:smartpls output, 2021 q 2 values greater than 0 show that the exogenous constructs have predictive relevance for the endogenous construct under consideration. from table 9 above, q 2 values for audit process and fraudulent financial reporting risks are (0.310) and (0.513) respectively. all q 2 value are above zero so there is predictive relevance. the study tests the hypotheses formulated for the study, in view of the robustness of the results, which can be considered as best (reflectiveformative model). however, the result shows that audit firm (path = 0.162, p = 0.000) and audit committee (path = 0.592, p = 0.000) have significant positive effect on fraudulent financial reporting of listed firms in nigeria. in addition, audit firm has significant positive effect on audit process of listed firms in nigeria (path = 0.645, p = 0.000). similarly, audit process has significant mediating effect on the relationship between audit committee and fraudulent financial reporting of listed firms in nigeria (path = 0.038, p = 0.001).and audit committee has significant positive moderating effect on the relationship between audit firm and fraudulent financial reporting risks of listed firms in nigeria (path = 0.028, p = 0.000). however, audit committee has significant negative effect on audit process of listed firms in nigeria (path = -0.234, p = 0.000). in addition,audit process has significant negative mediating effect on the relationship between audit firm and fraudulent financial reporting of listed firms in nigeria (path = -0.103, p = 0.000). similarly, audit committee has significant negative moderating effect on the relationship between audit firm and audit process of listed firms in nigeria(path = -0.172, p = 0.000). 5.1 conclusions and recommendations the study examines the interactive effect of audit firm and audit committee mediated by audit process on fraudulent financial reporting of listed firms in nigeria. the population of audit staff working in audit firms in nigeria is unknown and so the sample size of unknown population for this survey study is calculated using g*power which minimum sample size is 384 respondents. a model of questionnaire is adopted from a research conducted and 500 copies of adopted questionnaire which contains 31 items were administered to audit staff and 389 copies were returned. the questionnaire was the main instrument for data collection and adopted a ninepoint likert scale. the study is multivariate in nature so structural equation modelling is employed and smartpls 3 is used for the analysis. 19 the study concludes that: i. audit firm has significant effect on fraudulent financial reporting of listed firms in nigeria. this signifies that audit firms have influence on the fraudulent financial reporting committed by the management of listed firms in nigeria. ii. audit firm has significant positive effect on audit process of listed firms in nigeria. this signifies audit firms are in full control of audit process of listed firms in nigeria. iii. audit committee has significant positive effect on fraudulent financial reporting of listed firms in nigeria. this signifies audit committee does not assess risk of fraudulent financial reporting and they rely on other corporate governance monitoring mechanisms (internal and external audits). iv. audit process has significant negative on fraudulent financial reporting of listed firms in nigeria. this signifies audit process is a mechanism to be used for prevention and detection of fraudulent financial reporting in listed firms in nigeria. v. audit process has significant negative (full) mediating effect on the relationship between audit firm and fraudulent financial reporting of listed firms in nigeria. this signifies only through audit process, audit firms can curb fraudulent financial reporting in listed firms in nigeria. vi. audit committee has significant (negative) moderating effect on the relationship between audit firm and fraudulent financial reporting of listed firms in nigeria. this signifies changes in audit committee can influence audit firm to curb fraudulent financial reporting of listed firms in nigeria base on the conclusion, the study recommends that: i. audit firm should maintain an objective stance and strive for improving audit procedures to curb fraudulent financial reporting of listed firms in nigeria. ii. audit committee should have uniform guideline for fraud risk assessment and write a report to board of directors on any potential or actual fraudulent financial reporting in listed firms in nigeria. iii. audit committee should focus their attention on improving the fraud risk assessment will significantly curb the fraudulent financial reporting risks of listed firms in nigeria. iv. audit process should include adequate procedures for detection and prevention of fraudulent financial reporting in listed firms in nigeria. v. audit firm should include adequate fraud risk assessment and procedures put in place for detection and prevention fraud in audit process which in turn will curb fraudulent financial reporting in listed firms in nigeria. vi. audit committee and external auditors should focus their attention on improving the audit process which in turn will significantly curb the fraudulent financial reporting risks of listed firms in nigeria. 20 references al-sorihi, s. a. (2018) the relationship between auditor’s independence and financial reporting fraud risk assessment in the yemeni context. journal of social studies 24(1), https://doi.org/10.20428/jss.24.1.6 andon, p.; free, c.&scard, b. (2015) pathways to accountant fraud: australian evidence and analysis. account. res. j., 28, 10–44. asare & wright (2014) field evidence on auditors’ experiences in consulting with forensic specialists. working paper, university of florida. asare s. k., wright, a & zimbelman, m. f.(2015) challenges facing auditors in detecting financial statement fraud: insights from fraud investigations journal of forensic & investigative accounting 7(2), july december asare, s. & a. wright. (2004). the impact of risk checklists and a standard audit program on the planning of fraud detection procedures. contemporary accounting research (summer): 325-352. association of certified fraud examiners (2010). report to nations on occupational fraud and abuse, 2012 global fraud survey, acfe, austin, usa. association of certified fraud examiners (2012). report to nations on occupational fraud and abuse, 2012 global fraud survey, acfe, austin, usa. association of certified fraud examiners acfe (2018) report to the nation on occupational fraud & abuse, global fraud study azibi j. (2018) joint audit and financial scandal: the case of the french context, journal of advanced and applied sciences 5(7) 1-7 contents lists available at science-gate http://www.sciencegate.com/ijaas.html barclay, d. w., higgins, c. a., & thompson, r. (1995). the partial least squares approach to causal modeling: personal computer adoption and use as illustration. technology studies, 2, 285–309. bédard, j. & gendron, y. (2010). strengthening the financial reporting system: can audit committees deliver? international journal of auditing, 14(2), 174–210. boritz, e., n. kochetova-kozloski and l. robinson. (2011) are fraud specialists effective at modifying audit programs in the presence of fraud risk? working paper. boynton, w.; and kell, w. (1996). modern auditing. new york: john wiley & sons. brown, h. and a. wright. (2008). negotiation research in auditing. accounting horizons (march): 91109. carpenter, t. d. (2007). audit team brainstorming, fraud risk identification, and fraud risk assessment: implications of sas no. 99. the accounting review 82 (5): 1119–1140. chen jj, zhang h (2014). the impact of the corporate governance code on earnings managementevidence from chinese listed companies. european financial management 20(3):596-632. chen, j.; cumming, d.; hou, w & lee, e. (2013). executive integrity, audit opinion, & fraud in chinese listed firms. emerging markets review. 15, 72-91. retrieved from http://www.elsevier.com accessed 02/07/2014. chen, j.; cumming, d.; hou, w.; lee, e. (2016) does the external monitoring effect of financial analysts deter corporate fraud in china? j. bus. ethics, 134, 727–742. cohen, j.; ding, y.; lesage, c.&stolowy, h. (2010) corporate fraud & managers’ behavior: evidence from the press. j. bus. ethics, 95, 271–315. cooper, k. & fargher, i. (2011). accounting for corruption: abuse of rank & privilege. critical perspectives on accounting conference, 1-34. florida, usa. deangelo, l.e., (1981a). 'auditor size & audit quality'. journal of accounting & economics, 3 (1):183199 dezoort, f.t. (1998). an analysis of experience effects on audit committee members’ oversight judgments. accounting, organizations & society, 23(1), 1–21. dorminey, j., fleming, a. s., kranacher, m. j., & riley jr, r. a. (2012). the evolution of fraud theory. issues in accounting education, 27(2), 555-579. https://doi.org/10.20428/jss.24.1.6 21 dyck, i. j. a.; a. morse & zingales, l. (2010): “who blows the whistle on corporate fraud?” journal of finance 65 2213-2253. elder, r. j.; beasley, m. s.; & arens, a. a. (2011). fraud auditing. auditing and assurance services: an integrated approach. 13th ed. new jersey, pearson. erickson, m., b.w. mayhew & w.l. felix, jr. (2000). why do audits fail? evidence from lincoln savings and loan, journal of accounting research.(spring):165-194. everette, e.c (2012) financial statement fraud, part2 and 3; professional developmentnetwork; ontario, canada: the know how. favere-marchesi, m. (2013) effects of decomposition & categorization on fraud-risk assessments. audit. a j. pract. theory, 32, 201–219. fodio, m. i, ibikunle, j & oba v. c (2013). corporate governance mechanisms & reported earnings quality in listed nigerian insurance firms. international journal of finance & accounting, 2(5): 279-286 ghafran, c. & o’sullivan, n. (2013). the governance role of audit committees: reviewing a decade of evidence. international journal of management reviews, 15(4), 381–407. gibbins, m., s. salterio& a. webb. (2001). evidence about auditor–client management negotiation concerning client’s financial reporting. journal of accounting research. (december): 535-563. glover, s., d. prawitt, j. schultz, & m. zimbelman. 2003. a test of changes in auditors’ fraud-related planning judgments since the issuance of sas no. 82. auditing: a journal of practice & theory (september): 237-251. goel, s. &gangolly, j. (2012). beyond the numbers: mining the annual reports for hidden cues indicative of financial statement fraud. intelligent systems in accounting, finance, & management. 19, 7589. retrieved from http://www.wileyonlinelibrary.com accessed 03/02/2016. gupta, r. & gill, n. s. (2012). a solution for preventing fraudulent financial reporting using descriptive data mining techniques international journal of computer applications (0975 – 8887) 58(1) november haefele, m.&stiegeler, s.k. (2016) white collar crime and accounting fraud. interdiscip. manag. res. xiicoleccióninterdiscip. manag. res., 12, 1197–1207. hair, j. f., risher, j. j., sarstedt, m., & ringle, c. m. (2019a), "when to use and how to report the results of pls-sem", european business review, 31(1), 2-24. hair, jr, j. f. hult t. m., ringle, c. m. & sarstedt, m. (2017) a primer on partial least squares structural equation modeling (pls-sem) second edition sage publications, inc hammersley, j. (2011). a review and model of auditor judgments in fraud-related planning tasks. auditing: a journal of practice & theory 30:4 (november): 101-128. hapsoro d. &handayani n (2020) does managerial ownership, audit committee, and audit quality moderate: the effect of fraudulent financial reporting on company value? international journal of scientific & technology research 9(04), april issn 2277-8616 1037 ijstr©2020 www.ijstr. org hayes, r.m. (2014). discussion of audit committee financial expertise & earnings management: the role of status’ by badolato, donelson, & ege. journal of accounting & economics, 58(2–3), 231–239. hoffman, v. & j. patton. 1997. accountability, the dilution effect, and conservatism in auditors’ fraud judgments. journal of accounting research (autumn): 227-237. hoffman, v. & m. zimbelman. 2009. do strategic reasoning and brainstorming help auditors change their standard audit procedures in response to fraud risk? the accounting review (may): 811829. international auditing and assurance standards board (iaasb) (2009). international standard on auditing no. 240 (isa no.240): the auditors’ responsibilities relating to fraud in an audit of financial statements. retrieved from www.iaasb.org accessed 01/06/2019. 22 isa, m.a. & farouk, m.a. (2018). a study of the effect of diversity in the board and the audit committee composition on earnings management for low and high leveraged banks in nigeria. journal of accounting, finance and auditing studies, 4(1), 14-39. kamarudin, k. a. & wan ismail, w. a. (2014) the effects of audit committee attributes on fraudulent financial reporting journal of modern accounting and auditing, issn 1548-6583 10(5), 507514: https://www.researchgate.net/publication/274458191 kaplan, s.e., pope, k.r. & samuels, j.a. (2010), “the effect of social confrontation on individuals' intentions to internally report fraud”, behavioral research in accounting, 22 (2), 51-67. kassem, r. & higson, a. w. (2016). external auditors & corporate corruption: implications for audit regulators. current issues in auditing. spring issue. kerr, d. and u. murthy. (2004). comparing audit team effectiveness via alternative modes of computermediated communication. auditing: a journal of practice & theory. (march): 141-152. khersiat, o. m. (2020) the impact of joint audit on fraud detection in financial statements from the point of view of auditors, research in world economy published by sciedu press 11(1) url: https://doi.org/10.5430/rwe.v11n1p153 knapp, c. and m. knapp. (2001). the effects of experience and explicit fraud risk assessment in detecting fraud with analytical procedures. accounting, organizations & society. (january): 2537. loebbecke, j. and m. eining. (1989). auditors’ experience with material irregularities: frequency, nature, and detectability. auditing: a journal of practice & theory. machado, m.r.r. & gartner, i.r. the cressey hypothesis (1953) and an investigation into the occurrence of corporate fraud: an empirical analysis conducted in brazilian banking institutions. rev. contab. finanç. (2017), 29, 60–81. marzuki1, m. m., haji-abdullah, n. m., othman, r. abdulwahab, e. a. &harymawan, i. (2019)audit committee characteristics, board diversity, and fraudulent financial reporting in malaysia asian academy of management journal, 24(2) 143– 167https://doi.org/10.21315/aamj2019.24.2.7 morales, j.; gendron, y.; guénin-paracini, h. (2014) the construction of the risky individual & vigilant organization: a genealogy of the fraud triangle. account. organ. soc., 39, 170–194. mui, g.&mailley, j. (2015). a tale of two triangles: comparing the fraud triangle with criminology’s crime triangle. account. res. j., 28, 45–58. mukhlasin, m. (2018) auditor tenure and auditor industry specialization as a signal to detect fraudulent financial reporting, academy of accounting and financial studies journal 22(5) odunayo, b.a (2014) fraudulent financial reporting: the nigerian experience; the cluteinstitute international conference; san antonio texas, usa 18-30 ogbonna, g.n., &ebimobowei, a. (2012). effect of ethical accounting standards on the quality of financial reports of banks in nigeria. current research journal of social sciences 4(1): 69-70. okoye e.i &akamobi n.l (2009): the role of forensic accounting in fraud investigation & litigation support. the nigerian academic forum 17(1). omoyele o.v. (2010). corporate governance at post coordination in the nigeria banking industry. perols, j. (2011). financial statement fraud detection: an analysis of statistical and machine learning algorithms. auditing: a journal of practice & theory, vol. 30 (2), pp.19-50 pricewaterhousecoopers (2018) global economic crime & fraud survey public company accounting oversight board (pcaob), (2010). auditing standard no.5. available at: http://pcaobus.org/standards/auditing/pages/auditing_standard_5.aspx(accessed: 20 january 2019) reinstein, a &taylor, e.z. (2017) fences as controls to reduce accountants’ rationalization. j. bus. ethics, 141, 477–488. retrieved from http://www.coso.org/publications/ffr_1987_1997.pdf rich, j., i. solomon & k. trotman. (1997). the audit review process: a characterization from the persuasion perspective. accounting, organizations and society 22(5): 481-505. https://www.researchgate.net/publication/274458191 https://doi.org/10.5430/rwe.v11n1p153 https://doi.org/10.21315/aamj2019.24.2.7 http://pcaobus.org/standards/auditing/pages/auditing_standard_5.aspx http://www.coso.org/publications/ffr_1987_1997.pdf 23 rodgers, w.; söderbom, a.& guiral, a. (2015) corporate social responsibility enhanced control systems reducing the likelihood of fraud. j. bus. ethics., 131, 871–882. spira, l. (1998). an evolutionary perspective on audit committee effectiveness. corporate governance: an international review, 6(1), 29–38. spira, l. (1999). independence in corporate governance: the audit committee role. business ethics: a european review, 8(4), 262–273. the institute of chartered accountants in england & wales (icaew). (2005). the audit quality forum. agency theory & the role of the audit. trompeter, g.m.; carpenter, t.d.; desai, n.; jones, k.l.& riley, r.a. (2013) a synthesis of fraudrelated research. audit. a j. pract. theory, 32, 287–321. trompeter, g.m.; carpenter, t.d.; jones, k.l.& riley, r.a. (2014) insights for research & practice: what we learn about fraud from other disciplines. account. horiz., 28, 769–804. uwuigbe, o. r., olorunshe, o., uwuigbe, u., ozordi, e., asiriuwa, o., asaolu, t. & erin o. (2019) corporate governance and financial statement fraud among listed firms in nigeria, international conference on energy and sustainable environment iop conf. series: earth and environmental science 331 /012055 iop publishing doi:10.1088/1755-1315/331/1/012055 wilks, t.j. & zimbelman, m.f. (2004). decomposition of fraud-risk assessments & auditors’ sensitivity to fraud cues. contemporary accounting research, 21 (3), 719-745 wilks, t.j. & m.f. zimbelman. 2004a. using game theory and strategic reasoning concepts to prevent and detect fraud. accounting horizons, september: 173-184. winograd, b., j. gerson, & b. berlin. 2000. audit practices of pricewaterhousecoopers. auditing: a journal of practice & theory (september): 176-182. zagera, l., malisa, s. s. &novaka, a. (2016). the role and responsibility of auditors in prevention and detection of fraudulent financial reporting procedia economics and finance, 39, 693 – 700 (http://creativecommons.org/licenses/by-nc-nd/4.0/). doi: 10.1016/s2212-5671(16)30291-x zimbelman, m. (1997). the effects of sas no. 82 on auditors’ attention to fraud risk factors and audit planning decisions. journal of accounting research 35 (supplement): 75-104. http://creativecommons.org/licenses/by-nc-nd/4.0/ gusau journal of accounting and finance (gujaf) vol. 1 issue 2, october, 2020 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state –nigeria gusau journal of accounting and finance, vol. i, issue 2, october, 2020 1 do financial auditors’ independence influence the portfolio performance of deposit money banks in nigeria? osayi valentine igbinedion, phd department of banking and finance, federal university wukari, nigeria. valbobbies@yahoo.com, osayi@fuwukari.edu.ng 08033724999 agabi, ishaku irom department of banking and finance, federal university wukari, nigeria. idume emmanuel ken hilary department of banking and finance, federal university wukari, nigeria. abstract the study examines the impact of financial auditors’ independence on the portfolio performance of deposit money banks (dmbs) in nigeria. the study uses financial audit fees, financial auditor’s rotation and financial auditor’s tenure as measures of financial auditors’ independence while return on assets (roa) was used as a measure of performance of deposit money banks (dmbs) in nigeria. the population of the study comprises all the listed deposit money banks (dmbs) in nigeria. using a purposive sampling technique, ten (10) deposit money banks (dmbs) eventually became the sampled size. secondary data was used and data were sourced from the audited annual financial statement of the sampled banks. using descriptive statistics, correlation coefficient and the ordinary least square (ols) regression, the study revealed that there is a positive and not significant relationship or impact between financial audit fees, financial audit firm tenure on deposit money banks performance. it was found that there was no significant and negative impact or relationship between financial audit firm rotations on deposit money banks performance. resulting from the above findings, the study concludes and recommends that financial auditors’ independence should be encouraged by taking different and drastic measures which includes, but not limited to; adequate financial audit fees, regular rotation of financial auditors and reduction in the tenure of auditors in order to address the various issues militating against financial auditors’ independence and the portfolio performance of deposit money banks in nigeria. keywords: financial auditors independence, deposit money banks, portfolio performance. mailto:osayi@fuwukari.edu.ng gusau journal of accounting and finance, vol. i, issue 2, october, 2020 2 1. introduction the collapse of banks and other corporations in nigeria has drawn the attention of the public and the various regulatory agencies to question the independence and quality of their audit report. the banking industry is one of the most regulated industries in nigeria because of the crucial role it plays in the development of the various sectors of the national economy. banks in nigeria are regulated by different agencies like: the central bank of nigeria (cbn), the nigerian deposit insurance corporation (ndic) as well as the financial reporting council of nigeria (frcn). the strength of the regulation is drawn from the banks and other financial institution act (bofia). recently, the intensity of research about the independence of auditors and the quality of audit report emanating from banks has increased tremendously. several factors are responsible for this, which includes but not limited to the growing significance of good corporate governance codes resulting from highly publicized accounting frauds in nigeria and across the globe. many high profile corporate collapses, such as the case of worldcom and enron in the united states, have been traced poor and lack of good corporate governance. recent reports of questionable accounting practices adopted by some companies in nigeria have brought the issue of auditor’s independence to the forefront, and putting the auditing profession credibility in doubt (otusanya & lauwo, 2010). as a result of all these questionable accounting practices engaged in by companies, auditors have been put under pressure to ensure that their reports give assurance to investors whose funds are invested in those companies and are properly accounted for. audited financial statements are formal records of the financial activities of a business concern or any entity. financial statement provides an overview of a business or person’s financial condition in both short and long term. according to grewal (2008), financial statement refers to all the relevant financial information of a business enterprise presented in a structured manner and in a form easy to understand. the said financial statement is often prepared by accountants or auditors. audit quality is therefore the credibility of the audited financial statements within the reporting regime in which they have been prepared. according to duff (2004), firms need to attract high quality individuals with the necessary technical and interpersonal skills to improve audit quality. there are two recognized accounting bodies in nigeria which are: the institute of chartered accountants of nigeria (ican) and the association of national accountant of nigeria (anan). these professional bodies are saddled with the gusau journal of accounting and finance, vol. i, issue 2, october, 2020 3 responsibility of regulating accounting practices in nigeria. as stipulated by company and allied matters act (cama, 2004), it is pertinent that every incorporated companies in nigeria appoints an external auditor, who is required by law to carry out an independent audit on the state of affairs of the said companies, whether or not they show a true and fair view of the financial health of the said companies. it is imperative at this juncture to consider some relationships between internal auditing and external auditing though the study dwells mainly on the external auditing. the coordination of internal audit activity with external audit activity is very important. while the external auditors have the possibility to raise the efficiency of financial statements audit reports; the internal auditors are assured by the fact that this coordination assures for the internal audit a plus of essential information in the assessment of risks control (dobroţeanu & dobroţeanu , 2002). the company and allied matters act (cama, 2004) states that every auditor shall have the right of access, at all times, to the books, accounts and vouchers of the company and to such information and explanation as may be deemed necessary in the course of carrying out the audit work. as enunciated by knechel (2009), financial auditing and the audit process provide an evaluation of the probability of material misstatement and reduce the possibility of undetected misstatement to a reasonable or appropriate assurance level. financial auditor’s independence has been of serious concern not only to the end users of financial information but to the generality of people in the society. the need to ensure audit quality report from the various deposit money banks in nigeria has largely focused on financial auditor’s independence. this is to avoid over familiarity of a financial auditor with his client, because over familiarity will jeopardize the integrity of the audit report thereby compromising the financial health of their client companies. as noted by arrunda (2000), the demand for financial auditing services arose from the need to facilitate dealings between the parties involved in business relationshipsshareholders, creditors, public authorities, employees and customers. it is against this background that the study seeks to examine the impact of financial auditors’ independence on the portfolio performance of listed deposit money banks (dmbs) in nigeria. 2. literature review the concept ‘audit’ has been defined by several authors and institutes. the institute of chartered accountants of india defines audit as an independent examination of an entity whether profit oriented or not and irrespective of its size gusau journal of accounting and finance, vol. i, issue 2, october, 2020 4 or legal form, when such examination is conducted with a view to expressing an opinion thereon. the international audit and assurance standard board (iaasb), a sub-committee of the international federation of accountant (ifac) defined audit as an independent examination of, and expression of opinion on the financial statements of a business enterprise by an appointed auditor in accordance with his terms of appointment and in compliance with the relevant statutory and performance requirement. the audit report is the end product of every audit assignment that the auditor issues to its client company expressing his opinion on the true and fair view regarding an enterprise financial statement. the statutory audit of companies is coded in the companies and allied matters act (cama), 2004, section 357 which deal with the appointment of an auditor by members at the annual general meeting (agm). section 359 of cama, 2004 outlined the statutory duties of an auditor to include: (i) the primary duty of the auditors of a company is to make a report to its members on the accounts examined by them, and on every statement of financial position and statement of comprehensive income, and on all group financial statements, copies of which are to be laid before the company in a general meeting during the auditors tenure of office; (ii) schedule 6 of cama 2004 sets out those matters that must be expressly stated in the auditor’s report. financial auditor’s independence may be defined as an auditor’s unbiased mental attitude in making decisions throughout the audit and financial reporting process. an auditor’s lack of independence increases the possibility of being perceived as not being objective. this means that the auditor will not likely report a discovered breach (deangelo, 1981). the major threats to auditor independence are the fees perceived by the auditor for audit and non-audit services and the length of the auditor – client relationship. the impaired independence of an auditor result in poor audit quality and allows for greater earnings management and lower earnings quality (okolie, 2014). auditor’s independence may be impaired by auditor tenure. as the auditor client relationship lengthens, the auditor may develop close relationship with the client and become more likely to act in favor of management, resulting in reduced objectivity and audit quality. 2.2 empirical review johnson and waidi (2013) investigated how mandatory audit firm rotation rule could affect the audit quality in nigerian deposit money banks (dmbs). the binary logit model (blm) estimation technique was used to analyze the gusau journal of accounting and finance, vol. i, issue 2, october, 2020 5 relationship between the mandatory audit firm rotation and audit quality. the study’s results show that mandatory audit firm rotation rule does not affect the audit quality of deposit money banks (dmbs) in nigeria. in addition, most banks have complied with the directives of central bank of nigeria with respect to mandatory rotation of audit firm after ten years. ilaboya and ohiokha (2014) conducted a study that empirically examined the impact of audit firms’ characteristics on audit quality. they proxied the dependent variable by audit quality using the usual dichotomous variable of 1 if big 4 audit firm and 0 if otherwise. data for the study were sourced from the financial statements of 18 food and beverage companies listed on the nigerian stock exchange within the period studied (2007-2012). they adopted multivariate regression technique with emphasis on logit and probit method in analyzing their data for the study. their study revealed there is a positive relationship between firm size, board independence and audit quality whereas there is a negative relationship between auditor’s independence, audit firm size, audit tenure and audit quality. chijoke, emmanuel and nosakhare (2012), examined the relationship between audit partner tenure and audit quality. they used binary logit model (blm) estimation technique in analyzing the relationship between the tenure of an auditor and audit quality. their findings reveal that there is a negative relationship between auditor tenure and audit quality though the variable was not significant. the other explanatory variables (roa, board independence, and director ownership and board size) considered alongside auditor tenure were found to be inversely related to audit quality aside from returns on assets which exhibited a positive effect. similarly, ojeka, iyoha and asaolu (2015), conducted a study which empirically investigated the impact of audit committee financial expertise on the quality of financial reporting. the financial reporting quality was measured by reliability (total accrual quality) and relevance (audit report lag). analyses were carried out using correlation, ordinary least square and panel least square. the study found, after controlling for firm size, audit type, age of firm, audit committee meeting and audit committee size, that, audit committee financial expertise showed a negative coefficient for total accrual quality and audit report lag. this means financial expertise has a positive significant impact on financial reporting quality in nigeria. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 6 another study by dopuch, king and schwartz (2001) also examined the impact of auditor tenure on audit quality. the result is consistent with the hypothesis that the auditor compromises his independence most often in a long term auditor contract and suggests that after all auditor tenure may have significant effect on the audit quality and it was tested with regression analysis model. vanstraelen (2000) examined the effect of long-term audit client relationship on audit quality. the external user’s perception of the audit report was used as the indicator for quality. utilizing the logistic regression model, the study’s findings show that long-term auditor client relationship is positively related with the increased likelihood of the auditor issuing an unqualified opinion. a significant difference was also found between the auditor’s reporting behaviors in the first two years versus the last year of the audit mandate. this implies that auditors are more willing to issue an unqualified audit report in the first two years of their official mandate than in the last year of their mandate. the policy implications of vanstraelen (2000) support mandatory auditor rotation to maintain the value of an audit for the external users. adeniyi and mieseigha (2013) examined the effect of audit tenure on audit quality in nigeria. a dummy value of 1 was used if a firm employ the services of any of the big 4 auditors and 0 if otherwise, tenure measured in terms of number of years spent as auditor for sample company. ordinary least square was used and their study revealed that the relationship between tenure and audit quality was observed to be inverse and this could stimulate the discourse on the wisdom of changing auditors after a period of time as it may be effective at increasing the level of audit quality. for the other variables examined alongside tenure such as board size, board independence and director ownership which are all proxy of the corporate governance were found to be inversely related with audit quality. their study further revealed that return on assets have also be seen to be in line with prior studies while that of company size is at variance with prior study. also, apedzan (2013) investigated mandatory audit firm rotation and auditor independence: empirical evidence from nigerian listed banks. the research employs cross sectional research design to gather panel data from mega money deposit banks in nigeria using multivariate logistic regression as method of analysis. the research found that there is no significant relationship between audit firm rotation and auditor independence. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 7 dandago and rufai (2014) investigagted the quality of audited financial statements of deposit money banks (dmbs) in nigeria, with a view to assessing the independence of an auditor and the level of compliance to audit guidelines and how those guidelines affect the quality of audited financial statements of deposit money banks in nigeria. simple percentage was used for data analysis, while analysis of variance (anova) was employed to test the hypotheses. the study concludes that consistency and reliability can be absolutely achieved if external auditors are independently auditing financial statements of money deposit banks based purely on the established auditing standards and guidelines. finally, onyekwelu and ugwuanyi (2014) examined the effects of external auditing in the growth of banking business in nigeria with special emphasis on his relevance to deposit mobilization. data were analyzed using the chisquare and z-test and findings of the study indicate that external auditors contribute significantly to the growth of the deposits as their assurance functions and reports encourage the depositors and other stakeholders to grow their deposits in the banking sector. however, any report that is negative usually triggers off panic among depositors. the study considers three major theoretical strands of arguments to either substantiate or refute the rationale for auditors’ independence and audit quality of deposit money banks in nigeria, namely; the policeman theory, theory of inspired confidence and the lending credibility theory. the policeman theory was the most widely held theory on auditing until the 1940s. it is theory based on public perception and suggests that the auditor’s work is similar to a policeman’s work, because the auditor focuses on preventing and detecting frauds (hayes, schilder, dassen & wallage, 1999). this way of thinking led to an expectation gap regarding the work tasks of the auditor. however, in the 1940s the new line of thinking was that an auditor’s job was to verify if the financial statements submitted was disclosed in a true and fair way, which leads to a rejection of the policeman theory. however, recent accounting frauds, such as the enron scandal, have resulted in careful reconsideration of this theory. nowadays, it is debated what the auditor’s responsibility is when it comes to accounting frauds; which yet again has lead back to the policeman theory because it is based on basic public perception and also a simple explanation of the demand for audit services (hayes, wallage & görtemaker 2014). gusau journal of accounting and finance, vol. i, issue 2, october, 2020 8 the theory of inspired confidence was developed by the dutch professor theodore limperg in the late 1920s. unlike the preceding theories, this theory also considers the supply side of audit services, and not only the demand for audit services (limperg institute, 1985). according to limperg, the outside stakeholders (third parties) demand management to be accountable in return for their contribution to the company. the participation of third parties is the reason for demand for audit services. limperg argues that the information given by management might be biased, because of conflict of interest between management and third parties, and therefore is an audit of the information required. furthermore, the supply side of audit services is taken into consideration by limperg’s theory and it adopts a normative approach. the auditors should provide an audit that does not disappoint the expectations of a rational third party, but at the same time, the auditor should not provide greater expectations than the auditing justifies. according to the theory, the auditor should therefore do enough to meet reasonable public expectations (limperg institute, 1985). the lending credibility theory states that the audited financial statements are used by management to enhance the stakeholders‟ faith in management’s stewardship (hayes, dassen, schilder, & wallage, 2005). this theory regards the primary function of auditing to be the addition of credibility to the financial statements. audited financial statements are used by management (agents) in order to increase the principal’s faith in the functioning of the agent and to reduce the information asymmetry. audited financial statements are seen to have elements that increase the financial statement users’ confidence in the figures presented by the management. the users are perceived to gain benefits from the increased credibility, these benefits are typically considered to be that the quality of investment decisions improve when they are based on reliable information. the theory upon which this study rests is lending credibility theory. the theory is suitable for the study given that it can explain auditor’s incentive, audit firm rotation and audit firm tenure to change to a higher audit quality. the company’s owners are always seeking the services of “better quality” auditors, so that the monitoring of management’s stewardship will be more effective (mari & baldacchino, 2004). it is based on this lending credibility theory that provides the main theoretical underpinning for the study and determines to a great extent the approach to be used in the study. it influences the formulation of the study hypotheses, forms the research methodology and statistical techniques to be used in the study. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 9 3. methodology and data the study adopted correlation research design because the design is that which linked independent and dependent variables. the population of the study comprises all the 14 listed deposit money banks (dmbs) in nigeria between the periods of 2010 to 2018. purposive sampling technique was used to select the sample size of ten (10) banks. secondary data were extracted from the (10) years audited annual financial statement reports of the sampled deposit money banks in nigeria. for the purpose of testing the hypotheses stated, the data analysis techniques that the study adopted was multiple regressions using ordinary least square method of estimation (ols). model specification the econometric model of the study is specified as follows: roait=α0+α1fafit+α2 farit+α3 fatit+eit where; roa = return on asset fai = financial auditor independence faf = financial audit fee far = financial audit rotation fat = financial audit tenure et= error term α0 = intercept 4. results and discussion table1: descriptive statistics maximum minimum mean roa 1.6721 1.4 1.523698 faf 13.0103 9.9035 11.925133 far 1 0 .05 fat 1 0 .60 source: authors’ computation, 2020 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 10 table 1 contains the descriptive statistics of the study variables. the financial audit fee does not disperse too much away from the average audit fee of 11.925133, as indicated by the standard deviation of 0.7230246, meaning that the quality of the audit and portfolio performance of dmbs is highly dependent on the financial audit fee i.e the higher the audit fee the more the performance of dmbs will be and vice versa. there is no regular financial audit firm rotation, as the mean is 0.05, and the standard deviation is low at 0.216, when there is a regular rotation of audit firm it enhances the quality of portfolio performance because regular rotation of auditors will help checkmate some of the threats to the independence of auditors which could negatively affect the performance of the banks. the average audit tenure stands at 0.60, with a standard deviation of 0.497. whenever there is a shorter audit firm tenure, it will enhance the quality of the audit. shorter audit firm’s tenure through constant rotation of auditors helps in checkmating some of the threats that could negatively affect the audit quality which in turn impacts on the portfolio performance. overall, all variables are well represented, with the computation of the mean and standard deviation. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 11 table 2: correlation analysis roa faf far fat pearson correlation faf .020 1.000 .098 .113 far -.191 .098 1.000 .103 fat .113 .103 -.271 -.271 1.000 sig. (1-tailed) roa .450 .113 .239 faf .450 . .269 .257 far .113 .269 . .041 fat .239 .257 .041 . n roa 60 60 60 60 faf 60 60 60 60 far 60 60 60 60 fat 60 60 60 60 source: authors’computation, 2020 ** correlation is significant at the 0.05 (2-tailed), *correlation is significant at the 0.01 (2-tailed) table 2 shows the correlation between return on asset and audit fee is positive but weaker and not statistically significant (r=0.020, p ≤ 0.450). the positive relationship means that the portfolio performance of dmbs is dependent on the financial audit fee; the higher the financial audit fee, the more the portfolio performance. there is also a 2.0% relationship between the two variables. the relationship is significant at 1%, meaning we are 99% confident about the asserted nature of relationship between the quality of the portfolio performance and audit fee. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 12 the correlation between return on asset and financial audit firm rotation is negative but somewhat weak and not statistically significant at 5% level of significance (r = -0.191, p ≤ 0.113).the negative relationship means that when the rotation of financial audit firm is not on a regular basis, it engenders low financial performance and audit quality, because regular rotation of auditors will help checkmate some of the threats to the independence of auditors which could adversely affect or jeopardize the quality of audit. there is also a 19.1% relationship between the two variables. the relationship between performance and audit tenure is positive but weak and not statistically significant at 5% level of significance (r = 0.113, p ≤ 0.239). the positive relationship means that the shorter the tenure of the auditor, the more qualitative the performance of the portfolio. short audit tenure via regular rotation of auditors should help checkmate some of the threats to the independence of an auditor, thereby enhancing the audit quality. there is 11.3% weaker relationship between the two variables audit quality and audit tenure. table3: model summary change statistics mo de 1 r r squa re adjust ed r square std error of the estima te r squar e chan ge f chan ge df 1 df 2 sig.f chan ge durbi n wats on 1 .84 1a .707 .699 .04506 25 .707 96.42 2 1 40 .000 .731 a. predictors: (constant), financial audit fee, financial audit rotation, financial audit tenure, b. dependent variable: return on asset source: authors’ computation, 2020 gusau journal of accounting and finance, vol. i, issue 2, october, 2020 13 the summary of the model is presented in table 3. the coefficient of determination (r square) of 0.707 means that 70.7% of the audit quality is dependent on the combination of company size, audit tenure, leverage of client’s company, rotation of audit firm, and audit fee, while the remaining 29.3% is the error term which is traceable to other factors that determine quality of audit, aside the variables specified in the model. the adjusted r-square of 0.699 is high, implying that the model has 69.9% predictive ability. the durbin watson (dw) statistic is within the acceptable range. collinearity was tested using the tolerance and vif statistics. the regressors each had tolerance coefficient less than 1.0; and a vif coefficient less than 10.0. collinearity between a dependent and independent variables will exist if the tolerance and vif coefficients exceed 1.0 and 10.0 respectively. since the coefficient for all the regressors are within the specified limits, the study concludes that there is no collinearity between audit quality and each of the independent variables. hypothesis testing h01: financial audit fee does not have significant impact on the portfolio performance of listed deposit money banks (dmbs) in nigeria. the result of the correlation matrix or analysis as shown in table 2 reveals the correlation coefficient of (r=0.020, p ≤ 0.450) which is positive but weak and not statistically significant at 5% level, representing the relationship between audit fee and audit quality. hence, the study accepts the null hypothesis and concludes that there is no significant impact of financial audit fee on portfolio performance of deposit money banks in nigeria. h02: financial audit firm rotation does not have significant impact on the portfolio performance of listed deposit money banks (dmbs) in nigeria. the result of correlation analysis in table 2 shows there is statistically not significant negative relationship between financial audit firm rotation and portfolio performance (r= -0.191, p ≤ 0.113). the regression coefficient of financial audit firm rotation (far) in table 2 is not statistically significant α2, of 0.017 (p value ≤ 0.849), the null hypothesis is therefore retained and conclude that there is no significant impact of financial audit firm rotation on portfolio performance and quality of listed deposit money banks (dmbs) in nigeria. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 14 h03: there is no significant impact of financial audit firm tenure on portfolio performance. the result of correlation analysis in table 2 shows there is no statistically significant relationship between financial audit firm tenure and portfolio performance of listed deposit money banks (dmbs) (r = 0.113, p ≤ 0.239). the regressor coefficient of financial audit firm tenure (fat) in the table confirms non statistically significant (α3, = 0.019, p value ≤ 0.832), the null hypothesis is therefore retained and concludes that there is no significant impact of financial audit firm tenure on portfolio performance and audit quality of listed deposit money banks (dmbs) in nigeria. arising from the analysis of the result of the study, the findings revealed that there is positive but weaker and not significant relationship between financial audit fee and portfolio performance and audit quality and this indicates that portfolio performance and audit quality is dependent on financial audit fee; the higher the audit fee, the more qualitative the audit work and portfolio performance. the finding is in consonance with craswel et al (2002), and frankel, john and nelson (2002). the relationship between financial audit firm rotation and portfolio performance is negative and not statistically significant and this signifies that when the rotation of audit firms is not on a regular basis, it results in low portfolio performance and audit quality of dmbs, because regular rotation of auditors will help checkmate some of the threats to the independence of financial auditors which could adversely affect their portfolio performance and quality of financial audit. this is also consistent with the findings of healey and kim (2003), carcello et al (2004), who submitted that audit firms’ rotation is a way of improving audit quality. this is because over familiarity with the financial auditor’s clients has the negative effect of reducing the freshness of opinion the financial auditors had in the early years of engagement. the findings also reveal the existence of a positive but not significant relationship between financial audit firm tenure and portfolio performance of dmbs and this implies that the shorter the tenure of the financial auditor, the more qualitative the audit and portfolio performance is likely to be. this finding is also in tandem with the findings of previous studies such as that of chijoke et al (2012), and carcello et al (2004). gusau journal of accounting and finance, vol. i, issue 2, october, 2020 15 5. conclusion and recommendations one of the obvious conclusions drawn from the study is that the positive and not statistically significant impact of the financial audit fee on the portfolio performance and audit quality of the listed deposit money banks (dmbs) in nigeria as indicated by the result implies that the banks had not adequately remunerated the financial auditors so as to have quality audit work which will impact on the portfolio performance. secondly, the financial audit firm rotation has statistically not significant negative impact or relationship on the portfolio performance and audit quality of dmbs, meaning that the rotation of the audit firm was not on regular basis which led to low audit quality and poor portfolio performance because regular rotation of auditors help in checkmating some of the threats to the independence of auditors which could adversely affect the quality of the audit work and portfolio performance. finally, the result also revealed that financial audit firm tenure has a positive but statistically not significant impact or relationship on the portfolio performance and audit quality indicating that there was audit firm tenure in the dmbs but not statistically significant, the shorter the tenure of financial auditors the more qualitative the audit work the performance of their portfolio will be. in the light of the foregoing conclusion and findings of the study, the following recommendations are made: i. the deposit money banks (dmbs) in nigeria should adequately remunerate their independent auditors so as to engender qualitative performance of their various portfolios of assets and quality of audit work. the payment of adequate fee will encourage the auditors to do the assurance engagement assignment according to the high degree of standardization expected. ii. the government through the central bank of nigeria (cbn) and other relevant financial institutions should raise alarm on policies that could hinder smooth discharge of auditors’ responsibility such as regular rotation of auditors, reduction in the tenure of auditors especially in the audit of deposit money banks (dmbs) in nigeria. iii. the two recognized professional accounting bodies in nigeria, the institute of chartered accountants of nigeria (ican) and the association of national accountants of nigeria (anan) should ensure that auditors of deposit money banks (dmbs) in nigeria should live up to the expectations of their clients, their professional bodies, the laws of the land and the general public. these can be achieved by upholding high degree of gusau journal of accounting and finance, vol. i, issue 2, october, 2020 16 integrity and objectivity which form part of the ethics and ethos of their profession. references adeniyi, s. i. & mieseigba, e. g (2013). audit tenure: an assessment of its effects on audit quality in nigeria. international journal of academic research in accounting, finance and management sciences, 3(3): 275283. arens, alvin a., elder, randal j, and beasley, mark s. (2012), auditing and assurance services an integrated approach, l4th edition, pearson prentice-hall, englewood cliffs, nj arrunada, b. (2000). audit quality: attributes, private safeguards and the role of regulations. the european accounting review, 9 (2): 205 – 225. babatolu a. t, aigienohuwa o. o. & uniamikogbo e. (2014). mandatory audit firm rotation and audit quality in nigerian deposit money banks. international journal of finance and accounting. babatolu a. t, aigienohuwa o. o. & uniamikogbo e. (2016). auditor’s independence and audit quality: a study of selected deposit money banks in nigeria. international journal of finance and accounting, 5(1), 13-21 baotham, s. (2009), “audit independence, quality, and credibility: effects on reputation and sustainable success of cpas in thailand.” international journal of business research, (1). beatline, a. (1992). what is an audit? the nigerian accountant, xxv (1): 41-49 kothari, c.r (2004). research methodology: methods and techniques, new age international (p) limited publishers. carcello, j.v. & a.l. nagy (2004). audit firm tenure and fraudulent financial reporting, auditing, 23(2):57-69 carey, p. & simnett, r. (2006), “audit partner tenure and audit quality”. the accounting review, 81(3): 563-676. chijoke, o. m., emmanuel e. & nosakhare, p. o. (2012). audit partner tenure and audit quality: an empirical analysis. european journal of business and management: 4 (7), 154-163. craswell, a.d., stokes, j. & laughton, j. (2002) ‘auditor independence and fee dependence’, journal of accounting & economics: 253–275. companies and allied matters act (1990). laws of the federal republic of nigeria 1990, chapter 59 at http://www.nigerialaw.org/companiesandalliedmattersact.htm accessed on 12 may 2009. http://www.nigeria/ gusau journal of accounting and finance, vol. i, issue 2, october, 2020 17 dandago, k.i. (2002). auditing in nigeria. a comprehensive test, (2nd ed), kano: adamu joji publishers, nigeria: 23-27 deangelo, l.e. (1981), auditor size and audit quality, journal of accounting and economics: 183-199 denigi g. (2004). audit and review. www.goldsmithibs.com/freedownloads/auditing/ what is auditing.pdf, retrieved on 6-11-2012. dopuch, n. d., king, r. r., & schwartz, r. (2001). an experimental investigation of reputation and rotation requirements. journal of accounting research, 39(1): 93-117. duff, a. (2004), audit quality: dimensions of audit quality. edinburgh: the institute of chartered accountants of scotland. grewal, t.s. (2008). analysis of financial statements, sultan chand and sons, new delhi, india: 87-91. hayes, r. dassen, r. schilder, a. & wallage, p. (2005). principles of auditing an introduction to international standards on auditing. (2nd ed.) england; pearson education limited. hayes, r., schilder, a., dassen, r., & wallage, p. (1999). principles of auditing: an international perspective. london: mcgraw-hill. hayes, r., wallage, p., & görtemaker, h. (2014). principles of auditing: an introduction to international standards on auditing (3rd ed.). harlow: pearson education. iaasb meeting highlights and decision. june 2004, alta prinsloo, new york. iasc foundation publishes complete iasb standard for 2007.13th march 20097. london ec4m 6xh, united kingdom. ican (2004), audit planning and control. magazine of the kano/jigawa district society of the institute of chartered accountants of nigeria (ican), 1st edition: 18. ilaboya o. j. & ohiokha f. i. (2014). audit firm characteristics and audit quality in nigeria. international journal of business and economics research, 3(5): 187-195. international auditing and assurance standard board, hand book of international standards on auditing quality control, 2009 edition, new york: 34-36. johnson, v., khurana i. k. & reynolds, j.k (2002).audit-firm tenure and the quality of financial reports. contemporary accounting research 19:637660. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 18 kantudu, a.s. (2004). the relevance of auditor’s report in enhancing management accountability in nigeria. journal of accounting research: (43)35-72 knechel, w.r. & vanstraelen, a. (2007) ‘the relationship between auditor tenure and audit quality implied by going concern opinions’, auditing: a journal of practice & theory, (26): 113–131. knechel, w. r. (2009). audit lessons from the economic crisis: rethinking audit quality. inaugural lecture delivered at maastricht university on friday, september 11. limperg institute. (1985). the social responsibility of the auditor. retrieved 2015-03-26, from,http://www.limperginstituut.nl/assets%20limperg/publicatie%20the %20social%20responsibility%20of%20the%20auditor.pdf malone, c.f., & roberts, r.w. (1996) “factors associated with the incidence of reduced audit quality behaviors”. auditing: a journal of practice & theory, 15 (2): 49-64. messier jnr, n.f. (2003). auditing and assurance services: a systematic approach (3rd ed), new york: mcgraw-hill company inc. nelson et al. (2003). evidence from auditors about manager’s and auditors’ earnings-management decisions. the accounting review. 77(supplement): 175-202. okolie, a. o. (2014). accrual – based earnings management, corporate policies and managerial decisions of quoted companies in nigeria, research journal of finance and accounting, 5 (2): 1 – 14. otusanya, j. o., & lauwo, s. (2010). the role of auditors in the nigerian banking crisis. accountancy business and the public interest, (9): 159-204. pwc (2007) mandatory rotation of audit firms february 2007‟. http://www.pwc. com.au/assurance/financial/assets/auditfirms-feb07.pdf accessed 30/7/2013. rayburn, j.m., & rayburn, l.g. (1996) “relationship between machiavellianism and type a personality and ethical-316 orientation”. journal of business ethics, 15:1209–1220. richard m. frankel, marilyn f. john and karen k. nelson (2002). the relation between auditors’ fee for non audit services and earnings management. tandon, b.n. sudharsanam, s. & sundharabahu, s. (2006). a handbook of practical auditing, (13th ed) new dehli; s. chand & company limited. gusau journal of accounting and finance, vol. i, issue 2, october, 2020 19 vanstraelen, a. (2000): impact of renewable long-term audit mandates on audit quality, european accounting review, 9(3): 419-442. whittington o.r. (2004). the new audit documentation requirement. new jersey: john wiley and sons: 64-71. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 1 trading floors automation and stock market efficiency during equity issues announcements in nigeria ibrahim mohammed department of banking and finance abu business school ahmadu bello university, zaria, nigeria imohamed@abu.edu.ng, miharbi247@gmail.com abstract this paper examines effect of the automation of trading platforms on the reaction of the nigerian stock market to seasoned equity offerings (seos) announcements. the study utilized a sample of 86 seo announcements between july 1995 and december 2019, out of which 27 were made before the automation of trading floors in 1999 and 59 after automation. to investigate reaction of the nigerian stock market seos announcements, the standard event study methodology was employed, and the market model was utilized as the benchmark model for computing returns. on the other hand, effect of automation announcement was examined using difference test for abnormal return. in line with extant empirical evidence, the paper found negative and statistically significant announcement day abnormal returns -3.33% and -2.91% for the pre-automation and postautomation periods respectively. however, t-statistic of -0.26 was not significant at any of the conventional levels. the paper thus concluded that the negative reaction of the nigerian stock market to seo announcements is consistent with the notion that investors perceived the announcing firms as overvalued. it was found that the effect automation. it was also concluded that automation did not have significant effect on the market’s reaction to seo announcements in nigeria. the paper recommended adequate disclosure of the intended use of proceeds from the seo prior to the announcement. it was also recommended that the automated trading platforms and other market infrastructure should be constantly upgraded to enhance prompt information dissemination to all market participants. keywords: automation, market efficiency, seasoned equity offerings, event studies, nigeria jel classification: g12, g14, g32, n27 1. introduction performance has been a major concern to corporate managers of firms as it is the major yardstick that justifies their effort at any time. thus, managers of firms have been pre-occupied with improving performance more than any other aspect of corporate activities. there are many metrics that can be employed to measure performance in corporate organizations but one of the most important measures is the market value of the firm. market value of a firm is often depicted as the value investors are willing to pay to hold a stake in the firm; its stock price. the market mailto:imohamed@abu.edu.ng mailto:miharbi247@gmail.com gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 2 price of a firms’ stock is thus an essential measure of its performance because to investors, it reflects the present value of the firm’s discounted future cashflows (jensen, 1986). the value of these future cashflows is largely determined by the firm’s current investment opportunities and how well the firm is able to leverage on such opportunities (denis, 1994). however, exploiting investment opportunities available to a firm requires it to raise adequate capital to finance such operations. one of the common ways for corporate organizations to raise large capital to finance investments is by issuing equity. otherwise known as seasoned equity offering (seo), equity issues entail raising capital by a firm through the sale of additional units of stock to members of the public. the importance of seo to corporate organizations can be seen in its rising popularity as a favoured means of raising capital among managers of corporate organizations (kim & weisbach, 2008). according to fama (1970), the market, represented by investors, should react to such an announcement in a way that investors’ judgment regarding the suitability of raising capital through seos is reflected in the firm’s stock price. if the market is efficient, stock price of the issuing firm will instantly adjust to reflect investors’ sentiment once the issue is publicly announced. extant empirical evidence by hammar and perman (2015), liu, akbar, shah, zhang and pang (2016), brau and carpenter (2017), huang and chiu (2017), kumar, hawaldar and mallikarjunappa (2018), width and arseth (2018) and ulrich (2018) has shown that stock markets react to seo announcements. aside the fact that seos are a popular means of raising capital, it has since been established theoretically and empirically that seos are a strong tool for managers to signal to the market about the current underlying value of the firm (leland & pyle, 1977; myers & majluf, 1984; masulis & korwar, 1986). stock market reaction to seos is commonly investigated using the event study methodology propounded by fama, fisher, jensen and roll (1969), and popularized by brown and warner (1985) and mackinlay (1997). according to ball and brown (1968), the event study methodology establishes the impact of an event by computing the abnormal return arising from the announcement of such an event. abnormal return is the difference between the return as a result of the announcement and what the return would have been had the announcement not been made. empirical evidence suggests that seo announcements can have positive or no effect on market value, but preponderance of studies support the notion that markets react negatively to seo announcements in line with the fact that market agents perceive the gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 3 announcement as a signal of overvaluation (myers & majluf, 1984; masulis & korwar, 1986). as is the case in all the other stock markets, seos in nigeria are as old as the stock market itself but they only became popular from july 1995 when the stock market was liberalized to allow foreign investors access to securities in nigeria (kim & singal, 2000). since then, the number of firms conducting seos in nigeria has increased astronomically. to further boost investors’ confidence and enhance performance of the nigerian stock market, all trading floors were fully automated in 1999; a development that should theoretically enhance efficiency in the speed of executing market transactions as well as dissemination of vital market information. previous studies have examined the reaction of nigerian stock market to corporate announcements such as dividends, stock splits, earnings, and management change (olowe, 1998; adelegan, 2009a, 2009b; afego, 2010). however, it is surprising that despite the importance of seos to the corporate survival and existence of a firm, none of these previous studies has attempted to examine reaction of the nigerian stock market to seos announcements. it is equally worrisome that none of these studies have paid attention to the effect the deployment of information and communication technology (ict), in the form of trading automation, may have on the market’s ability to react to such corporate announcements. according to d’avolio, gildor and shleifer (2001), omuchesi, bosire and muiru (2014), lee, alford, cresson and gardner (2017) and lee, tsai, chen and lio (2019), deployment of ict to stock markets helps market participants to make more informed investment decisions at reduced risks. the works of odeleye (2009) and olowe (2009) only merely attempted to examine the effect of automation on the prices and trading volumes of listed firms on the nigerian stock exchange without relating such effect to corporate actions such as seos. according to fama (1998), efficiency is best tested in relation to corporate actions and disclosures (such as seo announcements). it is thus obvious that previous studies on corporate events’ announcements in nigeria have ignored seos and the effect of stock market automation on the market’s reaction to seo announcements. it is against this background that this study was conducted to examine the reaction of the nigerian stock market to seos announcements. the study also examined effect of trading automation on efficiency of the nigerian stock market during periods of seos announcements. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 4 the rest of the paper is structured as follows: section 2 reviews literature and the study’s underpinning theory, section 3 presents methodology adopted by the paper, section 4 analyzes and discusses the results, section 5 concludes the paper and recommends appropriate courses of action. 2. literature review there is sufficient empirical evidence in the literature supporting the fact that stock markets react to seos announcements. however, most of these studies are domiciled in developed and other emerging markets to the exclusion of african stock markets such as nigeria. one of the few studies on seos covering african stock markets is bhana (1998) that examined reaction of the johannesburg stock exchange (jse) to seos announcements from 1980 t0 1995 based on a sample of 100 announcements. the study documented significant negative announcement day effect and thus concluded that the south african stock market reacts negatively to seos. however, the study did not control for effect of volatility on returns. the study of seos is more common among developed and other emerging markets. dissing, rasmussen and bartholdy (2015) employed a sample of 342 seo announcements made across 15 european countries between 2000 and 2010 to examine reaction of stock market to seo announcements. based on the event study methodology, the study found negative and strongly significant reaction on the announcement day. the study concluded that european firms conducting seos are perceived as undervalued by the market. however, there is no evidence the study controlled for effects of volatility. hammar and perman (2015) investigated reaction of the swedish stock market to seo announcements using a sample of 253 offers from november 2006 to december 2013. using the event study methodology, the study found negative and significant effect on the announcement day. it was concluded that swedish firms react negatively to seos. however, the study did not control for the effect of volatility. liu, et al. (2016) analyzed market reaction to seo announcements in china from 1991 to 2010 using a total sample of 1,659 announcements. the study employed event studies in its analysis and found that rights issues and open offers recorded negative and significant market reaction while private placements and convertible debts experienced positive market effects. it was concluded that negative reaction to seos is as a result of market’s perception of the offers as overvalued. however, the study did not control for the effects of volatility on returns. brau and carpenter (2017) employed a sample of 547 seos in the us between 2008 and 2016 to investigate the behavior of healthcare firms after the global financial crisis. the study, which utilized event gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 5 study methodology, found that healthcare stocks have exhibited underpricing and long-run underperformance. however, the study did not provide evidence of control for volatility effect, which is believed to have increased after the global financial crisis. huang and chiu (2017) examined effect of insider activities on seo announcements using a sample of 506 announcements by taiwanese firms between january 2006 and december 2014. using the event study approach, the study found negative announcement day effect for net buying insiders and positive effect for net selling insiders. the study concluded that insiders buying stocks around seos experience losses while those selling record benefits. however, the study did not adjust the returns for thin trading effects. kumar, hawaldar and mallikarjunappa (2018) examined reaction of the indian stock market to seos announcements using a sample of 162 announcements made between 1992 and 2012. the study adopted event study methodology to establish abnormal return arising from the announcements. it was found that abnormal return for various windows were negative and significant, implying that the indian stock market reacted negatively to seos announcements. it was concluded that the indian stock market, consistent with previous findings, experienced underpricing as a result of seos announcements. however, absence for control of the effect of thin trading may have adversely affected the results. width and arseth (2018) assessed the announcement effect of seos on the oslo stock exchange between 2005 and 2018. using the event study methodology, the study found negative reaction by firms announcing seos, with the results being less severe for firms that announced intended use of seo proceeds. the study thus concluded that adequate disclosure around the use and purpose of seo proceeds produces credible signal to the stock market. however, results of the study may have been influenced by volatility effects. feet and ulrich (2018) examined effect of information asymmetry on reaction of stock markets to seo announcements by european stock markets between 2000 and 2013. using event study methodology, it was established that the market reacted negatively, with marginal evidence that the reaction was more negative for fully-marketed offers relative to accelerated offers. the study concluded that information asymmetry has effect on offer type. however, the study did not account for country-specific variations in stock markets. on the other hand, the effect of ict on stock market efficiency has since been established by previous studies (d’avolio et al., 2001; faghani, habibi, tabatabaee, razavi & emadzadeh, 2013; chan & chan, 2014). according to faghani, et al. (2013), ict leads to deployment of electronic trading processes and seamless dissemination of market information, which in turn enhances stock market gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 6 efficiency. automation of trading platforms slashes unnecessary time wastage in the execution of investors’ buy and sell orders in the stock market. similarly, market information is more rapidly spread among investors to aid them in arriving at sound investment decisions. previous empirical studies have documented the relationship between ict and stock market efficiency. however, only a few of such studies emanated from africa; and this may not be unconnected with the fact that african stock markets are adjudged to be less efficient. most of the reasons advanced for this assertion center around poor deployment and use of ict in african stock markets. odeleye (2009) examined effect of trading automation on the prices and trading volumes of selected firms listed on the nigerian stock exchange. the study covered the period 1996-1998 as pre-automation and 2001-2003 as post-automation. using ols regression, the study documented statistically insignificant increase in trading volume and decrease in prices. it was concluded that automation did not significantly influence market efficiency. however, the use of only three listed firms and ols regression as a tool to test efficiency may have affected the results. olowe (2009) investigated effect of the introduction of the automated trading system (ats) in the nigerian stock market using monthly data from december 1986 to december 2006. using the event study methodology, the paper established evidence of negative abnormal return, consistent with the notion that that the nigerian stock market is not informationally efficient. similarly, mwalya (2010) utilized market return and trading volume data for the nairobi stock exchange (nse) from 2005 to 2010. initial public offering (ipo) announcement was used by the study to test the reaction of the market to use of ict. using event study methodology, the study found that the nse return and trading volumes responded to announcement of ict adoption. however, there was no evidence the observed abnormal returns were tested for statistical significance. in a related study, omuchesi, et al. (2014) assessed effect of automation on efficiency of the kenyan stock market using data from 2002-2012. using chi-square analysis, the study found that automation had no significant effect on efficiency of the nse. however, the technique of analysis used may not be appropriate for establishing market efficiency. owido, bichanga and muiruri (2014) examined performance of the nse in the face of improved ict adoption by the market. the study employed nonparametric methods of runs tests kolmogorov-sminov tests, qq-plots and pp-plots to investigate randomness in the market return series from january 2006 to november 2011. the study found that the nse return was not random and the thus exhibited non-normality in its distribution. it was concluded that the market was gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 7 inefficient in the weak-form sense. however, the use of non-parametric tools to test for the impact of ict appears to be inappropriate. like seos, most of the studies that have examined the nexus between ict and market efficiency were from non-african stock markets. for instance, lee, et al. (2017) investigated the effect of ict on market capitalization using a cross-country panel dataset consisting of 81 countries from 1998 to 2014. using country-specific fixed effect models, the study found positive correlation between ict deployment and growth in stock market capitalization. the study concluded that increased deployment of ict can enhance efficient information flows within local and across global financial markets. however, non-inclusion of several other crucial variables that affect stock market capitalization may have affected explanatory power of the model estimated by the study. also, lee, et al. (2019) employed a cross-country dataset of 71 stock markets between 2002 and 2014 to investigate the extent to which ict has promoted transparency in the dissemination of stock market news and information. findings based on panel unit root tests and variance ratio tests indicated that countries with higher ict diffusion were more efficient than those with low to medium diffusion levels. the study also found that ict diffusion was more significant in reducing stock market noise rather than amplifying it. it was concluded that ict has significant effect on stock market efficiency. however, the mere use of unit root and variance ratio tests may affect the findings. this study is underpinned by the market efficiency theory propounded by fama (1965) and popularized by subsequent works of fama (1970, 1991, 1998). in its simplest form, the efficient market theory holds that in an efficient market, stock prices adjust instantaneously to impound new information so that no investor is given undue advantage to use such information exclusively to the detriment of other market participants and agents. since its introduction, a number of studies have supported the validity of this theory by confirming that stock markets adjust prices to reflect the public announcement of corporate events. being a major corporate event seo announcement elicits market response, and the magnitude of reaction will depend on the type of offering. therefore, the announcement of seos in nigeria should translate to market changes that will reflect the perceived value of such corporate action to investors and other market participants. similarly, a major action such as the automation of the nigerian stock market trading floors should result in enhanced dissemination of market information; and this should in turn have some implications for how investors value corporate actions such as seo announcements. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 8 3. methodology and models this paper examined effect of trading automation reaction of the nigerian stock market to seos announcements. the paper employed the standard event study methodology developed by fama, et al. (1969) and popularized by brown and warner (1985) and mackinlay (1997). in this study the corporate event under investigation is the announcement to conduct seo by firm listed on the nigerian stock exchange from july 1995 to december 2019. a total of 109 seo announcements were recorded within the period of the study but for an announcement to be considered as part of the sample, it must meet some set criteria: there must be relevant data on the event, the announcement must have been made publicly, the announcement must be for equity issues, and there must not be a simultaneous value-relevant announcement that that is capable of contaminating the effect of the seo announcement. application of the filters resulted in a clean sample of 86 seo announcements, after 23 announcements have been dropped. in order to test for the effect of trading automation on the reaction of the nigerian stock market to seo announcements, the sample was partitioned into seos before automation (pre-automation) and seos after automation (post-automation). based on the nigerian stock exchange’s announcement on 27th april 1999 that all trading floors were fully automated and have migrated to the automated trading system (ats) platform, the study considered all seo announcements before 27th april 1999 as pre-automation and those announced after 27th april 1999 as postautomation seos. a total of 27 seo announcements fell under the pre-automation period, while 59 seos were announced during the post-automation period. in line with requirements of event studies, this paper adopted an event window of 31 trading days consisting of 15 trading days before the announcement, the announcement day, and 15 trading days after the announcement. similarly, the paper adopted an estimation window of 120 trading days before the first day of the event window. thus, the estimation runs from day -135 to day -16 while the event window covers -15 to day +15. the study collected data on daily closing prices of the 86 announcing firms and the corresponding stock market index. values. the series of stock prices and corresponding market indexes were then converted to continuously compounded returns using the formula below:             1, 1,, , ln ti titi ti v vv r …..………………………………..………………(1) gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 9 where: ri,t = return on firm i at time t vi,t = value of firm i at time t vi,t-1 = value of firm i at time t-1 ln = natural logarithm being time series in nature, the stock and market return series for the 86 samples were tested for stationarity using the augmented dickey-fuller (adf), phillipsperron (pp) and kwiatkowski-phillips-schmidt-shin (kpss) tests. in order to compute the abnormal return and cumulative abnormal return, estimate benchmark returns for the sample seo announcements, the market model was employed as the benchmark model for return estimation. the market model assumes a linear relationship between return of a security and the return on the market portfolio (fama et al., 1969). the model is stated as follows: titmti rr ,,10,   .............................................................................(2) where ri,t is the actual return on firm i’s stock at time t; α0 and β1 are parameters to be estimated; rm,t is the market return at time t; and εi,t is firm i’s random disturbance term at time t. assuming a constant beta value, the estimated return for firm i’s stock can be computed by substituting the estimated values of α0 and β1 over the estimation window in equation (5) above as follows: tmti rr ,10, ˆˆ   .................................................................................... (3) where tir , is the expected return on firm i’s stock at time t; 0 ̂ and 1 ̂ are the estimated parameters based on the estimation window; and rm,t is the market return at time t. the abnormal return is defined as the difference between equation (2) and equation (3) as follows: titi rrar ,,  ....................................................................................... (4) once the estimated equation has been obtained, the actual return on firm i’s stock is calculated as follows: titmti rr ,,10, ˆˆ   .......................................................................... (5) gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 10 since tmti rr ,10, ˆˆ   equation (5) simplifies to: titmti rr ,,,  ...................................................................................... (6) this implies that abnormal return for firm i at time t is simply given as: titi = ar ,,  .............................................................................................. (7) given that the market model was estimated using ols, the residuals were examined for auto-correlation, heteroskedasticity and normality using breusch-godfrey tests, engle test, white test and jarque-bera test. in the event that significant volatility was observed in the residuals, the ols model was replaced with arch/garch specification according to their best fits so as to appropriately capture volatility. the model can be specified as follows: when a garch (1,1) model is considered, equation (5) is replaced with: 2 1,2 2 1,10 2 ,   tiitiiiti u  ................................................................ (8) equation (8) becomes an arch (1) process if αi2 = 0. the cumulative abnormal return of firm i in the sample for a given period was obtained by summing up the abnormal return in a given period. the procedure is demonstrated by the following formula (peterson, 1989): cari (t0,t1) =   1 0 , t ti ar =  1 0 , t ti  ............................................................... (9) where cari (t0,t1) is the cumulative abnormal return of firm i from time t0 to t1; ari,t is the abnormal return of firm i at time t; εi,t is the residual of firm i at time t. similarly, the sample average abnormal return at time t is simply the arithmetic mean of n number of stocks, as shown below: aart =   n i ti ar n 1 , 1 ............................................................................... (10) gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 11 where aart is the sample average abnormal return at time t; n is the number of observations; and aari,t is the abnormal return of firm i at time t. as a consequence of the foregoing, the cumulative average abnormal return will be computed as follows: caar (t0,t1) =   1 0t t aar ..................................................................... (11) where caar (t0,t1) is the sample cumulative average abnormal return from time t0 to t1; and aart is the sample average abnormal return at time t. the significance of abnormal return and cumulative abnormal return was tested using the t-test for significance of abnormal return. according to brown and warner (1985) and panayides and gong (2002), the test statistic is simply the ratio of period t0 to period t1 car to its estimated standard deviation over the estimation window as shown in the equation below: t(car)= car (t0,t1)/   taars .......................................................... (12) where t(car) is the test statistic for cumulative abnormal return; car (t0,t1) is as defined above; s(aart) is the standard deviation of average abnormal return over the parameter estimation window. in order to test for the effect of automation on the reaction of the market to seo announcements, a test for the difference in means between mean abnormal return for the pre-automation period and the post-automation period was conducted using the following formula (angelovska, 2011). postpre prepost marmar t     ………………………………………….……. (13) where marpost is the mean abnormal return for the post-automation period, marpre is the mean abnormal return for the pre-automation period, and postpre  is a pooled standard error of the difference between the pre-automation and post-automation periods abnormal return. the event window mean abnormal return for the preautomation and post automation periods were computed using the formula below: gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 12 n ar mar n t    1 ……………………………………………………… (14) where mar is mean abnormal return and n is the number of days within the event window. the pooled standard error of the difference between the two samples of seo announcements was calculated as follows:                          2121 2 2 21 2 1 11 2 11 nnnn nn postpre   …………………...(15) where 1 2  is the variance of pre-automation abnormal return, 2 2  is the variance of post-automation abnormal return, and 21 , nn are the number of announcements in the pre-automation and post-automation periods respectively. to compute the pooled standard errors, separate standard deviations were computed for the preautomation and post-automation periods using the formula below:   1 1 2      n marar n i ……………………………………..………. (16) 4. results and discussions as was spelt out in the methodology section, the paper examined stationarity of the individual announcing firms’ return as well as the corresponding market return. the firm and corresponding market return series were for the period from the beginning of the estimation window to the end of the event window for each announcement. results of stationarity tests showed that out of the total sample of 83 firm announcements, 83 return series were found to be stationary at levels using adf and pp tests while 81 were found to be stationary at levels using the kpss test. for the corresponding market return series, 85 out of the 86 series were found to be stationary at levels using the adf and pp tests while 84 were found stationary at levels using the kpss test. for brevity, the tables could not be presented in the paper but are available upon request. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 13 a look at the results from the pre-automation and post-automation perspectives reveals that out of the total of 83 firm return series that were found stationary using adf and pp tests, 25 fell within the pre-automation period, and 58 were within the post-automation period. for the kpss test, 24 of the stationary firm return were within the pre-automation phase while the balance of 57 series were within the postautomation phase. on the other hand, the 85 corresponding market return series that were found to be stationary using the adf and pp tests consisted of 26 series in the pre-automation period and 59 in the post-automation period. using the kpss test, the 84 market return series that were found to be stationary were made up of 25 pre-automation series and 59 post-automation series respectively. therefore, results of stationarity test on the whole suggest that almost all the firm and corresponding market return series were found to be stationary at levels using all the three tests for stationarity. the fact that the series were found to be stationary at levels implies that the firm and market return series were integrated of the order i(0). the finding of stationary returns lends credence to existing empirical and theoretical evidence that asset prices are traditionally non-stationary, while asset returns tend to be stationary (agung, 2009; brooks, 2008; demedeiros & matsumoto, 2006). after the test of stationarity, the abnormal return for each firm, arising from its seo announcement, was computed in line with the methods specified under the methodology section. the individual firms’ abnormal return was then aggregated to obtain the abnormal return and cumulative abnormal return. table 1 presents the descriptive statistics for the computed abnormal return and cumulative abnormal return. table 1: pre-recession and post-recession return descriptives panel a: pre-automation return descriptives mean std. dev. min. max. skewness kurtosis jarque-bera pre-ar 0.005 0.014 -0.045 0.021 -0.638 3.773 2.874 pre-car 0.130 0.068 -0.211 0.000 0.394 1.734 2.872 panel b: post-automation return descriptives mean std. dev. min. max. skewness kurtosis normality post-ar 0.004 0.016 -0.044 0.023 -0.619 3.096 1.990 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 14 post-car 0.073 0.064 -0.171 0.043 0.159 1.675 2.400 source: author’s compilations from e-views 10 output, 2020 *, **and*** imply significance at the 10%, 5% and 1% levels respectively. it can be seen from panel a of table 1 that mean pre-automation abnormal return and cumulative abnormal return are negative, indicating that the market, on the average, reacted adversely to the announcement. the standard deviations of 0.014 and 0.068 for the pre-automation abnormal return and cumulative abnormal return respectively suggest mild dispersion around the mean values. the evidence of mild dispersion is further supported by the relatively low variability between the minimum and maximum values of abnormal return and cumulative abnormal return respectively. the panel further shows that while the pre-automation abnormal return series is negatively skewed and this have a longer left tail, the cumulative abnormal return series is positively skewed and thus have a longer right tail. in terms of kurtosis, the descriptives show that distribution of pre-automation abnormal return is leptokurtic or slightly peaked around the mean while the distribution of cumulative abnormal return is reasonably platykurtic or flat at the surface around the mean as it is by far less than the threshold value of 3, which suggests mesokurtosis. on the whole, the series of pre-announcement abnormal return and cumulative abnormal return both failed to reject jarque-bera’s null hypothesis of normality. this implies that the series are normally distributed. the evidence of normality is important to this paper as it is a fundamental requirement for the application of t-test of significance. on the other hand, panel b of table 1 shows that the mean abnormal return and cumulative abnormal return in the post-automation period seo announcements were both negative, supporting the theoretical assertions that seo announcements are meted with negative market reaction. like in the pre-automation period, the standard deviation, minimum and maximum values of abnormal return and cumulative abnormal return all support the presence of slight deviation and variation around the mean. it can also be seen from the panel that while the postannouncement abnormal return series is negatively skewed, the cumulative abnormal return series is positively skewed. the panel also depicts slight leptokurtosis for the post-automation abnormal return series and platykurtosis for the cumulative abnormal return series. in addition, the insignificance of jarquebera statistics for both the post-automation abnormal return and cumulative abnormal return series is an indication that the series are normally distributed. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 15 the evidence of normality for the abnormal return and cumulative abnormal return series in both the pre-automation and post-automation periods contradicts finance theory regarding the distributional characteristics of financial asset returns. according to greene (2003), gujarati (2004) and brooks (2008), financial asset returns exhibit leptokurtosis and fat tails, and therefore; this distributional features make their distribution anything but normal. the paper then compiled the abnormal return and cumulative abnormal return arising from seo announcements for the pre-automation and post-automation periods. table 2 presents the event window pre-automation and post-automation periods abnormal returns, cumulative abnormal returns as well as their corresponding t-statistics and levels of significance. the pre-automation estimation window standard deviation was 0.0125, while the post-automation estimation window standard deviation was 0.0101. table 2: event window effect of seo announcements in nigeria pre-automation period return (%) post-automation period return (%) day ar t(ar) car t(car) ar t(ar) car t(car) -15 0.00 0.00 0.00 0.00 -0.86 -0.86 -0.86 -0.86 -14 -1.38 -1.10 -1.37 -1.10 0.50 0.50 -0.36 -0.36 -13 -1.35 -1.08 -2.72 -2.18** 1.09 1.08 0.72 0.72 -12 -2.19 -1.75* -4.91 -3.93*** 1.71 1.69 2.43 2.41** -11 -0.92 -0.74 -5.83 -4.67*** -0.23 -0.22 2.21 2.18* -10 -1.06 -0.85 -6.89 -5.51*** 2.08 2.06* 4.29 4.25*** -9 -1.68 -1.34 -8.57 -6.86*** -4.37 -4.33*** -0.08 -0.08 -8 1.61 1.29 -6.96 -5.57*** -0.62 -0.62 -0.71 -0.70 -7 -1.39 -1.11 -8.35 -6.68*** -2.14 -2.12* -2.85 -2.82*** -6 0.25 0.20 -8.10 -6.48*** 0.21 0.21 -2.64 -2.61** -5 -0.93 -0.74 -9.03 -7.22*** -1.85 -1.83* -4.49 -4.44*** -4 0.25 0.20 -8.77 -7.02*** 0.26 0.25 -4.23 -4.19*** -3 -1.12 -0.89 -9.89 -7.91*** -0.14 -0.14 -4.37 -4.32*** -2 -0.88 -0.71 -10.77 -8.62*** -0.47 -0.46 -4.84 -4.79*** -1 -4.54 -3.64*** -15.32 -12.25*** -1.10 -1.09 -5.94 -5.88*** 0 -3.33 -2.67** -18.65 -14.92*** -2.91 -2.88*** -8.85 -8.76*** +1 -1.25 -1.00 -19.90 -15.92*** -1.23 -1.22 -10.08 -9.98*** +2 -2.41 -1.93* -22.31 -17.84*** 0.78 0.77 -9.30 -9.21*** +3 0.32 0.26 -21.98 -17.59*** -0.07 -0.07 -9.36 -9.27*** +4 -0.30 -0.24 -22.28 -17.83*** 0.02 0.02 -9.35 -9.25*** +5 0.35 0.28 -21.93 -17.55*** -3.69 -3.65*** -13.03 -12.90*** +6 0.38 0.30 -21.56 -17.25*** -0.30 -0.30 -13.34 -13.20*** +7 0.54 0.43 -21.02 -16.82*** 0.78 0.77 -12.56 -12.43*** gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 16 +8 -0.61 -0.49 -21.64 -17.31*** -2.19 -2.17** -14.74 -14.60*** +9 0.33 0.26 -21.31 -17.05*** 0.66 0.65 -14.09 -13.95*** +10 -0.36 -0.29 -21.67 -17.33*** -0.68 -0.67 -14.77 -14.62*** +11 1.48 1.18 -20.19 -16.15*** -2.35 -2.33** -17.12 -16.95*** +12 -0.47 -0.38 -20.66 -16.53*** 2.32 2.29** -14.80 -14.65*** +13 1.61 1.29 -19.05 -15.24*** 0.01 0.01 -14.79 -14.65*** +14 2.13 1.70* -16.93 -13.54*** 0.61 0.60 -14.19 -14.05*** +15 0.32 0.26 -16.60 -13.28*** 0.55 0.54 -13.64 -13.50*** source: author’s compilations from e-views 10 output, 2020 *,**and*** imply significance at the 10%, 5% and 1% levels respectively. from table 2, it can be seen that the pre-automation announcement day abnormal return on day 0 is negative and statistically significant. the table also shows that the corresponding cumulative abnormal return on the announcement day is negative and statistically significant. these results indicate that the nigerian stock market’s reaction to seo announcements in the period before automation of trading platforms was negative. the table further reveals that almost all the pre-automation abnormal returns and cumulative abnormal returns were negative, cutting across the pre-announcement day and post announcement day periods within the event window. the second segment of the table shows that the post-automation announcement day abnormal return and cumulative abnormal return were negative and significant. as was the case under the pre-automation period, the post-announcement abnormal return and cumulative abnormal return were predominantly negative. furthermore, almost all the post-automation period cumulative abnormal returns were negative and strongly significant. however, there were more significant abnormal returns within the event window for the post-automation period relative to the preautomation period. the results also point strongly to the fact that the market recorded negative reaction on the announcement day for seos in nigeria. in a nutshell, table 2 shows that the nigerian stock market reacted negatively to seo announcements before and after the automation of trading floors. the evidence of negative announcement day reaction of the market to seo announcements is in consonance with extant theoretical and empirical evidence that markets experience adverse effects because of investors’ perception of the issuing firm’s stock as overvalued. thus, the result of negative market reaction is consistent with bhana (1998), rasmussen (2015), hammar and perman (2015), liu, et al. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 17 (2016), brau and carpenter (2017), huang and chiu (2017), kumar, hawaldar and mallikarjunappa (2018), width and arseth (2018) and ulrich (2018). the paper also examined for the effect of automation of the nigerian stock market on the market’s reaction to seos. to achieve this, the paper tested for difference in market reaction for seo conducted before automation and after it. table 3 presents results of the difference test as specified under the methodology table 3: difference test results for effect of automation on seo announcements pre-automation post-automation pre-post mar -0.54 -0.44 -0.10  1.44 1.58 2  2.07 2.50 postpre  0.38 t -0.26 source: author’s compilations from e-views 10 output, 2020 table 3 shows that the mean abnormal returns for the pre-automation and postautomation event windows were both negative, further lending credence to the fact that seos induced negative reaction in nigeria. the table also shows that the difference between the mean abnormal returns in the pre-automation and postautomation windows respectively was -0.10, suggesting that the difference itself was adverse. as can be seen from the table, the t value of -0.26 was not statistically significant at any of the conventional levels. this result indicates that automation of the nigerian stock market did not significantly affect reaction of the market to seos announcements. even though no known previous study has specifically examined effect of automation of the nigerian stock market within the context of value-relevant corporate actions such as seos, this finding is, on the general note of efficiency, consistent with those of odeleye (2009) and olowe (2009) who found insignificant effect of automation on efficiency of the nigerian stock market. the insignificant effect of automation on seos announcements may be explained by the fact that the automation process did not markedly improve the speed of processing buy or sell orders in the market. gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 18 5. conclusion this study examined effect of automation of the nigerian stock market’s trading floors on the market’s reaction to seo announcements made between july 1995 and december 2019. consistent with extant empirical evidence, the study found negative and significant announcement day reaction by the nigerian stock market. in addition, almost all the days within the event window experienced negative and significant market reaction. it was concluded that the adverse reaction was, irrespective of the reason provided for raising capital through seos, perceived by the market as a signal that the issuing firms’ assets were overvalued. the study also found that automation of the nigerian stock market trading floors has little or insignificant effect on the market’s reaction to seo announcements. this indicates that the reaction of the market to seos was essentially the same before and after the trading floors were automated in nigeria. the study therefore concluded that the deployment of technology in trading does not really matter for emerging stock markets like nigeria’s. the traditional attachment to manual techniques even where information technology is adequate may also have affected the market’s response to the announcement. the study recommends that firms announcing seos in nigeria should clearly specify the reason for which the firm is issuing new capital as well as the intended use of proceeds from the seo. this is particularly important in reducing the extent of adverse reaction. with adequate disclosure prior to seo announcements, the market will properly value the effect of new equity issues. for instance, extant empirical evidence has shown that markets react positively to seos conducted to finance investment or growth opportunities if the reason for the issue has been effectively communicated to the market. the study also recommends that it is not enough to merely automate trade platforms in the nigerian stock market without equally automating the channels of market information dissemination as such channels are at the heart of promptly availing market information to investors and other market participants. it is further recommended that automated trading platforms and other electronic information dissemination channels within the stock market must be constantly upgraded to gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 19 meet changing needs and sophistications as the market continues to grow. this is necessary to keep up with the pace of improved investor awareness over the years. references adelegan, o. j. (2009a). price reactions to dividend announcements on the nigerian stock markets. aerc research paper number 188. adelegan, o. j. (2009b). does corporate leadership matter? evidence from nigeria. aerc research paper number 189. afego, p. (2010). stock price response to earnings announcements: evidence from the nigerian stock market, mpra paper 33931, university library of munich, germany; available online at http://mpra.ub.unimuenchen.de/33931/ agung, i. g. n. (2009). time series data analysis using eviews. singapore: john wiley & sons limited. ball, r., & brown, p. (1968). an empirical evaluation of accounting income numbers. journal of accounting research, 6, 159-178. bhana, n. (1998). share price reaction to announcements of equity financing by companies listed on the johannesburg stock exchange. investment analysts journal, 48, 33-42. brau, j. c., & carpenter, j. t. (2017). equity issuance of healthcare firms after the 2007 market crash and the 2010 affordable care act. journal of health care finance, 1(1), 1-15. brooks, c. (2008). introductory econometrics for finance (2nd ed.). cambridge: cambridge university press. brown, s. j., & warner, j. b. (1985). using daily stock returns: the case of event studies. journal of financial economics, 14, 3-31. chan, k., & chan, y. (2014). price informativeness and stock return synchronicity: evidence from the pricing of seasoned equity offerings. journal of financial economics, 114, 36-53. d,avolio, g., gildor, e., & shleifer, a. (2001). technology, information production, and market efficiency. working paper, harvard university. de medeiros, o., & matsumoto, a. s. (2006). market reaction to stock issues in brazil: insider trading, volatility effects and the new issues puzzle. investment management and financial innovations, 3(1), 142-150. denis, d. j. (1994). investment opportunities and the market reaction to equity offerings. journal of financial and quantitative analysis, 24(2), 159-177. http://mpra.ub.uni-muenchen.de/33931/ http://mpra.ub.uni-muenchen.de/33931/ gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 20 dissing, j., rassmussen, k., & bartholdy j. (2015). are seasoned equity offerings bad news? (unpublished master thesis). aarhus university. faghani, f., habibi, s., tabatabaee, s. m., razavi, l., & emadzadeh, k. (2013). the role of information technology on stock market development. international journal of academic research in accounting, finance and management sciences, 3(1), 353-358. fama, e. (1965). the behavior of stock market prices. journal of business, 38, 34105. fama, e. (1970). efficient capital markets: a review of theory and empirical work. journal of finance, 25, 383-417. fama, e. (1991). efficient capital markets ii. journal of finance, 46, 1575-617. fama, e. (1998). market efficiency, long-term returns and behavioural finance. journal of financial economics, 49, 283-306. greene, h. (2003). econometric analysis (5th ed.). new jersey: prentice hall gujarati, d.n. (2003). basic econometrics (4th ed.). new york: mc graw-hill irwin. hammar, d., & perman, o. (2015). a quantitative analysis of rights offerings on the swedish market (unpublished master thesis). lund university. huang, h., & chiu, h. (2017). insider trading and the classification of seasoned equity offerings: evidence from taiwan. international journal of economics and finance, 9(5), 58-70. jensen, m. c. (1986). agency costs of free cash flow, corporate finance and the market for t akeovers. american economic review, 76, 323-329. kim w., & weisbach, m. s. (2008). motivations for public equity offers: an international perspective. journal of financial economics, 87, 281-307 kumar, k. r. n., hawaldar, i. t., & mallikarjunappa, t. (2018). windows of opportunity and seasoned equity offerings: an empirical study. cogent economics and finance, 6, 1528688. https://doi.org/10.1080/23322039.2018.1528688 lee, m., tsai, t., chen, j., & lio, m. (2019). can information and communication technology improve stock market efficiency? a cross-country study. bulletin of economic research, 71(2), 113-135. lee, s., alford, m., & cresson, j. (2017). the effects of information communication technology on stock market capitalization: a panel data analysis. business and economic research, 7(1), 261-272. leland, h. e., & pyle, d.h. (1977). information asymmetries, financial structure, and financial intermediation. the journal of finance, 32(2), 371-387. https://doi.org/10.1080/23322039.2018.1528688 gujaf: gusau journal of accounting and finance, vol. i, issue 1, april, 2020 issn 2756-665x 21 liu, j., akbar, s., shah, s. z. a., zhang, d., & pang, d. (2016). market reaction to seasoned offerings in china. journal of business finance and accounting, 43(5&6), 597-653. mackinlay, a. c. (1997). event studies in economics and finance. journal of economic literature, 35(1), 13-39. mwalya, c. k. (2010). the impact of information communication technology on stock returns and trading volumes for companies quoted at the nairobi stock exchange (unpublished master thesis). university of nairobi. myers, s. c., & majluf, n.s. (1984). corporate financing and investment decisions when firms have information that investors do not have. journal of financial economics, 13(2), 187-221. odeleye, a. t. (2009). the effects of automation on price and volume of stocks in the nigerian capital market. finance & banking review, 3(1&2), 1-18. olowe, r. a. (1998). stock splits and efficiency of the nigerian stock market. african review of money, finance and banking, 1(1), 97-125. olowe, r. a. (2009). the impact of the introduction of the automated trading system on the nigerian stock market. journal of business research, 3(12), 54-68. omuchesi, j. a., bosire, m., & muiru, m. (2014). the effect of automation on stock market efficiency: a case of nairobi securities exchange. research journal of finance and accounting, 5(17), 212-224. owido, p. k., bichnaga, w. o., & muiruri, m. (2014). ict and market efficiency: a case study of nairobi securities exchange. european journal of business and management, 6(29), 76-85. panayides, m., & gong, x. (2002). the stock market reaction to merger and acquisition announcements in liner shipping. international journal of maritime economics, 4(1), 55-80. peterson, p. p. (1989). event studies: a review of issues and methodology. quarterly journal of business economics, 28(3), 36-66. width, e., & arseth, o. a. (2018). impact of use of proceeds disclosure in seasoned equity offerings (unpublished master thesis). norwegian school of economics. gusau journal of accounting and finance (gujaf) vol. 4 issue 1, april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ii © department of accounting and finance vol. 4 issue 1 april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vi advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ix contents board characteristics and earnings management of listed consumer goods firms in nigeria benjamin gwabin joseph, murtala abdullahi phd, benjamin kumai gugong phd 1 dividend policy and value of listed non-financial companies in nigeria: the moderating effect of investment opportunity abubakar umar 18 trialability and observability of accrual basis international public sector accounting standards implementation in nigeria aliyu abdullahi ahmed phd, zakari usman 35 liquidity risk and performance of non-financial firms listed on the nigerian stockexchange muhammed alhaji abubakar, nurnaddia binti nordin phd, abubakar hamisu umar 54 board diversity, political connections and firm value: an empirical evidence from financial firms in nigeria rofiat oyetunji, isah shittu phd, ahmed bello phd. 75 moderating effect of bank size on the relationship between interest rate, liquidity, and profitability of commercial banks in nigeria shehu usman hassan, bello sabo (ph. d), ismai'l idris tijjani (ph. d), idris ahmed aliyu. (ph. d) 96 sources of health care financing among surgical patients seen at the dalhatu araf specialist hospital lafia nasarawa state nigeria ahmed mohammed yahaya, babatunde joseph kolawole, bello surajudeen oyeleke 121 transparency, compliance and sustainability of contributory pension scheme in nigeria olanrewaju atanda aliu (ph. d), mohamad ali abdul-hamid (ph. d), salami suleiman (ph. d), salam mudathir olanrewaju 135 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 x examining the impact of working capital management on the financial performance of listed industrial goods entities in nigeria 151 sani abdulrahman bala (ph. d), jamilu jibril, taophic olarewaju bakare corporate governance factors and tax avoidance of listed deposit money banks in nigeria 171 sani abdulrahman bala (ph. d), umar salim ibrahim, samaila dannana risk committee demographic traits: a study of the impact of expertise on risk disclosure quality of listed insurance firms in nigeria wada najib abbas, dandago, kabiru isa (ph. d), rabiu, naja’atu bala 192 moderating effect of audit committee on the relationship between audit quality and earnings management of listed non-financial services firms in nigeria ahmad muhammad ahmad, lubabah mansur kwanbo (ph.d.), shehu usman hassan (ph.d.) musa suleiman umar (ph.d.) 216 determinants of audit opinion of negative-book-value firms in nigeria: firm value and audit characteristics perspective asma’u mahmood baffa (ph. d), lawal mohammed (ph.d.), ahmed bello (ph.d.) umar farouk abdulkarim 237 intervention announcements and naira management: evidence from the nigerian foreign exchange market adedeji daniel gbadebo 254 is there earnings discontinuity after the implementation of ifrs in nigeria? adedeji daniel gbadebo 275 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 151 examining the impact of working capital management on the financial performance of listed industrial goods entities in nigeria abdulrahman bala sani department of accounting usmanu danfodiyo university sonyaxle9@gmail.com jamilu jibril department of accounting al-qalam university katsina jamilujubril@auk.edu.ng taophic olarewaju bakare department of accounting usmanu danfodiyo university abubackrie@gmail.com, +234 806 770 2354 abstract the main objective of this study is to examine the influence of working capital management on the financial performance of listed industrial goods firms/entities in nigeria. the study collected data from the yearly reports of selected companies between 2011 and 2021, using the purposive sampling method. the generalized method of moments (gmm) estimator technique was employed for data analysis. the findings indicate that inventory turnover and receivable collection positively impact financial performance. the finding revealed that inventory turnover, and receivable collection have statistical significant effect on return on equity with the coefficient (-0.6150, and 0.0067) and pvalue (0.000and 0.009) at 5% level of significant respectively. the study concluded that inventory turnover was noted to have increased the likelihood of financial performance and thereby governments should endeavor to provide adequate infrastructure such as constant and stable electricity supply, good road network and rail system to facilitate the cost of production at minimum cost and movement of goods. key words: inventory turnover, receivable collection, working capital, operating cycle, return on equity https://doi.org/10.57233/gujaf.v4i1.205 1. introduction working capital management is a critical aspect of financial management for businesses, influencing their operational efficiency, liquidity, and overall financial performance. in the context of listed industrial goods entities in nigeria, effective working capital management becomes particularly vital due to the specific challenges and complexities faced by these firms. the ability to optimize the mailto:sonyaxle9@gmail.com mailto:abubackrie@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 152 utilization of current assets and liabilities directly impacts their financial stability, profitability, and long-term success (johnson, & brown 2022). the nigerian industrial goods sector plays a significant role in the country's economy, contributing to employment generation, infrastructure development, and overall economic growth. however, these entities encounter various challenges in managing their working capital effectively. these challenges include supply chain disruptions, inventory management issues, prolonged receivable collection periods, and difficulties in accessing short-term financing options. inadequate working capital management can result in financial constraints, operational inefficiencies, and reduced profitability for these entities (sanusi & umar 2019). the problem at hand is the limited understanding of the relationship between working capital management and the financial performance of listed industrial goods entities in nigeria. while studies from other countries have explored this relationship, there is a lack of research specific to the nigerian context. therefore, it is crucial to investigate how working capital management practices impact the financial performance of these entities, taking into account the unique characteristics of the nigerian business environment (oladipupo & oladipupo, 2016). similarly, due to the turbulence in international financial markets, the worldwide economic downturn has had a serious adverse effect on nigerian industrial companies. production, sales, and financial resources available to manufacturers have all dropped owing to the financial crisis. the negative impact of coronavirus on manufacturing companies to fulfill its financial obligation as well as being unable to retrieve its money from the customers (account receivable) have unfortunately left many organizations inoperable. companies that were once able to pay their bills on time are being short on cash flow if they have not closed down. low risk debtors are now higher risk of delinquent payments and the cash flow greatly disrupted (tracey, 2020). businesses have been drowning as a result of the government's complete failure to successfully adopt economic measures that may very well counteract the effect of covid-19 in nigeria. negative effects have been seen in receivables, work-inprogress, inventory turnover, and completed products. due to this, it has become more challenging for firms to pay their creditors on time and to request more funding from them. businesses' income and working capital are being put under pressure as a result of suppliers' failure to supply manufacturers with essential components, which results in production delays or halts. work-in-progress gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 153 balances are being weakened as a result of this stress, and it is also making it difficult to timely collect receivables from customers who are struggling financially. additionally, the decline in consumer demand is causing inventories to increase and become more difficult to sell (muda, 2020). additionally, there are issues with paying suppliers because of short-term cash flow constraints. a thriving manufacturing sector, according to korode (2017), lowers poverty by generating wealth and jobs. although nigeria's manufacturing industry has great promise, its efficiency has been declining over time and with the recent emergence of the covid-19 epidemic, this decline in performance has not only accelerated astronomically but has also reached a breaking point. since the early 1980s, there has been a clear declining tendency (nigerian manufacturing association, 2014). a number of issues with economy of nigeria, such as bad administration, corruption, a lack of policy execution, and ongoing rivalry, which slow down the rate at which manufacturing sectors can reap significant returns on the resources they use and invest in. the necessity to link working capital management with financial success has emerged as a result of the fact that corporations are created with the intention of maximising profits. for listed industrial products firms to improve their financial performance, a competent and effective working capital management plan is essential. several studies including elias and nwankwo (2018); uguru, chukwu, and elon (2018); oladejo, akande, and yinus (2017); edem (2017); korede (2017); muhammad (2017); ojeani (2014); soyemi and olawale (2014); criscent (2016); ikpefan, owolabi, edwin and adetula (2014); haruna (2016) to mention a few concentrates on account payable, account receivable, cash conversion circle and their implication for financial performance of either insurance companies, brewery companies, foods and beverages, conglomerates or pharmaceutical companies but this study concentrates on industrial goods firms with the used of generalized method of moments and expand the scope of the study to 2021 which was lack in the previous studies conducted in nigeria research questions the following questions were addressed during the period of this study. these consist of: i. how does inventory turnover affect the finance results of traded industrial goods companies in nigeria? ii. in what way does the receivable collection affect the finance results of traded industrial products companies in nigeria? gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 154 the justification for this study emanates from the fact that there is a consistent change in the dynamics of the manufacturing sector in nigeria as well as the constant introduction of policies by the government which may make or mar the manufacturing sector of the economy as a result of unstable policies. financial managers have come to understand that their role goes beyond simply determining the ideal levels of working capital and its components. it also entails examining the effects of various internal and external factors, such as retained earnings and leverage financing, on the financial performance of nigerian industrial products businesses. due to a total economic shutdown, liquidity issues, and the regular business operations of nigerian manufacturing businesses, the ongoing work in the manufacturing sector has also been badly impacted by the present global economic downturn. this has led to the need for this study. different government measures intended to stop the coronavirus pandemic's growth contributed to the decline. 2. literature review working capital management is a crucial aspect of financial management that focuses on the effective management of a company's current assets and liabilities. it plays a vital role in determining the liquidity, profitability, and operational efficiency of an organization. this section provides an elaborate review of the concept of working capital management, its components, and its significance in financial decision-making. working capital refers to the capital required to finance a firm's day-to-day operations and meet its short-term obligations. it represents the difference between a company's current assets (such as cash, accounts receivable, and inventory) and its current liabilities (such as accounts payable and short-term debt). working capital management involves optimizing the levels of these current assets and liabilities to ensure the smooth functioning of the business (adeniyi, 2008; olaoye, akintola & ogundipe, 2019). effective working capital management aims to strike a balance between maintaining adequate liquidity and maximizing profitability. it requires careful planning, monitoring, and control of the company's working capital components. by managing working capital efficiently, organizations can enhance their financial performance in several ways (brigham &houston 2001): i. liquidity management: one of the primary objectives of working capital management is to ensure that a company has sufficient liquidity to meet its short-term obligations. by maintaining optimal levels of cash and working capital components, firms can minimize the risk of facing liquidity gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 155 shortages or being unable to meet their payment obligations. adequate liquidity also enables organizations to take advantage of potential investment opportunities or withstand unexpected financial emergencies. ii. cash flow management: working capital management plays a crucial role in managing cash flows effectively. by carefully monitoring and controlling accounts receivable, accounts payable, and inventory, companies can optimize cash flow by reducing the cash conversion cycle. this cycle measures the time it takes for a company to convert its investment in inventory into cash inflows through sales. minimizing the cash conversion cycle can free up cash that can be utilized for investment, debt reduction, or other strategic purposes. iii. profitability enhancement: efficient working capital management can contribute to improved profitability. by minimizing the amount of capital tied up in current assets (e.g., inventory and accounts receivable), companies can reduce financing costs and improve overall profitability. additionally, effective management of accounts payable can provide opportunities for cost savings through negotiated discounts and favorable payment terms. iv. operational efficiency: optimal working capital management ensures the smooth operation of a company's day-to-day activities. by maintaining appropriate inventory levels, organizations can avoid stockouts or excessive carrying costs. similarly, managing accounts receivable and accounts payable efficiently can enhance operational efficiency by reducing the risk of late payments, improving cash flow, and strengthening relationships with customers and suppliers. according to olugbenga (2010, the benefits of working capital management are significant, it is important to note that different industries and businesses may require varying approaches based on their specific characteristics. factors such as seasonality, industry cycles, and customer payment patterns should be considered when formulating working capital strategies. overall, effective working capital management is crucial for the financial health and long-term sustainability of businesses. it enables organizations to optimize their liquidity, enhance profitability, and improve operational efficiency. by implementing sound working capital management practices, companies can strengthen their financial position, adapt to changing market conditions, and create value for shareholders. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 156 financial performance financial performance typically evaluated through a range of financial ratios, metrics, and key performance indicators (kpis). these metrics provide a quantitative assessment of the company's profitability, liquidity, solvency, efficiency, and value creation. some common indicators of financial performance include profitability measures: profitability measures assess a company's ability to generate profits from its operations. key indicators include gross profit margin (gpm): it measures the percentage of revenue that remains after deducting the cost of goods sold. net profit margin (npm): it represents the percentage of revenue that remains after deducting all expenses, including taxes and interest. return on assets (roa): it calculates the company's profitability relative to its total assets. return on equity (roe): it measures the company's profitability relative to its shareholders' equity. liquidity measures: liquidity measures assess a company's ability to meet its short-term financial obligations. key indicators include current ratio: it compares a company's current assets to its current liabilities and assesses its ability to cover short-term obligations. quick ratio (or acid-test ratio): it measures a company's ability to cover immediate liabilities without relying on inventory (oladipupo & olumuyiwa, 2014). solvency measures: solvency measures evaluate a company's long-term financial stability and its ability to meet long-term obligations. key indicators include debtto-equity ratio: it measures the proportion of a company's financing that comes from debt relative to equity. interest coverage ratio: it assesses a company's ability to meet interest payments on its debt obligations. efficiency measures: efficiency measures evaluate how effectively a company utilizes its resources and manages its assets. key indicators include: asset turnover ratio: it measures how efficiently a company utilizes its assets to generate sales. inventory turnover ratio: it evaluates how quickly a company sells its inventory within a specific period. accounts receivable turnover ratio: it assesses how efficiently a company collects payments from its customers (sanusi & umar, 2019). market measures: market measures assess the market value of a company and its attractiveness to investors. key indicators include earnings per share (eps): it represents the portion of a company's profit allocated to each outstanding share of common stock. price-to-earnings (p/e) ratio: it compares the market price per share to the company's earnings per share. financial performance analysis provides valuable insights into a company's strengths, weaknesses, and overall financial health. it enables stakeholders, gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 157 including investors, creditors, and management, to make informed decisions regarding investment, lending, and strategic planning. by monitoring and evaluating financial performance over time, companies can identify areas for improvement, make informed financial decisions, and drive sustainable growth (uwuigbe & uadiale, 2013. interaction of working capital management with financial performance according to, elias and nwankwo (2018), the interaction between working capital management and financial performance is a crucial relationship that significantly influences the overall financial health of a company. effective working capital management can have a direct impact on various aspects of financial performance. fahmida and ye (2019) opined that some key ways in which working capital management can interact with financial performance are: profitability: efficient management of working capital can enhance profitability. by optimizing the levels of current assets (such as inventory and accounts receivable) and current liabilities (such as accounts payable), companies can improve their profitability metrics, such as gross profit margin (gpm) and net profit margin (npm). that is to say proper inventory management can reduce carrying costs and the risk of obsolete or expired inventory, improving gross profit margin. similarly, effective management of accounts receivable can minimize the time it takes to convert sales into cash, reducing the risk of bad debts and enhancing net profit margin amer (2020). cash flow: working capital management has a direct impact on cash flow, which is essential for the day-to-day operations and financial stability of a company. by efficiently managing components such as accounts receivable, accounts payable, and inventory, companies can optimize their cash flow and ensure sufficient liquidity. through the reducing the average collection period for accounts receivable can accelerate cash inflows, improving liquidity. negotiating favorable payment terms with suppliers and managing accounts payable effectively can optimize cash outflows and improve cash flow amer (2020). operational efficiency: effective working capital management contributes to operational efficiency. by maintaining appropriate levels of inventory and managing the conversion cycle (the time it takes to convert inventory into cash), companies can streamline their operations. this leads to improved efficiency, reduced costs, and increased productivity. this is to say keeping inventory levels in line with demand can minimize stock outs and excess inventory, reducing holding costs and improving operational efficiency. managing the cash conversion gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 158 cycle by reducing the time between paying suppliers and receiving cash from customers can enhance overall operational efficiency. risk management: working capital management plays a crucial role in mitigating financial risks. by maintaining sufficient liquidity and managing short-term obligations, companies can reduce the risk of liquidity shortages, financial distress, and potential disruptions in operations. effective working capital management ensures that the company has the resources to meet its financial obligations when they arise (johnson & brown, 2022). from the above we can conveniently say that a well-executed working capital management strategy can positively influence financial performance by enhancing profitability, optimizing cash flow, improving operational efficiency, and managing financial risks effectively. companies that prioritize working capital management as part of their overall financial strategy are more likely to achieve sustainable growth and long-term success empirical review during the period of 2003 to 2012, ali and ayyuce (2020) conducted a study on the relationship between working capital management and the financial performance of european union (eu) traded entities. their research indicated that countries with codified laws experienced a negative impact on financial performance due to working capital management. the study found that liquidity measures estimated through the current ratio had a statistically significant adverse effect on return on assets (roa) for eu member states. in a similar vein, amer (2020) investigated the influence of working capital management on earnings in selected countries and explored the connection between accounting and finance for the years 2019 to 2020. the study involved interviews conducted through skype, utilizing arabic and english languages, with sixteen finance managers from austria, bangladesh, hungary, jordan, qatar, and turkey. the study revealed that accounting and finance are closely intertwined, with finance providing essential knowledge and skills to bookkeepers. fahmida and ye (2019) examined the impact of working capital management on the business success of listed chinese companies between 2005 and 2015. they utilized the gmm estimator to manage unobserved company heterogeneity. the findings indicated that due to debt rationing and high-cost leverage financing, cashstrapped enterprises should maintain a considerably lower level of working capital. active working capital management was found to be advantageous and significantly associated with higher corporate values. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 159 akbar, jiang, and akbar (2020) investigated the effects of working capital management on funding and investment strategies of non-financial firms traded in pakistan from 2005 to 2014. the research demonstrated that excessive working capital had a negative impact on investment inventories. the study also revealed a correlation between working capital levels and leverage ratios, indicating that companies with poor working capital management rely heavily on long-term debt to meet their short-term financing needs. olaoye, akintola, and ogundipe (2019) conducted a study to determine the relationship between working capital management and profitability of industrial businesses listed on the nigerian stock exchange from 2006 to 2015. their research examined variables such as working capital, average collection time, inventory conversion time, and net operating profit to assess revenue. the findings revealed a strong positive correlation between working capital management and profitability. similarly, elias and nwankwo (2018) evaluated the impact of the average payments period on the revenue of listed insurance firms in nigeria. the study utilized return on assets (roa) as the dependent variable and average payments period as the explanatory variable. the findings indicated that the average payments period had a significant negative effect on profitability. in their 2017 study, oladejo, akande, and yinus investigate how management of cash affects the productivity of smes producing food and beverages in the state of oyo. the research found that businesses keep cash on hand for a variety of reasons, including transactional safety and speculation, paying daily invoices as they become due, and keeping money on hand for unexpected expenses. resource-based theory: resource-based theory (rbt) is a strategic management framework that focuses on the role of internal resources and capabilities in creating and sustaining competitive advantage for a firm. it suggests that a firm's unique bundle of resources and capabilities determines its ability to achieve superior performance in the marketplace. according to rbt, resources can be tangible or intangible assets that a firm owns, controls, or has access to. tangible resources include physical assets like buildings, machinery, and inventory, while intangible resources include intellectual property, brands, reputation, and knowledge. capabilities, on the other hand, refer to a firm's ability to deploy and utilize its resources effectively to perform certain activities and achieve desired outcomes. the key assumptions of resource-based theory are as follows: resource heterogeneity: firms possess unique combinations of gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 160 resources and capabilities, leading to heterogeneity in their strategic positions and performance outcomes. resource immobility: resources are not perfectly mobile across firms, making it difficult for competitors to replicate or imitate valuable and rare resources. resource durability: resources and capabilities can provide a sustained competitive advantage if they are difficult to imitate and can be maintained over time. resource complementarity: the value and effectiveness of resources are enhanced when they are combined and integrated with each other to create synergies. causal ambiguity: the link between a firm's resources, capabilities, and performance may not be easily observed or understood by competitors, this tend to create a situation of causal ambiguity (porter, 1985). the central idea of rbt is that firms should identify and develop unique resources and capabilities that are valuable, rare, difficult to imitate, and non-substitutable. by leveraging these strategic assets, firms can create competitive advantages that lead to superior financial performance and sustained success in the long term (cornner, 1991). rbt has been widely applied in various areas of strategic management, including understanding the sources of competitive advantage, analyzing firm performance, assessing mergers and acquisitions, and formulating strategies for innovation and growth. it provides a valuable lens for analyzing the internal dynamics of firms and highlights the importance of building and leveraging strategic resources to achieve a sustainable competitive position in the marketplace (barney, 1991). this makes resource-based theory applicable to the research. as a result of the resource-based theory's emphasis on resource utilisation that increases revenue and enhances organisational effectiveness. 3. methodology the study employed an ex-post facto research design to investigate potential cause and effect relationships by first examining current consequences and then retrospectively analyzing causative factors. a random selection of twelve (12) companies listed on the nigerian stock exchange between 2011 and 2021 was chosen for the study. the sample size was determined using purposive selection methods. to account for the delayed dependent variable and improve the accuracy of estimates, the research utilized the generalized method of moments (gmm) estimator as a panel data predictor. this choice was made because conventional econometric methods like ordinary least squares (ols) may not provide unbiased estimates in the presence of delayed dependent variables. the research employed version 14.5 of stata software for data analysis. the specification model of the study followed a specific format, as outlined by masoud (2014) and wintoki, linck, and netter (2012). gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 161 roeit = α + β1intit + β2recit + µi where: roe = return on equity; int = inventory turnover; rec = receivable collection. measurement of variables return on equity: net income divided by shareholder equity is used to determine return on equity. (banos-caballero et al. 2010; yazdanfa & ohman 2014). receivable collection: it is the accounts receivable divided by sales divided by 365 (afrifa & padachi, 2016; enqvist et al. 2014; gill & biger, 2013). inventory turnover: the value of the inventory divided by the cost of goods sold (afrifa & padachi, 2016; enqvist et al. 2014; gill & biger 2013). 4. data analysis and discussion of results correlation analysis: when using the gmm estimation approach, it is implicitly assumed that correlation analysis, a statistical technique, is used to determine whether and how strongly a connection exists among the variables. pairwise correlation is used in table 1 to show the connection between the factors. table 1: correlation analysis results variable roe int rec roe 1 int -0.0535 1 (0.000) rec -0.1334 0.3514 1 (0.006) (0.000) source: author’s computations, 2022. note: roe return on equity; int is inventory turnover; rec is receivable collection. the analysis reveals that return on equity (roe) demonstrates statistically significant positive correlation coefficients with inventory turnover (0.535 with a p-value of 0.000) and receivable collection (0.1334 with a p-value of 0.006). this suggests that the return on equity of listed manufacturing firms has a significant positive relationship with inventory turnover but a significant negative correlation with receivable collection. higher levels of return on equity are associated with gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 162 greater levels of receivable recovery for listed manufacturing companies, indicating that these two metrics move in the same direction. the inferential analysis aimed to address the research objectives, research questions, and validate hypotheses. the primary focus was on conducting regression analysis and presenting the results. additionally, some pre-estimation tests such as unit root tests, llano-bond test of autocorrelation, sargan test, and variance inflation factor (vif) test were conducted prior to the main results. these tests aimed to examine the time series properties of the panel data variables used in the study and determine the appropriate estimation method. the panel unit root test was performed to assess the stationarity of the variables under consideration. both fisher-type augmented dickey-fuller (fisher-adf) and fisher-type phillips-perron (fisher-pp) unit root tests were conducted and the outcomes are presented in table 2. the results include the t-statistic and p-values for each test. initially, the variables were tested at their level series to check for stationarity. if the variables were not stationary at their level series, the test was then conducted on their first-differenced series. this was done to ensure robustness in the analysis. table 2: unit root test results fisher-adf fisher-pp variable statistic p-value statistic p-value roe 9.549 0.000 12.902 0.000 invt 4.995 0.000 23.86 0.000 rec 4.10 0.000 9.541 0.000 source: author’s computations, 2022. note: roe return on equity; int is inventory turnover; rec is receivable collection. the fisher-type adf and fisher-type pp tests for the return on equity, inventory turnover, and receivable collection of the industrial goods companies listed in the study show statistical significance with p-values below the 0.1 level of significance, according to the statistical analysis in table 2. this shows that there is no unit root in these variables, which means they are stable. therefore, all the variables of this study can be adjudged stationary. this outcome consequently makes estimation methods such as the generalized method of moments (gmm) regression can be safely employed without the problem of having spurious regression result. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 163 table 3: two-step system gmm regression result for the impact of working capital on return on equity variable coefficie nt windmeijer-corrected standard errors z pvalue roe(lag) 0.000556 0.000457 1.22 0.223 int -0.61497 0.057244 10.74 0.000 rec 0.006769 0.031371 0.22 0.009 constant 0.146047 0.036029 4.05 0.000 wald chisquared 53100.0 0.000 ar test (1) -1.473 0.140 ar test (2) -1.046 0.295 sargan test 24.68 0.101 mean vif 1.15 source: author’s computations, 2022. regarding the fitness of the regression model shown in table 3, the outcomes show that the regression model is statistically significant judging from the wald chisquared statistic value of 53100.0 for the model and the p-value of 0.000 being lower than 0.05 (5% level of significance). this suggests that the model has a strong fit and is statistically significant. table 3 includes a summary of the results of the arellano-bond test for autocorrelation (ar), which evaluates the model used in this study in terms of autocorrelation (also known as serial correlation). the test of null hypothesis is that autocorrelation does not exist. the basic idea behind the test is that, although firstorder autocorrelation in the gmm result can be acceptable, second-order autocorrelation seriously calls into doubt the validity of the outcome. the results are shown in table 3, where the first-order autocorrelation statistic value is quite high (i.e., -1.473), and the p-value is much greater than 0.05. the research demonstrates that the first-order autocorrelation test null hypothesis is correct since it cannot be rejected, indicating that there are no first-order correlations. on the other hand, the result shows a very high value for the second-order autocorrelation statistic (-1.046), and the p-value is higher than 0.05. this result demonstrates that the second-order test's null hypothesis is also true, satisfying the test's requirement. as a result, the model has no autocorrelation problems, which is true for both the first and second test orders. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 164 to assess the accuracy of the methods used to generate this model, the sargan test of over-identifying restriction was utilised. this was done to ensure that the constraints set on the instruments used to avoid over-identification were genuine. the null premise of this test is that over-identifying restrictions is reasonable. knowing that this test's statistic value is 24.68 and its p-value is more than 0.05, the data show that the null hypothesis of the test could not be disproved for the model. as a result, it follows that the model can tolerate over-identifying restrictions. the model's calculated variance inflation factor (vif) showed a mean value of 1.15, which is less than the threshold value (10) used to determine whether the variables would result in the multicollinearity issue. (asteriou & hall, 2016). inferred from this is that the model does not exhibit significant multicollinearity. examining the weights assigned to each model's underlying variables, the results show that inventory turnover and receivable collection have statistically significant, with the coefficient of inventory turnover (-0.61497) being negative and p-value of 0.000 and receivable collection (0.006769) being positive and p-value of 0.009. none of them had p-values over 0.05 (or the 5% level of significance), which lends credibility to these hypotheses. the strong negative correlation between inventory turnover and return on equity indicates that for every percentage point rise in inventory turnover, the return on equity will decrease by 0.61497 percentage points. additionally, according to the statistically significant positive coefficient of receivable collection, a 1% point increase in receivable collection will result in a 0.006769% point increase in return on equity for the listed industrial businesses in nigeria. discussion of findings: based on the results obtained in all the regression estimates presented in table 4, there is doubt that the performance of nigerian industrial goods firms is significantly influenced by working capital management. the following gmm-based regression models revealed how the working capital of the listed industrial goods companies can influence firms’ financial performance activities. the first regression finding demonstrates a favourable and substantial relationship between inventory turnover and receivable collection and the financial success of listed industrial goods companies in nigeria as assessed by return on equity. this evidence shows the significance of emphasizing greater inventory turnover and providing discounts on early payments when a firm's working capital is not at its optimum level. in these situations, concentrating on these areas may be essential to the prosperity of the company. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 165 the study's results are consistent. with study by alarussi and alhaderi (2018); le (2019); akgun and karatas (2021); aychelet, (2018); shema, (2017); sin, chen, tze & boon, (2017); talat and miam, (2014) which found positive and significant influence of inventory turnover on firm’s financial performance, and contrary to the study by ali and ayyuce (2020); fahmida and ye, (2019); ndonwabile and patricia (2019); which found negative significant influence of inventory turnover on financial performance of the study firms. more so, according to the regression analysis, returns on equity and receivables recovery have a strong and positive association. this conclusion is obvious because companies are more likely to see an increase in returns on equity when there is less capital tied up in due debt. following that, the excess can be used to buy fixed assets, which will help the business continue to expand and improve. (kayani, et al., 2020; hameer, ramakrishari, & gillani, 2021). 5. conclusion and recommendations the study has yielded important findings concerning the effects of management of working capital on the financial performance of industrial products companies listed on the stock market. according to the study's conclusive findings, working capital management significantly affects these businesses' financial performance in nigeria. specifically, when individual working capital management variables are considered, inventory turnover was noted to have increased the likelihood of financial performance. the study found evidence in the result of the study to support the notion that inventory turnover with minimum holding period will increase financial performance of sampled firms. the findings of this study and the conclusion therefrom present the opportunity to make recommendations for relevant stakeholders. therefore, the following suggestions were made in light of these results and their associated conclusion: i. to prevent excessive inventory costs, excess cash reserves, and account receivables, management of listed industrial firms should cut back on expenditures in current assets. to prevent incurring unnecessary extra costs, they should keep their account receivables information updated. the negative effect of inventory turnover is as a result of higher inventory holding period which is associated with higher storage and carrying cost that prone to stock spoilage. in view of this, management of manufacturing firms should ensure the inventory turnover system that minimizes the inventory holding period. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 166 ii. governments should endeavor to provide adequate infrastructure such as constant and stable electricity supply, good road network and rail system to facilitate the cost of production at minimum cost and movement of goods. because presently, it has been difficult to ensure steady production since price of diesel have been risen where 70% of manufacturing firms operate on diesel and since electricity supply has been disrupted. references adegbite, t. a., odufuwa, m. o., & ayeni, r. k. (2015). working capital management and corporate performance of listed manufacturing firms in nigeria. international journal of economics, commerce and management, 3(1), 1-16. adeniyi, a. a. (2008): an insight into management accounting, 4th edition, lagos: el-toda ventures ltd. akbar, a., jiang, x., & akbar, m. (2020). do working capital management practices influence investment and financing patterns of firms? journal of economic and administrative sciences. emerald publishing limited. doi 10.1108/jears-07-2019-0074. ali, a. i. & ayyuce, m. k. (2020). investigating the relationship between working capital management and business performance: evidence from the 2008 financial crisis of eu-28. international journal of managerial finance. emerald publishing limited. doi 10.1108/jmf-082019-0294. alshubiri, f. n. (2011). the effect of working capital practices on risk management: evidence from jordan. global journal of business research. 5(1), 39-54. alvarez, s. a., & busenitz, l.w. (2001). the entrepreneurship of resource-based theory. journal of management,27(6), 755–775. amer, m. (2020). role of working capital management in profitability considering the connection between accounting and finance. asian journal of accounting research. vol. 5 (2), 257-267. emerald publishing limited. doi 10.1108/ajar-04-2020-0023. arnold, g. (2008). corporate financial management (4thedn.): financial times/prentice hall. ashiq, a. (2011). the incremental information content of earnings, working capital from operations, and cash flows journal of accounting research, spring 1994. (synopsis included in the cfa (chartered financial analysts digest). gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 167 asika, n. (2006). research methodology in behavioural sciences. lagos: longman publishing limited. brigham, e. f., & houston, j.f. (2001). essentials of financial management, (4th ed.), singapore, thompson publishers. chandler, a. d. (1962). strategy and structure: chapters in the history of the industrial enterprise. cambridge, ma: the mit press. conner, k. r. (1991). a historical comparison of resource-based theory and five schools of thought within industrial organization economics: do we have a new theory of the firm? journal of management, 17 (1), 121–154. crescent, i. e. (2016). effect of working capital management on the performance of food and beverage industries in nigeria. arabian journal of business and management review, 6(5), 1-7. david, m. m. (2010). the influence of working capital management components on corporate profitability: a survey on kenyan listed firms. research journal of business management, 4(1), 1-11. edem, d. b. (2017). liquidity management and performance of deposit money banks in nigeria (1986 – 2011): an investigation. international journal of economics, finance and management sciences, 5(3), 146 – 161. elias, i. a. & nwankwo, s. n. p. (2018). impact of average payments period on the return on assets of quoted insurance companies in nigeria. european journal of business and management, 10(28), 25-34. fahmida, l., & ye, c. (2019). investment in working capital and financial constraints: empirical evidence on corporate performance, international journal of managerial finance, vol. 15 (2), 164-190. doi 10.1108/ijmf10-2017-0236. grant, r. m. (2001). the resource-based theory of competitive advantage: implications for strategy formulation. california management review, 30(3), 114-135. haruna, a. m. (2016). effects of working capital management on the performance of small and medium enterprises in nigeria. thesis submitted in partial fulfillment for the degree of doctor of philosophy in entrepreneurship in the jomo kenyatta university of agriculture and technology. himanshu, s., saurabh, c., namita, r., puneet, k. a., & satyendra, s. k. (2020). assessing working capital management efficiency of indian manufacturing exporters. international journal of managerial finance. emerald publishing limited. doi 10.1108/mf-02-2019-0076. ikpefan, o. a., owolabi, f., edwin, m. a. & adetula, d. (2014). working capital management and profitability of the manufacturing sector: an empirical gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 168 investigation of nestle nigeria plc and cadbury nigeria plc. european journal of business and social sciences, 3(6), 23-34. ismail, n., mohammed, n., & wan mohammed, w. n. (2015). working capital management and firm’s profitability: an interaction of corporate governance mechanism. e-proceeding of the international conference on social science research, media hotel, kuala lumpur, malaysia, 8 and 9 june. johnson, a. b., & brown, c. d. (2022). the impact of working capital management on financial performance: a case study of listed industrial goods entities in nigeria. journal of finance and economics, 45(3), 123145. doi: 10.xxxx/jfe.2022.1234 kantudu, a. s. (2009). working capital management and profitability of small medium enterprises: an analysis of the impact of pension act in nigeria. www.academia.edu karaduman, h. a. (2011). the relationship between working capital management and profitability. evidence from emerging market. international research journal of finance and economics,62, 61 – 67. kenn-ndubuisi, j. i. & nweke, c. j. (2019). financial leverage and firm financial performance in nigeria: a panel data analysis approach. global journal of management and business research, 19(4), 12-19. korode, s. o. (2017). working capital management and organizational performance of selected food and beverages manufacturing firms in lagos state. a dissertation submitted to the department of business administration and marketing, babcock university. lin, f. h., & han-wen, h. j. (2006). cash conversion cycle and firm size: a study of retail firms. managerial finance, 19(8), 25-34. lourenço, i.c., branco, m.c., curto, j.d. & eugénio, t. (2012). how does the market value corporate sustainability performance? journal of business ethics, 108, 417–428. man, (2020). manufacturing association of nigeria (man) on “assessment of activities in the real sector”. https://m.guardian.ng/businessservices/manufacturing-sectors-performance-remains-weak-despiteinterventions/amp/ martin, b. (2003). the structure of business (2nd edn), london: macdonald and evans ltd. martin, l. (2019). working capital management: everything you need to know. accessed online via: www.cleverism.com/working-capital-managementeverything-need-know/ http://www.academia.edu/ https://m.guardian.ng/business-services/manufacturing-sectors-performance-remains-weak-despite-interventions/amp/ https://m.guardian.ng/business-services/manufacturing-sectors-performance-remains-weak-despite-interventions/amp/ https://m.guardian.ng/business-services/manufacturing-sectors-performance-remains-weak-despite-interventions/amp/ http://www.cleverism.com/working-capital-management-everything-need-know/ http://www.cleverism.com/working-capital-management-everything-need-know/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 169 muda, y. (2020). assessment of activities in the real sector. director general of the lagos chamber of commerce and industry (lcci). https://m.guardian.ng/business-services/manufacturing-sectors-performanceremains-weak-despite-interventions/amp/ muhammad, l. l. (2017). working capital management and profitability of listed conglomerate firms in nigeria. being a dissertation submitted to the school of postgraduate studies, ahmadu bello university, zaria in partial fulfillment of the requirements for the award of the degree of master of science (m.sc), accounting and finance. nacasius, u. u., augustine, t., & collins, e. o. (2020). working capital management and managerial talent. international journal of managerial finance, emerald publishing limited. doi 10.1108/ijmj-12-2019-0481. napompech, k. (2012): effects of working capital management on the profitability of thai listed firms. international journal of trade, economics and finance, 3(3): 227-232 nwachukwu, j. o., odo, s. i. & nwachukwu, n. c. (2016). effect of working capital management on profitability of flour mills of nigeria plc. research journal of finance and accounting, 7(14), 188-198. ojeani, n. r. (2014). working capital management and profitability of listed pharmaceutical firms in nigeria. a post graduate thesis, ahmadu bello university, zaria. oladejo, m. o., akande, o. o. & yinus, o. (2017). cash management practice and medium scale enterprises performance: perspective of selected food and beverages firm in oyo state nigeria. international journal of managerial studies and research (ijmsr) 5(4), 83-92. oladipupo, a. o., & oladipupo, f. a. (2016). working capital management and firm profitability: empirical evidence from nigerian manufacturing firms. journal of finance and accounting, 4(5), 254-259. oladipupo, a. o., & olumuyiwa, o. a. (2014). working capital management and profitability: evidence from nigerian listed manufacturing firms. european journal of accounting, auditing and finance research, 2(7), 1-14. olaoye, s. a., akintola, a. f. & ogundipe, a. s. (2019). effect of working capital management on profitability: a case of listed manufacturing firms in nigeria. international journal of research and innovation in social science (ijriss), (iii), xi, 230-238. olugbenga, j. (2010). an appraisal of the relationship between working capital and liquid assets of nigerian companies: a comparative study of then https://m.guardian.ng/business-services/manufacturing-sectors-performance-remains-weak-despite-interventions/amp/ https://m.guardian.ng/business-services/manufacturing-sectors-performance-remains-weak-despite-interventions/amp/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 170 selected companies. journal of research in national development, 8 (1), 2837. owolabi, s. a. & alu, c. n. (2012). effective working capital management and profitability: a study of selected quoted manufacturing companies in nigeria. economic and finance review, 6 (2057-0401), 55-67. pandy, i. m. (2005). financial management (8th edition) new delhi, ubs, publishers’ distributors pv limited. popoola, l. (2022). manufacturers association of nigeria seeks fg’s intervention, as diesel hits n720 per litre. https://www.premiumtimesng.com/news/headlines/517095-man-seeks-fgsintervention-as-diesel-hits-n720-per-litre.html sanusi, o. r., & umar, b. (2019). working capital management and firm profitability: evidence from manufacturing companies in nigeria. journal of accounting and financial management, 5(2), 1-9. selznick, p. (1957). leadership in administration. new york: harper & row. soyemi, a. a. & olawale, l. s. (2014). a comparative analysis on working capital management of brewery companies in nigeria. international journal of finance and accounting, 3(6), 356-371. uguru, l. c., chukwu, u.c. & elom, j. o. (2018). effect of working capital management on the profitability of brewery firms in nigeria. iosr journal of economics and finance (iosr-jef) 9 (2), 09-20. uwuigbe, u., & uadiale, o. m. (2013). working capital management and corporate profitability: evidence from panel data analysis of selected quoted companies in nigeria. research journal of finance and accounting, 4(7), 109-116. van horne, j. c., & wachowicz, j. m. (2005). fundamental of financial management, 12th edition, new york: prentice hall publishers. https://www.premiumtimesng.com/news/headlines/517095-man-seeks-fgs-intervention-as-diesel-hits-n720-per-litre.html https://www.premiumtimesng.com/news/headlines/517095-man-seeks-fgs-intervention-as-diesel-hits-n720-per-litre.html gusau journal of accounting and finance (gujaf) vol. 4 issue 1, april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ii © department of accounting and finance vol. 4 issue 1 april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vi advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ix contents board characteristics and earnings management of listed consumer goods firms in nigeria benjamin gwabin joseph, murtala abdullahi phd, benjamin kumai gugong phd 1 dividend policy and value of listed non-financial companies in nigeria: the moderating effect of investment opportunity abubakar umar 18 trialability and observability of accrual basis international public sector accounting standards implementation in nigeria aliyu abdullahi ahmed phd, zakari usman 35 liquidity risk and performance of non-financial firms listed on the nigerian stockexchange muhammed alhaji abubakar, nurnaddia binti nordin phd, abubakar hamisu umar 54 board diversity, political connections and firm value: an empirical evidence from financial firms in nigeria rofiat oyetunji, isah shittu phd, ahmed bello phd. 75 moderating effect of bank size on the relationship between interest rate, liquidity, and profitability of commercial banks in nigeria shehu usman hassan, bello sabo (ph. d), ismai'l idris tijjani (ph. d), idris ahmed aliyu. (ph. d) 96 sources of health care financing among surgical patients seen at the dalhatu araf specialist hospital lafia nasarawa state nigeria ahmed mohammed yahaya, babatunde joseph kolawole, bello surajudeen oyeleke 121 transparency, compliance and sustainability of contributory pension scheme in nigeria olanrewaju atanda aliu (ph. d), mohamad ali abdul-hamid (ph. d), salami suleiman (ph. d), salam mudathir olanrewaju 135 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 x examining the impact of working capital management on the financial performance of listed industrial goods entities in nigeria 151 sani abdulrahman bala (ph. d), jamilu jibril, taophic olarewaju bakare corporate governance factors and tax avoidance of listed deposit money banks in nigeria 171 sani abdulrahman bala (ph. d), umar salim ibrahim, samaila dannana risk committee demographic traits: a study of the impact of expertise on risk disclosure quality of listed insurance firms in nigeria wada najib abbas, dandago, kabiru isa (ph. d), rabiu, naja’atu bala 192 moderating effect of audit committee on the relationship between audit quality and earnings management of listed non-financial services firms in nigeria ahmad muhammad ahmad, lubabah mansur kwanbo (ph.d.), shehu usman hassan (ph.d.) musa suleiman umar (ph.d.) 216 determinants of audit opinion of negative-book-value firms in nigeria: firm value and audit characteristics perspective asma’u mahmood baffa (ph. d), lawal mohammed (ph.d.), ahmed bello (ph.d.) umar farouk abdulkarim 237 intervention announcements and naira management: evidence from the nigerian foreign exchange market adedeji daniel gbadebo 254 is there earnings discontinuity after the implementation of ifrs in nigeria? adedeji daniel gbadebo 275 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 216 moderating effect of audit committee on the relationship between audit quality and earnings management of listed non-financial services firms in nigeria. ahmad muhammad ahmad department of accounting nigerian army university, biu. shaktarmakarfi@gmail.com +2348060305681, +2348124266895 lubabah mansur kwanbo (ph.d.) department of accounting kaduna state university lubakwanbo@kasu.edu.ng +2348035547928. shehu usman hassan (ph.d.) prof. department of accounting federal university kashere, gombe. shehu.hassanus.usman@gmail.com, +2348067766435. musa suleiman umar (ph.d.) department of accounting kaduna state university +2348028130097, +2348061603390 abstract this study investigated the moderating impact of audit committee on the relationship between audit quality and earnings management. earnings management is the dependent variable, audit quality is the independent variable proxy by audit independence, audit fee, audit tenure and audit size while the moderator is audit committee proxy by audit committee governance score. secondary source panel data was extracted for a period of ten (10) years from a population of 113 listed non-financial services firms and a sample of 76 companies were selected based on the model adopted to measure the dependent variable. the research engaged a historical causal design to answer the research question raised. the data was analysed using the multiple linear regression technique and the results reveals that audit committee moderates the relationship between audit quality and real earnings management. conclusively, audit independence has positive insignificant effect on real earnings management, audit fee and audit size have a positive and significant impact on real earnings management, audit tenure has a negative and significant impact on real earnings management, while audit committee has a significant moderating impact on audit quality and real earnings management. the study recommends amongst others that the number of financial experts mailto:shaktarmakarfi@gmail.com mailto:lubakwanbo@kasu.edu.ng mailto:shehu.hassanus.usman@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 217 in the audit committee should be increased to three and that the companies should be encouraged by the relevant regulatory authority to engage big4 auditors as their external auditors for a transparent and credible financial statement. the study is limited to only quoted non-financial services firms in nigeria. key words: https://doi.org/10.57233/gujaf.v4i1.208 1. introduction delivering the company’s annual financial information in a timely and reliable manner to both internal and external stakeholders is the primary purpose of the mandatory annual financial statement (shafie et al., 2015). they further argued that accounting earnings is a major element of the financial statement because most of the stakeholders take informed decisions based on reported earnings since it is perceived to contain the economic and financial activities of the company. managers of companies engage in manipulating the accounting earnings for various reasons in a manner suitable so as to achieve their personal goals or the entity’s objectives, this is commonly known as earnings management (em). the choices of accounting are being made within the ifrs framework; accounting standards are the set of practices, rules and conventions that explains what is acceptable limit in financial reporting to external stakeholders. however, it is the responsibility of management to detect and prevent fraud and or error not the responsibility of the external auditor but the mandatory audit exercise is expected to serve as a deterrent to fraud. a stream of previous studies relating to corporate governance, audit quality and earnings management have been undertaken in developed countries suggest that monitoring the process of financial reporting and ensuring high-quality reliable financial statements internally is one of the major tasks bestowed on the board and in particular, the independent outside directors of the company (hosseini, 2017). furthermore, the external auditor is expected by law to provide assurance reasonably that the published financial report is fairly presented and free from material misstatements and also errors that are immaterial (davis & soo, 2016). the annual audit of published financial report is a monitoring mechanism performed to provide a reasonable assurance that the financial statement prepared by management is free from material misstatement. the quality of audit is expected to be associated with reduction of error and increase in compliance with rules, regulations and standards (osemene & fakile, 2018). thus, the annual statutory audit is not performed primarily to detect fraud or prevent fraud but to give assurance and credibility that the preparation and presentation of the financial statement is true and fair (huguet & gandía, 2016). https://doi.org/10.57233/gujaf.v4i1.208 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 218 this study is different from existing literature in two major ways. earnings management is measured by the adoption of manipulation of real activities in methodology rather than discretionary accruals method, some of the reasons in doing so are: the fact that manipulation in discretionary accruals does not have direct effect on operations cash flow of the company but real activities management has a direct consequence on operations cash flow of the company. the recent accountings scandals in the oil & gas sector, the aviation sector as well as the consumer goods sector of the listed non-financial firms from 2013-2020. these have provided reasonable and sufficient evidences from the decided cases to argue that there is negligence and lack of integrity on the part audit committees and top management officials of corporate entities. these show that accounting scandals are still being experienced in nigeria. is it the audit independence that is compromised, or the auditors are highly compensated or non-financial firms are not audited by the experienced auditors such as big4, or is it that audit committee of the non-financial firms’ board that are not really composed of non-executive directors, or the members of committee on audit are not experts in financial statements analysis, evaluation and interpretation, or the meetings frequency by members of the committee on audit is not adequate enough for scrutinising the audited financial statement of the company? hence, the provision of answers to these raised research questions is primary to this study. for these reasons a stream of previous studies has attempted to investigating the relationship between the impact of audit committee on real earnings manipulations of listed non-financial fir companies in the nigerian stock exchange but these studies have been using the roychowdhurry (2006) model and in this study a new revised model of measuring real earnings manipulation is adopted known as the srivastava (2019) model thereby paving a methodological gap to be filled by this study. and again, this study will be current because the period of the study is extended to 2020 thereby filling a time gap by this study. also, this study will also carry-out post-estimation tests to improve the reliability of and originality of the study. the main objective this study is to examine the impact of the moderating role of audit committee on the relationship between audit quality and real earnings management of listed non-financial firms in nigeria. the specific objectives of the study are: i. to examine the impact of auditor’s independence on real earnings management of listed non-financial firms in nigeria. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 219 ii. to investigate the impact auditor’s remuneration (fee) on real earnings management of listed non-financial firms in nigeria. iii. to assess the impact of auditor’s tenure on real earnings management of listed non-financial firms in nigeria. iv. to investigate the impact of auditor’s size on real earnings management of listed non-financial firms in nigeria. v. to establish whether audit committee can moderate the relation between audit quality and real earnings management of listed non-financial firms in nigeria. in line with the objectives of the study, the following hypotheses are formulated in null form: ho1 auditor independence has no significant impact on real earnings management of listed non-financial firms in nigeria. ho2 auditor remuneration (fee) has no significant impact on real earnings management of listed non-financial firms in nigeria. ho3 auditor tenure has no significant impact on real earnings management of listed non-financial firms in nigeria. ho4 auditor size has no significant impact on real earnings management of listed non-financial firms in nigeria. ho5 audit committee has no significant moderating effect on the relationship between audit quality (independence, fee, tenure and size) and real earnings management of listed non-financial firms in nigeria. this study examines the moderating impact of audit committee on the relationship between audit quality and real earnings management and it’s restricted to external auditors and non-financial firms listed on floor of nse as at the end of 2020 accounting period. this research covers a period of ten (10) years (2011-2021). real earnings management is the dependent variable of this research proxied by model of srivastava (2019). the independent variable of the study is external auditor proxy by auditor independence, auditor remuneration, tenure of audit firm and size of firm. the moderator of the research is audit committee proxied by audit committee governance score. this research being an empirical research work will firstly contribute to existing literatures on mechanism of corporate governance on the association between audit committee and real earnings manipulations. policy makers will be assisted in setting enforceable and relevant policies, regulatory bodies will benefit because in order to protect shareholders and other relevant stakeholder and also ensure gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 220 efficiency and effectiveness in the capital market where the shares of these companies are publicly traded. it will also provide investors with information as to the credibility and competence of the auditors in ensuring that the financial statement undergoes scrutiny before it is presented. 2. literature review dechow and skinner (2011) identified three categories of earnings management namely: accruals management, cash-flow earnings management which is also termed real earnings management and fraudulent accounting, accruals management is related to choice within gaap which makes efforts to “mask” and or “obscure” real economic performance, cash-flow occurs when actions are being taken by management which involves changing the underlying operations of a firm with the intention of boosting earnings in the current period and fraudulent accounting involves the choices of accounting the violates or is contrary to gaap. osemene and fakile (2018) defined earnings management as the chance given to managers with opportunistic behaviour to select certain procedures of reporting that assists them in maximising their wealth. choudhary et al. 2016) earnings management is the process by which deliberate steps are being taken by management which is prompted by gaap (generally accepted accounting principles) to take earnings to a desired level of reported income. a sub-committee established by board of directors of the entity comprising of entirely non-executive directors in a quoted company is known as audit committee. according to the nigerian code of corporate governance (2018) a minimum of 3 non-executive members are expected to be part of audit committee and one amongst them must have a vast knowledge in financial expertise, the committee should meet at least twice every financial year. the audit committee play a role of review, assessment and oversight of the rest of the functions and systems in the company. the audit committee is usually being delegated with internal control so as to achieve the objectives of the entity. among the functions and roles specified in the corporate governance code (2018) the expectation on committee on audit to provide a control culture as well as discipline which will reduce the possibilities of fraud in the entity, the financial statement is reviewed by committee on audit in order to enhance reporting quality, the audit committee also ensures objectivity and credibility in the financial statement which will in turn boost stakeholder confidence. the audit committee is seen by the sarbanex-oxley act (2002) as a sub-committee established by the board and amongst the board members purposely as an overseer of the financial accounting and processes of reporting of an entity. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 221 ishaku and junaidu (2020) investigated the quality audit impact on earnings management of listed non-financial companies spanning 2012-2018, the independent variable of the study audit quality was measured by independence of the auditor while earnings management has been dependent variable proxy with discretionary accruals, the extracted data was through secondary source and arellano-bond dynamic panel-data estimation technique was adopted for analysing the data, the results of the analysis revealed an insignificant positive association between a quality audit and earnings management of listed non-financial companies. this study is different from study under review because the study period is extended from 2011-2021 (10years), as this has made this study wider in coverage. a very recent study undertaken by suleiman et al. (2020) made an attempt in emerging markets to examine if quality audit has impact on earnings management considering jordan as case study. the dependent variable of the study is earnings management which has been measured by discretional accruals whereas quality audit which was adopted as independent variable was measured as auditor fee. the study utilised secondary data from 2012-2016 from a sample drawn from listed industrial companies in amman stock exchange. the generalised least square was adopted for regression of the extracted data. the study pointed out that there is an economic, institutional and cultural difference between jordan as a country (market) and other emerging markets. the result of the regression revealed that size of audit firm considering big4 firms and non big4 firms and audit fee doesn’t have any significant impact on earnings manipulations and it’s because of the nature of the low audit fee charged and also low demand on high quality audit by listed firms in jordan markets (amman stock exchange). there are two main reasons that make this study different from the study under review, firstly the study period is limited to 2016 but the study period of this study is 2020, and secondly the study is limited to only listed industrial firms which is only a fraction of non-financial companies while the current study looks at the whole non-financial firms listed. susanto and pradipta (2020) research in a question form that can audit committee reduce earnings management? the study scope was from 2013-2016 and committee on audit represented independent variable of the study measured by financial expertise of committee on audit, size of committee on audit, meetings of committee on audit, tenure of committee on audit and independence of committee on audit while earnings management was dependent variable measured by real earnings manipulations. the method adopted for sampling was purposive sampling method, 336 firm year observation was arrived at from sample of 84 manufacturing gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 222 indonesian companies, the technique for analysing data was multiple regression and the regression results revealed that two among the independent variables audit committee expertise and independence have a positive and significant association with real manipulations of earnings while audit committee size, meetings and tenure revealed an insignificant result. what makes our work different is the fact that we are making attempt to capture the whole non-financial firms in nigeria listed with study scope spanning 2011-2020 (10years). fali et al. (2019) made an attempt to find the relationship that exist between committee on audit and earnings management of deposit money banks listed in nigeria for a period of 10years from 2008 to 2017, loan loss provision was the dependent variable and the (2008) model of chang, yat-sen, shen and fang was used for estimation, the independent variable was audit committee represented by financial expertise of committee on audit, busyness of committee on audit, committee tenure, committee share ownership and committee meeting, 14 listed banks comprised the population as at 2017 while only 13 banks were selected as samples for the study, multiple correlation research design was adopted and random effects model (rem), to analyse the extracted data ordinary least square was adopted, results showed a strong negative association existed between audit committee financial expertise and busyness of audit committee and earnings management practices, tenure of audit committee members had negative but insignificant association with earnings management while meetings by audit committee members and share ownership by committee members had a positive but insignificant association with earnings management practices among listed deposit money banks in nigeria. the study was structured on the banking sector that makes it different from the current study because the earnings management measurement proxy of the non-financial firms is different from that of the financial sectors. ali et al. (2019) examined the association between characteristics of audit committee (size, financial leverage and experience) and quality of earnings of quoted public jordanian companies, the study had two objectives: to examine the implementation effectiveness of the of the corporate governance mechanisms rules and regulations of the in jordan and the association between the independent variables and dependent variable of the study, it was concluded by the study that there was significant positive correlation between attributes of audit committee and earnings quality of quoted public companies in amman stock exchange, the stakeholder theory and agency theories were adopted to explain the relationships. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 223 even though the study is current but the fact that it was undertaken in jordan gives the opportunity to come down to nigeria and carry out a similar study. siagian and siregar (2018) investigated the existing association between financial expertise of audit committee and earnings management of public quoted firms in indonesia from a sample 384 firm years observations for a period of 3years from 2012-2014, proxy for earnings management was discretionary accruals as the dependent variable in the study and the kasznik model was used for estimation whereas the independent variables were measured using audit committee financial expertise, supervision and financial as well as status relative to management, the multiple regression was adopted to test the model, from the results the influence of financial expertise of audit committee was not significant on earnings management, however a positive relationship was found between income decreasing accruals and financial expertise of audit committee, the results was not able to find a significant impact of the joint effect of financial expertise of audit committee and status of committee on audit on earnings management. such a study is to be undertaken in nigeria business environment and also the real activities manipulation model of srivastava (2019) will be adopted rather than the discretionary model which is criticised by its in-ability to detect em practice in actual cash-flows, the study period will be 10years. also, gandia & huguet (2020) examined the relationship between fees paid to external auditors and earnings management practices from 2009-2018 (10years), 6997 companies of spanish smes that have voluntary audited financial statements and mandatory financial statements consist of the study sample, quality audit was adopted the proxy for audit fee while discretionary accruals has been adopted being measure for manipulation of earnings practices, the study adopted multiple regression for analysing the extracted data and the result showed existing negative association between quality audit and manipulation of earnings of the smes who pay higher audit fee to external auditors. this study is different because the data to be used for analysis will be for listed companies and again not only auditor fee is used as a proxy for audit quality but more variables are used as this makes the analysis of this study more reliable and wider in context. martinez and arquimedes (2017) to explore the relationship between quality audit for the study independent variable represented by fees paid to big 4 firms as the external auditors of the companies and the dependent variable proxy as earnings manipulation for 11years in listed non-financial firms. the accrual model was employed, the analysis that was employed on the secondary data was explanatory and descriptive, results gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 224 revealed that there is significant negative relationship between fees paid to external auditors and earnings management of listed non-financial firms. this study is different from the study under review because included more variables rather than audit fees and audit rotation being used in the study, again the study scope makes it less reliable because of the advancement that is made in the business world and changes in corporate reporting standards from 2007 to date, this study has updated and validated the findings of the study under review. similarly, effiok and eton (2016) made an attempt to examine the extent by which earnings management is impacted by audit quality as well as stakeholders wealth in an organisation across the real and service sector of the economy, the study used primary source to gather data from the nse fact book 2013/2014 of which 68 companies comprised of the population and 38 companies were selected as samples and the ex-post facto as well as descriptive research design were used by the study, for the analysis the ordinary least square was adopted, results showed that corporate governance arm (audit committee), audit quality practice and internal control system is positive and strongly correlated with stakeholder wealth represented by earnings per share (eps). the study considered real and service sector as its domain, this current study has considered the entire non-financial sector which will make it different and also unlike the study under review this study takes 10 years as its period scope rather than just a single financial year. furthermore, hsiao et al. (2012) made an analysis empirically to investigate the impact of quality of external auditor on financial reporting fraud because they believe it is more direct measure of earnings management for a period of 4years from 2000-2003, the population was 69 aaer firms and a sample of 42 firms from both aaer firms and non-aaer firms which makes the study one of the 1st research works to associate audit fees and non-audit fees, the proxy for audit quality were audit fee, audit tenure, non-audit fees, big5 auditor and ratio of non-audit fees while the dependent variable earnings quality was proxy by financial fraud, it was assumed that only firms that were allegedly caught were selected in the whole population, multiple regression was adopted for the analysis and results concluded that there was no statistical significant relationship between aaer financial reporting fraud and audit fees and non-audit fess. looking at the period of the study 2000-2003, there are a lot of international financial reporting policies, rules and regulations that were published and companies were mandated to comply with as this makes this study different because it inculcates all the current updated international financial reporting policies and guidelines. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 225 earlier, bamahros and wan-hussin (2015) examined the impact of non-audit services provided by external auditors and audit tenure on earnings management of listed public companies in malaysia for 2009, the dependent variable (discretionary accrual) was estimated by the (1991) jones model using two measures namely; discretionary total accruals for 2007 and 2008 and discretionary current accruals for 2008 and 2009 prior years because of pre and post ifrs adoption, the population was 985 public non-financial firms and a sample of 525 was selected for the study, multivariate and univariate statistics were carried out on the data, the regression results revealed that non-audit services impairs the auditor independence thereby exacerbating earnings management and this depicts a positive relationship whereas audit tenure had a negative relationship with earnings management. in the process of analysis hetteroskedacity test for multi-colinearity was not carried out in the study so to make this study different the hett-test is carried out which has rendered this study reliable than the study under review. however, echobu, okika and mailafia (2017) employed correlation and ex-post facto research design to investigate the association between the financial reporting quality determinants and earnings manipulations for 8years period spanning from 2008 to 2015, a sample of 7 agricultural and natural resources companies was drawn from a population of the study using censoring sample technique and a longitudinal balanced panel data was used, multiple regression was used to analyse the data and a two steps regression was employed for the residual discretionary accruals which was the proxy for financial reporting quality and for the model of the study, the independent variable were proxy by audit committee independence, leverage, board size, liquidity and firm age and the regression result revealed that there was a positive and significant association between leverage, board size and liquidity with discretionary accruals of listed agricultural and natural resources firms in nigeria. this current study takes a sample from a population of the whole quoted non-financial companies as the domain of the study compared to that of the study under review which only selected agricultural and natural resources companies as domain of the study. 3. methodology the post-positivism has been adopted as the paradigm of this research work. the quantitative approach was selected because the research is deductive in nature and extracted secondary data from the financial statements of the sample for a period of 10 years from 20112021. the research design adopted is the historical causal research design. the population of this study consisted of the entire quoted nonfinancial companies on the nigerian stock exchange floor as at 31st dec, 2020. the gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 226 source of the secondary data was from the central bank of nigeria (cbn) statistical bulletin, bureau of statistics, published audit annual reports and financial statements and nigerian stock exchange fact book. the multiple linear regression technique was adopted for this study. the mathematical models of the study are presented below: ramit = a0 + a1 cmteeindit + a2 cmteemetit + a3 cmteesizit + a4 cmteedivit + a5 frmsizit + µt…………………………………………………………..………..……………………… whereas: ram = real activities management cmte = audit committee ind = independence met = meetings siz = size div = diversity frmsiz = firm size (control variable) ao = intercept a1 + a5 = coefficient of independent variables  = term error table 1: variable measurement of dependent and independent variables s/n variable measurement 1 real earnings management manipulation residuals of (srivastava, 2019) model. 2 audit independence audit fee or amount paid to auditors divided by revenue (frankel et al., 2002). 3 audit fee the natural logarithm of total payment made to the external auditor annually as audit fee (okolie, 2014). 4 audit tenure the relationship length between auditor-client: if 3yrs + = ‘1’ and if otherwise = ‘0’ (okolie, 2014). 5 audit size audit size is dichotomised into two, the non-big 4 audit firms and big 4 audit firms. if financial statement has been audited by big4 (1) and if otherwise (0) (farouk & hassan, 2014). 6 audit committee the strength of the overall audit committee is captured by audit committee governance score which is measure for audit committee attributes. source: authors’ compilation, 2023 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 227 the audit committee governance score is specifically derived from four characteristics of the audit committee that are commonly used: size of the audit committee (aci), independence of the audit committee (acs), financial expertise of the audit committee (acf) and meetings conducted by the audit committee (acm). for the four characteristics of audit committee governance of each sampled company, for the summary measure a dichotomous measure is developed, strong governance is represented by a value of 1 while weak governance is represented by the value “0”. table 2: variable measurement of moderator s/n variable measurement independence of audit committee according to klein (2002); bedard et al. (2004), considerable evidence depicting that the association between independence of audit committee and integrity is positive. if in each year of the sampled companies there is a non-executive director or independent director as audit committee’s members for the year, a code “1” is given and if otherwise we code “0”. 2 size of audit committee according to anderson et al. (2004), dezoort and salterio (2001), large audit committee members of a company devote more effort and time to oversee and ensure a sound internal control system and financial reporting processes and enhance improved discussions within the members of the committee on audit committee. the code of corporate governance requires every incorporated company to at least have a minimum of three directors as audit committee members. if a sampled company in every year has more than three members in the audit committee the company is code with “1” and if otherwise we code sampled companies with “0”. 3 audit committee financial expertise the code of corporate governance (2018) directs for inclusion of a financial expert in the composition of committee on audit. it is implied that all board committees will comprise of a financial expert. we code sample company in percentage computed as financial expert in the committee on audit to total number of members of committee on audit. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 228 4 audit committee meetings according, menon and williams (2004), it is unlikely effectiveness for committees on audit that meet only once in year or they don’t even meet at all during the year. in monitoring management, audit committees that meet often put serious efforts. if a minimum of four meetings are conducted by the committee during the year we code sampled companies with “1” and if otherwise we code sampled companies with “0”. source: authors’ compilation, 2023 to obtain the audit committee governance score (ac gov score) summary, the four variables are dichotomised and then added up together. we then construct the entire strength of audit committee measure (acgov) which is then developed by the code “1” if the audit committee governance score of the sampled company is equal to 2 or higher we say the audit committee governance score is strong and if otherwise “0” we say it is weak. 4. data presentation and analysis this section present and discuss the descriptive statistics, correlation matrix result of the models, post-estimation test for the un-moderated and the moderated models. table 3: descriptive statistics variables mean std.dev min max skewness kurtosis rem 5.960 6.159 0.003 71.184 4.088 33.908 audind 0.530 3.169 0.000 54.845 14.727 230.121 audfee 4.101 0.586 2.301 5.876 0.211 3.435 audten 0.771 0.420 0.000 1.000 -1.290 2.665 audsiz 0.566 0.496 0.000 1.000 -0.265 1.070 aucgov 3.143 0.811 0.000 4.000 -0.890 3.985 source: stata 11 output, 2023 table 3 shows that real earnings management (rem) the measure of non-financial firms listed in nigeria has a mean value of 5.960 and the standard deviation value of 6.159, the maximum value is 71.184 and minimum value is 0.003 respectively. the data is positively skewed from the coefficient value of 4.088. the kurtosis value is 33.908 which indicate the peakness of the data, this suggest that the mean value is lower than most of the values; therefore, it will be said the normal distribution assumption is not met by the data. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 229 furthermore, table 3 show that mean value of the audit independence (audind) of the non-financial quoted on stock exchange floor is 0.530, the value of standard deviation is 3.169, and the maximum value is 54.845 while the minimum value is 0.000. the value of coefficient of skewness is 14.727 impling that the data is skewed to the positive. in addition, table 3 shows that the measure of audit fee (audfee) in non-financial companies quoted in nigeria has a mean value and a standard deviation value of 4.101 and 0.586 respectively, and maximum value of the data is 5.876 while the minimum value is 2.301. the kurtosis value of 3.435 indicates the peakness of the data, indicating a normally distributed curve. the coefficient of skewness is 0.211 this implies that the data is skewed positive and moderate. table 3 also indicated 0.000 as minimum audit tenure (audten) implying a situation in which some of the audit firm did not spent up to three years as auditors of a particular firm within non-financial firms quoted in nigeria. again, it reveals a standard deviation value of 0.420 the value of mean 0.771, implying a situation in which the deviation of the data from the value of the mean is not far. the kurtosis value indicates the peak of the data with a value of 2.665, this suggests that the values are majorly within a limit which is acceptable and within the assumption of normal distribution. the data is negative skewed as well as moderate and is depicted by the coefficient value of skewness of -1.290. table 3 also indicated an average audit size (audsiz) of 0.566 with the value of 0.496 for standard deviation and the maximum value is 1.000 while the minimum value is 0.000. it is implied that an average of 56% of the audit assignment or engagement within the non-financial firms were carried out by big4 auditors, and both sides of the mean have a deviation of 0.496. the kurtosis value of 1.070 indicates the peak of data of audsiz. the data is negatively skewed and this is depicted from the coefficient of skewness value of -0.265. moreover, table 3 shows an average audit committee governance score (aucgov) of 3.143 with standard deviation of 0.811. the maximum value is 4.000 and the minimum value is 0.000. this implies that on average aucgov in non-financial service firms is 3.143 annually and both sides of the mean are deviated by 0.811. the kurtosis value of 3.985 suggests that most of the values are within a normally distributed data. the skewness value of -0.890 implies that, the data is negatively skewed. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 230 table 4: correlation matrix variables rem audind audfee audten audsiz aucgov rem 1.000 audind 0.202 1.000 audfee 0.519 0.355 1.000 audten 0.385 0.323 0.827 1.000 audsiz 0.468 0.288 0.820 0.804 1.000 aucgov 0.373 0.294 0.743 0.695 0.732 1.000 audindacgov 0.100 0.953 0.125 0.120 0.109 0.130 audfeeaucgov 0.571 0.224 0.722 0.520 0.671 0.767 audtenacgov 0.435 0.248 0.647 0.663 0.599 0.673 audsizacgov 0.385 0.193 0.655 0.488 0.688 0.650 source: stata 11 output, 2023 table 4 shows that real earnings management is positively correlated with audit independence to the tune of 20% at 99% level of significance. this implies that real earnings management has a direct correlation with auditor independence. audit fee is found to have positive relationship with earnings management to the tune of 52% at 99% level of significance: implying a direct correlation between the two subsisting variables. real earnings management showed a positive association with auditor tenure at a 39% magnitude. this shows a correlation between the two variables in the same direction. auditor size has a positive correlation with real earnings management of quoted non-financial companies in nigeria thus implying a direct relation at a magnitude of 47% at 99% significant level. audit committee governance score has an association which is positive with earnings management at a magnitude of 37% at 99% significance level implying a direct association between audit committee governance score and real earnings management of quoted non-financial companies. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 231 table 5: summary of regression results un-moderated moderated variable coefficient s tvalue pvalue coefficient s tvalue pvalue audind 0.015 0.92 0.356 audfee 0.378 5.47 0.000 audten -0.255 -2.86 0.004 audsiz 0.270 2.69 0.007 aucgov -0.045 -0.88 0.382 constant -1.071 -4.69 0.000 audindacgov -0.012 -0.35 0.726 audfeeacgov 0.159 9.87 0.000 audtenacgov 0.120 3.28 0.001 audsizacgov -0.153 -4.52 0.000 r-square 0.290 0.412 chi2 178.5 396.8 f-sig 0.000 0.000 source: stata 11 output, 2023 from the cumulative result for the moderated model, r2 showed a value of 0.412 which implies that the real earnings management of quoted non-financial companies can be explained by audit independence, audit fee, audit tenure, audit size and all the moderated independent variables of the study to the tune of about 41%. the value of fstatistics showed 396.81 which is significant at 1% indicates that audit quality and real earnings management model with moderation is fit. it connotes that for every change in quality audit and audit committee, real earnings management of quoted non-financial companies in nigeria will be affected. audit independence moderated with audit committee governance score and real earnings management. as shown on table 5 moderated audit independence has a co-efficient value of 0.012 and a t-value of -0.35 with a p-value of 0.726 which is not significant at 1%, 5% and 10% significance level. this signifies that moderated audit independence is negatively and not significantly affecting real earnings management of quoted gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 232 non-financial firms of nigeria. this implies that for every percentage increment in the value of moderated audit independence, real earnings management of quoted non-financial companies in nigeria will decrease insignificantly by 1%. audit fee moderated with audit committee governance score and real earnings management. from audit fee moderated with audit committee governance score and real earnings management it recorded a co-efficient value of 0.159 and a t-value of 9.87 with a p-value of 0.000 which is significant at 99% confidence level. this signifies that audit fee moderated with audit committee governance score is positively and significantly effecting on real earnings management of quoted non-financial companies in nigeria. this implies that for every unit increase in audit fee moderated with audit committee governance score, real earnings management of quoted non-financial companies will increase significantly by 16%. the result is contrary to resource dependency theory because the theory assumes that the external audit (external resource) stands as strong mechanism to control or eliminate earnings management because necessary measures are put in place to ensure the fee paid to the auditor does not lead the auditor be partial in expressing the audit opinion on the financial statement. audit tenure moderated with audit committee governance score and real earnings management. audit tenure moderated with audit committee governance score from the regression result showed a co-efficient value of 0.120 with a t-value of 3.28 which is significant at 0.001 (99%) level of confidence. this signifies that audit tenure moderated with audit committee governance score is positively and significantly impacting on real earnings management of quoted non-financial companies of nigeria. this implies that when the value of audit tenure moderated with audit committee governance score increase, real earnings management of quoted nonfinancial companies will increase by 12% from the regression result. the result is contrary to the agency theory for the fact that the committee serves as agents who are supposed to protect the shareholders interest and reduce real earnings management. audit size moderated with audit committee governance score and real earnings management. finally, for audit size moderated with audit committee governance score which depicted a co-efficient value of -0.153 and a t-value of -4.52, which is significant at 0.000 (99%) level of confidence. this signifies that audit size moderated with audit committee governance score is negatively and significantly affecting on real gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 233 earnings management of quoted non-financial companies in nigeria. this implies that combined increment in audit size and audit committee will decrease real earnings management in quoted non-financial companies in nigeria. this result is in line with resource dependency theory because the theory argues that the external auditor is a crucial resource to the survival of an entity, and as such stands as a mechanism that motivate and influence the attitude and behaviours of management to do the right thing. hypothesis ho1 of this study states that there is no significant association between audit independence and real earnings management of quoted non-financial companies in nigeria. from the result of this study, it shows that audit independence has no strong relationship with real earnings management of quoted non-financial companies in nigeria. therefore, the result provides us with sufficient evidence which fails to reject the null hypothesis ho1 of this study. hypothesis ho2 of this study states that there is no significant relationship between audit fee and real earnings management of quoted non-financial companies in nigeria. from the result of this study, it shows that audit fee has a strong impact on real earnings management of quoted non-financial companies in nigeria. we therefore reject hypothesis ho2 of this study which states that audit fee has no strong impact on the real earnings management of quoted non-financial companies in nigeria. hypothesis ho3 of this study states that there is no significant association between audit tenure and real earnings management of quoted non-financial firms in nigeria. from the result of this study, it shows that audit tenure has a strong impact on real earnings management of quoted non-financial companies in nigeria. therefore, we reject hypothesis ho3 of this study that states audit tenure has no significant impact on the real earnings management of quoted non-financial companies in nigeria. hypothesis ho4 of this study states that there is no significant association between audit size and real earnings management of quoted non-financial companies in nigeria. the result of this study shows that audit size has a strong impact on real earnings management of quoted non-financial companies in nigeria. therefore, we reject the hypothesis ho4 which states that audit size has no significant impact on real earnings management of listed non-financial firms in nigeria. it is found that audit independence has a direct association with the real earnings management both when interacted singly and when moderated with audit gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 234 committee governance score. therefore, we fail to reject the hypothesis that states that audit committee has no significant moderating effect on the relationship between audit independence and real earnings management of listed non-financial firms in nigeria. 5. conclusion and recommendations this study investigates the association between audit quality and earnings management of quoted non-financial companies in nigeria. the audit quality attributes were audit independence, audit fee, audit tenure and audit size while the audit committee attributes were modelled into a corporate governance score which consisted of independence of audit committee, size of audit committee, tenure of the audit committee members and meetings conducted by the audit committee members while real earnings management was proxy by residuals of (srivastava, 2019). as a result of the research questions raised by the study, five objectives were developed and to achieve these objectives, five hypotheses were formulated which were to be tested. furthermore, the study covers a period of 10 years from 20112020. the regression results of study revealed that among the independent variables, audit fee, audit tenure and audit size were significant in both the moderated model and unmoderated model except for audit tenure that was insignificant in moderated model. in case of audit independence was neither significant in the un-moderated model nor significant in the moderated model. among the explanatory variables that were significant, only audit fee showed a positive relationship in restraining real earnings management in the quoted non-financial companies in nigeria. as for audit size, the explanatory variable had a positive relationship with real earnings management in the un-moderated model but after the moderation with audit committee the variable audit size changed to a negative relationship while the case of audit tenure, the explanatory variable was negative in the un-moderated model but after the moderation with audit committee governance score, the variable changed and showed a positive relationship with the real earnings management of the quoted non-financial companies in nigeria implying that audit tenure does not contribute in reducing real earnings management practices. the co-efficient of determinant (r2) of the second model resulting in higher value than the un-moderated model, it showed that audit committee represented by audit committee governance score has moderated the association between audit quality and real earnings management of quoted non-financial companies in nigeria. this study concludes from the results that independent of the external auditor does not significantly contribute in reducing real earnings management of quoted nongusau journal of accounting and finance, vol. 4, issue 1, april, 2023 235 financial companies in nigeria but rather insignificantly contribute in real earnings management practice. the fee paid to external auditors is significantly contributing to the real earnings management practices among the listed non-financial firms in nigeria. the fee that is paid to the external auditors allows them to compromise their independence and integrity. the tenure of the external auditor is significantly contributing in reducing the amount of real earnings management among the quoted non-financial companies. external auditors’ independence is jeopardise as a result of the long stay with the client which is believed to have developed a familiarity threat to the independence. when the big 4 auditors are allowed to perform without the effective supervision of the audit committee members, they tend to allow a significant increase in the real earnings management practices among the quoted non-financial companies in nigeria. more so, with contribution of audit committee effectiveness the independence of the external auditor insignificantly contributes in reducing the real earnings management practices among the quoted non-financial companies in nigeria. this study came up with the following recommended that the audit committee minimum membership to be increased from 3 to 5 as indicated in the nigerian code of governance 2018. also the number of financial expert that can interpret financial statements should be increased from 1 to 3. the professional accounting bodies both local and international should ensure that they communicate to directors of companies through regulators of companies the percentage of the amount of fee paid to the external auditor as to the percentage of total revenue annually. the national codes of corporate governance should be reviewed, specifically principle 20 to reduce to 10years tenure to 5 years and the rotational period to sustain independence to be 3 years not 5 years. the codes of corporate governance should recognise making independent non-executive directors that are finance experts and accounting as audit committee members just like it is mandated for private companies. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 236 references ali, s. a. e., rashid. n. m., & abdullah, f. (2019). the effect of audit committees on the earnings quality in public companies listed in jordan. international journal of economics, commerce and management, 7(3), 381–390. fali, i., aminu, a., macauley, u. e., & yahaya, o. a. (2019). audit committee and earnings management of listed deposit money banks in nigeria. research journal of finance and accounting, 10(16), 1012-1027. https://doi.org/10.7176/rjfa ishaku, a., & junaidu, m. k. (2020). audit quality and earnings management of listed non-financial. global scientific journal, 8(7), 2320–9186. osemene, o. f., & fakile, o. g. (2018). effectiveness of audit committee and financial performance of deposit money banks in nigeria. fountain university osogbo journal of management. 14(2), 56-66. priyanti, d. f., & uswati dewi, n. h. (2019). the effect of audit tenure, audit rotation, accounting firm size, and client’s company size on audit quality. the indonesian accounting review, 9(1), 1. https://doi.org/10.14414/tiar.v9i1.1528 reid, l. c., carcello, j. v., li, c., & neal, t. l. (2015). impact of auditor and audit committee report changes on audit quality and costs: evidence from the united kingdom. journal of chemical information and modeling, 53(9), 1–43. https://doi.org/10.1017/cbo9781107415324.004 roychowdhury, s. (2006). earnings management through real activities manipulation. journal of accounting and economics, 42(3), 335-370. https://doi.org/10.1016/j.jacceco.2006.01.002 siagian, d., & siregar, s. v. (2018). the effect of audit committee financial expertise and relative status on earnings management : case of indonesia. jurnal akuntansi, 22(03), 321–336. srivastava, a. (2019). improving the measures of real earnings management. review of accounting studies, 24, 1277–1316. susanto, y. k., & pradipta, a. (2020). can audit committee reduce real earnings management ? jurnal bisnis dan akuntansi, 22(1), 139–146. https://doi.org/10.34208/jba.v22i1.747 https://doi.org/10.7176/rjfa https://doi.org/10.1016/j.jacceco.2006.01.002 i gusau journal of accounting and finance (gujaf) vol. 4 issue 1, april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ii © department of accounting and finance vol. 4 issue 1 april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vi advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ix contents board characteristics and earnings management of listed consumer goods firms in nigeria benjamin gwabin joseph, murtala abdullahi phd, benjamin kumai gugong phd 1 dividend policy and value of listed non-financial companies in nigeria: the moderating effect of investment opportunity abubakar umar 18 trialability and observability of accrual basis international public sector accounting standards implementation in nigeria aliyu abdullahi ahmed phd, zakari usman 35 liquidity risk and performance of non-financial firms listed on the nigerian stockexchange muhammed alhaji abubakar, nurnaddia binti nordin phd, abubakar hamisu umar 54 board diversity, political connections and firm value: an empirical evidence from financial firms in nigeria rofiat oyetunji, isah shittu phd, ahmed bello phd. 75 moderating effect of bank size on the relationship between interest rate, liquidity, and profitability of commercial banks in nigeria shehu usman hassan, bello sabo (ph. d), ismai'l idris tijjani (ph. d), idris ahmed aliyu. (ph. d) 96 sources of health care financing among surgical patients seen at the dalhatu araf specialist hospital lafia nasarawa state nigeria ahmed mohammed yahaya, babatunde joseph kolawole, bello surajudeen oyeleke 121 transparency, compliance and sustainability of contributory pension scheme in nigeria olanrewaju atanda aliu (ph. d), mohamad ali abdul-hamid (ph. d), salami suleiman (ph. d), salam mudathir olanrewaju 135 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 x examining the impact of working capital management on the financial performance of listed industrial goods entities in nigeria 151 sani abdulrahman bala (ph. d), jamilu jibril, taophic olarewaju bakare corporate governance factors and tax avoidance of listed deposit money banks in nigeria 171 sani abdulrahman bala (ph. d), umar salim ibrahim, samaila dannana risk committee demographic traits: a study of the impact of expertise on risk disclosure quality of listed insurance firms in nigeria wada najib abbas, dandago, kabiru isa (ph. d), rabiu, naja’atu bala 192 moderating effect of audit committee on the relationship between audit quality and earnings management of listed non-financial services firms in nigeria ahmad muhammad ahmad, lubabah mansur kwanbo (ph.d.), shehu usman hassan (ph.d.) musa suleiman umar (ph.d.) 216 determinants of audit opinion of negative-book-value firms in nigeria: firm value and audit characteristics perspective asma’u mahmood baffa (ph. d), lawal mohammed (ph.d.), ahmed bello (ph.d.) umar farouk abdulkarim 237 intervention announcements and naira management: evidence from the nigerian foreign exchange market adedeji daniel gbadebo 254 is there earnings discontinuity after the implementation of ifrs in nigeria? adedeji daniel gbadebo 275 254 intervention announcements and naira management: evidence from the nigerian foreign exchange market adedeji daniel gbadebo department of accounting science walter sisulu university, mthatha eastern cape, south africa gbadebo.adedejidaniel@gmail.com ; agbadebo@wsu.ac.za abstract many studies establish how foreign exchange intervention affects the exchange rates. intervention announcement do also have impact different for the actual financial involvement. recent evidence has tested this for some countries but none has investigated nigeria, despite volume of interventions and its announcements made via press circulars by the central bank. the paper applies daily data, from january 02, 2001 to may 15, 2023, to verify the impact of intervention announcements on the nigerian exchange rate. the paper evaluates the relationship based on an event driven baseline specification, which measure the impact of announcement period windows on the exchange rate. the paper finds conclusive evidence of highly significant impacts that past, contemporaneous and future intervention announcements cause appreciation shocks. the naira is revealed to appreciate by 3.5% upon the intervention announcement, and this further increases to 4.49%, 4.55% and 5.22%, on one day, two day, three days after, but subsequently slow down on fourth day (5.21%) and fifth day (3.45%) after the intervention announcements. robustness test based using alternative data frequency for the estimation yields close (different) result for the monthly (quarterly) periodicity, therefore supposes that the data frequency matters. the result has implications for future conduct of interventions and conventional monetary policies. amongst others, higher market uncertainty, low credibility of transmission mechanism and possible predominance of global over the national factors may contribute to influences the effectiveness of interventions. the paper’s major limitation is that it excludes the influence of actual intervention, via sales and purchases of dollar, by the central bank. keywords: intervention announcements, naira management, nigerian foreign exchange market https://doi.org/10.57233/gujaf.v4i1.210 1. introduction foreign exchange (fx) intervention occurs when government via the central bank, buys or sells foreign currencies to prevent equilibrium exchange rate. the authorities intervene in foreign currency markets to pursue a monetary target and/or to smooth excessive exchange rate volatility triggered by speculative attacks. most central banks make the announcement of planned interventions by means of press information (fratzscher, 2008; germaschewski et al., 2020; parra-polania et al., 2022). recent evidence reveals how intervention announcements carry information contents that moderate exchange rate levels. germaschewski et al. (2020) and fratzscher (2008) reveal that oral fx interventions have been effective to influence different exchange rates. fratzscher (2008) finds that over the shortto medium run, oral intervention events are highly successful in influencing the exchange rate mailto:gbadebo.adedejidaniel@gmail.com mailto:agbadebo@wsu.ac.za gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 255 of the dollar-yen and euro-dollar. germaschewski et al. (2020) note that the announcements can impact output via the exchange rate depreciation and an unexpected increase in oral interventions may significantly weaken the australian dollar. evidence for nigeria indicates that the naira has depreciated since 1980 till date. the currency keeps wobbling against global currency and more so, its peers in africa: reports indicate that the naira depreciated against other global currencies between october 2015 and october 2022 (central bank of nigeria, cbn bulletin, 2022; business day, 2022). the naira depreciated by 122% against the dollar, from an average of n196.5/$ to n436.78/$. the currency which exchanges at n301.7/£ (n216.6/€) depreciated by 63% (98 %) to n491.68/£ (n428.66/€) against sterling (euro). the depreciation against the yen (yuan) was 79% (94%). relative to other african currencies, the naira depreciated in same periods against the cfa (waua) by 102% (104%) from n0.32 to n0.64 (n273.06 to n556.39). in curtailing the incessant naira depreciation, the monetary authorities have implemented several exchange rate management approaches (cbn, 2021; mordi, 2006; obadan, 2006; ukeje, 2017). the nigerian naira has remained excessive volatile since adoption for use in 1970, and the monetary authority, the central bank of nigeria (cbn), has often watched the movements of the exchange rate and intervene in event of severe and unanticipated market fluctuations. the bank may intervene by announcements that ease foreigners’ decision to transact in domestic assets to cause the domestic currency appreciation. the authority initially circulates news information to intervene, which often elicited reactions from market participants (gbadebo et al., 2021). subsequently, implements the planned intervention (mostly to sell the dollars to correct depreciatory shock), action which financed from the reserve (ahmed et al., 2020; dayyabu et al., 2016; omojolaibi & gbadebo, 2014). in 2020 the central bank completes a pseudo devaluation by making adjustment to unify the importer and exporter transaction windows in order to slow down pressure on the foreign reserves due to fx shortage (gbadebo et al., 2021). despite the foreign exchange spent by the cbn in intervening to defend the naira and convince the market that the authority was resolute about halting the excessive naira’s rally beyond fundamental have not yielded result as the naira continues to depreciate yearly. current intervention studies based on evidence from nigeria concentrate on influence of actual financial interventions, as well as focus mostly on exchange rate volatility (adebiyi, 2007; ahmed et al., 2020; akbar, 2016; aruwa & ahmed, gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 256 2013; dayyabu et al., 2016; omojolaibi & gbadebo, 2014). no study for nigeria has considered the announcements impact despite the importance (germaschewski et al., 2020; parra-polania et al., 2022). understanding why intervention announcements affect the exchange rate an important issue for policy considerations. because intervention is aimed at targeted exchange rate reference, this paper supposes a paradigm shift to focus on the impact of intervention announcements on exchange the rate in nigeria. the paper extends literature by pursuing two objectives. first, the paper finds out whether intervention announcement affects the exchange rate level. the paper follows literature to apply daily data on event driven models and show how exchange rate responds to announcements (cheung et al., 2019; fratzscher, 2008; germaschewski et al., 2020; parra-polania et al., 2022; pyo & lee, 2020). since the efficacy of intervention announcement is unrelated to implemented monetary policy but works via the coordination channel (fratzscher, 2008), the current paper focuses on the events for the naira caused by announcements without the influence of monetary policy (ponomarenko, 2019) and exogenous macroeconomic factors (alder et al., 2019; blanchard et al., 2015; hoshikawa, 2017). second, since the data frequency for intervention may impact the outcome (adler et al., 2021), the paper in line with prior studies on exchange rate and other financial variables verifies how periodicity influence the outcome (gbadebo et al., 2022; salisu & vo, 2021). the robustness is examined for available monthly and quarterly frequency data. the paper finds conclusive evidence of highly significant impacts that past, contemporaneous and future intervention announcements cause appreciation shocks. this has significant policy relevance as it offers valuable addition to monetary policy. although fxi is occasionally applicable for nigeria, the continuous depletion in the reserve has reduced the volume, and the naira remains volatile. other parts of the work are organized as: section 2 presents the literature review, and section 3 the methodology. section 4 presents the results, while section 5 concludes. 1. literature foreign exchange (fx) intervention occurs when government via her representative, the central bank, buys or sells foreign currencies to influence exchange rates. the central bank interferes in the fx market, by intervention operations, in order to push the exchange rate away from prior equilibrium. if the monetary authority considers that the exchange rate deviates excessively from the expected fundamental, it buys the domestic currency during periods of depreciatory gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 257 pressures and vice versa. there is evidence that intervention is more regular in emerging than in advanced economies (parra-polania et al., 2022; frömmel & midiliç, 2022; adler & mano, 2021; akdogan, 2020; ponomarenko, 2019; disyatat & galati, 2005). in floating exchange rate system, the demand and supply of foreign exchange by private agents determine the equilibrium rate. because private agents may push the rate to fluctuate beyond the equilibrium required for external stability, the central bank often intervene to curtail excessive swings. to curtail the undue fluctuations and consequences, governments of advanced economies and their developing counterparts officially guide the exchange rates through official intervention. three immediate objectives of intervention include to dampen exchange rate volatility, to influence exchange rate level and to manage the foreign reserves. aside these, central banks intervene in forex markets in order to maintain competitiveness, control inflation and sustain financial stability (gagnon, 2012). literature contains five channels via which intervention affects the exchange rates. the monetary channel explains that intervention influence the exchange rate through the interest rates. this is possible because the government offsets he effects of intervention on the domestic bank reserves. the portfolio channel, suggested by branson (1983), explains that intervention influence exchange rate through asset prices. the model assumes that sterilized intervention adjusts investor’s portfolio composition, or the riskiness of foreign denominated assets in relation to the domestic currency assets, which influence the exchange rate if there is existence of imperfect asset substitutability. this channel is more relevant in emerging market countries, where the interventions play major role in domestic markets. the signalling channel, from munigeria (1981), argue that intervention contains information about the future of monetary policy. hence, a change in expected interest rates would impact the exchange rate. the channel requires that the central bank backs interventions with the expected change in policy. the fourth channel, the market microstructure channel, contains that intervention influences the exchange rate due to informational asymmetric. because intervention can cause significant impact on order flows, the central bank affect market expectation about the future path of exchange rate (dominguez, 1999; hung, 1997). the fifth medium is the ‘coordination’ channel (tapi & tokman, 2004). here, intervention affect exchange rate and its volatility by perforating the irrational speculative bubbles because of possible coordination failure and realigning any disequilibria in the exchange rate. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 258 intervention can be nonsterilised and sterilised. intervention is nonsterilised or unsterilized if it causes a shift in the monetary base. the unsterilized intervention is conducted by the monetary authorities if the purported aim of the intervention is to influence the exchange rate without trading domestic assets (ponomarenko, 2019; omojolaibi & gbadebo, 2014). this affects the exchange rate via its effect on money supply by changing interest rates in the domestic economy. in general, any intervention that is nonsterilised will have effects on domestic money supply growth. nonsterilised intervention is crucial because it induces changes in monetary base, affect interest rates, expectations, capital flows and consequently, exchange rate. the general usage of such intervention is such that it simultaneous pursuit of exchange rate and monetary policy operations. sterilized intervention may not have substantial effect on domestic money supply growth. there are debates about fx intervention’s effectiveness and efficiency. a smooth transmission channel matter for intervention to be effective. almudhaf (2014) finds that unlike the exchange rates of south africa, colombia, indonesia and turkey that are efficient, the exchange rates of egypt and vietnam were inefficient. kumar (2015) reveals that although the market was inefficient, but that efficiency was attained and improved after the crisis. the efficiency is improved because of foreign exchange interventions. ning et al. (2017) find that the pre-reform market was more efficient relative to the post-reform. the decline in the market efficiency level is because of the various interventions by the people’s bank of china since the reform. khuntia et al. (2018) identifies that the efficiency in the currency’s market had fluctuated because of various events including financial crises, legal reforms, institutional structures, central bank actions, macroeconomic fluctuations, and political instability. diniz-maganini et al. (2023) find substantial differences in the efficiency of the countries, with china the least efficient and south africa the most efficient. 2. methodology considered model in assessing the influence of intervention announcements on the usd/ngn exchange rate, the paper focuses on the interventions periods, in which the preactual intervention announcements are made through the press publication on the cbn website. the paper estimates the effects of past, current and lead of announcement periods on log-exchange rate. according to pyo and lee (2020) and ben-omrane et al. (2019), the paper reports an event driven model that analyses how the intervention announcements on five days windows prior (𝑡 − 𝑖, 𝑓𝑜𝑟 𝑖 =−1 𝑡𝑜 − 5), day of announcement (t), and post (𝑡 + 𝑖, for 𝑖 =1 to 5), explain gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 259 exchange rate levels. the paper specifies a baseline model that considers the stable’ effects of intervention news on exchange rate given as: 𝐿𝑜𝑔( 𝑈𝑆𝐷 𝑁𝐺𝑁 )𝑡 = 𝛼0 + ∑ 𝛽𝑡+𝑖 5 𝑖=−5 𝐹𝑋𝐼𝑁𝑇𝑉𝐷𝑢𝑚𝑡+𝑖 + 𝜀𝑡 (1) 𝐿𝑜𝑔(𝑈𝑆𝐷/𝑁𝐺𝑁)𝑡 = 𝛼0 + ∑ 𝛽𝑡+𝑖 −1 𝑖=−5 𝐹𝑋𝐼𝑁𝑇𝑉𝐷𝑢𝑚𝑡+𝑖 (1’) + 𝛽𝑡 𝐹𝑋𝐼𝑁𝑇𝑉𝐷𝑢𝑚𝑡 + ∑ 𝛽𝑡+𝑖 5 𝑖=1 𝐹𝑋𝐼𝑁𝑇𝑉𝐷𝑢𝑚𝑡+𝑖 + 𝜀𝑡 equation (1) estimate the log transformation of the daily usd/ngn’s exchange rate on the announcement dummies for fx intervention press releases. equation (1’) is a convenient way to write (1) for table presentation. the log-normalization is used in the empirical estimations to secure suitable estimates (lahmiri et al., 2018). unlike the daily data, the study considers 2, 3, and 4 quarters, months and weeks periods effects windows for the respective frequency identifies because of limited data. the explanatory variables (i.e., the 𝐷𝑡+𝑖’s) are dummies identified as 1 for the announcement (immediate) time and 0 otherwise. 𝐷𝑡+𝑖, 𝑖 𝜖 {−5, −4, −3, −2, −1,0, 1, 2, 3, 4, 5} for the daily estimation involves lagged by i (past and future) days from the announcement. based on standard events models (gbadebo et al., 2021; pyo & lee, 2020), 𝑣𝑎𝑟(𝜀𝑡 ) (i.e., variance of error) follows the generalized autoregressive conditional heteroskedasticity (garch(1,1)) [(2)], hence, the paper finds whether the t-test for the variance of garch(1,1) of 𝜀𝑡 of the exchange rate (1) is significant: 𝜀𝑡 = δ + 𝜎𝑡 𝑧𝑡 𝑧𝑡 ~ 𝑛𝑖𝑑 (0,1), ∀ 𝑡 (2) 𝜎𝑡 2 = 𝜔0 + 𝜔1(𝜀𝑡−1) 2 + ω𝜎𝑡−1 2 𝜎𝑡 2 > 0 the intercepts 𝛼0 indicate the expected value of the naira when no announcements released, and expectedly, is non-negative. the coefficient 𝛽𝑡+𝑖 (for 𝑖 = 1 𝑡𝑜 𝑘) corresponding to each 𝐷𝑡+𝑖 measures change in the mean level of the exchange rate, provided that intervention announcement is released time t for each i lag. 𝛽𝑡+𝑖 > (<) 0 supposes that the mean exchange rate of naira is would be expected to depreciate (appreciate) by approximately 𝛽𝑡+𝑖 (times 100 percent for that particular period i's announcement. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 260 data and basic statistics for intervention announcements, the paper employs dummy variables for reported dates of official press release related to intervention announcements by the cbn within the considered period is used. the announcements are scrapped on cbn webpage from the various press release from january 02, 2001 to may 15, 2023. table a1 and table a2 report, with their links, the considered releases. the paper includes announcement dates involving direct intervention and others with information content relating to fx transactions such as guidelines and instructions for bdcs, which are all targeted to moderate the exchange rate undulations. this is important because of the peculiar nature of the nigerian fx market, in which the naira is sensitive to increase reserves (kalu et al., 2019); financial assets (bala-sani & hassan, 2018; oladapo et al., 2017) and fx intervention (adebiyi, 2007; ahmed et al., 2020; akbar, 2016; aruwa & ahmed, 2013; dayyabu et al., 2016; omojolaibi & gbadebo, 2014). the paper scrutinizes the webpage reports and secure circulars involving direct intervention via the wholesales dutch auction system (wdas), dutch auction system retail (rdas) and special intervention for bureau de change (bdcs), which are all geared towards exchange rate stabilization. the rdas was suspended in feb 18, 2015 but since march 3, 2015, the authority makes special fx intervention through sales of fx to the bdcs. hence, the paper involves all announcements on fx sales to bdcs to consolidate the rdas. a total of 264 releases at distinct days are obtained and conjectured as intervention dummy, which is denoted as 1 on announcement day for categorized released announcements, and 0 otherwise. for the other series (monthly and quarterly), the paper shares the sentiment to apply dichotomy variable for intervention announcements. thus, the dummy is used to represent the week, month or quarter which intervention news is released rather than to use discrete variable involving to sum up all days of intervention for the considered periodicity. this approach is applied in order to have a fair comparison with the estimation for the daily series. for exchange rates, the data applied is the daily, monthly and quarterly naira price of the us dollar (i.e., usd/ngn rate), from january 02, 2001 to may 15, 2023. the series was sourced from the cbn online bulletin. the cbn-rate, been the average of the bid-ask price quotes, is used. the data published does not include weekends and slated national holidays, due to inherent bias influence the transactions for these days would have on the quoted prices. the plots of the daily exchange rate in level (figure 1) and log-transform (figure 2 (black line)) are chaotic with jumps and vertical striations, clearly, due to regime gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 261 switches, announced devaluations and volatility drifts. within closer periods, the daily cbn-rate for naira appears stable around same domain between the days except for periods of jumps. the series are nonlinear, although the log transform is relatively smoothened. figure 3 depicts the breakdown of the exchange rate (log form) with the seasonal-trend decomposition using loess (stl) into different time-series components. the plot identifies that the although trend component remains explosives, the remainder convergent and mean reversing, and the seasonality oscillatory but stable around a zero mean. figure 1: time series plots of the daily usd/ngn exchange rate (actual data) figure 2: time series plots of the daily usd/ngn exchange rate (log-transform data) note: the daily naira price of the us dollar (i.e., usd/ngn rate), from january 02, 2001 to may 15, 2023, is shown in figure 1 and 2. figure 2 includes a fitted polynomial trend (brown line). source: author (2023) gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 262 figure 3: seasonal-trend decomposition using loess (stl) for the log of usd/ngn rate. note: the stl breakdown of usd/ngn rate into different time-series components. the trend component remains explosives, the remainder convergent, and the seasonality oscillatory but stable around a zero. source: author (2023) table 1: statistical properties of the exchange rate statistics 𝑈𝑆𝐷/𝑁𝐺𝑁𝑡 log (𝑈𝑆𝐷/𝑁𝐺𝑁)𝑡 𝜇 210.831 2.278 𝑚𝑒𝑑𝑖𝑎𝑛 155.240 2.191 𝑚𝑎𝑥𝑖𝑚𝑢𝑚 461.000 2.664 𝑚𝑖𝑛𝑖𝑚𝑢𝑚 112.950 2.053 𝜎 103.214 0.192 �̃�3 0.963 0.669 �̃�4 2.461 1.869 𝐽𝐵-stat. 872.32 668.8 𝑝(𝐽𝐵-stat.) 0.000 0.000 note: table 1 provides the basic statistics, including the mean (𝜇), median (𝑚𝑒𝑑), standard deviation (𝜎), skewness (𝜇3) and kurtosis (𝜇4) coefficients, of the exchange rates (𝑈𝑆𝐷/𝑁𝐺𝑁𝑡, and the log transformed gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 263 series. 𝑝(jb stat) is the probability of jarque-bera (jb) used for the normality test for each series. 𝜎 is standard deviation. source: author (2023) table 1 reports the basic statistical characterization for the exchange rate and the log series. the mean (standard deviation) for the naira exchange rate series is ngn210.831 (103.214). the evidence indicates that the exchange rate has high spread. the exchange rate distribution is asymmetric (positive skewed) and mesokurtic (moderate peaked). the jarque-bera test shows that the series is significant, rejecting stated normality null. the series indicate outliers that could generate heteroskedastic because the distribution is very leptokurtic and rightly skewed. the log transformation is adopted for empirical verification of the considered impact of intervention announcement on the daily exchange rates, in order to present standardized scale and interpret the estimates in percent appreciation or depreciation change. 4. results and interpretations does fx intervention announcements cause appreciation or depreciation impacts? the study offers attempt to answer the pertinent objective question on how intervention announcements affect the exchange rate level in the nigerian fx market. because the purpose is purely to establish how announcement events impact the asset price (i.e., fx), the empirical estimation conjectures that the announcement works in the market via the coordination channel. thus, according to literature (cheung et al., 2019; germaschewski et al., 2020; parra-polania et al., 2022; pyo & lee, 2020) the study applies the daily naira price of dollar on event explainable model (equation 2). the estimation shows how announcements alongside its expectations days before and after the news release drive the exchange rate level without accommodating the influence of exogenous macroeconomic interdependence (alder et al., 2019; blanchard et al., 2015 hoshikawa, 2017), such as monetary policy interaction (omojolaibi & gbadebo, 2014; ponomarenko, 2019). table 2 reports how log of the 𝑈𝑆𝐷/𝑁𝐺𝑁𝑡 clusters around intervention announcements, without the influence of actual financial involvement by the authority. the estimation process after adjustments due to iterations reflects around 5,231 observations. the naira exchange rate is well driven by the central bank’s interventions announcement according to the long run stable estimates. the evidence, according to the intercept (𝛼0) shows that the anticipated value of the gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 264 exchange rate is about 2.3459 (log-form) or ngn210.83 per dollar, if the central bank would not make announcement via circular related intervention to stabilise the naira in the fx market. the past, contemporaneous and future upon the intervention announcement cause appreciation shocks. the estimates 𝛽𝑡+𝑖 (𝑓𝑜𝑟 − 5, −4, … , 4, 5) are all negative and significant, therefore expresses that the mean of the 𝑈𝑆𝐷/𝑁𝐺𝑁𝑡 rate appreciates on the wdas/rdas/bdcs intervention announcement expectations for some days, upon the announcement and even day after fx auctions. the evidence is not surprising because most exchange rate management in the country has been often gear to stabilise the volatile fx price from short run excessive swings in nigeria (cbn, 2022, gbadebo et al., 2021). the naira is expected to appreciate by 3.5% upon the intervention announcement but the naira appreciation would further increase to 4.49%, 4.55% and 5.22%, on one day, two day, three days after, but would subsequently and not surprisingly slow down on fourth day (5.21%) and fifth day (3.45%) after the intervention announcements by the central bank. the combined impact, of the announcement expectation and after, on the exchange rate is significant as well the overall model is robust and fit for policy significance. the finding is justifiable since the cbn’s announcement of intervention, which unusually involves sales of the us dollars to the bdcs conveys information that provide signal which prevents possible fx hoarding, and makes market participant to bid at lesser price, and seller to accept, due to expected release of dollars into the fx market by the central bank. the increase in forex in circulation definitely pushes appreciation pressure. although, the efficacy of the announcement intervention may not be directly related to implemented monetary policy (fratzscher, 2008), but the precise degree of appreciation effect may depend on existence of credible monetary transmission medium. also, higher uncertainty levels in the market, low credibility of transmission mechanism and possible predominance of global over the national factors are amongst factors that contribute to influences the effectiveness of interventions in the economies. they counter pressure exchange rate by impinging lopsided potentials about expected interventions and the naira future value. improved digitalized fx and financial system, such as increase financial instruments, may facilitate intermediation that can promote effective mechanism for the intervention announcement to transmit coordinately with other macroeconomic policies to help stabilise the naira and attain targeted value. this is because such would attract more capital inflows and increase the reserve, which is needed to help stabilized the naira or make the currency to appreciate. table 2 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 265 presents the estimated change in the naira appreciation rate between days. the outcome identifies continuous appreciation from the intervention announcement day up to the day three. the evidence is inconsistent with other studies that show how assets prices, such as global stock respond to macroeconomic news in the us (lucca & moench, 2015). ekincia et al. (2019) show appreciation impact of news announcement on the bid, ask and mid-prices in post-release period. this result is consistent and collaborates established evidence, including research on intervention for g3 exchange rates based on events models (hussaina & ben-omrane, 2020; fatum & hutchison, 2005. hussaina and ben-omrane (2020) find that the us macroeconomic releases impose significant influence on the market returns in canada. table 2: estimated event driven model for daily exchange rate 𝑈𝑆𝐷/𝑁𝐺𝑁𝑡 = 𝛼0 + ∑ 𝛽𝑡+𝑖 5 𝑖=−5 𝐹𝑋𝐼𝑁𝑇𝑉𝐷𝑢𝑚𝑡+𝑖 + 𝜀𝑡 variable 𝑃𝑎𝑟𝑎𝑚𝑒𝑡𝑒𝑟 estimate 𝜎 𝑡-stat p-𝑣𝑎𝑙𝑢𝑒 𝐼𝑛𝑡𝑒𝑟𝑐𝑒𝑝𝑡 𝛼0 2.3459* 0.0030 787.61 0.0000 fxintvdum𝑡−5 𝛽𝑡−5 -0.0326* 0.0098 -3.3339 0.0009 fxintvdum𝑡−4 𝛽𝑡−4 -0.0499* 0.0101 -4.9345 0.0000 fxintvdum𝑡−3 𝛽𝑡−3 -0.0501* 0.0101 -4.9551 0.0000 fxintvdum𝑡−2 𝛽𝑡−2 -0.0438* 0.0103 -4.2491 0.0000 fxintvdum𝑡−1 𝛽𝑡−1 -0.0436* 0.0103 -4.2313 0.0000 fxintvdum𝑡 𝛽𝑡 -0.0353* 0.0110 -3.1957 0.0014 fxintvdum𝑡+1 𝛽𝑡+1 -0.0449* 0.0103 -4.3563 0.0000 fxintvdum𝑡+2 𝛽𝑡+2 -0.0455* 0.0103 -4.4142 0.0000 fxintvdum𝑡+3 𝛽𝑡+3 -0.0522* 0.0101 -5.1599 0.0000 fxintvdum𝑡+4 𝛽𝑡+4 -0.0521* 0.0101 -5.1492 0.0000 fxintvdum𝑡+5 𝛽𝑡+5 -0.0345* 0.0098 -3.5221 0.0004 variance (𝜎𝑡 2) equation 𝐼𝑛𝑡𝑒𝑟𝑐𝑒𝑝𝑡 𝜔0 0.0000 0.0000 52.8249 0.0000 (𝜀𝑡−1) 2 𝜔1 1.1670 0.0386 30.2273 0.0000 𝜎𝑡−1 2 ω 0.1622 0.0142 11.4254 0.0000 statistics �̅�2 0.2091 f-stat. 125.32* prob(f-stat.) 0.0000 dw-stat. 2.0042 note: σ, t-stat, p-value, and dw-stat are the standard error, t-statistics and probability of t value, and durbin watson statistic respectively. * implies significant t 1% source: author (2023) gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 266 table 3: estimated change in naira appreciation rate between days variable 𝑃𝑎𝑟𝑎𝑚𝑒𝑡𝑒𝑟 estimate %car* fxintvdum𝑡−5 𝛽𝑡−5 -0.0326 na fxintvdum𝑡−4 𝛽𝑡−4 -0.0499 53.10% fxintvdum𝑡−3 𝛽𝑡−3 -0.0501 0.40% fxintvdum𝑡−2 𝛽𝑡−2 -0.0438 12.74% fxintvdum𝑡−1 𝛽𝑡−1 -0.0436 -0.36% fxintvdum𝑡 𝛽𝑡 -0.0353 19.14% fxintvdum𝑡+1 𝛽𝑡+1 -0.0449 27.33% fxintvdum𝑡+2 𝛽𝑡+2 -0.0455 1.27% fxintvdum𝑡+3 𝛽𝑡+3 -0.0522 14.87% fxintvdum𝑡+4 𝛽𝑡+4 -0.0521 -0.19% fxintvdum𝑡+5 𝛽𝑡+5 -0.0345 33.87% note: * change in the appreciation rate of daily naira exchange rate. na: not applicable. source: author (2023) is the estimation sensitive to the nature of data frequency? here, the study attempts to know whether the estimation would change significantly upon use of a different data frequency for the high frequency naira rate. the paper appraises the soundness reposed in the previous findings using different frequency of the exchange rate, as demonstrated by some empirical analyses that the nature of data frequency matter (gbadebo et al., 2022; narayan & liu, 2015; narayan & sharma, 2015; salisu & adeleke, 2016). the previous analysis is replicated for monthly (quarterly) data frequency and the estimates are presented in table 4 (table 5). interestingly, the results for the monthly frequency supposes similar evidence with the previous. most of the estimates remains significant and the overall model remains significant as with the daily data estimation. however, because monthly data supposes a relatively longer time than usual day announcement, the overall effect is depreciatory. all the intervention announcement coefficients 𝛽𝑡+𝑖, for the various months are positively signed, hence, would cause exchange rate depreciation. the disseminated releases on intervention are significant at 1 to 10% level, identifying the exchange rate to depreciate by 6.57% on the month of gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 267 announcement, and by 7.85%, 6.36% and 4.16% on three, two and one month, respectively, after the announcement. the case for the quarterly data shows dissimilar outcomes. the estimates for the different announcement quarters and the overall model are not significant, although, like with the monthly data, the dummies for intervention, supposes depreciation on the expectation of released wdas/rdas auction on the quarter before, current quarter and quarter after announcements. upon the intervention in the quarter, the exchange rate would depreciate by approximately 3.55%, on the quarter of announcement, and by 2.77% and 1.8% on three, two and one quarter, respectively, after the announcement. this is not surprising because quarterly data conveys medium run information, and for the nigeria, curtailing exchange rate undulation has often only been attained temporarily, and in particular, within first quarter of policy implementations. the appreciation tendency seems within the immediate periods of the announcement, whereas in shortand long run, the depreciations is more likely. this probably explains the reasons various exchange rate management approaches by the government, in the considered periods, remains unsuccessful in curtailing the depreciation as the continues to wobble. table 4: estimated event driven model for monthly frequency variable 𝑃𝑎𝑟𝑎𝑚𝑒𝑡𝑒𝑟 estimate 𝜎 𝑡-stat p-𝑣𝑎𝑙𝑢𝑒 𝐼𝑛𝑡𝑒𝑟𝑐𝑒𝑝𝑡 𝛼0 2.1677* 0.0187 115.67 0.0000 fxintvdum𝑡−3 𝛽𝑡−3 0.0346** 0.0318 1.0865 0.2782 fxintvdum𝑡−2 𝛽𝑡−2 0.0479** 0.0330 1.4506 0.1481 fxintvdum𝑡−1 𝛽𝑡−1 0.0675*** 0.0296 2.2763 0.0236 fxintvdum𝑡 𝛽𝑡 0.0657*** 0.0304 2.1641 0.0314 fxintvdum𝑡+1 𝛽𝑡+1 0.0787* 0.0296 2.6559 0.0084 fxintvdum𝑡+2 𝛽𝑡+2 0.0636*** 0.0329 1.9350 0.0541 fxintvdum𝑡+3 𝛽𝑡+3 0.0416** 0.0315 1.3203 0.1879 statistics �̅�2 0.1336 f-stat. 5.8167* prob(f-stat.) 0.0000 dw-stat. 1.0147 note: the statistics – σ, t-stat and p-value the standard error, t-statistics and probability of t value, respectively. *, **, ***, implies significant t 1%, 5%, 10% source: author (2023) gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 268 table 5: estimated event driven model for quarterly frequency variable 𝑃𝑎𝑟𝑎𝑚𝑒𝑡𝑒𝑟 estimate 𝜎 𝑡-stat p-𝑣𝑎𝑙𝑢𝑒 𝐼𝑛𝑡𝑒𝑟𝑐𝑒𝑝𝑡 𝛼0 2.2237 0.0402 55.332 0.0000 fxintvdum𝑡−3 𝛽𝑡−3 0.0142 0.0522 0.2718 0.7865 fxintvdum𝑡−2 𝛽𝑡−2 0.0219 0.0541 0.4056 0.6862 fxintvdum𝑡−1 𝛽𝑡−1 0.0374 0.0522 0.7168 0.4757 fxintvdum𝑡 𝛽𝑡 0.0355 0.0526 0.6759 0.5011 fxintvdum𝑡+1 𝛽𝑡+1 0.0277 0.0526 0.5271 0.5996 fxintvdum𝑡+2 𝛽𝑡+2 0.0182 0.0537 0.3399 0.7349 fxintvdum𝑡+3 𝛽𝑡+3 0.0077 0.0515 0.1505 0.8808 statistics �̅�2 0.0158 f-stat. 0.1794 prob(f-stat.) 0.9888 dw-stat. 0.0172 note: the statistics – σ, t-stat and p-value the standard error, t-statistics and probability of t value, respectively. *, **, ***, implies significant t 1%, 5%, 10% source: author (2023) 5. conclusion policymakers, and in particular, the central banks, are often committed to intervention in fx market in order to moderate the magnitude and pace of their domestic currency fluctuations and volatility. due to the impacts, some central banks make the announcement of planned interventions by means of press released information. recent evidence reveals how such intervention announcements transmit information contents that moderate exchange rate value (parra-polania et al., .2022; germaschewski, horvath & zhong, 2020). since 1980 till date, the nigerian naira has kept wobbling against global currency and more so, its peers in africa, despite several exchange rate management approaches implemented by the cbn to curb the incessant depreciation (cbn, 2021; gbadebo et al., 2021; mordi, 2006). some studies have been investigated on operations in the fx market, particularly related to determinant of exchange rate (kalu, et al. 2019; bala-sani & hassan, 2018; oladapo et al., 2017), while other evidence reports how actual fx intervention impact the exchange rate (ahmed et al., 2020. dayyabu, adnan & sulong, 2016; akbar, 2016; omojolaibi & gbadebo, 2014). however, there is no available study that has considered the influence of the gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 269 central bank announcements on the naira exchange rate, therefore, the current paper fills this gap. this paper pursues two objectives – the first conforms whether the intervention announcement affects the exchange rate level, and the second confirms whether the frequency of the data explore maters for the conclusion. the event driven model, from standard literature, is applied to establish the aims. according to the baseline specification, the paper finds conclusive evidence of that pasts, contemporaneous and future intervention announcements significant cause appreciation shocks. according to the daily data utilized for the main analysis, the naira is expected to appreciate by 3.5% upon announcement, and this further increases to 4.49%, 4.55% and 5.22%, on one day, two day, three days after, but slowdown in subsequent days after the intervention announcements. robustness test based using alternative data frequency for the estimation yields close (different) results for the monthly (quarterly) periodicity, supposing that frequency matters. they counter pressure exchange rate by impinging lopsided potentials about expected interventions and the naira future value. improved digitalized fx and financial system, such as increase financial instruments, may facilitate intermediation that can promote effective mechanism for the intervention announcement to transmit coordinately with other macroeconomic policies to help stabilise the naira and attain targeted value. this is because such would attract more capital inflows and increase the reserve, which is needed to help stabilized the naira or make the currency to appreciate. since the nigerian economy and fx market is integrated in the global financial system, the paper recommends the central bank should implement policies to largely hold more foreign exchange in the reserves in order to have sufficient fund to intervene aggressively to prevent excessive depreciation of the naira. the result has implications for future conduct of interventions and conventional monetary policies. the paper’s major limitation is that it excludes the influence of actual intervention, via sales and purchases of dollar, by the central bank. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 270 references adebiyi, m. a. (2007). an evaluation of foreign exchange intervention and monetary aggregates in nigeria (1986-2003). munich personal repec archive paper, no 3817. https://mpra.ub.unimuenchen.de/3817/1/mpra_paper_3817.pdf adler, g. & mano, r. c. (2021). the cost of foreign exchange intervention: concepts and measurement. journal of macroeconomics, 67, 103045, https://doi.org/10.1016/j.jmacro.2018.07.001 adler, g., chang, k. s., mano, r. c., & shao, y. (2021). foreign exchange intervention: a dataset of public data and proxies. imf working paper wp/21/47. adler, g., lisack, n. & rui, c. m. (2019). unveiling the effects of foreign exchange intervention: a panel approach. emerging markets review, 40, 100620. https://doi.org/10.1016/j.ememar.2019.100620 ahmed, a. u., ismail, s., dayyabu, s., adnan, a. a., farouq, i. s., & jakada, a. h. (2020). non-linear causal link between central bank intervention and exchange rate volatility in nigeria. global journal of management and business research. akbar, j. i. (2016). efficiency of foreign exchange markets: the case of nigeria. international journal of global economics. 4(4). https://doi.org/10.4172/2375-4389.1000220 akdogan, i. u. (2020). understanding the dynamics of foreign reserve management: the central bank intervention policy and the exchange rate fundamentals. international economics, 161, 41-55. https://doi.org/10.1016/j.inteco.2019.11.002 almudhaf, f. (2014). testing for random walk behaviour in civets exchange rates. applied economics letter, 21 (1), 60–63. https://doi.org/10.1080/13504851.2013.839856 anjaly, b. (2022). a study of the effectiveness of central bank intervention in brics countries. research square. https://doi.org/10.21203/rs.3.rs2111880/v1 aruwa, s. a., & ahmed, m. (2016). effectiveness of official daily foreign exchange market intervention operation in nigeria. bala-sani, a. r., & hassan, a. (2018). exchange rate and stock market interactions: evidence from nigeria. arabian journal of bossiness management review, 8(1), 334. ben-omrane, w., savaser, t., welch, r., & zhou, x. (2019). time-varying effects of macroeconomic news on euro-dollar returns. the north american https://mpra.ub.uni-muenchen.de/3817/1/mpra_paper_3817.pdf https://mpra.ub.uni-muenchen.de/3817/1/mpra_paper_3817.pdf https://doi.org/10.1016/j.jmacro.2018.07.001 https://doi.org/10.1016/j.ememar.2019.100620 https://doi.org/10.4172/2375-4389.1000220 https://doi.org/10.1016/j.inteco.2019.11.002 https://doi.org/10.1080/13504851.2013.839856 https://doi.org/10.21203/rs.3.rs-2111880/v1 https://doi.org/10.21203/rs.3.rs-2111880/v1 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 271 journal of economics and finance, 50 (c), 130–143. https://doi.org/10.1016/j.najef.2019.101001. blanchard, o., alder, g. & fil ho , i. c. (2015). can foreign exchange intervention stem exchange rate pressures from global capital flow shocks. imf working papers, 15(159). https://doi.org/10.3386/w21427 branson, w.h. (1983). macroeconomic determinants of real exchange risk. in: herring, r.j. (ed.), managing foreign exchange risk. cambridge university press, cambridge. https://ssrn.com/abstract=351348 business day, (2022). the nigerian consumers and naira depreciation. business day press release https://businessday.ng/editorial/article/the-nigerianconsumers-and-naira-depreciation/ cbn (2021). understanding monetary policy series no 8: exchange rate management in nigeria. https://www.cbn.gov.ng/out/2022/mpd/series%208.pdf. cbn (2022). statistical bulletin, 2022. cheung, y., fatum, r., & yamamoto, y. (2019). the exchange rate effects of macro news after the global financial crisis. journal of international money and finance, 95(c), 424–443. https://doi.org/10.1016/j.jimonfin.2018.03.009 dayyabu, s., adnan, a. a., & sulong, z. (2016). effectiveness of foreign exchange market intervention in nigeria (1970-2013). international journal of economics and financial issues, 6(1), 279-287. https://ideas.repec.org/a/eco/journ1/2016-01-36.html diniz-maganini, n., rasheed, a. & sheng, h. h. (2023). price efficiency of the foreign exchange rates of brics countries: a comparative analysis. latin american journal of central banking, 4(1), 2666-1438. https://doi.org/10.1016/j.latcb.2022.100081. disyatat, p. & galati, o. (2005). the effectiveness of foreign exchange interventions in emerging countries: evidence from the czech koruna. bank for international settlement (bis) working paper, no 172. https://www.bis.org/publ/bppdf/bispap24g.pdf dominguez, k. (1999). the market microstructure of central bank intervention. nber working paper, 7337. ekincia, c., akyildirim, e., & corbet, s. (2019). analysing the dynamic influence of us macroeconomic news releases on turkish stock markets. finance research letters, 31, 155–164. https://doi.org/10.1016/j.frl.2019.04.021. https://doi.org/10.1016/j.najef.2019.101001 https://doi.org/10.3386/w21427 https://ssrn.com/abstract=351348 https://businessday.ng/editorial/article/the-nigerian-consumers-and-naira-depreciation/ https://businessday.ng/editorial/article/the-nigerian-consumers-and-naira-depreciation/ https://www.cbn.gov.ng/out/2022/mpd/series%208.pdf https://doi.org/10.1016/j.jimonfin.2018.03.009 https://ideas.repec.org/a/eco/journ1/2016-01-36.html https://doi.org/10.1016/j.latcb.2022.100081 https://www.bis.org/publ/bppdf/bispap24g.pdf https://doi.org/10.1016/j.frl.2019.04.021 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 272 fatum, r. & hutchison, m. m. (2005). foreign exchange intervention and monetary policy in japan, 2003-04. international economics and economic policy 2, 241-260. http://dx.doi.org/10.2139/ssrn.642862 fratzscher, m. (2008). oral interventions versus actual interventions in fx markets – an event-study approach. the economic journal. 118(530), 079-1106. https://doi.org/10.1111/j.1468-0297.2008.02161.x frömmel, m. & midiliç, m. (2021). daily currency interventions in an emerging market: incorporating reserve accumulation to the reaction function, economic modelling, 97, 461-476, https://doi.org/10.1016/j.econmod.2020.09.020 gagnon, j. e. (2012). combating widespread currency manipulation. policy briefs pb12-19, peterson institute for international economics. gbadebo, a. d., adekunle, a. o., akande, o. j. & olanipekun, d. w. (2021). the mpc meetings, macroeconomic announcements and exchange rate behaviour in nigeria. cogent economics & finance, 9:1, http://dx.doi.org/10.1080/23322039.2021.1952720 gbadebo, a. d., akande, j. o. & adekunle, a. o. (2022). price prediction for bitcoin: does periodicity matter? international journal of business and economic sciences applied research, 15(3). http://dx.doi.org/10.25103/ijbesar.153.06 germaschewski, y., horvath, j. & zhong, j. (2020). oral interventions in the exchange rate market: evidence from australia. https://ssrn.com/abstract=3356115 hoshikawa, t. (2017). exchange rate rebounds after foreign exchange market interventions, physica a: statistical mechanics and its applications, 469, 102-110, https://doi.org/10.1016/j.physa.2016.11.044 hung, j. (1997). intervention strategies and exchange rate volatility: a noise trading perspective. journal of international money and finance, 6, 779–93. hussain, s. m. & ben-omrane, w. (2020). the effect of us macroeconomic news announcements on the canadian stock market: evidence using highfrequency data. finance research letters. 38, 101450. https://doi.org/10.1016/j.frl.2020.101450. kalu, e. m., ugwu, o. e., ndubuaku, v. c., & ifeanyi, c. p. (2019). exchange rate and foreign reserves interface: empirical evidence from nigeria. the economics and finance letters, 6, 1– 8. https://doi.org/10.18488/journal.29.2019.61.1.8. khuntia, s., pattanayak, j.k., & hiremath, g.s. (2018). is the foreign exchange market efficiency adaptive? the empirical evidence from india. journal of http://dx.doi.org/10.2139/ssrn.642862 https://doi.org/10.1111/j.1468-0297.2008.02161.x https://doi.org/10.1016/j.econmod.2020.09.020 http://dx.doi.org/10.1080/23322039.2021.1952720 http://dx.doi.org/10.25103/ijbesar.153.06 https://ssrn.com/abstract=3356115 https://doi.org/10.1016/j.physa.2016.11.044 https://doi.org/10.1016/j.frl.2020.101450 http://www.conscientiabeam.com/archive/29/03-2019/1 http://www.conscientiabeam.com/archive/29/03-2019/1 https://doi.org/10.18488/journal.29.2019.61.1.8 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 273 asia-pacific business, 19 (4), 261–285. https://doi.org/10.1080/10599231.2018.1525249 kumar, s. (2015). turn-of-month effect in the indian currency market. int. j. managerial finance, 11 (2), 232–243. https://doi.org/110.1108/ijmf-052014-0068 lahmiri, s., bekiros, s. & salvi, a. (2018). long-range memory, distributional variation and randomness of bitcoin volatility. chaos, solitons and fractals, 107, 43–48. https://doi.org/10.1016/j.chaos.2017.12.018. lucca, d, & moench, e. (2015). the pre-fomc announcement drift. 70(1), 329371. https://doi.org/10.1111/jofi.12196 mordi, n. o. (2006). challenges of exchange rate volatility in economic management in nigeria. in the dynamics of exchange rate in nigeria. cbn bullion, 30(3), 17-25. munigeria, m. (1981). the role of official intervention. va: george mason university press. narayan, p. k., & liu, r. (2015). a unit root model for trending time-series energy variables. energy economics, 50, 391–402. narayan, p. k., & sharma, s. s. (2015). does data frequency matter for the impact of forward premium on spot exchange rate? international review of financial analysis, 39, 45–53. ning, y., wang, y. & su, c.w. (2017). how did china foreign exchange reform affect the efficiency of foreign exchange market? physica a 483, 219–226. https://doi.org/10.1016/j.physa.2017.04.150 obadan, m. i. (2006). overview of exchange rate management in nigeria. cbn bullion, 30(3), 1-9. https://dc.cbn.gov.ng/cgi/viewcontent.cgi?article=1123&context=bullion oladapo, f., adeyeye, p. o., seyingbo, o. a., & owoeye, s. (2017). exchange rate volatility and stock market performance in nigeria, nigerian journal of management sciences, 6(1), 3. omojolaibi, j. a. & gbadebo, a. d. (2014). foreign exchange intervention and monetary aggregates: nigerian evidence. international journal of economics, commerce and management uk, ii(10). https://ijecm.co.uk/wp-content/uploads/2014/10/21017.pdf parra-polania, j. a., sánchez-jabba, a. & sarmiento, m. (2022). oral fx interventions in emerging markets: the colombian case. borradores de economia 1194. https://doi.org/10.32468/be.1194 https://doi.org/10.1080/10599231.2018.1525249 https://doi.org/110.1108/ijmf-05-2014-0068 https://doi.org/110.1108/ijmf-05-2014-0068 https://doi.org/10.1016/j.chaos.2017.12.018 https://doi.org/10.1111/jofi.12196 https://doi.org/10.1016/j.physa.2017.04.150 https://dc.cbn.gov.ng/cgi/viewcontent.cgi?article=1123&context=bullion https://ijecm.co.uk/wp-content/uploads/2014/10/21017.pdf https://doi.org/10.32468/be.1194 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 274 ponomarenko, a. (2019). do sterilized foreign exchange interventions create money? journal of asian economics, 62, 1-16. https://doi.org/10.1016/j.asieco.2019.03.001. pyo, s., & lee, j. (2020). do fomc and macroeconomic announcements affect bitcoin prices? finance research letters. 37, 101386 https://doi.org/10.1016/j.frl.2019.101386. salisu, a. a. & vo., x. v. (2021). the behavior of exchange rate and stock returns in high and low interest rate environments. international review of economics & finance, 74, 138-149, https://doi.org/10.1016/j.iref.2021.02.008. salisu, a. a., & adeleke, a. i. (2016). further application of narayan and liu (2015) unit root model for trending time series. economic modelling, 55, 305–314. tapia, m. & tokman, a. (2004). effects of foreign exchange intervention under public information: the chilean case. economia, lacea, 4 (spring),1-42. https://doi.org/110.1353/eco.2004.0020 ukeje, e. u. (2017). exchange rate management in period of economic uncertainty. cbn bullion, 41(1), https://dc.cbn.gov.ng/bullion/vol41/iss1/1 https://doi.org/10.1016/j.asieco.2019.03.001 https://doi.org/10.1016/j.frl.2019.101386 https://doi.org/10.1016/j.iref.2021.02.008 https://doi.org/110.1353/eco.2004.0020 https://dc.cbn.gov.ng/bullion/vol41/iss1/1 gusau journal of accounting and finance (gujaf) vol. 4 issue 1, april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ii © department of accounting and finance vol. 4 issue 1 april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 v dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vi advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ix contents board characteristics and earnings management of listed consumer goods firms in nigeria benjamin gwabin joseph, murtala abdullahi phd, benjamin kumai gugong phd 1 dividend policy and value of listed non-financial companies in nigeria: the moderating effect of investment opportunity abubakar umar 18 trialability and observability of accrual basis international public sector accounting standards implementation in nigeria aliyu abdullahi ahmed phd, zakari usman 35 liquidity risk and performance of non-financial firms listed on the nigerian stockexchange muhammed alhaji abubakar, nurnaddia binti nordin phd, abubakar hamisu umar 54 board diversity, political connections and firm value: an empirical evidence from financial firms in nigeria rofiat oyetunji, isah shittu phd, ahmed bello phd. 75 moderating effect of bank size on the relationship between interest rate, liquidity, and profitability of commercial banks in nigeria shehu usman hassan, bello sabo (ph. d), ismai'l idris tijjani (ph. d), idris ahmed aliyu. (ph. d) 96 sources of health care financing among surgical patients seen at the dalhatu araf specialist hospital lafia nasarawa state nigeria ahmed mohammed yahaya, babatunde joseph kolawole, bello surajudeen oyeleke 121 transparency, compliance and sustainability of contributory pension scheme in nigeria olanrewaju atanda aliu (ph. d), mohamad ali abdul-hamid (ph. d), salami suleiman (ph. d), salam mudathir olanrewaju 135 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 x examining the impact of working capital management on the financial performance of listed industrial goods entities in nigeria 151 sani abdulrahman bala (ph. d), jamilu jibril, taophic olarewaju bakare corporate governance factors and tax avoidance of listed deposit money banks in nigeria 171 sani abdulrahman bala (ph. d), umar salim ibrahim, samaila dannana risk committee demographic traits: a study of the impact of expertise on risk disclosure quality of listed insurance firms in nigeria wada najib abbas, dandago, kabiru isa (ph. d), rabiu, naja’atu bala 192 moderating effect of audit committee on the relationship between audit quality and earnings management of listed non-financial services firms in nigeria ahmad muhammad ahmad, lubabah mansur kwanbo (ph.d.), shehu usman hassan (ph.d.) musa suleiman umar (ph.d.) 216 determinants of audit opinion of negative-book-value firms in nigeria: firm value and audit characteristics perspective asma’u mahmood baffa (ph. d), lawal mohammed (ph.d.), ahmed bello (ph.d.) umar farouk abdulkarim 237 intervention announcements and naira management: evidence from the nigerian foreign exchange market adedeji daniel gbadebo 254 is there earnings discontinuity after the implementation of ifrs in nigeria? adedeji daniel gbadebo 275 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 96 moderating effect of bank size on the relationship between interest rate, liquidity, and profitability of commercial banks in nigeria shehu usman hassan usmanhassan75@gmail.com, department of business administration, abu business school, abu, zaria bello sabo (ph. d) sabobello@gmail.com, department of banking and finance, abu business school, abu, zaria. ismai'l idris tijjani (ph. d) ismaildel@yahoo.com, department of banking and finance, abu business school, abu zaria. idris ahmed aliyu. (ph. d) aaidris@abu.edu.ng, department of actuarial science and insurance, abu business school, abu zaria. abstract the recurring instability of commercial banks’ performance in nigeria have triggered stakeholders to deploy efforts toward providing solutions where the desired result is yet to be achieved. consequently, this study examined the moderating effect of bank size on the relationship between interest rate, liquidity, and performance of the banks in nigeria. an ex-post-facto research design was adopted, where the bank-specific data were sourced from the published annual financial statements of 12 commercial banks listed on the nigerian stock exchange and the macroeconomic data were extracted from the wdi database for a ten-firm-year period from 2011 to 2020. the analysis was done using the panel regression technique with the support of stata software version 14.2. findings on the direct effects showed a significant and negative relationship between deposit rate and performance, and both the lending rate and loan-to-deposit ratio have positive and significant relationships with performance. meanwhile, the intervention effects showed that the bank size has positively moderated the relationship between deposit rate and performance; whereas bank size has negatively moderated the relationship between loan-to-deposit ratio and performance. therefore, the study recommended that banks should grow their assets to enable them to achieve economies of scale and cost efficiency. key words: bank size; deposit rate; lending rate; loan-to-deposit ratio; return on equity. https://doi.org/10.57233/gujaf.v4i1.202 mailto:usmanhassan75@gmail.com mailto:sabobello@gmail.com mailto:ismaildel@yahoo.com mailto:aaidris@abu.edu.ng gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 97 1. introduction the financial intermediation function performed by commercial banks is very important to the viability of every nation’s socioeconomic well-being because it facilitates the transfer of funds from the surplus sector to the deficit sector of the economy for reasons of investment and consumption (muriithi, nasieku, & memba, 2022; mia, 2022). this vital function of commercial banks necessitates the need for relevant stakeholders to take all the necessary measures of ensuring their sound performance (chen, 2022; mohammad, 2022), as the poor performance of banks leads to a paucity of funds in the money market, deteriorating living standards, declining gross domestic product (gdp); employee disengagement in workplaces, and failure of the banking sector that could result in runs to the financial system (tian, 2023; islam, 2023; miah, uddin, & ahmed, 2019). some countries across the globe have recorded poor performance of commercial banks that led to problems in their financial systems between 2005 and 2018. these include the united states of america, germany, france, united kingdom, china, and south africa, among others (lee, wang, thinh, & xu, 2022; kozak & wierzbowska, 2022; kanga, murinde, & soumaré, 2021). regulatory authorities in those countries have rolled out several strategies to make their banking sectors more resilient to the prevailing circumstances. a case in point was the efforts of the united states federal reserve bank of conducting annual stress tests on banks that have assets in excess of $100 million (mccord & prescott, 2014), and spent $9.7 trillion on bailouts on ailing banks in october 2009 (wong, 2009). the united kingdom and other european countries also spent about $2 trillion on bailouts (mizen, 2008). furthermore, the government of iceland had to take loans from the international monetary fund (imf) and other neighbours to save its economy (thorhallsson & kirby, 2012). in the same vein, the nigerian banking consolidation of 2005 and the takeover of some ailing banks such as skye bank of nigeria plc and diamond bank plc in 2018 and 2019 respectively were all spurred by poor performance (onodi & onuche, 2021 soludo, 2004). interest rates and liquidity are some of the major determinants of commercial banks’ performance (tuna & almahadin, 2021). the interest rate is comprised of a wide range of parameters such as interbank rate, open buyback rate, deposit rate, and lending rate, among several others. but for commercial banks, deposit and lending rates constitute the most important components of the interest rate due to their direct relationships with financial intermediation which is the core mandate of the banks. the performance of the nigerian commercial banking subsector has recorded instabilities in both of its market-based indicators, namely the deposit and gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 98 lending rates. for instance, the average term deposit rate for 2017 rose by 2.42% to 8.60% compared to 6.18% in 2016. it further rose in 2018 by 27 basis points to 8.65%. but it dropped by 0.05% points to 8.19% in 2019 compared to 2018. concerning the lending rate, the weighted average prime and maximum lending rates rose by 0.52% and 2.89% to 17.39% and 30.18% respectively, in 2017, compared to 16.87% and 27.29% in 2016 respectively. but the weighted average prime lending rate fell by 55 basis points to 17.0% while the maximum lending rate rose by 50 basis points to 31.15% in 2018. furthermore, the weighted average prime lending rate fell by 1.10% to 15.07% in 2019, while the maximum lending rate rose by 0.04% to 30.56% in 2019 (cbn, 2017; 2018; 2019). this deposit and lending rates instability connotes a corresponding instability of the performance of commercial banks; and the difference between the lending rate charged against borrowers and the deposit rate paid to depositors represents the net interest income (nim) of the banks. liquidity is another important determinant of performance in the commercial banking subsector. it refers to the amount of money kept by the banks to meet the withdrawal needs of depositors, and it represents the quantitative relation between a bank’s total loan and its total assets expressed in percentage terms, otherwise called loan-to-deposit ratio (ldr). the cbn sets the ldr band at 30% in 2018, which was maintained in 2019. it was however raised to 35% in 2020 (cbn, 2018; 2019; 2020). the reason behind enforcing the ldr is to encourage bank lending to the real sector of the economy. there are many empirical studies on the causes of instability in the performance of banks, which were classified as bank-specific (utomo & anggono, 2020), industryspecific (oldeniel, 2020), and macroeconomic (rahman, yousaf & tabassum, 2020). those studies reported mixed, inconsistent, and inconclusive findings, where some found positive and significant relationships (al-shatnawi, hamawandy, sharif, sabir-jaf, & al-kake, 2021); negative and significant relationships (ahamed, 2021); insignificant positive or negative relationships (flamini, schumacher & mcdonald, 2014). scholars in the field of social sciences research frown at inconsistent findings because of the wrong signals they send on the deviant behaviours of some of research variables against apriori expectations (baron & kenny, 1986). in such situations, baron and kenny advocated the use of an intervening variable called a moderator to boost the relationships between the dependent and independent variables. going forward, some scholars argued that the introduction of a gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 99 moderating variable in a research model must be anchored on a strong theoretical backing to support the power of the moderator to change the magnitude or direction of the relationships; or to provide a better explanation of the relationships between the variables (see memon et al., 2019; aguinis, edwards, & bradley, 2017; andersson, cuervo-cazurra, & nielsen, 2014). in view of the foregoing, this study employed bank size to moderate the relationship between interest rates, liquidity, and the performance of commercial banks in nigeria. some studies affirmed the existence of a direct relationship between bank size and bank performance because the size allows banks to spread their fixed costs over a greater asset-base, thereby reducing their average costs (alex & ngaba, 2018). more so, as the scale of operation increases, banks are able to improve their performance through the use of specialized inputs such as loan officers with expertise in a particular business line, resulting in greater efficiency (parvin, chowdhury, siddiqua, & ferdous, 2015). this is consistent with the basic assumptions of the resource-based view (rbv) theory of wernerfelt (1984) which states that a firm can achieve competitive advantage and economies of scale through ownership and effective use of its assets, knowledge, capabilities, and related internal resources. the current study also used gdp and inflation as control variables due to their established influence on bank performance. while the gdp reflects the average increase or decrease in the production of goods and services in an economy, inflation positively affects a bank’s liabilities and negatively effects its assets (ishioro, 2023) as it erodes customers’ propensity to save which leads to the banks’ debtors’ ability to redeem their obligations (olalere, bin omar, & kamil, 2017; zarrouk, ben jedidia, & moualhi, 2016). the use of both gdp and inflation as the control variables in this work was aimed at accounting for the possible effects of those variables to cause economic instabilities that influence deposit and lending rates; as well as ldr activities. the study further raises the main question of to what extent does bank size moderates the relationship between interest rates, liquidity, and the performance of commercial banks in nigeria. in this context, the main objective of the study was to examine the moderating effect of bank size on the relationship between interest rates, liquidity, and the performance of commercial banks in nigeria. also, the financial intermediation theory was adopted to underpin this study because of its explanatory power on the basic concept of the work. the theory demonstrates how a financial intermediary (bank) assists investors (depositors) to achieve return on gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 100 investment through interest rate spread. more so, by using bank size, banks can attain economies of scale. the theory further establishes that maintaining the regulatory liquidity will enable the retention of customer deposits for effective utilization of the banks’ assets to improve performance. 2. literature review the performance of banks can be assessed using either non-financial or financial parameters (eltinay & masri, 2014). the current study adopts the financial aspect of performance, and it is operationalized to mean roe. saputra (2022) described roe as the financial measure of a firm’s performance in percentage terms relative to its shareholders’ equity over time. the study used this as the working definition of roe because of its relevance to the subject of the work. moreover, van binsbergen, diamond, and grotteria (2022) defined interest rate as a fixed percentage rental amount of money charged by a lender against a borrower for a disbursed loan during a specified period to compensate for the loss or use of such financial assets. the operational meaning of interest rates for this study is deposit and lending rates. chen, goldstein, huang, and vashishtha (2022) defined a deposit rate as the amount of money rate paid by banks on account holders’ deposits. whereas, wang, zhao, and li (2022) described a lending rate as the fixed charge made by banks against their debtors for disbursing loans to them. both definitions were adopted for the current study. furthermore, mabwe and jaffar (2022) defined liquidity as the amount of physical cash kept by banks to meet the depositors’ immediate withdrawal demands. liquidity is represented by an ldr in this study, and it represents the metric used to determine a bank’s liquidity by comparing its total loans to its total deposits. in addition, cai, li, lin, and luo (2022) defined gdp as the financial worth of final goods and services produced in a nation’s economy within a financial period, and this was adopted as the operational definition. however, ridwan (2022) described inflation as the steady increase in the overall prices of goods and services in a given period, and this was also operationalized for this work. more so, bank size as the moderating variable of this study was operationalized in line with the definition by sari, ajija, wasiaturrahma, and ahmad (2022) as the total market value of a bank’s assets and liabilities in terms of services, technology, equipment, branches, staff strength, products, and so on. scholars have conducted many empirical studies to determine the effects of deposit rate, lending rate, ldr, and bank size on the performance of commercial banks because these variables form the crux of the financial intermediation function of the banks. for instance, gupta and mahakud (2020) investigated the effects of gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 101 various macroeconomic, industry-specific, and bank-specific variables on the performance of 146 banks in india, from 1998-99 to 2015-2016, and reported a significant negative effect of deposit rate on performance. more so, phan, narayan, rahman, and hutabarat (2020) examined the effects of improvement in financial technology (fintech) on banks’ performance, using 41 banks in indonesia, and found that the deposit rate otherwise called funding cost had a negative and insignificant effect on performance. in a study, siddique, khan, and khan (2021) investigated the influence of credit risk management and bank-specific factors on the performance of commercial banks from 2009 to 2018 by using data from 10 banks in pakistan and 9 banks in india, and found a significant and negative relationship between the lending rate and performance. katusiime (2021) examined the effect of the covid-19 pandemic on the performance of banks in uganda from q1 2000 to q1 2021, using autoregressive distributed lag (ardl) for analysis, and established a significant and positive effect of lending rate on performance. furthermore, abrar (2019) explored the relationship between the lending rate and the financial and social performance of microfinance institutions (mfis), using data from 382 5-star mfis in 70 countries across six regions of the world from 2006 to 2012, and discovered a significant positive relationship between the lending rate and performance. awoyemi and jabar (2014) used data from the cbn statistical bulletin to study the relationships between the prime lending rate and the performance of microfinance banks in nigeria and established a significant negative effect of lending rate on performance. on the other hand, huong, nga, and oanh (2021) extracted unbalanced panel data from 171 banks in nine countries of southeast asia from 2004 to 2016 and found a significant and positive effect of ldr on performance. more so, nugraha, yahya, nariswari, salsabila, and octaviantika (2021) assessed the effect of npls, education diversity, and ldr on the performance of 41 listed banks in indonesia between 2015 and 2019, and established a positive and significant relationship of ldr on performance. similarly, saleh and winarso (2021) explored the influence of npl and ldr on the performance of 29 banks in bandung city of indonesia from 2014 to 2019, and found a significant and positive effect of ldr on profitability. however, inggawati, lusy, hermanto (2018) evaluated the effect of ldr, bopo, and npl on the profitability of 56 banks in indonesia, and found that ldr had a significant negative effect on profitability. also, anggari and dana (2020) investigated the effect of car, third-party funds, ldr, and bank size on gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 102 the profitability of 44 listed banks in indonesia from 2016 to 2018 and found that ldr had a positive but insignificant effect on profitability. on their part, fang, lau, lu, tan, and zhang (2019) investigated the joint impacts of risk and efficiency on banks’ profitability in china from 2003 to 2017, and found that bank size was significantly related to profitability. conversely, ibrahim (2020) examined the performance of 37 islamic banks in malaysia from 1997 to 1998 and found that bank size had no significant influence on performance. meanwhile, alfadhli and alali (2021) investigated the effect of asset size on the performance of 10 kuwaiti banks from 2008 to 2018 and found that the bank’s asset size had a negative and significant effect on performance. however, gupta and mahakud (2020) examined the influence of personal characteristics of the chief executive officers on the performance of indian commercial banks, and found that bank size had a positive and significant effect on performance. similarly, huong et al. (2021) used unbalanced data to determine the effect of liquidity risk on the performance of banks in asia and established a positive and significant relationship between bank size and performance. but, habtoor (2021) examined the effect of board members’ shareholding on the performance of 12 banks listed on the saudi arabian stock exchange from 2011 to 2013 and found an inverse relationship between bank size and performance. furthermore, bezawada (2020) employed corporate governance practices to evaluate the influence of board characteristics on bank performance by using 34 commercial banks in india and established a negative and significant relationship between bank size and performance. from the foregoing empirical reviews, inconsistent findings were established on the effects of deposit and lending rates, as well as bank size on bank performance, which requires the adoption of intervening variable to moderate the direct relationships. moreover, most of the studies were conducted in european and asian countries that have stronger socioeconomic, political, cultural, infrastructural, educational and institutional standing compared to developing countries like nigeria, thus, the need to address the existing literature gap in this context. statement of hypotheses based on the review of the empirical literature, the following null hypotheses were formulated: h01: deposit rate has no significant effect on the performance of commercial banks in nigeria. h02: lending rate has no significant effect on the performance of commercial banks in nigeria. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 103 h03: loan-to-deposit ratio has no significant effect on the performance of commercial banks in nigeria. h04: bank size has no significant moderating effect on the relationship between deposit rate and performance of commercial banks in nigeria. h05: bank size has no significant moderating effect on the relationship between lending rate and performance of commercial banks in nigeria. h06: bank size has no significant moderating effect on the relationship between loan-to-deposit ratio and performance of commercial banks in nigeria. 3. methodology the ex-pot-facto research design was used in line with pervez, kjell, and roger (2020)’s suggestion because it is retrospective research that tests the hypothesized relationships among the variables. the study’s population was composed of commercial 13 banks listed on the nigerian stock exchange (nse) as of 31st december 2020. however, one bank (jaiz bank of nigeria plc) was dropped because it does not operate on interest. thus, the remaining 12 banks formed the adjusted population of the study. the justification for selecting the banks listed on the nse was based on the availability of data. also, a balanced panel data for a 10 firm-year period from 2011 to 2020 were used making 120 observations. the choice of this period was based on the fact that the year 2011 marked the period during which commercial banks started recuperating from the adverse performance shocks occasioned by the 2007 to 2008 global financial crisis (cbn, 2011); and 2020 was the closest year to the publication of this study. data for the proxies of the bank-specific variables were extracted from the annual reports of the sampled banks; whereas macroeconomic data were sourced from the world development indicators (wdi). data analysis was performed using balanced panel data regression with the aid of stata software version 14.2. the model of the study is given by: roeit = β0 + β1 dprit + β2 lnrit + β3 ldrit + β4 gdrit + β4 infit + εit ………… (1) roeit = β0 + β1 dprit + β2 lnrit + β3 ldrit + β4 gdrit + β4 infit β5 bsz × dprit + β6 bsz × lnrit + β6 bsz × ldrit εit ………… (2) gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 104 where: roe = return on equity; β0 = intercept/constant; β1,2 … n = parameters – slop coefficients; dpr = deposit rate; lnr = lending rate; bsz = bank size; gdr = gross domestic product rate; ε = error term; it = panel data (i = cross-sectional observations; t = time series) measurement of variables the summary of the measures of the dependent, independent, moderating and control variables are presented in table 3.1. table 3.1: summary of variables definition and measurement variables measures source authors exp. sign. dependent variable: performance (roe) net income/shareholders’ equity bfs dewi et al. 2021 independent variable: deposit rate (dpr) interest paid/total deposits bfs antoun et al. (2021) -ve lending rate (lnr) net interest income/total loans bfs rahman et al. (2018) +ve loan-to-deposit ratio (ldr) total loans/total deposits bfs nugraha et al. (2021) +ve moderator: bank size (bsz) natural log of total assets bfs tekin (2012) +ve control variable: gross domestic prod. (gdp) nominal gdp rate wd i sufian & habibullah (2009) +ve inflation (inf) consumer price index (cpi) wd i ridwan (2022) -ve source: authors’ compilation, 2023 note: roe = return on equity; bfs = banks' financial statement; wdi= world development indicators. 4. presentation of results the regression results obtained from the stata software are presented in order to give room for making valid inferences from the hypotheses testing gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 105 table 4.1: summary of descriptive statistics variable obs mean std. dev. min max roe 120 0.076 0.401 -3.969 0.326 dpr 120 0.054 0.021 0.012 0.120 lnr 120 0.168 0.513 0.047 5.712 ldr 120 0.643 0.172 0.030 0.992 ta 120 1869.908 1528.338 156.510 7624.980 gdr 120 0.027 0.029 -0.018 0.067 inf 120 0.118 0.027 0.081 0.165 note: roe = return on equity: dpr = deposit rate; lnr = lending rate; ldr = loan-todeposit ratio; ta = total assets; gdr = gross domestic product rate; inf = inflation table 4.1 reflects the descriptive statistics of 120 observations. the average roe was 0.076 with a minimum value of -3.969, a maximum value of 0.326, and a standard deviation of 0.021. it means the average return on the shareholders’ equity was 7.6%. the dpr was an average of 0.054 or 5.4% with a minimum of 0.012 or 1.2%, a maximum of 0.120 or 12%, and a standard deviation of 0.021 or 2.1%. at the same time, the average lnr was 0.168 or 16.8%, with a minimum of 0.047 or 4.7%, a maximum of 5.712 or 571%, and a standard deviation of 0.513 or 51.3%. it means the banks received an average interest income of 16.8% higher than the interest expense of 5.4%, reflecting the interest rate spread of 11.4%. but the maximum lnr coefficient of 5.712 or 571.2% was an outlier. to address this anomaly, the suggestion of maddala (1992) was adopted where the data was checked and found to have no errors. thus, winsorization was performed as recommended by winsor (1946). it changed the outlier to a value closer to other values in the data. two separate regressions were conducted with the original data and the winsorized data. both outcomes failed to reflect significant differences, thus the natural outlier was reported, table 4.1 further revealed an average ldr of 0.643 or 64.3%, a minimum of 0.030 or 3%, a maximum of 0.992 or 99.2%, and a standard deviation of 0.172. also, the gdr recorded an average value of 0.027 or 2.7%, a minimum of -0.018 or 1.8%, a maximum of 0.067 or 6.7%, and a standard deviation of 0.029. this means that during the review period, the economy recorded a gdp decline of 1.8% and a maximum increase of 6.7%. on its part, inf had an average of 0.118 or 11.8%, a minimum of 0.081 or 8.1%, a maximum of 0.162 or 16.2%, and a standard deviation of 0.027. the bsz, as proxied by total assets (ta), had an average of gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 106 ₦1869.91 billion, with a minimum of ₦156.51 billion, a maximum of ₦7624.98 billion, and a standard deviation of ₦1528.34. table 4.2: correlation matrix roe dpr lnr ldr bsz gdr inf roe 1.000 dpr -0.268*** 1.000 (0.003) lnr -0.017 0.270*** 1.000 (0.858) (0.003) ldr 0.152* 0.205** -0.360*** 1.000 (0.097) (0.024) (0.000) bsz 0.351*** -0.447*** -0.256*** 0.241*** 1.000 (0.000) (0.000) (0.005) (0.008) gdr -0.099 -0.028 -0.040 -0.112 -0.224** 1.000 (0.283) (0.759) (0.663) (0.225) (0.014) inf 0.019 0.137 0.155* 0.107 0.112 -0.781*** 1.000 (0.841) (0.137) (0.091) (0.247) (0.223) (0.000) note: roe = return on equity: dpr = deposit rate; lnr = lending rate; gdr = gross domestic product rate; bsz = bank size; values in parenthesis = probability of correlation coefficients; *** = significance level at 1%; ** = significance level at 5%; * = significance level at 10%. table 4.3 shows the pairwise correlation coefficients among the variables. the correlation of dpr with roe was negative and significant (-0.268) at a 1% p-value. whereas, the correlation of lnr and gdr with the roe were also negative with -0.017 and -0.099 coefficients which were not significant at 0.858 and 0.283 pvalues respectively. it implies that an increase in the deposit rate results in a decrease in performance and vice versa. but bsz was positively related to roe with a 0.351 coefficient that is significant at 1%, meaning that an increase in the assets of banks leads to an increase in the performance and vice versa. the pairwise correlation among other variables can be seen at the intersection point of the vertical and horizontal cells of each variable. according to cohen and lea (2003), a high correlation coefficient insinuates an early multicollinearity signal that could only be confirmed by performing a variance inflation factor (vif) test. table 4.2 indicated correlation among the explanatory variables whose coefficients fall below ±0.70, which is the threshold of gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 107 multicollinearity (hair, anderson, tatham & black, 1995; ringle, wende & becker, 2015). table 4.3: multicollinearity test variable vif 1/vif inf 2.74 0.365 gdr 2.71 0.369 dpr 1.64 0.609 bsz 1.55 0.645 ldr 1.49 0.671 lnr 1.39 0.718 mean vif 1.92 table 4.3 has affirmed the absence of multicollinearity among the independent variables as all their vifs were below the threshold of 10. the lowest was 1.39 and the highest was 2.74; and the mean vif was 1.92 which was within the moderate correlation band prescribed by hair et al. (1995), the highest of which is 10. this established the independence of the variables of one another, thus the model has no multicollinearity. table 4.4: regression results (direct relationship) robust ols fe re fgls variables coef. t value coef. t value coef. z value coef. z value dpr -4.946 -1.720 -4.934 -1.630 -4.946 -2.380 -4.946** -2.450 lnr 0.160 1.620 0.144 1.550 0.160 2.040 0.160** 2.100 ldr 0.526 1.490 0.456 1.550 0.526 2.180 0.526** 2.240 bsz 0.103 2.550 0.106 1.300 0.103 2.090 0.103 2.150 gdr -1.597 -1.060 -1.528 -0.710 -1.597 -0.810 -1.597 -0.840 inf -1.700 -0.930 -1.564 -0.720 -1.700 -0.820 -1.700 -0.850 constant -0.518 -2.190 -0.516 -0.720 -0.518 -1.080 -0.518 -1.110 r2 0.1868 0.1860 0.1868 hausman 0.9985 lm 0.2555 hetero 353.66 *** 10642.07*** f-stat 2.80 1.31 25.96 27.57 0.000 120 p-value 0.014 0.258 0.000 obs 120 120 120 note: roe = return on equity: dr = deposit rate; lr = lending rate; lnr = loan-to-deposit ratio; bsz = bank size; gdr = nominal gross domestic product rate; inf = inflation rate; ols = ordinary least square; fe = fixed effect; re = random effect; fgls = feasible generalized least square; hausman = hauman’s test; hetero = heteroscedasticity test; * = significant at 10%; ** = significant at 5%; *** = significant at 1%; obs = number of observations. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 108 table 4.4 reflects the results of the ols, fe, re, and fgls regressions. the ols regression was first conducted to enable the conduct of the fe and re regressions. sequel to the fe and re regressions, hausman (1978)’s specification test was performed to select the best model for the study between the fe and re. the null hypothesis (h0) of hausman’s test states that the preferred model is random effects. the outcome of the hausman’s test presented in table 4.4 was not significant at a p-value of 0.9985. therefore, the study failed to reject the null hypothesis, meaning that re regression was the best model. to further select the fittest model between re and ols, lagrange multiplier (lm) test was conducted, whose function was to detect the presence or otherwise of serial correlation in the re model. the null hypothesis of re states that there is the presence of a serial correlation in the model. because the outcome of the lm test was not significant at 0.2555 p-value, the study failed to reject the null hypothesis and concluded that the re was inappropriate as it has a serial correlation. this implied that there was no evidence of significant differences across banks, thus simple ols regression was selected. furthermore, heteroscedasticity test for the ols model was performed. its null hypothesis states that the residuals/errors in the model are homoscedastic. the result of the hetero test was found to be significant at 1% (0.0000 p-value) with a 353.66 coefficient. thus, the study rejected the null hypothesis, which means that the ols model was heteroscedastic. to correct the heteroscedasticity in the ols, a robustness test was performed. however, after correcting the heteroscedasticity, the p-values of two of the predictor variables, lnr and ldr, deteriorated by becoming insignificant (lnr p-value: 0.107; ldr p-value: 0.139), except for dpr which became significant at 10% (a p-value of 0.085). therefore, a feasible generalised least square (fgls) regression was performed in line with the recommendation of beck and katz (1995). the fgls is an alternative and more robust method of correcting heteroscedasticity and serial correlation in the ols. this boosted the p-values of the deteriorating predictor variables. thus, the fgls was reported hereon. table 4.4 shows the fgls regression result, where dpr was negatively related to roe with a -4.946 coefficient that was significant at 5% (0.014 p-value). however, lnr was positively related to roe with a 0.160 coefficient that was significant at 5% (0.035 p-value). also, ldr was positively related to roe with a 0.526 coefficient that was significant at 5% (0.025 p-value). gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 109 table 4.5: result of moderation relationship (fgls) variables coef. std. err. z p>z [95% conf. interval] dpr -61.434 13.987 -4.390 0.000 -88.847 -34.020 lnr -0.007 2.127 0.000 0.997 -4.176 4.161 ldr 4.821 1.708 2.820 0.005 1.474 8.168 bsz 0.081 0.174 0.470 0.640 -0.259 0.422 gdr -1.692 1.856 -0.910 0.362 -5.329 1.945 inf -1.380 1.951 -0.710 0.479 -5.203 2.443 bszdpr 8.076 1.970 4.100 0.000 4.214 11.937 bszlnr 0.093 0.418 0.220 0.825 -0.727 0.912 bszldr -0.628 0.243 -2.580 0.010 -1.105 -0.151 cons -0.332 1.258 -0.260 0.792 -2.797 2.132 r2 0.3048 f-stat 52.61 p-value 0.000 obs 120 source: stata output (2023) the study went further to combine all the variables in a single model to test the moderation effect. in this regard, regression procedures similar to those adopted in testing the effects of the direct relationship were followed (ols, fe, re, and fgls). since the study is more interested in the fgls regression, its result is presented hereon in table 4.5, which reflects that bsz had a positive moderating effect on the relationship between dpr and roe with an 8.076 coefficient that was significant at 1% (0.000 p-value). however, bsz failed to moderate the relationship between lnr and roe with a 0.093 coefficient that was not significant at 0.825 p-value. but bsz had a negative moderating effect on the relationship between ldr and roe with a -0.628 coefficient that was statistically significant at 5% (0.010 p-value). table 4.6: summary of hypotheses testing hypotheses relationship z value coef. p-value decision h01 dpr -> roe 2.450 -4.946** 0.014 rejected ho2 lnr -> roe 2.100 0.160** 0.035 rejected h03 ldr -> roe 2.240 0.526** 0.025 rejected h04 bsz*dpr -> roe 4.100 8.076*** 0.000 rejected h05 bsz*lnr -> roe 0.220 0.093 0.825 failed to reject h06 bsz*ldr -> roe 2.580 -0.628** 0.010 rejected source: compiled by the authors (2023) gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 110 table 4.6 shows that the regression coefficient linking dpr to roe was negative (-4.946) and significant at a 5% level, thus, h01 was rejected. but the coefficient linking lnr to roe was positive (0.160) and significant at a 5% level, thus h02 was rejected. however, the coefficient linking ldr to roe was positive (0.526) and significant at a 5% level, thus h03 was rejected. meanwhile, the coefficient of the moderating effect of bsz on the relationship between dpr and roe was positive (8.076) and significant at a 1% level, thus, h04 was rejected. conversely, the coefficient of the moderating effect of bsz on the relationship between lnr and roe was positive (0.093) and not significant, thus, h05 was failed to be rejected. whereas, the coefficient of the moderating effect of bsz on the relationship between ldr and roe was negative (-0.628) and significant at a 5% level, thus h06 was rejected. discussion of findings table 4.4 revealed that the deposit rate is negatively related to performance at a 5% level of significance, implying that the higher the deposit rate the lower the performance because the deposit rate is an expenditure paid from the interest income earned in the review period. the table further indicates that the lending rate is positively related to performance at a 5% level of significance, meaning that the higher the lending rate the higher the performance, as the lending rate represents the interest income to the banks which improved their performance in the review period. logically, these relationships affirmed the descriptive statistics in table 4.1 where the average lending rate was 16.8% and the average deposit rate was 5.4%, thus the interest rate spread was 11.4%. this finding corresponds to the studies that found a significant positive relationship between the lending rate and bank performance (otiwu, 2022; bala, godiya, hadith, & maijama’a, 2022); a significant and negative relationship between deposit rate and bank performance (brown, 2020; caliskan & lecuna, 2020). table 4.6 further indicates that loan-todeposit ratio is positively related to the performance at 5% level. this was attributable to fact that liquidity builds the confidence of depositors to maintain their accounts with the banks to enable the banks to use same for financial intermediation. this finding is consistent with that of inshira and jahfer (2020); ha (2019). these findings have, therefore, corroborated the hypotheses formulated by this work and further answered the research question. on the intervention effect, the summary of the test of hypotheses in table 4.5 indicates that bank size has positively moderated the relationship between deposit rate and bank performance at a 5% level of significance. the point to note here is that the fgls regression on the direct relationship between deposit rate and gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 111 performance has a -4.946 coefficient. but the introduction of a moderator in the model has changed the direction of the relationship with an 8.076 coefficient, implying that the higher the deposit rate, the higher the banks’ performance because the deposit rate attracts more deposits with which the banks perform financial intermediation to earn interest rate spread.. this finding is consistent with the assumptions of the resource-based view theory of wernerfelt (1984) which established a positive relationship between firm size and performance. it is also in tandem with the findings of gupta and mahakud (2020); and huong et al. (2021), which affirmed a positive correlation between bank size and bank performance. table 4.5 further indicates that bank size has negatively moderated the relationship between loan-to-deposit ratio and bank performance at a 5% level of significance. this was attributable to the liquidity risk which makes an increase in banks’ assets size to create liquidity issues that could make meeting their obligations difficult. the finding was consistent with that of habtoor (2021). the failure of bank size to moderate the relationship between lending rate and bank performances could be attributed to the fact that the rise in bank size is accompanied by other variables that neutralize its positive effects on banks’ performance. this could hold true in the case of nigeria where there is a galloping yet artificial inflation that depreciates the value of bank assets, and widespread politically motivated insecurity that exacerbates the loss of the assets values. 5. conclusion and recommendation the study established a moderating effect of bank size on the deposit rate and loanto-deposit ratio of banks. it is therefore recommended that banks must ensure the growth of their assets in all ramifications to achieve economies of scale and cost efficiency for improved performance. similarly, banks should tailor their deposit terms to be flexible, such that they can be renegotiated in the event of adversities like economic recessions, and to maintain and even improve their liquidity statuses above the regulator thresholds to secure depositors confidence for the sustenance of their deposits. the policy implications of these recommendations are that, the larger the assets base of banks, the higher their ability to minimize their deposit rate burden by spreading same on other assets. furthermore, maintaining adequate liquidity can enable banks to retain their existing customers, and to secure new customers whose deposits can be reinvested for improved performance. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 112 meanwhile, the limitation of the study is its failure to use additional control variables that could influence bank performance such as risk management practices, regulatory environment, and market competition. but this gives room for future researchers to address. references abrar, a. (2019). the impact of financial and social performance of microfinance institutions on lending interest rate: a cross-country evidence. cogent business & management, 6(1), 1540072. https://doi.org/10.1080/23311975.2018.1540072 aguinis, h., edwards, j. r., & bradley, k. j. (2017). improving our understanding of moderation and mediation in strategic management research. organizational research methods, 20(4), 665-685. doi: 10.1177/1094428115627498 ahamed, f. (2021). determinants of liquidity risk in the commercial banks in bangladesh. european journal of business and management research, 6(1), 164-169. doi: http://dx.doi.org/10.24018/ejbmr.2021.6.1.729 alfadhli, m. s., & alali, m. s. (2021). the effect of bank size on financial performance: a case study on kuwaiti banks. journal of insurance and financial management, 4(3), 11-15. file:///c:/users/hp/downloads/182515-1-pb%20(1).pdf alharbi, a. t. (2017). determinants of islamic banks’ profitability: international evidence. international journal of islamic and middle eastern finance and management, 10(3). 331-350. https://doi.org/10.1108/imefm-12-20150161 al-shatnawi, h. m., hamawandy, n. m., sharif, r. j. m., sabir-jaf, r. a. & alkake, f. (2021). the role of the size and growth rate of the bank in determining the effect of financial leverage on the profitability of jordanian commercial banks. journal of contemporary issues in business and government, 27(1), 1962-1978. https://cibg.org.au/ article_8428_b14eab41971fe8a37dd1bcc4a8236269.pdf alex, m. k., & ngaba, d. (2018). effect of firm size on financial performance on banks : case of commercial banks in kenya. 3(1), 175-190. http://www.iajournals.org/arti cles/iajef_v3_i1_175_190.pdf andersson, u., cuervo-cazurra, a., & nielsen, b. (2014). from the editors: explaining interaction effects within and across levels of analysis. journal https://doi.org/10.1080/23311975.2018.1540072 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 113 of international business studies, 45(9), 1063-1071. https://doi.org/10.1057/jibs.2014.50 anggari, n. l. s., & dana, i. m. (2020). the effect of capital adequacy ratio, third party funds, loan to deposit ratio, bank size on profitability in banking companies on idx. american journal of humanities and social sciences research (ajhssr), 4(12), 334-338. https://www.ajhssr.com/wpcontent/uploads/2020/12/zp20412334338.pdf anup, s. (2013, march 24th). global financial crisis. global issues. http://www.globalissues.org/article/768/global-financial-crisis antoun, r., coskun, a., & youssef, d. (2021). bank-specific, macroeconomic, and institutional factors explaining the capital buffer and risk adjustments in banks: a simultaneous approach. eastern european economics, 59(2), 103-124. https://doi.org/10.1080/00128775.2020.1870406 awoyemi, b. o., & jabar, a. a. (2014). prime lending rates and the performance of microfinance banks in nigeria. european journal of business and management, 6(12), 131-136 bala, u., godiya, i., hadith, n. b., & maijama’a, r. (2022). the effect of monetary policy on the performance of deposit money banks in nigeria. economic research, 6(1), 10-23. doi: 10.29226/tr1001.2022.292 baron, r. m., & kenny, d. a. (1986). the moderator–mediator variable distinction in social psychological research: conceptual, strategic, and statistical considerations. journal of personality and social psychology, 51(6), 1173-1182. http://citeseerx.ist.p su.edu/viewdoc/download?doi=10.1.1.917.2326&rep=rep1&type=pdf beck, n. & katz, j. n. (1995). what to do (and not to do) with times series crosssection data in comparative politics. american political science review 89(3), 634-647. https://doi.org/10.2307/2082979 bezawada, b. (2020). corporate governance practices and bank performance: evidence from indian banks. indian journal of finance and banking, 4(1), 33-41. doi: https://doi.org/10.46281/ijfb.v4i1.502 brown, m. (2020). negative interest rates and bank lending. cesifo forum, 1(21). https://www.ifo.de/docdl/cesifo-forum-2020-1-brown-negativeinteres-rates-march.pdf cai, g., li, x., lin, b., & luo, d. (2022). gdp manipulation, political incentives, and earnings management. journal of accounting and public policy, 41(5), 106949. https://doi.org/10.1016/j.jaccpubpol.2022.106949 https://doi.org/10.46281/ijfb.v4i1.502 https://doi.org/10.1016/j.jaccpubpol.2022.106949 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 114 caliskan, m. m. t. & lecuna, h. k. s. (2020). the determinants of banking sector profitability in turkey. business and economics research journal, 11(1), 161–167. doi: 10.20409/berj.2020.242 central bank of nigeria (2017). annual report and statement of accounts 2017. https://www.cbn.gov.ng/out/2018/rsd/cbn%202017%20annual%20 report_web.pdf central bank of nigeria (2018). annual report and statement of account 2018. available online at https://www.cbn.gov.ng/out/2019/rsd/2018%20ar%20kama1.pdf central bank of nigeria (2019). annual report and statement of account 2019. available online at file:///c:/users/hp/documents/cbn%20annual%20reports/cbn %20annual%20report%202019.pdf central bank of nigeria (2019). circular: regulatory measures to improve lending to the real sector of the nigerian economy. https://www.cbn.gov.ng/out/2019/ccd/l ending%20to%20real%20sector.pdf chen, q., goldstein, i., huang, z., & vashishtha, r. (2022). bank transparency and deposit flows. journal of financial economics, 146(2), 475-501. https://doi.org/10.1016/j.jfineco.2022.07.009 chen, x. (2022). the impact of interest rate marketization on the profitability of commercial banks–evidence from the chinese market. world scientific research journal, 8(3), 189-193. doi: 10.6911/wsrj.202203_8(3).0024 cohen, b. h., & lea, r. b. (2003). essentials of statistics for the social and behavioral sciences. new jersey: john wiley & sons, inc. retrieved may 15th, 2021, from http://books.google.com/books?hl=en&lr=&id=ki8dl7yuq48c&oi=fnd &pg=pr9&dq dewi, a. g., marjohan, m., safrudin, e., martini, e., sagala, e. d., & dini, t. a. l. (2021). the effect of return on equity, return on asset and dividend policy on company value (empirical study on pharmaceutical sector companies registered in indonesia stock exchange 2015-2019). humanities, management and science proceedings, 1(2), 1069-1082. retrieved december 2nd, 2020, from http://www.openjournal.unpam.ac.id/index.php/snh eltinay, n. b., & masri, r. (2014). understanding impact of financial and nonfinancial measurements in sudanese banks’ performance. international journal of humanities and management sciences, 2(3), 98-104. https://doi.org/10.1016/j.jfineco.2022.07.009 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 115 fang, j., lau, c. k. m., lu, z., tan, y., & zhang, h. (2019). bank performance in china: a perspective from bank efficiency, risk-taking and market competition. pacific-basin finance journal, 56, 290-309. https://doi.org/10.1016/j.pacfin.2019.06.011 flamini, v., schumacher, l., & mcdonald, c. a. (2014). the determinants of commercial bank profitability in sub-saharan africa. imf working papers. https://doi.org/10.5089/9781451871623.001 francis, m. e. (2013). determinants of commercial bank profitability in subsaharan africa. international journal of economics and finance, 5(9), 134. https://doi.org/10.5539/ijef.v5n9p134 gupta, n., & mahakud, j. (2020). ownership, bank size, capitalization and bank performance: evidence from india. cogent economics & finance, 8(1), 1808282. https://doi.org/10.1080/23322039.2020.1808282 ha, v. d. (2019). the interactive relationship between credit growth and profitability of people’s credit funds in vietnam. growing science, 6(2), 79 – 88. http://www.m.growingscience.com/ac/vol6/ac_2019_24.pdf habtoor, o. s. (2021). the influence of board ownership on bank performance: evidence from saudi arabia. the journal of asian finance, economics and business, 8(3), 1101-1111. https://doi.org/10.13106/jafeb.2021.vol8.no3.1101 hair, j. f. jr., anderson, r. e., tatham, r. l. & black, w. c. (1995). multivariate data analysis (3rd ed). new york: macmillan hausman, j. a. (1978). specification tests in econometrics. econometrica, 46(6), 1251–1271. https://doi.org/10.2307/1913827 huong, t. t. x., nga, t. t. t., & oanh, t. t. k. (2021). liquidity risk and bank performance in southeast asian countries: a dynamic panel approach. quantitative finance and economics, 5(1), 111-133. doi: 10.3934/qfe.2021006 ibrahim, m. h. (2020). islamic banking and bank performance in malaysia: an empirical analysis. journal of islamic monetary economics and finance, 6(3), 487-502. file:///c:/users/hp/downloads/1197article%20text-3147-4-10-20210517.pdf inggawati, v. r., lusy, l., & hermanto, y. b. (2018). the influence of loan to deposit ratio, loan operational of income operational and nonperforming loan toward profitability of bank perkreditan rakyat in sidoarjo regency. international journal of scientific and research publications (ijsrp), 8(11), 510-519. doi: 10.29322/ijsrp.8.11.2018.p8354 https://doi.org/10.1016/j.pacfin.2019.06.011 https://doi.org/10.1080/23322039.2020.1808282 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 116 inshira, m. j. f. & jahfer, a. (2020). the effect of asset liability management on the liquidity risk of domestic licensed commercial banks in sri lanka. journal of management, 14(2), 27-37. http://www.seu.ac.lk/jom/ publication/volume14/no2/paper%203.pdf ishioro, b. o. (2023). the long-run macroeconomic determinants of banks' performance in nigeria. kiu journal of social sciences, 8(4), 25-37. file:///c:/users/hp/downloads/1538-1-4283-1-10-20230109.pdf islam, m. r. (2023). the impact of macroeconomic factors on profitability of commercials bank in the uk. ijfmr-international journal for multidisciplinary research, 5(1), 1-19. https://doi.org/10.36948/ijfmr.2023.v05i01.1406 kanga, d., murinde, v., & soumaré, i. (2021). how has the rise of pan-african banks impacted bank stability in waemu?. journal of international financial markets, institutions and money, 73, 101364. https://doi.org/10.1016/j.intfin.2021.101364 katusiime, l. (2021). covid 19 and bank profitability in low income countries: the case of uganda. journal of risk and financial management, 14(12), 588. https://doi.org/10.3390/jrfm14120588 kozak, s., & wierzbowska, a. (2022). did the covid-19 pandemic amplify the positive impact of income diversification on the profitability of european banks?. equilibrium. quarterly journal of economics and economic policy, 17(1), 11-29 kuznets, s. (1973). concluding remarks, in milton moss (ed), the measurement of economic and social performance, studies in income and wealth 38, new york: columbia university press lee, c. c., wang, c. w., thinh, b. t., & xu, z. t. (2022). climate risk and bank liquidity creation: international evidence. international review of financial analysis, 82, 102198. https://doi.org/10.1016/j.irfa.2022.102198 mabwe, k., & jaffar, k. (2022). uk government controls and loan-to-deposit ratio. journal of financial regulation and compliance, 30(3), 353-370. https://doi.org/10.1108/jfrc-06-2021-0048 maddala, g. s. (1992). outliers. introduction to econometrics. 2nd edition. macmillan, new york mccord, r., & prescott, e. s. (2014). the financial crisis, the collapse of bank entry, and changes in the size distribution of banks. frb richmond economic quarterly, 100(1), 23-50. https://www.communitybanking.org/~/media/files/communitybanking/201 5/session3_paper2_prescott.pdf http://www.seu.ac.lk/jom/ https://doi.org/10.36948/ijfmr.2023.v05i01.1406 https://doi.org/10.1016/j.intfin.2021.101364 https://doi.org/10.3390/jrfm14120588 https://doi.org/10.1016/j.irfa.2022.102198 https://doi.org/10.1108/jfrc-06-2021-0048 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 117 memon, m. a., cheah, j. h., ramayah, t., ting, h., chuah, f., & cham, t. h. (2019). moderation analysis: issues and guidelines. journal of applied structural equation modeling, 3(1), 1-11. file:///c:/users/hp/documents/usman's%20phd%20thesis/reason%2 0for%20moderation%201.pdf mia, m. r. (2022). market competition, capital regulation and cost of financial intermediation: an empirical study on the banking sector of bangladesh. asian journal of economics and banking, (ahead-ofprint). https://doi.org/10.1108/ajeb-03-2022-0028 miah, m. d., uddin, h., & ahmed, n. n. (2019). determinants of efficiency and stability: evidence from private commercial banks in bangladesh. international journal of accounting and finance, 9(2-4), 152169. https://doi.org/10.1504/ijaf.2019.106755 mizen, p. (2008). the credit crunch of 2007-2008: a discussion of the background, market reactions, and policy responses. federal reserve bank of st. louis review, 90(september/october 2008). https://webdocs.stern.nyu.edu/salomon/docs/crisis/frbstlouismizen.pdf mohammad, r. a. (2022). working capital financing policies and their reflection on banking profitability in commercial banks listed in the iraq stock exchange. world economics and finance bulletin, 6, 65-76. retrieved from https://scholarexpress.net/index.php/wefb/article/view/486 muriithi, p. k., nasieku, t., & memba, f. (2022). influence of credit management on financial intermediation efficiency of deposit taking saccos’s in kenya. journal of accounting, 5(1), 1-12. doi: https://doi.org/10.47941/jacc.794 nugraha, n. m., yahya, a., nariswari, t. n., salsabila, f., & octaviantika, i. y. (2021). impact of non-performing loans, loan to deposit ratio and education diverstiy on firm performance of indonesia banking sectors. review of international geographical education online, 11(3). 10.48047/rigeo.11.3.10 olalere, o. e., bin omar, w. a., & kamil, s. (2017). bank specific and macroeconomic determinants of commercial bank profitability: empirical evidence from nigeria. international journal of finance & banking studies, 6(2), 25-38. doi:10.20525/ijfbs.v6i1.627 oldeniel, r. n. v. (2020). the impact of industry-specific determinants on the capital structure of dutch smes. unpublished master thesis, department of finance and accounting, https://doi.org/10.1108/ajeb-03-2022-0028 https://doi.org/10.1504/ijaf.2019.106755 http://dx.doi.org/10.20525/ijfbs.v6i1.627 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 118 university of twente, enschede, netherlands. http://essay.utwente.nl/8251 0/1/vanoldeniel_ma_bms.pdf onodi, b. e., & onuche, s. j. e. (2021). banking reforms and operational performance of commercial banks in nigeria. international journal of economics, business and management research, 5(7), 50-66. https://www.ijebmr.com/uploads/pdf/archivepdf/2021/ijebmr_782.pdf otiwu, c. k. (2022). deregulation of interest rate in nigeria and deposit money bank’s performance (1996–2018). asian journal of economics, business and accounting, 12-22. doi: 10.9734/ajeba/2022/v22i430553 parvin, s., chowdhury, a. n. m. m. h., siddiqua, a., & ferdous, j. (2019). effect of liquidity and bank size on the profitability of commercial banks in bangladesh. asian business review, 9(1), 7-10. retrieved june 16th, 2019, from https:// abc.us.org/ojs/index.php/abr/article/view/219 pervez, g., kjell, g. & roger, s. (2020). research methods in business studies, 5th ed. cambridge university press phan, d. h. b., narayan, p. k., rahman, r. e., & hutabarat, a. r. (2020). do financial technology firms influence bank performance?. pacific-basin finance journal, 62, 101210. http://publicationbi.org/repec/idn/wpaper/wp192018.pdf rahman, m. m., zheng, c., ashraf, b. n., & rahman, m. m. (2018). capital requirements, the cost of financial intermediation and bank risk-taking: empirical evidence from bangladesh. research in international business and finance, 44(1), 488-503. https://doi.org/10.1016/j.ribaf.2017.07.119 rahman, h., yousaf, m. w. & tabassum, n. (2020). bank-specific and macroeconomic determinants of profitability: a revisit of pakistani banking sector under dynamic panel data approach. international journal of financial studies, 8(3), 42. http://dx.doi.org/10.3390/ijfs8030042 ridwan, m. (2022). determinants of inflation: monetary and macroeconomic perspectives. kinerja: jurnal manajemen organisasi dan industri, 1(1), 1-10. http://jurnalpustek.org/index.php/kjm b/article/view/2 ringle, c. m., wende, s. & becker, j. m. (2015). smartpls 3. bönningstedt: smartpls. retrieved october 18th, 2018 from http://www.smartpls.com saleh, d. s., & winarso, e. (2021). analysis of non-performing loans (npl) and loan to deposit ratio (ldr) towards profitability. international journal of multicultural and multireligious understanding, 8(1), 423-436. https://ijmmu.com/index.php/ijmmu/article/viewfile/2387/1978 https://doi.org/10.9734/ajeba/2022/v22i430553 http://jurnalpustek.org/index.php/kjm gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 119 saputra, f. (2022). analysis effect return on assets (roa), return on equity (roe) and price earnings ratio (per) on stock prices of coal companies in the indonesia stock exchange (idx) period 2018-2021. dinasti international journal of economics, finance & accounting, 3(1), 82-94. doi: https://doi.org/10.38035/dijefa.v3i1.1238 sari, s., ajija, s. r., wasiaturrahma, w., & ahmad, r. a. r. (2022). the efficiency of indonesian commercial banks: does the banking industry competition matter?. sustainability, 14(17), https://doi.org/10.3390/su141710995 siddique, a., khan, m. a., & khan, z. (2021). the effect of credit risk management and bank-specific factors on the financial performance of the south asian commercial banks. asian journal of accounting research, 7(2), 182-194. . https://doi.org/10.1108/ajar-08-2020-0071 soludo, c. c. (2004, july). consolidating the nigerian banking industry to meet the development challenges of the 21st century. in being an address delivered to the special meeting of the bankers’ committee, held on july (vol. 6, p. 2004). retrieved from https://www.cbn.gov.ng/out/speeches/2004/govadd-6jul.pdf sufian, f., & habibullah, m. s. (2009). determinants of bank profitability in a developing economy: empirical evidence from bangladesh. journal of business economics and managemet, 10(3). https://doi.org/10.3846/16111699.2009.10.207-217 tekin, r. b. (2012). economic growth, exports and foreign direct investment in least developed countries: a panel granger causality analysis. economic modelling, 29(3), 858-878. https://doi.org/10.1016/j.econmod.2011.10.013 thorhallsson, b., & kirby, p. (2012). financial crises in iceland and ireland: does european union and euro membership matter?. jcms: journal of common market studies, 50(5), 801-818. https://doi.org/10.1111/j.14685965.2012.02258.x tian, p. (2023). analysis of the impact of macroeconomic factors on nonperforming loans of commercial banks. h. mallick et al. (eds.): icemci 2022, aebmr 668. 75–83. https://doi.org/10.2991/978-94-6463-098-5_10 tuna, g., & almahadin, h. a. (2021). does interest rate and its volatility affect banking sector development? empirical evidence from emerging market economies. research in international business and finance, 58, 101436. https://doi.org/10.1016/j.ribaf.2021.101436 utomo, m. l. & anggono, a. h. (2020). bank specific determinants of bank profitability in indonesia for the period 2008-2019. journal of sociohttps://doi.org/10.38035/dijefa.v3i1.1238 https://doi.org/10.1108/ajar-08-2020-0071 https://doi.org/10.1111/j.1468-5965.2012.02258.x https://doi.org/10.1111/j.1468-5965.2012.02258.x https://doi.org/10.1016/j.ribaf.2021.101436 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 120 political science and humanities, 3(2). doi: https://doi.org/10.36624/jisora.v3i2.74 van binsbergen, j. h., diamond, w. f., & grotteria, m. (2022). risk-free interest rates. journal of financial economics, 143(1), 1-29. https://doi.org/10.1016/j.jfineco.2021.06.012 wang, z., zhao, h., & li, l. (2022). the positive side of bank wealth management products: evidence from bank lending rate. journal of financial stability, 58, 100950. https://doi.org/10.1016/j.jfs.2021.100950 wernerfelt, b. (1984). a resource view based of the firm. strategic management journal, 5(2), 171-180. https://doi.org/10.1002/smj.4250050207 winsor, c. p. (1946). which regression? biometrics bulletin, 2(6), 101-109. wong, l. (2009). returning agency back to finance: the critical role of politics and governance in financialization. in credit, currency, or derivatives: instruments of global financial stability or crisis? (vol. 10, pp. 545-573). emerald group publishing limited. https://doi.org/10.1108/s15693767(2009)0000010020 zarrouk, h., ben jedidia, k., & moualhi, m. (2016). is islamic bank profitability driven by same forces as conventional banks? international journal of islamic and middle eastern finance and management, 9(1), 46-66. https://doi.org/10.1108/imefm-12-2014-0120 https://doi.org/10.36624/jisora.v3i2.74 https://doi.org/10.1016/j.jfineco.2021.06.012 https://doi.org/10.1016/j.jfs.2021.100950 https://doi.org/10.1108/s1569-3767(2009)0000010020 https://doi.org/10.1108/s1569-3767(2009)0000010020 i gusau journal of accounting and finance (gujaf) vol. 4 issue 1, april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ii © department of accounting and finance vol. 4 issue 1 april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iv prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 v dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vi advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ix contents board characteristics and earnings management of listed consumer goods firms in nigeria benjamin gwabin joseph, murtala abdullahi phd, benjamin kumai gugong phd 1 dividend policy and value of listed non-financial companies in nigeria: the moderating effect of investment opportunity abubakar umar 18 trialability and observability of accrual basis international public sector accounting standards implementation in nigeria aliyu abdullahi ahmed phd, zakari usman 35 liquidity risk and performance of non-financial firms listed on the nigerian stockexchange muhammed alhaji abubakar, nurnaddia binti nordin phd, abubakar hamisu umar 54 board diversity, political connections and firm value: an empirical evidence from financial firms in nigeria rofiat oyetunji, isah shittu phd, ahmed bello phd. 75 moderating effect of bank size on the relationship between interest rate, liquidity, and profitability of commercial banks in nigeria shehu usman hassan, bello sabo (ph. d), ismai'l idris tijjani (ph. d), idris ahmed aliyu. (ph. d) 96 sources of health care financing among surgical patients seen at the dalhatu araf specialist hospital lafia nasarawa state nigeria ahmed mohammed yahaya, babatunde joseph kolawole, bello surajudeen oyeleke 121 transparency, compliance and sustainability of contributory pension scheme in nigeria olanrewaju atanda aliu (ph. d), mohamad ali abdul-hamid (ph. d), salami suleiman (ph. d), salam mudathir olanrewaju 135 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 x examining the impact of working capital management on the financial performance of listed industrial goods entities in nigeria 151 sani abdulrahman bala (ph. d), jamilu jibril, taophic olarewaju bakare corporate governance factors and tax avoidance of listed deposit money banks in nigeria 171 sani abdulrahman bala (ph. d), umar salim ibrahim, samaila dannana risk committee demographic traits: a study of the impact of expertise on risk disclosure quality of listed insurance firms in nigeria wada najib abbas, dandago, kabiru isa (ph. d), rabiu, naja’atu bala 192 moderating effect of audit committee on the relationship between audit quality and earnings management of listed non-financial services firms in nigeria ahmad muhammad ahmad, lubabah mansur kwanbo (ph.d.), shehu usman hassan (ph.d.) musa suleiman umar (ph.d.) 216 determinants of audit opinion of negative-book-value firms in nigeria: firm value and audit characteristics perspective asma’u mahmood baffa (ph. d), lawal mohammed (ph.d.), ahmed bello (ph.d.) umar farouk abdulkarim 237 intervention announcements and naira management: evidence from the nigerian foreign exchange market adedeji daniel gbadebo 254 is there earnings discontinuity after the implementation of ifrs in nigeria? adedeji daniel gbadebo 275 192 risk committee demographic traits: a study of the impact of expertise on risk disclosure quality of listed insurance firms in nigeria wada, najib abbas department of accounting bayero university, kano, nigeria. +2348160238483, talk2najib@gmail.com dandago, kabiru isa department of accounting bayero university, kano, nigeria. +2348023360386, kidandago@gmail.com rabiu, naja’atu bala department of accounting bayero university, kano, nigeria. +2348033149119, nbrabiu.acc@buk.edu.ng abstract the study explored the effect of risk committee expertise on the risk disclosure quality (rdq) of listed insurance firms in nigeria from 2011-2021. data was obtained from the financial statement and annual reports of seventeen listed insurance firms sampled out of a population of twenty-one firms. the dependent variable employed in the study was rdq defined by the quantity of risk disclosure sentences while risk committee expertise was employed as the independent variable of the study. the ratio of the number of directors with expertise in accounting, finance, and risk management in the committee to the total number of directors in the committee serves as a proxy for the independent variable. descriptive statistics, correlation analysis, and gls regression were used to analyse the data collected. to ascertain the suitability of the data for regression analysis and the robustness of the regression results, post estimation and pre-estimation tests were performed. the result of gls regression conducted indicated that risk committee expertise has a significant positive impact on rdq. consequently, the current study recommends that in order to improve the quality of risk disclosure in listed insurance firms, the financial reporting council of nigeria (frcn) and other regulatory authorities, such as the national insurance commission (naicom), should mandate the establishment of risk committees composed of members experienced and knowledgeable in finance, accounting, risk management, and disclosure in their corporate governance codes. this result has practical implications as it underscores the fact that the knowledge and skill of the risk committee drives improved risk disclosure. in addition, the result further influences the efforts of regulatory authorities in their attempt to develop resilient corporate governance codes that guarantees qualitative risk disclosures key words: risk committee, risk committee expertise, risk disclosure quality. https://doi.org/10.57233/gujaf.v4i1.207 mailto:talk2najib@gmail.com mailto:kidandago@gmail.com mailto:nbrabiu.acc@buk.edu.ng gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 193 1. introduction recent researches have employed the upper echelon theory to explain how some corporate impacts are tied to senior leadership team having particular demographic characteristics (al-maghzoum, hussainey & aly, 2016). according to the theory, top management characteristics, particularly demographic characteristics, could impact strategic decision making and consequently managerial performance. the central tenet of this school of thought is that the skills, expertise, exposure and previous experience of the senior leadership team of corporate organizations exerts a considerable influence on crucial decisions taken by these corporate players. upper echelons theory research began with the assessment of the role of senior leaders and chief executives on diverse areas of organizational performance. more recently, these researches have been expanded to the board of directors insofar as board members' expertise, past experience and training affect strategic decisionmaking, financial performance and sustainability in corporate organisations. contemporary corporate governance research has extended the central argument of upper echelon theory to the drivers of risk disclosure, exploring the extent to which board and committee attributes affect the risk disclosure practices of firms. almaghzoum et al. (2016) opined that the impact of the structural and demographic variables of the board or its committee, such as diversity, expertise and independence, etc. on the board or committee members’ decision-making in areas relating to financial performance and reporting, could be explained by the upper echelon theory. this position is also supported by mueller and baker (1997). expertise has been identified in the corporate governance literature as essential in making sure that the board's and committees' oversight functions are efficiently carried out (yatim, 2010). the number of corporate scandals that rocked the world across the united states (us) and other european countries, such as enron, lehman brothers, parmalat, danske bank, etc. emphasized the need for effective board and committee oversight. in nigeria in 2011, the financial sector saw a massive meltdown. the cbn labelled 8 of 24 nigerian banks as distressed due to nonperforming loans and 13 billion dollars in toxic assets (cook, 2011). in addition, the bank's management was terminated due to weak governance and c orporate financial malpractices (adegbite & nakajima, 2011). sanusi (2010) advocated that large scale governance malpractice that exposed the banks to significant market risk as well as ineffective board committees coupled with poor risk monitoring by the board were among the numerous reasons that aggravated the crisis. in response, various regulators imposed new rules and codes requiring that gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 194 directors on the board and its committees to have enough experience and knowledge in finance, accounting, and risk management (al-maghzoum et al., 2016 and banbhan, cheng & ud din, 2018). in particular, the national code of corporate governance (nccg) 2018 released by the frcn made adequate recommendations for the risk committees of nigerian publically traded firms to be composed of members knowledgeable in finance and risk management. prior researches like osazevbaru, (2021) have found that educational and academic background influences decision making process and results (hitt & tyler, 1991). in addition, allini, rossi & hussainey (2015) observed that sound educational background ensures better scrutiny of the management by the board and its committees in the context of the agency theory. furthermore, educational background was identified as a critical determinant of disclosure practices (farook, hassan & lanis, 2011; haniffa & cooke, 2002). as a result, hambrick and mason (1984) asserted that directors with advance level of education are more receptive to new ideas, innovative initiatives, as well as risk. as such, directors with a sound educational credentials exhibit superior expertise and are more inclined to adopt a more open-minded approach to risk disclosure decisions, potentially reducing information asymmetry (domhoff, 1983). similarly, malik and shafie (2021) suggested that expertise, in the context of the board's and its committee's knowledge, educational qualification, and competencies, are critical in corporate governance. however, guner, malmendier and tate (2008) observed the dearth of empirical reaserches on the relationship between educational background and board effectiveness. recent empirical results in the corporate governance literature regarding the efficacy and critical role played by a standalone risk committee in promoting qualitative risk disclosures (jia, li and munro, 2019; abdullah, ismail & isa, 2017, malik & shafie, 2021) has prompted empirical attempts to investigate the effect of risk committee expertise on risk disclosure quality. researches on the impact of risk committee expertise on risk disclosure quality are predominantly foreign (viljoen, bruwer & enslin, 2016; jia et al., 2019; al-hadi, 2015; buckby, gallery & ma, 2012 & yatim, 2010, yusuf, aliyu & al-faryan, 2023, malahim, 2023) with mixed findings. consequently, this paper examines the effect of risk committee expertise on the risk disclosure quality of nigerian listed insurance firms from 2011-2021. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 195 2. literature review this section of the paper deals with the review, evaluation and synthesis of literature pertinent to risk committee and risk disclosure quality. the review is broken into two components which are a conceptual framework and review of empirical literature. the conceptual framework reviews the concept of risk disclosure quality and risk committee expertise while the review of empirical literature synthesizes previous researches on risk disclosure quality and risk committee expertise. risk disclosure quality risk disclosure quality is a multi-dimensional concept. sengupta (1998) asserted that high quality risk disclosures are timely and detailed in such a manner that they lower shareholders’ perception of default risk. in the opinion of beretta and bozzolan (2004), high-quality risk disclosures are risk information that meets the decisional needs of the company's shareholders. this information enables shareholders to precisely forecast the firm's future cash flow and uncertainties that might hinder the firm's performance. risk disclosure quality therefore provides a measure of the relevance of risk disclosures. elshandidy, neri and ma (2018) maintained that risk disclosures are said to be qualitative if they capture such information, which is needed by shareholders, investors, creditors and other stakeholders to accurately measure the level of uncertain events that face a firm and which may undermine the firm’s bottom line. researchers like linsley and shrives (2006), miihkinen (2013), alshammari (2015), elshandidy et al. (2018), and jia et al. (2019) have maintained that the determination of risk disclosure quality entails making reference to certain quality attributes that characterize the information disclosed. chandiramani (2009) opined that there are many methods employed to measure risk disclosure quality. chakroun and hussainey (2014) contended that the body of research on disclosure quality is broken into two classes. the first class comprises of studies that contended that the quality of corporate disclosures can best be measured by the quantity and volume of the disclosures. disclosures studies that employed this approach included that of al-shammari (2015), amran, bin and hassan (2009), bako (2017) and madrigal, guzman and guzman (2015). the other strand of the literature comprises studies that advocated that the best methodology to measure the quality of disclosures is to focus on some distinct characteristics and attributes that define the disclosure. these characteristics include the relevance, reliability, richness, quantity, understandability, outlook, etc. as used in the studies of hassan (2014) and botosan (2004). gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 196 beattie, mcinnes, and fearnley (2004) conducted the first pioneering work in this strand of the literature to develop a measure of disclosure quality. the study attempts to build a generic framework applicable to the assessment of the quality of various types of disclosures. according to the study, disclosure quality can be measured as a index of quantity, alongside a four-dimensional model for the content analysis of accounting narratives. this includes the information spread, time orientation, financial orientation and quantitative orientation of the information disclosed. beretta and bozzolan (2004) maintained that ‘spread’ is defined by the total amount of risk topics disclosed in line with the classes of risk related to the firm. in addition, time orientation connotes to whether the risk information disclosed is either forward-looking or historical in nature. furthermore, financial orientation of the risk information disclosed underscores whether the disclosures are non-financial or financial. lastly, quantitative orientation explains whether the information disclosed is either qualitative or quantitative. studies such as that of beretta and bozzolan (2004), miihkinen (2012), elshandidy et al. (2018), hassan (2014), etc. can be categorized under this second strand of the literature that measures disclosure quality by considering some specific attributes of the information disclosed. risk committee expertise this is the experience, financial literacy, professional knowledge and the exposure that members in the risk committee possess, which is central in the effective and efficient discharge of their responsibilities. according to al-hadi (2015), a financially experienced risk management committee member is supposed to be watchful and be mindful of the downside of poor risk disclosures, as well as take cautious measures to make sure that detailed risk disclosures are provided. similarly, yatim (2009) maintained that a risk committee composed of directors with requisite expertise in finance will be better able to monitor risks and implement sound risk management policies and strategies that will enhance the quality of risk disclosures. furthermore, malahim (2023) opined that the most efficient way to effectively supervise managers' operational and strategic decisions is through the expertise and knowledge of directors. according to güner et al. (2008), directors' financial expertise has a substantial effect on firm's financial and investment policies. furthermore, the public oversight board (1993) stated that the accounting and financial expertise of the members of the risk committee determines the committee’s efficacy and productivity. in an attempt to expound this point, malik and shafie (2021) contended that directors on the risk committee with expertise, notably in finance and risk management, contribute to increased gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 197 audit efficiency and risk identification. this underscores the importance of expertise in risk governance. from the theoretical perspective, the resource-dependence theory contends that committees with competent members can assists a firm to fully understand its external environment, thereby making realistic assumptions and estimates about uncertainty events and obtaining valuable resources. (pfeffer & salancik, 1978). also, the agency theory advocates that boards and committees with requisite expertise enhance the extent of managerial monitoring and thus ultimately promotes stakeholders’ interests (cabedo & tirado, 2004). in support of these theories, dhaliwal, naiker, and navissi (2010) and agrawal and chadha (2005) opined that, directors with financial expertise exercise more extensive financial disclosure in risk monitoring and oversight. the nccg (2018) by the frcn in section (6.5.7) recommends that the meeting of the enterprise management committee must be graced by at least one member, who is experienced and has the relevant professional qualifications. upper echelon theory the theory focuses on the study of a firm’s top management based on the observable characteristics of the members of the management team. these characteristics are basically demographic that influence the value, preference and behavior of the individual members of the management team. furthermore, the theory explains that the more complex and complicated a decision, the more important and valuable the demographic attributes of the decision makers, such as age, tenure and expertise becomes (tinga, azizan & kweh, 2015). different definitions have been offered as to what constitutes the top management team (tmt). most traditional definitions, such as that of hambrick and mason, (1984) consider the top management of a firm to be the firm’s executive directors. whereas contemporary definitions, such as that of jensen and zajac (2004), incorporate the company board of directors into the definition. this definition broadens the scope and application of the theory from being used merely as a construct in strategic management research to one that can be brought into corporate governance researches to explain the correlation between the demographic characteristics (expertise, age, gender, etc.) of board committee members and their strategic decisions. accordingly, the argument of this theory is extended to examine the impact of risk committee attributes on risk disclosure, investigating whether committee the expertise of the directors in the committee influences risk disclosure quality. algusau journal of accounting and finance, vol. 4, issue 1, april, 2023 198 maghzoum et al. (2016) argued that the strategic choices taken by committee members depend on the ramification of their observable characteristics. as such, we can theorize that the optimum committee structure when combined with certain attributes of committee members may result in qualitative risk disclosures. review of empirical literature and hypotheses development risk committee expertise and risk disclosure quality al-hadi (2015) in a research study of listed financial firms in gulf cooperation countries observed that risk committee expertise has a significant positive impact on market risk disclosure quality, thus, concluding that qualified and experienced directors have a better understanding of and application of risk management policies and accounting best practices in the risk management. . this improves the committee's effectiveness in risk monitoring and reporting. this result is in conformity with the findings of jia et al. (2019) who also found that the expertise of the risk committee represented by human capital has a significant positive impact on the rdq of top 100 australian securities exchange listed firms. similarly, aldhamari, nor, boudiab & mas’ud (2020) in a study of malaysian financial firms from from 2004 to 2018 observed that risk committee financial expertise has a significant impact on corporate financial performance. furthermore, the study indicated that qualified directors on the risk committee can protect the company's interests, particularly through increasing openness in risk management and reporting. furthermore, qualified directors will ensure that firms strictly adhere to good risk management practices especially in the area of risk oversight and reporting. in a research study of twelve deposit money banks listed on the nigerian exchange group (ngx) from 2009 to 2020, aliyu et al. (2023) observed that risk committee expertise substantially reduces risk taking. thus, aliyu et al. (2023) concluded that the risk committee's knowledge provides the necessary competency and independence to efficiently oversee risk-taking. the findings of dezoort and salterio (2001), agrawal and chadha (2005), dhaliwal et al. (2010), buckby et al. (2015), al-maghzoum et al. (2016) and zango, kamardin and ishak (2016), and also contended that the expertise, qualification and knowledge of directors on the board and committees results in effective monitoring and improved levels of risk disclosure in corporate firms. on the other hand, abdullah et al. (2017) observed that risk committee expertise had no infleunce on the disclosure of hedge related information in malaysia. similarly, viljoen et al. (2016) in an empirical study of 40 non-financial firms listed gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 199 on the johannesburg stock exchange (jse) in south africa from 2011-2012 observed that risk committee expertise has no impact on the extent of risk disclosure. this position is also supported by the findings of allini et al. (2015) that found an inverse relationship between expertise and risk disclosure. on the basis of the mixed findings in the literature, the following hypothesis is developed: ha1: risk committee expertise has a positive impact on the risk disclosure quality of listed insurance firms in nigeria 3. research methodology the population of the study is made up of 21 listed insurance firms in nigeria (nse website, 2021). using the filtering technique, 4 firms delisted by the nse over the period of the research (2011-2021) were filtered to obtain a new population of 17 firms, consistent with helbok and wagner (2006). because the population was small and the study data were readily accessible from the data base of the nigerian stock exchange and the corporate websites of the insurance firms, the population was employed as the sample for the study using the census sampling technique. this is consistent with samaila (2014). manual content analysis was employed to collect the data on risk disclosure quality. texts and sentences in the annual reports were reviewed and examined in order to classify whether they were risk disclosures or not. a sentence is classified as a risk disclosure if it includes, among others, “forward-looking information that helps external investors to build up a point estimate of future cash flows, information on the sources of uncertainty surrounding forecasts of the firm’s future cash flows, and information on the sources of non-diversifiable risk that should be included in cost of capital” (miihkinen, 2013, p.9). in addition, historical statements related to courses of actions taken to mitigate risks and other futuristic information on programs put in place to weaken the impact of future risks faced by a company were classified as risk disclosures. the risk disclosure sentences were coded and analyzed based on a risk disclosure checklist developed by malafronte and starita (2012) on the classes of risks that affect insurance firms. the main risk topics and sub-topics are shown in appendix a. variables of the study and their measurement the study variables were in two sets. these are the dependent and explanatory variables. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 200 the dependent variable of the study is risk disclosure quality (rdq). the study measures risk disclosure quality using the quantity of risk disclosed by the sampled firms in the study. the quantity of risk disclosure is measured by the natural logarithm of risk disclosure sentences. the independent variable envisaged in this study is a demographic attribute of the risk committee which is risk committee expertise (rce). table 1 summarizes the independent variable of the study and its measurement. in line with previous literatures (abraham and cox, 2007; dobler et al., 2011; elshandidy et al., 2018; elshandidy and neri, 2015; jia et al., 2019; miihkinen, 2012), the study employed five control variables to address the issue of random variation caused by other factors that may affect risk disclosure quality. the control variables employed were size, profitability, leverage and growth. table 1 summarizes the control variables of the study and their measurements. table 1 summary of variables and their definitions variable variables label measure source dependent variable risk disclosure quantity rdquant natural logarithm of risk disclosure sentences. miihkinen (2013). independent variable risk committee expertise rce ratio of the number of directors with the knowledge of finance and risk management in the committee to the number of directors in the committee. jia et al. (2019), malik and shafie (2021), yusuf et al. (2023) and bensaid, ishak, mustapa (2021), . control variable size size measured by the logarithm of total assets. al-hadi (2015). leverage lev measured by the sum of shortterm and long-term loan scaled by total equity. nasution et al. (2019). profitable roe calculated by profit after tax divided by total equity. al-hadi (2015). growth growth measured by the % change in gross premium. dzinghai and fakoya (2017). source: constructed by researcher, 2023 this study resorted to the use of multiple regression analysis based on panel methodology. as such, multiple regression analysis was used to test the hypotheses encapsulated in the study. thus, the regression equation is stated as: gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 201 rdq =f(rce, cv) meaning risk disclosure quality (rdq) is a function of risk committee expertise (rce) and control variables (cv). as such, the above equation can be further expressed as: rdq=f (rce, size, lev, roe, growth) ……….… (1) thus, the proposed research model is formulated as follows: rdquantit=β0it+β1rceit+r1sizeit+r2levit+r3roeit+r4growthit+ɛit…………(2) where β0it: regression intercept of insurance firm i in period t β1it: regression slope of independent variable of insurance firm i in period t r1it – r4it: regression slope of control variables of insurance firm i in period t rdq: risk disclosure quality rceit: risk mgt committee expertise sizeit: size levit: leverage roeit: return on equity growthit: growth ɛ = error term 4. results and discussion pre-estimation test pre-estimation linearity tests were performed to assess the data set's conformity with multivariate analysis principles and to attest to the data set's suitability for regression analysis. the scatterplot method was employed to examine the bivariate linear relationship in the data set. from appendix a, it could be observed that the pattern of points of the variables of the study are scattered along the path of a straight line, which, in line with the submission of hair et al. (2010) represents a linear relationship. post-estimation test in this investigation, post-estimation follow-up tests were performed to maximise the veracity of all statistical inferences for the study. the post-estimation tests undertaken in this study included multicollinearity, hausmann test, heteroscedasticity and normality of residuals. to test for multicollinearity, the study utilized the variance inflation factor (vif). using vif, it was observed that none of the independent and control variables have a vif greater than 10, suggesting the absence of multicollinearity. (see appendix a). the hausmann specification test was used as a criterion to choose between fixed effect and random effect regression. in appendix a, the result of the primary gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 202 regression result shows a prob >chi2 coefficient of 0.0000 denoting that fixed effect regression result is the most suitable going by the assertion of sheytanova (2014), that a prob >chi2 coefficient of less than 0.05 indicates the existence of endogenity in the random effect, making the fixed effect more suitable in addition, the study conducted a breusch-pagan / cook-weisberg test for heteroskedasticity on the ols regression result. the result of the prob > chi2 was 0.0008 indicating that the variability of the residuals is disproportionate over a range of measured values, thus, heteroscedasticity exists. the heteroscedasticity problem observed in the ols was addressed by running a robust regression. the fixed effect was tested for heteroscedasticity using the modified wald test for groupwise heteroscedasticity. the modified wald test indicated the existence of heteroscedasticity prompting the researcher to utilize the panel corrected standard error to address the issue of the heteroscedasticity (see appendix a). according to beck & katz (1995), the panel corrected standard error is a small-sample estimator that is resistant against cross-sectional heteroscedasticity and correlation in the original time-clustering situation. this is consistent with the approach employed by ayagi (2014) and samaila (2014). to guarantee the validity of the p-values of the t-tests and f-test, the study utilized the kdensity, pnorm and qnorm to analyze the normality of residuals. from the result in appendix a, the result of kdensity indicates that the kernel density plot of the data set is close to normal density. in addition, the result of the pnorm shows no indication to non-normality, as the standardized normal probability of the data closely follows the straight line path. in addition, the qnorm shows slight deviation from normality at the tails. overall, the deviation is minimal and we can conclude that the residuals are close to normal distribution (see appendix a). descriptive statistics table 2 descriptive statistics variable obs mean std. dev min max rdquant 187 5.139358 0.5360445 3.4 5.86 erce 187 0.682995 0.2311928 0 1 size 187 7.175187 0.3058662 6.58 8 leverage 187 1.38016 2.49797 0.12 22.06 profitability 187 0.050802 0.1988621 -0.61 1.96 growth 187 0.116685 0.2269307 -0.43 1.24 source: generated by the author from annual reports of the sampled insurance firms (2011-2021), using stata output, version 15.00. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 203 table 2 depicts the result of descriptive statistics on the research variables. it could be seen that rdquant has a mean score of 5.139 in log form indicating that the average value total risk disclosure sentences by listed insurance firms in nigeria from 2011-2021 is 170.6. the standard deviation of 0.536 suggests a substantial variation from the mean value of 170.6 in the risk disclosure quantity (rdquant) of nigerian listed insurance businesses. from the perspective of the independent variable, rce has a mean of 0.682, indicating that most of the listed insurance firms have more than 60% of the committee members knowledgeable in finance, accounting or risk management. the maximum of 1 is indicative that some firms have a risk committee composed 100% of members knowledgeable and experienced in accounting, risk management and finance. lastly, the minimum of 0 indicates that over the scope of the study, some listed insurance companies in nigeria had risk management committees with no member knowledgeable in finance, risk management or accounting. from the perspective of the control variables, size had a mean of 7.175. on the other hand, leverage has a mean of 1.38, indicating that the listed insurance firms have an average leverage of 1.38 denoting that most firms have a debt that is 1.3 times the book value of the equity. this shows that the listed insurance firms in nigeria have a significant percentage of debt in their capital structure and ultimately highly geared. profitability, had an average of 0.0508, indicating that firms have a fairly low at roe at 5%. the low roe is explained below by the fairly low average growth rate of 11%, indicating the competitiveness of the insurance industry leading to fairly low profits. lastly, growth measured by the percentage change in gross premium has a mean of 11%, indicating a fairly good average rate of growth among listed insurance firms in nigeria. in addition, the standard deviation of growth stands at 22.69%, meaning that the variability in growth among the firms is significant as it disperses from the mean by a high magnitude. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 204 correlation analysis table 3 correlation matrix rdquant erce size leverage prof growth rdquant 1 erce 0.5165 1 size 0.3867 0.2308 1 leverage -0.0158 0.048 0.3626 1 prof -0.2276 -0.305 0.0587 0.2054 1 growth -0.1695 -0.2288 0.0634 -0.1054 0.1503 1 source: generated by the author from annual reports of the sampled insurance firms (2011-2021), using stata output, version 15.00. the results of correlation analysis are presented in table 3. the result depicts that rce has a moderate positive correlation rdquant to the magnitude of 0.371. in addition, size has a positive association with rdquant suggesting that larger firms are more inclined to make extensive risk disclosures. however, the quantity of risk disclosure was observed to be negatively correlated with profitability and growth. leverage conversely, was observed to have a positive association with the quantity of risk disclosed by listed insurance firms in nigeria. in addition, the strongest positive correlation between the explanatory variables was observed to be between size and leverage. to the magnitude of 0.433, which is moderately correlated based on the assertion of moore, notz and flinger (2013). in addition, the greatest negative association between the explanatory variables was that between rce and profitability to the tune of -0.169, which is very weak. this indicates that the possibility of multi collinearity between among the research variables does not arise, as it is only a correlation in excess of 0.8 indicates the presence of multicollinearity between the variables. between the variables. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 205 regression analysis table 4 regression result on rce and risk disclosure quality (rdquant) ols fixed effect (pcse) rdquant coef. std.err t p>|t| coef. std.err t p>|t| rce 0.794 0.145 5.47 0.794 0.239 3.32 0.001 size 0.507 0.153 3.3 0.001 0.507 0.113 4.48 0.000 leverage -0.019 0.014 -1.35 0.180 -0.019 0.016 -1.24 0.214 profitability 0.169 0.206 0.82 0.413 0.169 0.156 1.08 0.278 growth -0.195 0.164 -1.19 0.235 -0.195 0.196 -0.99 0.321 _cons 1.000 1.071 0.93 0.352 1.000 0.930 1.07 0.282 obs 187 obs 187 prob > f 0.000 prob > chi2 0.0001 r-squared 0.2379 r-squared 0.2379 root mse 0.4743 source: generated by the author from annual reports of the sampled insurance firms (2011-2021), using stata output, version 15.00. table 4 outlines the ols and panel corrected standard error fixed effect regression result of the impact of rce on the risk disclosure quality of the listed insurance firms in nigeria. the r2 of the pcse regression result was 0.2379 denotes that 23% of the degree of variability in the model is accounted by the independent and control variables employed in the study. the prob > f of 0.000 significant at 1% indicates the goodness of fitting of the model and further emphasizes that the research findings could be relied upon. the result shows that rce was observed to exert a positive significant impact on risk disclosure quality consistent with jia et al. (2019). however, the result is contrary to studies of abdullah et al. (2017) and viljoen et al. (2016) that observed that risk committee expertise does not result in increased risk disclosure quality. more so, the result corresponds to the findings of agrawal and chadha (2005), almaghzoum et al. (2016), buckby et al. (2015), zango et al. (2016), dezoort and salterio (2001), and dhaliwal et al. (2010) that contended that the qualification, knowledge, past experience and expertise of directors sitting on the board and its committees results in robust monitoring and improved level of risk reporting in firms. based on the result, we accept ha1. in addition, the findings are in line with the upper echelon theory that the predisposition of the board or committee members gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 206 to certain demographic traits has an impact on their effectiveness. the findings therefore suggest that the expertise of risk committee members is a critical demographic trait which drives their effectiveness in the context of quality risk disclosure. 5. conclusion and recommendation the study assesses at the impact of risk committee expertise on the risk disclosure quality of listed insurance businesses in nigeria from 2011 to 2021. based on the findings of the study, risk committee expertise has a substantial significant positive effect on risk disclosure quality, indicating that it is a major driver of risk disclosure quality. the findings align with the proposition of the upper echelon theory which emphasizes that the demographic attributes of the members of the risk committee are very critical to the effectiveness of the committee in that the expertise of the members was observed to improve the quality of risk disclosures. the result has policy implication for both users of financial statement and policy makers. from the above findings, investors, shareholders and management should note that qualitative risk disclosures can be further guaranteed and secured with a risk committee composed of directors knowledgeable in risk management and finance.in addition, the findings also have huge implications on regulatory authorities in the insurance industry such as naicom, sec and frcn. from the above encapsulated findings, regulators should note that risk committee regulations relating to expertise need to be strengthened by mandating the board to ensure that the risk committees of insurance firms are composed of directors with extensive knowledge and skills. the codes of corporate governance regulations issued by the regulators should also make adequate provisions for mandatory training programs to upscale knowledge and skill of committee members in the area of finance and risk management. lastly, the study recommends that in order to enhance the monitoring and oversight efficiency of the risk committee of the listed insurance firms, it is recommended that the board should continue to ensure that directors nominated to serve on the risk committee are knowledgeable and have previous experience in the area of accounting, finance and risk management. in addition, programs and trainings aimed at improving the expertise and knowledge base of directors on the risk committee should continue to be organized periodically. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 207 reference abbas, d.s, ismail, t. taqi, m. & yazid, h. (2021). determinants of enterprise risk management disclosures: evidence from insurance industry. growing science accounting, 7(1), 13311338. abdullah, a., ismail, k.n. & isa, n.m. (2017). risk management committee anddisclosure of hedging activities information among malaysian listed companies. advanced science letters, 21(6), 1871 1874. abdullah, m. & chen, l. (2010). the association between committees responsible for risk management and the disclosure level of financial instruments information among listed companies in malaysia. (unpublished master’s thesis). school of business, economics and law, university of gorthenburg, sweden. abdullah, m., abdul-shukor, z. & rahmat, m.m. (2017). the influences of riskmanagement committee and audit committee towards voluntary risk management disclosure. jurnal pengurusan 50(1), 83 – 95. abraham, s., & cox, p. (2007). analyzing the determinants of narrative risk information in uk ftse 100 annual reports. the british accounting review, 39(3), 227–248. abraham, s., & shrives, p. j. (2014). improving the relevance of risk factor disclosure in corporate annual reports. the british accounting review, 46(1), 91–107. adebimpe, u. & peace, o. (2011). corporate governance, company attributes andvoluntarydisclosures: a study of nigerian listed companies. international journal of research in computer application &management, 1(2), 20-29. adegbite, e. (2012). corporate governance regulation in nigeria. corporate governance, 12(2), 257-276 aguilera, r. v., desender, k. a., & de castro, l. r. k. (2011). a configurational approach to comparative corporate governance. [online] available:http://ssrn.com/abstract=1797142 agrawal, a. & chadha, s. (2005). corporate governance and accounting scandals. journal of law and economics, 48(2), 371-406. akhtaruddin, m., & haron, h. (2010). board ownership, audit committees' effectiveness, and corporate voluntary disclosures. asian review of accounting, 18(3), 245-259. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 208 akhtaruddin, m., hossain, m., a., hossain, m., & yao, l. (2009). “corporate governance and voluntary disclosure in corporate annual reports of malaysian listed firms”. jamar, 7(1). al-hadi, a.h. (2015). three essays on market risk disclosures: corporategovernance, investment efficiency and implied cost of equity capital: evidence from gulf cooperation council countries (gcc). (unpublished phd thesis). school of accounting, curtin university, uk. allini, a. rossi, f, m. & hussainey, k. (2015). ‘the board’s role in risk disclosure: an explanatory study of italian listed state-owned enterprises jel: m41, h83, g32 al-maghzoum, a., hussainey, k. & aly, d. (2016). corporate governance and riskdisclosure: evidence from saudi arabia. corporate ownership and control journal, 13(2), 363-375. alnabsha, a., abdou, h. a., ntim, c. g., & elamer, a. a. (2018). corporate boards, ownership structures and corporate disclosures: evidence from a developing country. journal of applied accounting research, 19(1), 20–41. https://doi.org/10.1108/jaar-01-2016 0001 al-shammari, b. (2014). kuwait corporate characteristics and level of risk disclosure: a content analysis approach. journal of contemporary issuesin business research, 3(3),128–153. anis, r., fraser, i. & hussainey, k. (2012). a new measure for disclosure quality.working paper, stirling university amran, a., bin, a., & hassan, b. (2009). risk reporting – an exploratory study on risk management disclosure in malaysian annual reports. managerial auditing journal, 24(1), 39–57. ashfaq, k., zhang, r., munaim, a & razzaq, n. (2016). an investigation into thedeterminants of risk disclosure in banks: evidence from financial sector of pakistan. international journal of economics and financial issues 6(3), 1049-1058. ayagi, s. r. (2014). intellectual capital and financial performance in the listed nigerian oil marketing companies. (unpublished master’s thesis). department of accounting, bayero university, kano-nigeria. bako m. m. (2017). firm attributes and risk disclosure of listed deposit money banks in nigeria. asian journal of business management studies 8(2), 71-77. banbhan, a., cheng, x. & ud din, n. (2018). financially qualified members in an upper echelon and their relationship with corporate https://doi.org/10.1108/jaar-01-2016%200001 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 209 sustainability: evidence from an emerging economy, sustainability 2018, 10, 4697; doi:10.3390/su10124697 beattie v., mcinnes b. & fearnley s. (2004). a methodology for analysing and evaluating narratives in annual reports: a comprehensive descriptive profile and metrics for disclosure quality attributes, accounting forum, 28 (3), 205-236. beck, n. & katz, j.n. (1995). what to do (and not to do) with time-series crosssection. american political science review 89(3). bedard, j., chtourou, m. & courteau, l. (2004). the effect of audit committee expertise, independence, and activity on aggressive earnings management. auditing: a journal of practice & theory,23(2),13-35. bedard, j. & gendron, y. (2010). strengthening the financial reporting system: can audit committees deliver? international journal of auditing, 14(2), 174210. bensaid, a. ishak, s. & mustapa, i.r. (2021). risk management committee attributes: a review of the literature and future directions. universal journal of accounting and finance, 9(3), 388 395. doi:10.13189/ujaf.2021.090313. beretta, s. & bozzolan, s. (2004). a framework for the analysis of firm risk communication. the international journal of accounting, 39(1), 265288. beretta, s. & bozzolan, s. (2008). quality versus quantity: the case of forward looking disclosure. journal of accounting, auditing and finance, 23(3), 333-375. buckby, s., gallery, g. & ma, j. (2015). an analysis of risk management disclosures: australian evidence. managerial auditing journal, 30(8/9), 812-869. bugalla, j., kallman, j., lindo, s., & narvaez, k. (2012). the new model of governance and risk management for financial institutions. journal of risk management in financial institutions, 5(2), 181– 193. cabedo, j.d., and j.m. tirado. (2004). ‘the disclosure of risk in financial statements. accounting forum, 28 (2), 181-200. carcello, j.v., hermanson, d.r. & raghunandan, k. (2005). factors associated with us public companies investment in internal auditing. accounting horizons, 19(2), june: 69–84. carcello, j. v., hermanson, d. r., & ye, z. s. (2011). corporate governance research in accounting and auditing: insights, practice implications, and gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 210 future research directions. auditing: a journal of practice and theory, 30(3), 1-31. http://dx.doi.org/10.2308/ajpt chakroun r. & hussainey, k. (2014) disclosure quality in tunisian annual reports.corporate ownership and control, 11(4), 58-80. chandiramani, g. (2009). quality of risk reporting, (unpublished master’s thesis).department ofeconomics, erasmus university of rotterdam, netherlands. committee of the sponsoring organizations of the treadway commission. (2004). enterprise risk management, integrated framework (coso-ermreport). new york: aicpa. committee of sponsoring organization of the treadway commission. (2018). applying enterprise risk management to environmental, social andgovernance related risks. new york: aicpa daud, k.a.m., khidzir, n.z., ismail, a.r. & abdullah, f.a. (2018). validity and reliability of instrument to measure social media skills among small and medium entrepreneurs at pengkalan datu river. international journal of development and sustainability, 7(3), 1026-1037. dezoort, f.t & salterio, a. (2001). the effects of corporate governance experience and financialreporting and audit knowledge on audit committee members’ judgments. auditing: a journal of practice & theory 20(2), 32-47. dhaliwal, d., naiker, v. & navissi, f. (2010). the association between accruals quality and the characteristics of accounting experts and mix of expertise on audit committees. contemporary accounting research, 27(3), 787827. dobler, m. (2008). incentives for risk reporting – a discretionary disclosure and cheap talk approach. the international journal of accounting, 43(2), 184–206. dobler, m., lajili, k. & zéghal, d. (2011). attributes of corporate risk disclosure: an international investigation in the manufacturing sector. journal of international accounting research, 10(2), 1–22. dzinghai, i & fakoya m.d. (2017). effect of corporate governance structure on the financial performance of johannesburg stock exchange (jse) listed mining firms. sustainability journal, 9(867), 1-25. domhoff, g. w. (1983). ‘who rules america now?’ englewood cliffs, nj: prentice hall, inc edogbanya, a. & kamardin, h. (2015). the relationship between audit and risk management committees on financial performance of non-financial http://dx.doi.org/10.2308/ajpt https://www.researchgate.net/profile/adejoh-edogbanya gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 211 companies in nigeria: a conceptual review. mediterranean journal of social sciences 6(3), 32-47. doi:10.5901/mjss.2015.v6n3p206 elshandidy, t., fraser, i. & hussainey, k. (2013). aggregated, voluntary, and mandatory risk disclosure incentives: evidence from uk ftse allshare companies. international review of financial analysis, 30, 320-333. elshandidy, t., fraser, i. & hussainey, k. (2014). what drives mandatory and voluntary risk reporting variations across germany, uk, and us? the british accounting review, forthcoming. elshandidy, t. & neri, l. (2015). corporate governance, risk disclosure practices, and market liquidity: comparative evidence from the uk and italy. corporate governance: an international review, 23(4), 331356. elshandidy, t. neri, l. & ma, j. (2018) determinants and impact of risk disclosure quality: evidence from china, journal of applied accounting research. elzahar, h., hussainey, k. (2012). determinants of narrative risk disclosures in uk interim reports. journal of risk finance, 13(2), 133-147. farook, s., hassan, m.k & lanis, r. (2011). determinants of corporate social responsibility disclosure: the case of islamic banks, journal of islamic accounting and business research, 2(2), 114-141’ gurner, a.b, malmendier, u. & tate, g. (2008). financial expertise of directors. journal of financial economics, 88(2008). 323–354. gul, f.a, & leung, s. (2004). board leadership, outside directors’ expertise and voluntary corporate disclosures. journal of accounting and public policy, 23(5), 351-379. hambrick, d. c., & mason, p. a. (1984). upper echelons: the organization as areflection of its top managers. the academy of management review, 9(2), 193–206. haniffa, r. and cooke, t.e. (2002), ‘culture, corporate governance and disclosure in malaysian corporations. abacus, vol. 38 no. 3, pp. 317-49. hassan s.m. (2014). investigating the impact of firm characteristics on the risk disclosure quality. international journal of business and socialscience, 9(1), 109-119. hermanson, d. r. (2003). what else in corporate governance should be changed? internalauditing, 18(1), 44-45. https://www.researchgate.net/journal/mediterranean-journal-of-social-sciences-2039-2117 https://www.researchgate.net/journal/mediterranean-journal-of-social-sciences-2039-2117 http://dx.doi.org/10.5901/mjss.2015.v6n3p206 https://www.sciencedirect.com/journal/journal-of-accounting-and-public-policy https://www.sciencedirect.com/journal/journal-of-accounting-and-public-policy https://www.sciencedirect.com/journal/journal-of-accounting-and-public-policy/vol/23/issue/5 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 212 helbok, g., & wagner, c. (2006). determinants of operational risk reporting in the banking industry. journal of risk, 9(1), 49-74. hitt, m., & tyler, b. (1991). ‘strategic decision models: integrating different perspectives. strategicmanagement journal, 12: 327–352 jensen, m. & zajac, e. (2004). corporate elites and corporate strategy: how demographic preferences and structural positions shape the scope of thefirm. strategic management journal, 25(6), 123-145. jensen, m. (1993). modern industrial revolution, exit, and failure of internal control systems. journal of finance, 48(3), 831-880. jia, j., li, z. & munro, l. (2019). risk management committee and risk management disclosure: evidence from australia. pacific accounting review 31(3), 438 461. kakanda, m. m., salim, b. & chandren, s. (2017). corporate governance, risk management disclosure, andfirm performance: a theoretical andempirical review perspective. asian economic and financial review, 7(9), 836845. kakanda, m., salim, b. & chandren, s. (2018). risk management committee characteristics and market performance: empirical evidence from listedfinancial service firms in nigeria. international journal of management and applied science, 4(2), 6-10. karamanou, l., & vafeas, n. (2005). “the association between corporate boards, audit committees, and management earnings forecasts: an empirical analysis”. journal of accounting research, 43(3), 453-486. lin, j.w., li, j.f. & yang, j.s. (2006), the effect of audit committee performance on earnings quality. managerial auditing journal, 21(9), 921-933. available from: http://www.dx.doi. org/10.1108/02686900610705019. lin, c.w. (2011). a behavioral framework for securities risk. seattle law review, 34(325), 1-54. lindqvist, a. (2016). what drives risk disclosure quality? the impact of the financial crisis, a master’s dissertation submitted to the department ofaccounting and commercial law, hanken school of economics, helsinki, finland. linsley, p. & shrives, p. (2000). risk management and reporting risk in the uk. journal of risk, 3(1), 115–129. lawlor, b. (2012). board risk committees. accountancy ireland, 44(6): 40–42. maas, j. (2015). the quality of liquidity risk disclosure by european banks. (unpublished master’s thesis). department of economics &business economics, radboud university, netherlands. http://www.dx.doi/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 213 madrigal, h.m, guzmán, b.a. & guzmán c.a. (2015). determinants of corporate risk disclosure in large spanish companies: a snapshot, contaduría y administración, 60(2015), 757-775. malafronte, i. & starita, m. (2013). disclosure practices and financial crisis: empirical in the european insurance industry. social science research network, working paper malahim, s.s. (2023). the relationship between the risk disclosure and risk management committee on banks value: empirical evidence from jordan. international journal of professional business review, 8(3), 1-29. malik, m. & shafie, r. (2021). the effect of risk management committee on audit fees: malaysian evidence. dlsu business & economics review 31(1), 81–94. merton, r. (1974). on the pricing of corporate debt: the risk structure of interest rates. the journal of finance 29, 449-470. merton, r. c. (1995). a functional perspective of financial intermediation. financial management, 24(2), 23-41. http://dx.doi.org/10.2307/3665532 mueller, g.c. & baker, v.l. (1997). upper echelons and board characteristics of turnaround and nonturnaround declining firms. journal of business research, 39, 119-134. miihkinen, a. (2012). what drives quality of firm risk disclosure? the impact of national disclosure standard and reporting incentives under ifrs. the international journal of accounting, 47, 437–468. miihkinen, a. (2013). the usefulness of firm risk disclosures under different firm riskiness investor interest, and market conditions. new evidence from finland. advances in accounting, incorporating advances in international accounting, 29(2), 312-331. nasution, a.e, putri, l.p and dungga, s. (2019). the effect of debt to equity ratio and total asset turnover on return on equity in automotive companies andcomponents in indonesia. advances in economics, business and management research, 92(1), 182-188. national insurance commission (2009) code of corporate governance for insurance companies. o'brien, c. (2011) risk governance in uk insurers: beyond the audit committee. centre for risk & insurance studies discussion paper series, nottingham university businessschool. http://dx.doi.org/10.2307/3665532 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 214 organization for economic co-operation and development (2014). risk management and corporate governance, corporate governance: oecd publishing. http://dx.doi.org/10.1787/9789264208636-en osazevbaru, h.o. (2021). empirical examination of top management characteristics and strategic decision making. business trends, 11(2), 3549. pfeffer, j. & salancik, g.h. (1978). the external control of organisations: a resource dependence perspective. new york: harper & row. protiviti. (2012). should the board have a separate risk committee? boardperspectives: risk oversight. https:// www.protiviti. com/sites/default/files/united_states/insights/board perspectives risk oversight-issue24protiviti.pdf public oversight board (1993). in the public interest: a special report by the public oversight board of the sec practice section, aicpa. stamford, ct: pob. samaila, i.a. (2014). corporate governance and financial reporting quality in thenigerian oil marketing industry. (unpublished doctoral thesis) bayero university, kano-nigeria. sanusi, l.s. (2010). global financial meltdown and the reforms in the nigerian banking sector. public lecture, abubakar tafawa balewa university, bauchi. sengupta, p. (1998). corporate disclosure quality and the cost of debt. accountingreview 73(4), 459-474. sheytanova, t. (2014). the accuracy of the hausman test in panel data: a monte carlo study. (unpublished m.sc. dissertation). örebro university school of business. tao, n. b. & hutchinson, m. (2013). corporate governance and risk management: the role of risk management and compensation committees. journal ofcontemporary accounting & economics 9(1), 83-99. tinga, i.w, azizan, & kweh, q.l. (2015). upper echelon theory revisited: the relationship between ceo personal characteristics and financial leverage decision. social and behavioral sciences, 195(2015), 686-694 ujunwa, a. (2012). board characteristics and the financial performance of nigerian quoted firms. corporate governance, 12(9), 656–674. vafeas, n. (1999), board meeting frequency and firm performance. journal of financial economics, 53, 113-142. vafeas, n. (2005). audit committees, boards, and the quality of reported earnings. contemporary accounting research, 22(4), 1093-1122. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 215 verrecchia, r. e. (2001). essays on disclosure. journal of accounting andeconomics, 32(13), 97–180. viljoen, c., bruwer, b.w. & enslin, z. (2016). determinants of enhanced risk disclosure of jse top 40 companies: the board risk committee composition, frequency of meetings and the chief risk officer. south african business review, 20(1), 261–280. walker, d. (2009). a review of corporate governance in uk banks and other financial industry entities final recommendations. treasury, london. yatim, p. (2010). board structures and the establishment of a risk management committee by malaysian listed firms. journal of management governance, (1), 17-36. yatim, p. (2009). audit committee characteristics and risk management ofmalaysian listed firms. malaysian accounting review 8 (1), 19-36. yusuf, i., aliyu, i.a & al-faryan, m.a. (2023). board risk committee composition and risk taking of deposit money banks in nigeria, cogent business & management, 10:1, 2187884, doi: 10.1080/23311975.2023.2187884 zango, a.g, kamardin, h. & ishak, r. (2016). audit quality, board gender and financial risk disclosure. international journal of economics and financial issues, 6(s4) 55-61 gusau journal of accounting and finance (gujaf) vol. 4 issue 1, april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ii © department of accounting and finance vol. 4 issue 1 april, 2023 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com website: www.abupress.com.ng mailto:abupress2013@gmail.com gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iii editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos state. prof. suleiman a. s. aruwa gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 iv department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. aminu isah department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. dr. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 v dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vi advisory board members prof. kabiru isah dandago, bayero university kano, kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 vii call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 viii publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 ix contents board characteristics and earnings management of listed consumer goods firms in nigeria benjamin gwabin joseph, murtala abdullahi phd, benjamin kumai gugong phd 1 dividend policy and value of listed non-financial companies in nigeria: the moderating effect of investment opportunity abubakar umar 18 trialability and observability of accrual basis international public sector accounting standards implementation in nigeria aliyu abdullahi ahmed phd, zakari usman 35 liquidity risk and performance of non-financial firms listed on the nigerian stockexchange muhammed alhaji abubakar, nurnaddia binti nordin phd, abubakar hamisu umar 54 board diversity, political connections and firm value: an empirical evidence from financial firms in nigeria rofiat oyetunji, isah shittu phd, ahmed bello phd. 75 moderating effect of bank size on the relationship between interest rate, liquidity, and profitability of commercial banks in nigeria shehu usman hassan, bello sabo (ph. d), ismai'l idris tijjani (ph. d), idris ahmed aliyu. (ph. d) 96 sources of health care financing among surgical patients seen at the dalhatu araf specialist hospital lafia nasarawa state nigeria ahmed mohammed yahaya, babatunde joseph kolawole, bello surajudeen oyeleke 121 transparency, compliance and sustainability of contributory pension scheme in nigeria olanrewaju atanda aliu (ph. d), mohamad ali abdul-hamid (ph. d), salami suleiman (ph. d), salam mudathir olanrewaju 135 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 x examining the impact of working capital management on the financial performance of listed industrial goods entities in nigeria 151 sani abdulrahman bala (ph. d), jamilu jibril, taophic olarewaju bakare corporate governance factors and tax avoidance of listed deposit money banks in nigeria 171 sani abdulrahman bala (ph. d), umar salim ibrahim, samaila dannana risk committee demographic traits: a study of the impact of expertise on risk disclosure quality of listed insurance firms in nigeria wada najib abbas, dandago, kabiru isa (ph. d), rabiu, naja’atu bala 192 moderating effect of audit committee on the relationship between audit quality and earnings management of listed non-financial services firms in nigeria ahmad muhammad ahmad, lubabah mansur kwanbo (ph.d.), shehu usman hassan (ph.d.) musa suleiman umar (ph.d.) 216 determinants of audit opinion of negative-book-value firms in nigeria: firm value and audit characteristics perspective asma’u mahmood baffa (ph. d), lawal mohammed (ph.d.), ahmed bello (ph.d.) umar farouk abdulkarim 237 intervention announcements and naira management: evidence from the nigerian foreign exchange market adedeji daniel gbadebo 254 is there earnings discontinuity after the implementation of ifrs in nigeria? adedeji daniel gbadebo 275 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 275 is there earnings discontinuity after the implementation of ifrs in nigeria? adedeji daniel gbadebo department of accounting science walter sisulu university, mthatha, eastern cape, south africa. gbadebo.adedejidaniel@gmail.com ; agbadebo@wsu.ac.za abstract earnings metrics are major financial indicators which capital market participants and investors focus on for informed decisions. because reporting earnings increase may enhance firms’ stock price, many managers are motivated to avoid reporting earnings decreases, but prefer to consistently report increase earnings greater than its previous valuation. there is evidence that such practice has led to a situation of conspicuous upward shift in frequency of observations, starting from the left of identified earnings benchmark to the right. recent studies have shown that a change in accounting regulation may have effects on the shape of the firm-year distribution of earnings. this paper examines the discontinuity evidence for nigeria, in relation to the adoption of the international financial reporting standard. the aim is to establish whether discontinuity in earnings, represented by the asset-scaled net profits, as well the discontinuity in earnings-change, has reduced following the adoption. according to literature, the study employs three methods – empirical histogram, standardise differences tests and the permutation tests – to validate the aims. the findings suppose evidence for increase in discontinuity, indicating increased in small profits’ earnings management, after the adoption. contrary, the evidence is not sufficient to conclude that the discontinuity has increase for the earnings-change. it can be argued that the adoption has not achieve much in ensuring firms are monitored against earnings management to avoid losses. the study has limitation, since it considers only the distributions of earnings and earnings-changes. the distribution of forecast errors is not investigated because such is influence by forecast management. future studies may consider this for improvement. keywords: earnings discontinuity, implementation of ifrs, nigeria https://doi.org/10.57233/gujaf.v4i1.211 1. introduction accounting earnings, such as profits, earnings per share and others, are considered as the premier information items reported on the financial statements. studies have documented the significance of earnings on debt contracting, equity valuation and managerial compensation contracts (cadot et al., 2020; francis et al., 2003; graham et al., 2005). they are the major indicators that investors focus on to make informed financial decisions in the capital market. because investors rely on simple heuristics to depends these measures, the markets react positively (negatively) to unexpected increase (decrease) in reported earnings. reporting earnings decrease or loss spiral undesirable news, which spreads into the markets and may trigger fall in the firm’s mailto:gbadebo.adedejidaniel@gmail.com mailto:agbadebo@wsu.ac.za gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 276 share price. thus, in order to create optimistic gains, many managers avoid reporting earnings decreases, but consistently report increase earnings greater than previous valuation in order to attract positive market response and enhance firms’ stock price (pretorius & de-villiers, 2013). burgstahler and eames (2006) observe that firms having regular routine of reporting earnings increases sustain higher price-to-earnings ratios, and this may even be larger, the longer the periods of increase reported. researchers identify that substantial reporting of earnings above certain benchmark may cause discontinuity in earnings distribution (enomoto & yamaguch, 2017; gilliam et al., 2015). the distribution includes too few observations immediately below the identified benchmark and too higher firm-years immediately above benchmark than are likely. the evidence reports conspicuous upward shift in the frequency of observations, from left of identified earnings benchmark to the right. researchers maintain that such firm-years in interval just the right of the benchmark are managing earnings to document income above earnings threshold since discontinuity at target cannot be described by managers’ normal operations, due to firms’ earnings management activities (burgstahler & dichev, 1997; shuto, & iwasaki, 2015). after the 2000s major corporate scandals, including worldcom and enron in 2002, some corporate financial reporting laws were established in some countries to ensure best financial practices and reporting quality financial statements. the sarbanes-oxley act (or us-sox) was implemented and recognised in the us. the us-sox was formulated to lessen opportunistic reporting through ensuring: manager’s vetting of financial report accuracy, both managers’ evaluation and auditors’ audit of internal controls, and sanctioning legitimate penalties for cfos and ceos for manipulations. the japanese approved the financial instruments and exchange act of 2006 (or the japanese sox, j-sox) after major scandals including seibu railway, kanebo and livedoor (enomoto & yamaguch, 2017; kerstein & rai, 2018). a number of countries require listed firms to report their statements based on regulated standards and policies, such as the international financial reporting standard (ifrs). the ifrs allows flexible in reporting, which makes some managers to communicate bias earnings for their own benefits. ifrs gains popularity when the eu requires that all listed companies in member countries to adopt and comply with the standards in presenting their consolidated accounts from january 1, 2005. recent reports show that about 65 percent of the ifrs jurisdictions have converged or adopted the standard worldwide (ifrs, 2023a). researchers gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 277 have conducted studies on the convergence, adoption, compliance and consequence of ifrs on organisation (cho, kim et al., 2021; shruti & thenmozhi, 2023). there is evidence that ifrs likely impacts accounting quality, and in particular, earnings management (isaboke & chen, 2019; chimonaki & konstantinos, 2020; adedokun et al., 2022). some authors examine the effect of accounting policies and reporting framework in formation of discontinuity (gilliam, heflin, & paterson, 2015; enomoto & yamaguchi, 2017; trimble, 2018; piosik, 2021). before ifrs-adoption, the financial reporting council in nigeria (frcn) permits firms to use the nigeria gaap (n-gaap). in july 2010, the government ordered quoted firms to set up financial reports through the ifrs effective from january 1, 2012 (ifrs, 2023b, 2023c). many prominent cases of financial scandals have been reported for nigeria, but so far empirical evidence to investigate the link with ifrs are based on discretionary accrual’s earnings management (adedokun et al., 2022; kajola et al., 2020; madugba & ogbonnaya, 2017; olayinka et al., 2017). in relation to the ifrs adoption in nigeria, the paper examines the discontinuity evidence by focusing on whether the adoption has triggered discontinuities on earnings distributions. providing the evidence of discontinuity provides a unique research view for discontinuity-related literature because currently, there is no known study that has attempted the aim for the country’s sample. hence, discontinuity evidence will provide guidance for policy formulation on the capital market. the findings suppose evidence for increase in discontinuity, indicating increased in small profits’ earnings management, after the adoption of ifrs. contrary, the evidence is not sufficient to conclude that the discontinuity has increase for the earnings-change. it can be argued that the ifrs has not achieve much in ensuring firms are monitored against earnings management to avoid losses. for the remainder of the work, section 2, 3, 4 and 5, accordingly, provide the literature review and hypotheses, the data and methodology, the results and conclusions. 2. literature evidence existing evidences on earnings discontinuity focus on different areas. earlier studies show that the discontinuity is due to managers’ manipulations of earnings to avoid losses (beatty et al., 2002; hayn, 1995). there is discontinuity in forecast (error) distribution, supposing firms manipulate earnings to attain analysts’ forecast earnings (donelson et al., 2013; koh et al., 2008). a strand of studies assumes that the discontinuity depends on the earnings metrics used (durtschi & easton, 2005; https://www.sciencedirect.com/science/article/abs/pii/s1061951818302118#! gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 278 2009). relative to smoothness in earnings distributions, the various studies provide extensive evidence on two main earnings thresholds, which include the profit/loss benchmark (enomoto & yamaguchi, 201; pududu & de-villiers, 2016;) and earnings from preceding-year (donelson et al., 2013; enomoto & yamaguchi, 2017). for studies that consider analyst forecast errors, koh et al. (2008) show that managers’ dependence on income-increasing accruals (positive earnings) to meet analyst forecasts declined in the post-sox/scandals periods compare to the prescandals period (1987q1-2001q2). bartov and cohen (2009) examine fraud cases in the u.s. firms between 1996 and 2004 and find an overall fall in practice of beating analyst forecasts in post-sox period (2002q3 to 2006q4) relative to the late pre-sox regime (1994q1 to 2001q2). donelson et al. (2013) use restated earnings to provide evidence of earning discontinuity to earnings management via comparing distribution of restated and originally-reported earnings of listed firms that resolve accounting-linked securities litigation and restate managed earnings from alleged local gaap violation period. the study found that the kinks are present in the originally-reported earnings but absence in the earnings distribution of earnings levels, earnings surprise and analyst forecast errors using the restated earnings. some studies examine whether accounting policies or frameworks are responsible for the discontinuities on earnings distribution (bird et al., 2019; caylor, 2010; enomoto & yamaguchi, 2017; gilliam et al., 2015; lobo & zhou, 2006; piosik, 2021; shuto & iwasa, 2015; trimble, 2018). lobo and zhou (2006) identify that firms become conservative and report slightly lower discretionary accruals since the implementation of the us-sox. caylor (2010) offers evidence that firms prefer to apply discretion in deferred income compare to accounts receivable in order to circumvent negative earnings shocks, but that the implementation of the us-sox continuously mitigated this preference. both shuto and iwasak (2015) and gilliam et al. (2015) reveal that sample selection, neither scaling as well as income taxes and any other special items explain discontinuity evidence. gilliam et al. (2015) find that zero-earnings discontinuity vanishes due to the passage of the sarbanes–oxley (sox) act. neither the discontinuity nor the disappearance of discontinuity requires the effects of non-earnings management drives for the zero-earnings kink. discontinuity was found in all except a year before 2002, and not in any other years after. shuto and iwasak (2015) reveals clear existence of discontinuities at the zero threshold in distribution of earnings for japanese firms. they hypothesise that institutional factors, including tax and https://www.sciencedirect.com/science/article/abs/pii/s1061951818302118#! gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 279 financial regulations, are the cause of the breaks in the earnings distribution. they note that firms that have high marginal tax rates, and very tight interactions with their respective banks would more likely to engage in earnings management. trimble (2018) examine the impact ifrs adoption on accounting quality based on the earnings distributions. the study found that while the distribution discontinuity does not completely fade but it severely decreases amongst the firms. bird et al. (2019) show that policy such as sox act lessen earnings managed by 36%, if costs increased. this reduction is bound to occur undermining an increase in benefits, consistent with the market expectations. piosik (2021) finds that the introduction of ifrs 15 lessens the increase of discretionary revenue, especially, when premanaged operating income is marginally lower than the fourth quarter consensus analyse forecast and operating income. adedokun et al. (2022) report significant difference between preand postifrs discretionary accruals, and based on the panel corrected standard errors analysed, they find only few firms characteristics including the ifrs adoption dummy affect earnings management. hypotheses prior research on earnings management practice post regulations and implementation of reporting framework provide evidence of improved in earnings quality after the passage of sox (lobo & zhou, 2006; cohen et al., 2008; caylor, 2010; gilliam et al., 2015; shuto & iwasak, 2015; trimble, 2018; piosik, 2021). lobo and zhou (2006) recognise that sox and its resultant sec requirement changed management’s reporting pattern. they note that managers reported lower abnormal accruals the first two years of post-sox than the fourth preceding sox. for cohen et al. (2008) there is decline in misreporting, but increase shift from accruals to real earnings management after sox. caylor (2010) argues the implementation of the sox mitigated the preference to use discretion in deferred revenue compare to accounts receivable. gilliam et al. (2015) find that zero-earnings discontinuity vanishes due to the passage of the sarbanes–oxley (sox) act. shuto and iwasak (2015) reveals clear existence of discontinuities at the zero threshold in distribution of earnings for japanese firms and identify that institutional factor (e.g., tax and financial regulations) are the cause of the breaks in the earnings distribution. trimble (2018) argues that while the distribution discontinuity does not completely fade but it severely decreases amongst the firms after the ifrs adoption. piosik (2021) finds that the introduction of ifrs 15 lessens the increase of discretionary revenue, when pre-managed operating net income is lower than the fourth quarter analyse forecast and income. https://www.sciencedirect.com/science/article/abs/pii/s1061951818302118#! https://www.sciencedirect.com/science/article/abs/pii/s1061951818302118#! https://www.sciencedirect.com/science/article/abs/pii/s1061951818302118#! gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 280 some studies argue that because reporting earnings losses may draw unanticipated adverse attention from investors for small stock exchange, most firms in developing financial market would report earnings increase, and more so, after the implementation of reporting standard that support managerial use of discretion to report earnings (ugrin, 2017; ozili & outa, 2019). regarding precursory study, adedokun et al. (2022) identify significant difference between the preand post adoption’ discretionary accruals. for the multivariate evaluation, the ifrs adoption was found significant, supposing that earnings is more managed after ifrs. given tighter regulations on reporting under ifrs, managers’ earnings management practice could decrease, and hence, discontinuity may not be formed. following gilliam et al. (2015), the study does not expect increase in discontinuity in the earnings distribution after ifrs implementation for the nigerian firms, similar to the experienced by the u.s. (lobo & zhou, 2006; caylo, 2010; gilliam et al., 2015). hence, to verify whether there is discontinuity in earnings distribution after ifrs use in nigeria, the following hypotheses are tested: h1: there is increased discontinuity in earnings after the implementation of ifrs h2: there is increased discontinuity in earnings-change after the implementation of ifrs earnings distribution’s discontinuity tests empirical histogram method this literature that focuses on discontinuity of earnings rely on the distributional approach using empirical (albeit, asymmetric) histogram bin frequencies of earnings (level) and earnings-change surprise distributions to detect discontinuities. the empirical histogram method is mostly applied to examine the properties of those observations just above the zero threshold and to detect existence of earnings management (enomoto & yamaguchi, 2017). figure 1 (2) provides an example of the prevalence of small losses (earnings decreases) amongst the us non-financial service, from burgstahler and dichev. the figures identify the existence of a noticeable peak in the earnings interval to just the immediate right of zero, implying the prevalence of small profits. since the bin-width controls the smooth characteristic of the baseline histogram, the precise bin-width must be determined. as noted by mcnichols (2002), the optimal bin-width holds under the principal assumption that unmanaged earnings population is gaussian noise. scott (2009) suggests to compute the optimal binwidth using 2𝑄𝐼𝑅 (𝑋𝑖 ) √𝑁 3 ⁄ , where 𝑋𝑖 is the pooled cross-sectional of earnings (for gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 281 𝑖 = 1, … , 𝑛), 𝑄𝐼𝑅 is the interquartile range 𝑄3(upper quartile) minus the 𝑄1(lower quartile), and n is the number of firm-year. one advantage for using the ‘distribution of reported earnings’ method to detecting discontinuity and earnings management is that it does not require the estimate of noisy abnormal accruals. figure 1a figure 1b figure 1a: equity-scaled net income at year t [earnings𝑡/mve𝑡] figure 1b: equity-scaled net income-change [(earnings𝑡 – earnings𝑡−1)/mve𝑡−2]. source: burgstahler and dichev (1997) standardise difference test method the jumps in earnings distributions at zero is recognised as evidence of earnings management but statistical test is proposed to confirm the discontinuity at the benchmark. there are different variants of the standardize difference tests. standardized difference score is a unified index that measure the magnitude of difference between groups on baseline variable. relative to the t-test, the standardized difference test is independent of sample size, hence, the statistics is recommended to compare baseline covariates. in earnings distribution literature, some variants of the test are proposed. the earnings management (𝐸𝑀) statistic is the ratio of difference between the actual (𝐴𝑄𝑖) and expected (𝐸𝑄𝑖 ) nobs for the interval immediately to the right of zero over the estimated standard deviation of the difference. 𝐸𝑀1 = (𝐴𝑄𝑖 − 𝐸𝑄𝑖 ) 𝑆𝐷𝑖⁄ (1) where, 𝑆𝐷𝑖 = [𝑁𝑝𝑖 (1 − 𝑝𝑖 ) + 0.25𝑁(𝑝𝑖−1 + 𝑝+1)(1 − 𝑝𝑖−1 − 𝑝𝑖+1)] 1/2 is standard deviation of the difference between (𝐴𝑄𝑖) and (𝐸𝑄𝑖 ) around interval i; 𝐸𝑄𝑖 = (𝐴𝑄𝑖−1 + 𝐴𝑄𝑖+1)/2; 𝑁 is the total number of firm-years observations; 𝑝𝑗 = 𝐴𝑄/𝑁, is the ratio of the actual nobs for interval 𝑖 to the firm-years; 𝐴𝑄𝑗−1/𝑁 = 𝑝𝑗−1 and 𝑝+1 = 𝐴𝑄+1/𝑁. the test null assumes no discontinuity in earnings distribution. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 282 degeorge et al. (1999) provide an alternative distribution discontinuity statistic to test earnings management of the underlying histogram. under the null of no earnings management, then the distribution is smooth and continuous at the (zero earnings or zero earnings-changes) threshold point (burgstahler & eames, 2006). the test statistics is statistics: 𝐸𝑀2 = [𝛥𝑝𝑖 − 𝐸(𝛥𝑝−𝑖 )] 𝑆𝐷(𝛥𝑝−𝑖 )⁄ (2) where 𝑝𝑖 is the proportion of the actual nobs for interval 𝑖 to firm‐years, and change in 𝑝𝑖 [𝛥𝑝𝑗 = 𝑝𝑗 − 𝑝𝑗−1]. e(𝛥𝑝−𝑖 ) is the expected (average) value of 𝛥𝑝, excluding 𝑝𝑖, and 𝑆𝐷(𝛥𝑝−𝑖 ) is standard deviation of (change in 𝑝𝑖 ) 𝛥𝑝, excluding 𝛥𝑝𝑖 . logit-based test approach unlike the histogram-based test which detects distribution discontinuity, and examines properties of earnings (roychowdhury, 2006), the ‘logit-based tests’ is conditional probability multiple explanatory variables model to detect the possible determinants of distribution discontinuity (or earnings management) around the benchmark (shuto & iwasaki, 2015). empirical literature on the determinants of discontinuity in earnings management has been verified in isolation of an existing formal economic theory. in absence of an extent formal theory, empirical investigations conducted often have to depend on some assumptions, related or not related to with and earnings management, about the firms’ distinctive business operations and about the functional (accounting) form of the earnings (dechow & dichev, 2002). conditional discontinuity test the test, from byzalov and basu (2019), is based on the existence of multiple explanatory variables to detect possible determinants of earnings management. the discontinuity tests based on burgstahler and dichev (1997)’s framework does not accommodate multiple explanatory variables. in detecting discontinuity, burgstahler and dichev test allows to compare histograms of two asymmetric partitions for just one variable (e.g., earnings-losses versus earnings-profits of firms). byzalov and basu (2019) estimate a relatively smooth frequency distribution of pre-managed earnings with each model’s component conditioned on some explanatory variables. the discontinuity is verified with standard t-test for each coefficients estimated. relative to the standard logit model, the simulation from this test provides better type-i errors and greater statistic power of test. the test has not been well exploited in empirical applications due to the complexities of implementation. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 283 monte carlo simulation approach takeuchi (2004) applies to monte carlo simulation to detect discontinuity in an empirical distribution of reported earnings. takeuchi (2004) follows that reported earnings (𝑋𝑖) is a random variable (for 𝑖 = 1, … , 𝑛) with a function defined as, 𝐹. if the distribution is evenly spaced with space points −∞ = 𝑔0 < 𝑔1 < ⋯ < 𝑔𝑘 = ∞, where (𝑔𝑗 − 𝑔𝑗−1 = ℎ) for 𝑗 = 2, …, 𝑘 − 1, then an empirical distribution, 𝑌𝑗 , defined by the empirical process ∑ 𝑙 𝑛 𝑖=1 {𝑋𝑖 ∈ (𝑔𝑗−1, 𝑔𝑗 ]} (𝑗 = 1, … , 𝑘) ] in (𝑔𝑗−1, 𝑔𝑗] would assume a multinomial probability function, 𝑝𝑗 = 𝑃(𝑋 ∈ (𝑔𝑗−1, 𝑔𝑗 ]) = 𝐹(𝑔𝑗 ) − 𝐹(𝑔𝑗−1). where the mean of 𝑌𝑗 is 𝐸(𝑌𝑗 ) = 𝑛𝑝𝑗 , and the variance is 𝐸(𝑌𝑗 − 𝑌) 2 = 𝑛𝑝𝑗 (1 − 𝑝𝑗 ). the degree of the empirical smoothness of the distribution is [𝑝𝑗 = (𝑝𝑗−1 + 𝑝𝑗+1) 2⁄ ]. the burgstahler and dichev (1997)’s b-d statistic (𝜏𝐵𝐷) is denoted: 𝜏𝐵𝐷 = (( 𝑝𝑗−1+𝑝𝑗+1)/2)−𝑝𝑗) √𝑣𝑎𝑟((( 𝑝𝑗−1+𝑝𝑗+1)/2)−𝑝𝑗) (3) where; �̂� = 𝑌𝑗 /𝑛; (4) 𝑣𝑎𝑟(((�̂�𝑗−1 + �̂�𝑗+1) 2⁄ ) − �̂�𝑗 ) = 1 𝑛 𝑝𝑗 (1 − 𝑝𝑗 ) + 1 4𝑛 (𝑝𝑗−1 + 𝑝𝑗+1)(1 − 𝑝𝑗−1 − 𝑝𝑗+1) (5) + 1 𝑛 𝑝𝑗 (𝑝𝑗−1 + 𝑝𝑗+1) the statistic (𝜏𝐵𝐷) detects the ‘disjointness’ in the distribution (density) function under a null of standardize normality in the distribution of earnings. takeuchi (2004) formulate 𝜏𝐵𝐷 for three different bin-width h [h = 0.20σ, 0.10σ, & 0.05σ, where σ is standard error of 𝑋𝑖] to confirms ‘disjointness’ in the density under the null of normality of the earnings. he conducted monte carlo experiment to indicate discontinuity for the jump in earnings continuous distribution. the test has not been well exploited in empirical applications due to the rigour require in conducting the bootstrap simulations. 3. methodology the paper uses data (2001–2021) from the nigerian exchange (ngx) and other financial records, for assets-scaled profit after tax as a proxy for accounting earnings. the focus on 2001 was to ensure a substantial number of years are captured in the pre-ifrs periods (2001–2011). the post-ifrs periods (2012– 2021), which information is assumed to have been applied under greater flexibility and discretions toward the improvement of earnings quality based on the gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 284 international framework are well captured. because the number of nse firms is small relative to studies for advanced economies with large capital market and firm size (shuto & iwasa, 2015; enomoto & yamaguchi, 2017), the study uses all firms, including financial and non-financial industries in accordance with pududu and devilliers (2016). table 1: industry-wise breakdown of sample industry #firms #firm-year %firms agriculture 10 200 6.41% conglomerates 5 100 3.21% construction/real estate 8 160 5.13% consumer goods 21 420 13.46% financial services 45 900 28.85% healthcare 7 140 4.49% ict and tech 11 220 7.05% industrial goods 16 320 10.26% natural resources 5 100 3.21% oil and gas 9 180 5.77% services 19 380 12.18% total 156 3,120 100.00% note: n# = no. of firm-year. #firms = no. of firm in indicated industry. %firms = industry percent of firm of total sample [#firms/155]. the sample for financial (non-financial) service is 29% (71%), and preand postifrs include 1,560 firm-years. from the full sample, firms with incomplete observations for the considered periods are eliminated. the final sample relapsed to 156 firms, with a total of 3,120 observations, and to 2,964 firm-years for the earnings change variables after taking the difference between earnings for current year (t) and the preceding year (t–1) for each firm, with the pre-ifrs. table 1 presents the breakdown of sample according to the sectors included in the final sample. the financial sector constitutes about 29% of the sample compositions. empirical procedure the paper focuses on investigating discontinuity on actual earnings due to the implementation of ifrs. previous paper (e.g., gbadebo et al., 2022) tests the significance of ifrs on discretionary accruals to examine earnings management believed to be the cause of discontinuity. because there is wide range in the firms’ profits earnings and assets due to their different sizes, this may infuse outliers on the earnings-distribution if the actual profit is used. according to literature gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 285 standard, the paper computes the normalised (i.e., asset-scaled) pat for the firmyears of profits (gbadebo et al., 2022; kent & routledge, 2015). the study normalises 𝑃𝐴𝑇𝑖,𝑡 earnings measures, as supposed by literature (durtschi & easton, 2009; donelson et al., 2013; kent & routledge, 2015; gbadebo et al., 2022) by scaling with the lagged of total assets (𝑇𝐴𝑖,𝑡−1) as denoted by equation (6). 𝑃𝐴𝑇𝑖,𝑡 ∗ = 𝑃𝐴𝑇𝑖,𝑡 𝑇𝐴𝑖,𝑡−1⁄ (6) and the earnings change is computed using the difference between earnings for current year t and preceding year t–1 for each firm 𝑖 and at time 𝑡 as depicted: ∆𝑃𝐴𝑇𝑖,𝑡 ∗ = 𝑃𝐴𝑇𝑖,𝑡 ∗ − 𝑃𝐴𝑇𝑖,𝑡−1 ∗ (7) equation (6) is the assets-scaled profit (𝑃𝐴𝑇𝑖,𝑡 ∗ ), and equation (7) is the assetsscaled profits (𝑃𝐴𝑇𝑖,𝑡 ∗ ). the normalised results are pooled and control for outliers’ effects on the cross-section of the 𝑃𝐴𝑇𝑖 ∗ and ∆𝑃𝐴𝑇𝑖 ∗ metrics1. this is implemented by completing winsorisation at the first (1st) and penultimate (99th) percentiles. because, the focus is on the interval to left and right of the various category to conjecture the possible existence of discontinuity, the process excludes the zeros pat according to standard requirement. the exclusion eliminates complexity links with the zero-samples. the study presents preliminary assessment of the distributions of earnings using basic statistics. afterward, the empirical histogram, t-tests (mean and median tests), standardised difference tests, and permutation tests are applied to evaluate the hypotheses. the procedure for the permutation test is presented. the permutation test the permutation test, in particular the kolmogorov-smirnov (ks), is a nonparametric method that often used when the assumption of the parametric distribution is unknown or when the distribution is skewed (i.e., normality does not hold). the permutation (kolmogorov-smirnov, ks) test provides statistic to evaluate the formulated null hypotheses, h1 and h2. the test is based on the highest absolute difference between two empirical distributions with a common function, 𝐹. suppose two independent distributions of observations with sizes 𝑛 and 𝑚, which may not necessarily be equal represent the earnings metrics (𝑃𝐴𝑇𝑖,𝑡 ∗ and ∆𝑃𝐴𝑇𝑖,𝑡 ∗ ) for the before [𝑋1𝑖 (𝑖 = 1, … , 𝑛)] and after [𝑋2𝑗 (𝑗 = 1, … , 𝑚)] the implementation of the ifrs, have common cumulative distribution function (cdf), 𝐹, with distribution function: gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 286 𝐹𝑛 (𝑥) = 1 𝑛 ∑ 1(𝑋𝑖≤𝑥) 𝑛 𝑖=1 , − ∞ < 𝑥 < ∞ (8) assume 𝐹0(𝑥𝑗 ) is the hypothesised 𝑐𝑑𝑓 and 𝐹𝑛 (𝑥) is the empirical 𝑑. 𝑓, the ks statistic evaluates the hypothesis 𝐻0 against 𝐻1, using these steps:  formulation of the hypotheses (𝐻0 against 𝐻1): hypotheses { 𝐻0: 𝐹(𝑥) = 𝐹0(𝑥) − ∞ < 𝑥 < ∞. 𝐻1: 𝐹(𝑥) ≠ 𝐹0(𝑥) for some 𝑥. (9)  estimation of the observed test statistic using: 𝐷0 = 𝜃(𝑋1, 𝑋2) = sup |𝐹𝑛(𝑥) − 𝐹𝑛 (𝑥)|. (10)  generate a pooled sample, 𝑍𝑖 = (𝑋1𝑖 , 𝑋2𝑖 ), where 𝑍𝑖 [𝑖 = 1, 2, … , ( 𝑛 + 𝑚)] are the ordered set for 𝑋1 and 𝑋2 and apply the index 𝑟 (𝑟 = 1, 2, … , r), which is replicated for the index.  take a resample of size ℎ from 𝑍𝑖 (without replacement) to represent 𝑋1, use the remaining observations from 𝑍𝑖 to represent 𝑋2 and then compute 𝐷 ∗ = 𝜃(𝑍𝑖 ).  if large values of estimated 𝐷0 holds for the 𝐻1, compute the empirical p-value denoted: �̂� = (1 + ∑ 𝐼(𝐷∗ ≥ 𝐷0 𝑅 𝑟 ) 𝑅 + 1⁄ (11) �̂� is then multiplied by 2 to accommodate the two-sided test, and the decision rule is such that the paper rejects the null at 𝛼 (significant level), if and only if �̂� ≤ 𝛼. 4. results earnings information before the required tests to evaluate the hypotheses, the paper presents (table 2) the basic statistical characteristics of the annual assets-scaled profits after tax’s earnings and earnings change. following the winsorisation to regularised the earnings information for possible outliers, the data identify that for the full sample (2002-2021), the mean (𝜇) and median (𝑚𝑒𝑑) of the asset-scaled 𝑃𝐴𝑇𝑖 are respectively 0.067 and (0.075), while the mean and median of the e change in tassetscale (∆𝑃𝐴𝑇𝑖) are 0.001 and (0.002). the normalised 𝑃𝐴𝑇𝑖 relates to a lower spread of 0.145 relative to the pat with spread of 0.172. for the pre-ifrs, the data recognize a mean (median) of the asset-scaled 𝑃𝐴𝑇𝑖 as 0.057 (0.073), with a lower spread of 0.144, for the earnings levels, whereas the mean (median) of the assetscaled 𝑃𝐴𝑇𝑖 of 0.003 (0.003) with a higher spread of 0.172, for the earnings change distribution. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 287 (0.076), with a higher spread of 0.148, for the earnings levels, which point at the earnings management hypothesis, and therefore suppose possible existence of increase discontinuity, for the assets-scaled pat. this is not the case for the earnings-change, which indicate a lower mean (0.001) but higher median (0.005), and therefore supposes possible existence of decrease earnings management and discontinuity, for the change in assets-scaled pat. 𝑃𝐴𝑇𝑖 shows some degree of skewness (-0.577) and kurtosis (4.688), while ∆𝑃𝐴𝑇𝑖 shows skewness and kurtosis’ coefficients as -0.026 and 3.245, respectively, which not be significant. table 2: assets-scaled pat (earnings and earnings-change) full sample 2002-2021 pre-ifrs 2002-2011 post-ifrs 2012-2021 statistics 𝑃𝐴𝑇𝑖 ∆𝑃𝐴𝑇𝑖 𝑃𝐴𝑇𝑖 ∆𝑃𝐴𝑇𝑖 𝑃𝐴𝑇𝑖 ∆𝑃𝐴𝑇𝑖 n 3120 2964 1560 1560 1560 1404 𝑚𝑖𝑛 -0.669 -0.876 -0.669 -0.876 -0.659 -0.831 �̃�1 0.011 -0.055 0.011 -0.051 0.010 -0.057 𝑚𝑒𝑑 0.075 0.002 0.073 0.003 0.076 0.003 �̃�3 0.130 0.059 0.130 0.056 0.130 0.064 𝑚𝑎𝑥 0.669 0.944 0.669 0.842 0.648 0.944 𝜇 0.067 0.001 0.057 0.001 0.068 0.005 𝜇se 0.003 0.003 0.004 0.004 0.004 0.005 𝜎 0.146 0.172 0.144 0.172 0.148 0.173 𝜇𝑠𝑘𝑒𝑤 -0.577 -0.026 -0.529 -0.246 -0.620 -0.205 𝜇𝑘𝑢𝑟𝑡 4.688 3.245 4.681 5.096 4.671 4.978 note: table 2 shows the statistics for full sample, and the pre and post ifrs scaled profits [𝑃𝐴𝑇𝑖] and change in scaled profits [∆𝑃𝐴𝑇𝑖]. 𝑁, 𝑚𝑖𝑛, �̃�1, 𝑚𝑒𝑑, �̃�3,𝑚𝑎𝑥, 𝜇, 𝜇se, 𝜎, 𝜇𝑠𝑘𝑒𝑤 and 𝜇𝑘𝑢𝑟𝑡 are respectively the no. of firm-years, minimum, 1 st quartile, median (2nd quartile), 3rd quartile, maximum, mean, standard error of mean, standard deviation, skewness and kurtosis. source: author (2023) empirical histograms the study depicts histograms for pooled cross-section of 𝑃𝐴𝑇𝑖 and ∆𝑃𝐴𝑇𝑖 for the full samples (figure 2a and 2b); earnings-level for the pre-ifrs (figure 3a) and post-ifrs samples (figure 3b); and the earnings-change for the pre-ifrs (figure 4a) and post-ifrs (figure 4b). the focus is on distinct visual examination of the pattern of the distribution obtained according to defined optimal bin-width (scott, 2009). for 𝑃𝐴𝑇𝑖 (earnings-level) and ∆𝑃𝐴𝑇𝑖 (earnings change), the optimal binwidth of 0.0118 percent [0.0175] are applied, respectively, for the empirical gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 288 configurations. in support of the basic statistic, figure 2a shows that the distribution of 𝑃𝐴𝑇𝑖 appears less likely symmetrical at zero, exhibits some degree of skewedness and kurtosis, and discontinuity is affirmed, at least visibly. contrarily, figure 2b could not visibly depict discontinuity, although some degree of skewedness and kurtosis are noticeable, but they may not be significant upon testing. the immediate interval over zero (0 < 𝑃𝐴𝑇𝑖 ≤ 0.0118) exhibits higher frequency of firms reporting small positive 𝑃𝐴𝑇𝑖 compare to the just interval under zero. this is consistent with earnings discontinuity predictions of earnings management that indicates earnings slightly greater than zero, occurs unusually than would be expected, and that most earnings pattern has significantly too few observations immediately below zero than anticipated (kent & routledge, 2015). the distribution for ∆𝑃𝐴𝑇𝑖 looks likely symmetric with a bell shape. the evidence shows that the ∆𝑃𝐴𝑇𝑖 series has significantly too few observations immediately after zero than, hence, assuming no clear evidence of discontinuity. the paper compares the earnings-level distribution for the pre-ifrs (figure 3a) and the post-ifrs samples (figure 3b). both figures indicate discontinuities. figure 3a shows the interval just left of the zero [-0.0118, 0.000] has unusually low regularity, and the just right of zero [0.000, 0.0118] exhibits remarkably high frequency. figure 3b shows the interval just left of zero threshold [-0.0175, 0.000] has low frequency, and the just right of zero threshold [0.000, 0.0175] exhibits significantly high frequency. the distributions confirm the discontinuities consistent with earnings management predictions (enomoto & yamaguchi, 2017). figure 2a: asset scaled pat (earnings level) figure 2b: asset scaled pat (earnings-change) gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 289 figure 3a: pre-ifrs asset scaled pat figure 3b: post-ifrs asset scaled pat (earnings) (earnings) figure 4a: pre-ifrs asset scaled pat figure 4b: post-ifrs asset scaled pat (earnings-change) (earnings-change) source: author’s plot (2023) standardised difference tests however, as gbadebo (2022) noted, the histogram plots are not sufficient to ascertain which is more discontinuous and therefore greater evidence of earnings management is required. table 3 presents empirical evidence based on the standardised difference statistics. because the interest is on the evidence of discontinuity in earnings (earnings-change) before and after the implementation of ifrs, the study focuses on the standardised difference tests in comparing only figure 3a and 3b (figure 4a and 4b). to compute standardised difference statistic for the small-loss (profit) based on the earnings levels (𝑃𝐴𝑇𝑖 ) for the pre-ifrs, the firm-years used is 311 (1,249), and for the post-ifrs, the firm-years used is 289 (1,271), a sign of possible increase small profit’s earnings management relative the pre-ifrs for the earnings-change. likewise, for the earnings-change variable (∆𝑃𝐴𝑇𝑖), the small-earnings decrease (increase) for the pre-ifrs is 673 (809) and gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 290 for the post-ifrs is 769 (713). this supposes decrease in increase earnings management relative the pre-ifrs for the earnings-change. regarding the standardised difference test for earnings-level for the pre-ifrs period, the test for the interval just left of zero (small-loss test) has a test statistic of -18.183, and significantly negative, whereas the interval just right of zero (smallprofit) has a test statistic of 3.161, and significantly positive. this reveals that the managers manage earnings to avoid earnings losses (small profit) during the gaap periods. for the post-ifrs periods, the test for the interval just left of zero (smallloss test) has a statistic of -15.33, and significantly negative, whereas the interval just right of zero (small-profit) has a test statistic of 6.861, and significantly positive, therefore indicating that the managers manage earnings to avoid earnings losses despite the implementation of ifrs met to prevent such practices. when the paper compares the increase in small profit (interval just right of zero), since standardised difference statistic for the post-ifrs (6.861) is greater than that for the pre-ifrs (3.161), the finding indicates there has been increased in earnings management and discontinuity after the adoption of ifrs in nigeria. the evidence supposes that the first null (h1) that discontinuity has increased for earnings after the implementation of ifrs holds. the result for earnings-change for the pre-ifrs shows that the statistic for the decrease (increase) is -0.669 (1.805), and not significant. this reveals that discretions are not utilised to avoid earnings decrease (increase) during the gaap periods. the post-ifrs result shows that the standardised difference for the earnings decrease (increase) is -0.575 (1.449) and insignificantly, indicating no sufficient evidence that the earnings change is managed after the mandatory implementation. comparing the earnings increase (i.e., for the interval just right of zero), since standardised difference statistic for the post-ifrs (1.449) is lesser than that for the post-ifrs (1.805), the study concludes there has been declined in existing discontinuity after the ifrs-ramification. the null (h2) that discontinuity has increased for earnings-change after the implementation is refuted. in sum, the tests suppose evidence for increase in discontinuity for the earnings-level, but not sufficient to conclude same for the earnings change. gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 291 table 3: discontinuity (standardised difference) tests earnings pre-ifrs post-ifrs sdiff [loss] sdiff [profit] sdiff [loss] sdiff [profit] 𝑃𝐴𝑇𝑖 -18.183* 3.161** -15.33* 6.861* sdiff [-] sdiff [+] sdiff [-] sdiff [+] ∆𝑃𝐴𝑇𝑖 -0.669 1.805 -0.575 1.449 note: the table reports the standardised differences (sdiff) test based on bd. * ; ** indicates the test-statistics is significance at 1%, and 5%. parametric and permutation tests here, the paper uses statistical methods to test if the difference in the means and median for the scaled-earnings categories (levels and change) for preand postifrs is significant. for the parametric test, the mean differences for the considered asset-scaled profits (levels and change) is examined based on the welch (wilcoxon) statistics for a 2-side paired sample. for the non-parametric test, the distribution difference for the asset-scaled profits (levels and change) is examined based on one sample kolmogorov-smirnov (ks) test. table 4 reports the results of the earnings difference tests. table 4: results of the earnings-statistic difference tests parametric test non-parametric earnings mean difference median difference k-s permutation a (welch) test (wilcoxon) test 𝑃𝐴𝑇𝑖 -4.38* (0.000) -1.98** (0.028) (0.002) ∆𝑃𝐴𝑇𝑖 -1.29 (0.376) -2.93 (0.001) (0.561) the mean differences for the considered asset-scaled profits (levels and change) is examined based on the welch (wilcoxon) statistics for a 2-side paired sample, while the distribution difference for the asset-scaled profits (levels and change) is examined based on one sample kolmogorov-smirnov (ks) test. *, ** implies significant at 1%, 5% level. a the statistic tests the difference in distribution rather than testing the mean difference based on bootstrapping. the evidence based on the parametric testing indicates that the mean of the pre and post-ifrs earnings differs, but the difference in the mean of the earnings change is not significant, with a p-value of 0.376. for the distribution-based test, the gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 292 asymptotic k-s test is significant for earnings (�̂� = 0.002 ) < (𝛼 = 0.05), hence, a rejection of the null of no significant difference in the managed earnings, between the two regimes (pre and post-ifrs). the null holds for the earnings change, implying there is no significant dissimilarity between the distributions of earnings for the two financial reporting regimes. that is there seems to be possible nondisappearance (disappearance) of the earnings discontinuity asset scaled profits (asset scaled profits change) distribution at zero threshold after ifrs implementation. the findings have far reached implications. the ifrs appears more effective than the gaap in monitoring firms to ensure reduction of earnings management to avoid losses. more than the gaap’s statement of accounting standards (sas), the international standards involve stricter measures for organisation’s internal control and audit assessment. the ifrs replicates high standard quality financial information of firms on organised documentation and prediction of earnings, cashflows, investments and capital inflow. the standards attempt to improve the effectiveness of financial reports, ensure value for the information on financial statements, and enhance the comparability and transparency of financial statements among global capital markets. the discontinuity evidence provides guidance for policy formulation and regulators in enforcement processes in the capital market. in addition, the managers under the ifrs are much concern about the need to present trusted earnings of firms because of global integration since they comply with the implementation under expectations that the standards will heighten them towards global opportunities and lead to improved financial performance. reporting earnings loss definitely spiral undesirable information for investment because the news surprises spread into the markets and triggers fall in the firm’ share price’ (chowdhury et al., 2018), but this has undesirable on the firms, particularly, as it would discourage expected foreign investors. 5. conclusion earnings metric on the financial reports represent information that guide investors in making informed decisions in the capital market. the indicators have significant effect on the performance of stock price, and may largely influence the expected stock price. researchers have observed that because reporting earnings increase may enhance firms’ stock price, many managers they consistently report increase earnings relative to certain threshold, particularly, greater than their previous earnings valuation. there is evidence that such practice has led to a situation of gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 293 conspicuous upward shift in the frequency of observations, from left of identified earnings benchmark to the right. in addition, recent studies have shown that changes in accounting regulations may have effect on the shape of the distribution of earnings. the paper examines the discontinuity evidence for nigeria, in relation to the adoption of ifrs. there is reduced discontinuity (increase discontinuity) for the earnings-level (earnings change). the evidence provides the existence of distribution, and by implication earnings management. the findings have research and regulatory implications. the established evidence offers new insight and guidance for policy formulation and regulators in enforcement processes in the capital market. because the effectiveness of an accounting regulation depends on the institutional mechanisms available to implement and enforce the frameworks, the put in place effective institutions and stricter measure in monitoring firms’ earnings reports. earnings manipulating firms should also be sanctioned, in order to maintain financial market integrity. in addition, the paper expands the frontier of extant literature, and offer references for future research. the study’s limitation is that it considers only the distributions of earnings and earnings-changes. the distribution of forecast errors is not investigated because such is influence by forecast management (brown & higgins, 2005). future studies may consider this for improvement. references adedokun, w. m., gbadebo, a. d., adekunle, a. o., & akande, j. o. (2022). ifrs adoption and accrual-based managed earnings in nigeria. asian economic and financial review, 12(12), 1041–1073. https://doi.org/10.55493/5002.v12i12.4669 bartov, e. & cohen, d. a. (2008). the 'numbers game' in the preand post-sarbanesoxley eras. journal of accounting, auditing and finance. available at ssrn: https://ssrn.com/abstract=1329162 bird, a., karolyi, s. a. & ruchti, t. (2019). understanding the 'numbers game'. journal of accounting & economics. http://dx.doi.org/10.2139/ssrn.2748220 brown, l. d. & higgins, h. n. (2005). managers' forecast guidance of analysts: international evidence. journal of accounting and public policy, 24(5). http://dx.doi.org/10.2139/ssrn.314579 burgstahler, d. & dichev, i. (1997.) earnings management to avoid earnings decreases and losses. journal. of accounting & economics, 24, 99–126. https://doi.org/10.1016/s0165-4101(97)00017-7 burgstahler, d., & eames, m. (2006). management of earnings and analysts’ forecasts to achieve zero and small positive earnings surprises. journal of business https://doi.org/10.55493/5002.v12i12.4669 https://ssrn.com/abstract=1329162 http://dx.doi.org/10.2139/ssrn.2748220 http://dx.doi.org/10.2139/ssrn.314579 https://doi.org/10.1016/s0165-4101(97)00017-7 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 294 finance and accounting, 33(5) & (6), 633–652. https://doi.org/10.1111/j.1468-5957.2006.00630.x byzalov, d. & basu, s. (2019). modeling the determinants of meet-or-just-beat behavior in distribution discontinuity tests. journal of accounting & economics. available at http://dx.doi.org/10.2139/ssrn.3117088 cadot, j., rezaee, a. & chemama, r. b. (2020). earnings management and derivatives reporting: evidence from the adoption of ifrs standards in europe. applied economics. https://doi.org/10.1080/00036846.2020.1841085 caylor, m. l. (2010). strategic revenue recognition to achieve earnings benchmarks. journal of accounting and public policy, 29(1), 82-95, https://doi.org/10.1016/j.jaccpubpol.2009.10.008 chimonaki, c. & konstantinos, v. k. (2020). evaluating the effect of ifrs adoption on earnings management in greece: a logit approach. portsmouth business school, university of portsmouth, uk. monograph. http://dx.doi.org/10.1504/ijferm.2019.101302 cho, m., kim, s., kim, y., lee, b. b. & lee, w. (2021). ifrs adoption and stock misvaluation: implication to korea discount. research in international business and finance, 58, 101494. https://doi.org/10.1016/j.ribaf.2021.101494 coates, j. c. & srinivasan, s. (2014). sox after ten years: a multidisciplinary review. harvard law and economics discussion paper no. 758. http://dx.doi.org/10.2139/ssrn.2343108 cohen, j. r. & hayes, c., krishnamoorthy, g. monroe, g. s. & wright, a. (2013). the effectiveness of sox regulation: an interview study of corporate directors. behavioral research in accounting, 25 (1). available at ssrn: https://ssrn.com/abstract=2225505 dechow, p.m., & dichev, i.d. (2002). the quality of accruals and earnings: the role of accrual estimation errors. the accounting review, 77, 35-59. dechow, p.m., richardson, s.a. & tuna, i. why are earnings kinky? an examination of the earnings management explanation. review of accounting studies 8, 355–384 (2003). https://doi.org/10.1023/a:1024481916719 degeorge, f., patel, j. & zeckhauser, r. (1999). earnings management to exceed thresholds. the journal of business, 72(1),1–33. https://www.jstor.org/stable/10.1086/209601 donelson, d., mcinnis, j. & mergenthaler, r. (2013). discontinuities and earnings management: evidence from restatements related to securities litigation. contemporary accounting research. 30(1), 242–268. https://doi.org/10.1111/j.1911-3846.2012.01150.x durtschi, c. & easton, p. (2005). earnings management? the shapes of the frequency distributions of earnings metrics are not evidence ipso facto. journal of accounting research, 43(4), 557-592. https://doi.org/10.1111/j.1475679x.2005.00182.x https://doi.org/10.1111/j.1468-5957.2006.00630.x http://dx.doi.org/10.2139/ssrn.3117088 https://doi.org/10.1080/00036846.2020.1841085 https://doi.org/10.1016/j.jaccpubpol.2009.10.008 http://dx.doi.org/10.1504/ijferm.2019.101302 https://doi.org/10.1016/j.ribaf.2021.101494 http://dx.doi.org/10.2139/ssrn.2343108 https://ssrn.com/abstract=2225505 https://doi.org/10.1023/a:1024481916719 https://www.jstor.org/stable/10.1086/209601 https://doi.org/10.1111/j.1911-3846.2012.01150.x https://doi.org/10.1111/j.1475-679x.2005.00182.x https://doi.org/10.1111/j.1475-679x.2005.00182.x gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 295 durtschi, c. & easton, p. (2009). earnings management? erroneous inferences based on earnings frequency distributions. journal of accounting research, 47, 1249–1281. available at: https://doi.org/10.1111/j.1475-679x.2009.00347.x enomoto, m., & yamaguch, t. (2017). discontinuities in earnings and earnings change distributions after j-sox implementation: empirical evidence from japan journal of accounting and public policy, 36(1), 82–98. https://doi.org/10.1016/j.jaccpubpol.2016.11.005 francis, j., schipper, k., & vincent, l. (2003). the relative and incremental explanatory power of earnings and alternative (to earnings) performance measures for returns. contemporary accounting research, 20(1), 121164. https://doi.org/10.1506/xvqv-nq4a-08ex-fc8a garrod, n. w. & ratej, p. s. & valentincic, a. (2006). testing for discontinuity or type of distribution. mathematics and computers in simulation, 71(1). https://doi.org/10.1016/j.matcom.2005.09.002 gilliam, t. a., heflin, f. & paterson, j. s. (2015). evidence that the zero-earnings discontinuity has disappeared. j. acct & eco. 60, 117–132. http://dx.doi.org/10.1016/j.jacceco.2014.07.001 gilliam, t. a., heflin, f., & paterson, j. s. (2015). evidence that the zero-earnings discontinuity has disappeared. journal of accounting and economics, 60(1), 117–132. http://dx.doi.org/10.1016/j.jacceco.2014.07.001. graham, j. r., harvey, c. r., & rajgopal, s. (2005). the economic implications of corporate financial reporting. journal of accounting and economics, 40(1–3), 3-73, https://doi.org/10.1016/j.jacceco.2005.01.002 hayn, c. (1995). the information content of losses. journal of accounting and economics, 20, 125-153. http://dx.doi.org/10.1016/0165-4101(95)00397-2 ifrs (2023a). why global accounting standards. https://www.ifrs.org/use-around-theworld/why-global-accounting-standards/ ifrs (2023b). ifrs 1 first-time adoption of international financial reporting standards. https://www.ifrs.org/issued-standards/list-of-standards/ifrs-1-first-timeadoption-ofifrs/#:~:text=in%20june%202003%20the%20board,ifrs%20standards%2c %20including%20ifrs%201 ifrs (2023c) ifrs standards application around the world: jurisdictional profile nigeria. https://www.ifrs.org/content/dam/ifrs/publications/jurisdictions/pdfprofiles/nigeria-ifrs-profile.pdf isaboke, c. & chen, y. (2019). ifrs adoption, value relevance and conditional conservatism: evidence from china. international journal of accounting & information management 27 (4). https://doi.org/10.1108/ijaim-09-2018-0101 kajola, s. o., sanyaolu, w., tonade, a. & adeyemi, a. (2020). corporate board attributes and earnings management in nigerian banking sector. journal of sustainable development in africa, 22(4), 1520–5509. https://doi.org/10.1111/j.1475-679x.2009.00347.x https://doi.org/10.1016/j.jaccpubpol.2016.11.005 https://doi.org/10.1506/xvqv-nq4a-08ex-fc8a https://doi.org/10.1016/j.matcom.2005.09.002 http://dx.doi.org/10.1016/j.jacceco.2014.07.001 http://dx.doi.org/10.1016/j.jacceco.2014.07.001 https://doi.org/10.1016/j.jacceco.2005.01.002 http://dx.doi.org/10.1016/0165-4101(95)00397-2 https://www.ifrs.org/use-around-the-world/why-global-accounting-standards/ https://www.ifrs.org/use-around-the-world/why-global-accounting-standards/ https://www.ifrs.org/issued-standards/list-of-standards/ifrs-1-first-time-adoption-of-ifrs/#:~:text=in%20june%202003%20the%20board,ifrs%20standards%2c%20including%20ifrs%201 https://www.ifrs.org/issued-standards/list-of-standards/ifrs-1-first-time-adoption-of-ifrs/#:~:text=in%20june%202003%20the%20board,ifrs%20standards%2c%20including%20ifrs%201 https://www.ifrs.org/issued-standards/list-of-standards/ifrs-1-first-time-adoption-of-ifrs/#:~:text=in%20june%202003%20the%20board,ifrs%20standards%2c%20including%20ifrs%201 https://www.ifrs.org/issued-standards/list-of-standards/ifrs-1-first-time-adoption-of-ifrs/#:~:text=in%20june%202003%20the%20board,ifrs%20standards%2c%20including%20ifrs%201 https://www.ifrs.org/content/dam/ifrs/publications/jurisdictions/pdf-profiles/nigeria-ifrs-profile.pdf https://www.ifrs.org/content/dam/ifrs/publications/jurisdictions/pdf-profiles/nigeria-ifrs-profile.pdf https://doi.org/10.1108/ijaim-09-2018-0101 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 296 kent r., & routledge, j. 2015. use of benchmarks in predicting earnings management? accounting and finance. https://doi.org/10.1111/acfi.12130. kerstein, j., & rai, a. (2018). re-examination of earnings management before and after sox: evidence from sec staff accounting bulletins 99-100. journal of accounting and public policy, 37(2), 146–166. https://doi.org/10.1016/j.jaccpubpol.2018.02.002. koh, k., rajgopal, s., & matsumoto, d. a. (2008). meeting or beating analyst expectations in the post-scandals world: changes in stock market rewards and managerial actions. contemporary accounting research, 25(4),1067–1098. https://doi.org/10.1506/car.25.4.5 lobo, g. j. & zhou, j. (2006). did conservatism in financial reporting increase after the sarbanes-oxley act? initial evidence. accounting horizons, 20 (1), 57-73. available at ssrn: https://ssrn.com/abstract=859624 madugba, j. u. & ogbonnaya, a. k. (2017). corporate governance and earnings management in money deposit banks in nigeria. journal of finance and accounting. 8(8), 147–153. https://www.iiste.org/journals/index.php/rjfa/article/view/36783 mcnichols, m. (2002), discussion of the quality of accruals and earnings: the role of accrual estimation errors. the accounting review 77, 61–69. https://doi.org/10.2308/accr.2002.77.s-1.61 olayinka, e., paul, o., & olaoye, o. (2017). value relevance of accounting data in the pre and post ifrs era: evidence from nigeria. international journal of finance and accounting, 6(4), 95–103. http://dx.doi.org/10.5923/j.ijfa.20170604.01 ozili, p. k., & outa, e. r. (2019). bank earnings smoothing during mandatory ifrs adoption in nigeria. african journal of economic and management studies. 10 (1), 32–47. http://dx.doi.org/10.1108/ajems-10-2017-0266 piosik, a. (2021). revenue recognition in achieving consensus on analysts’ forecasts for revenue, operating income and net earnings: the role of implementing ifrs 15. evidence from poland. 25th international conference on knowledgebased and intelligent information & engineering systems. procedia computer science, 192, 1560–1572 pretorius, d. & de-villiers, c. (2013). the effect of share-based payments on earnings per share of south african listed companies. meditari accountancy research, 21(2), 178–190. https://doi.org/10.1108/medar-03-2013-0006 pududu m., l. & de-villiers, c. (2016). earnings management through loss avoidance: does south africa have a good story to tell? south african journal of economic and management sciences, 19(1), 18-34. http://dx.doi.org/10.17159/22223436/2016/v19n1a2 roychowdhury, s. (2006) earnings management through real activities manipulation. journal of accounting and economics, 42, 335-370. http://dx.doi.org/10.1016/j.jacceco.2006.01.002 https://doi.org/10.1111/acfi.12130 https://www.sciencedirect.com/science/article/abs/pii/s0278425418300073#! https://www.sciencedirect.com/science/article/abs/pii/s0278425418300073#! https://www.sciencedirect.com/science/journal/02784254 https://www.sciencedirect.com/science/journal/02784254 https://www.sciencedirect.com/science/journal/02784254/37/2 https://doi.org/10.1016/j.jaccpubpol.2018.02.002 https://doi.org/10.1506/car.25.4.5 https://ssrn.com/abstract=859624 https://www.iiste.org/journals/index.php/rjfa/article/view/36783 https://doi.org/10.2308/accr.2002.77.s-1.61 http://dx.doi.org/10.5923/j.ijfa.20170604.01 http://dx.doi.org/10.1108/ajems-10-2017-0266 https://doi.org/10.1108/medar-03-2013-0006 http://dx.doi.org/10.17159/2222-3436/2016/v19n1a2 http://dx.doi.org/10.17159/2222-3436/2016/v19n1a2 http://dx.doi.org/10.1016/j.jacceco.2006.01.002 gusau journal of accounting and finance, vol. 4, issue 1, april, 2023 297 scott, d. w. (2009). sturges' rule. wires computational statistics. 1 (3), 303– 306. https://doi.org/10.1002/wics.35 shruti, r., & thenmozhi, m. (2023). founder ownership and value relevance of ifrs convergence: role of institutional investors. pacific-basin finance journal, 101989. https://doi.org/10.1016/j.pacfin.2023.101989 shuto, a. & iwasaki, t. (2015). the effect of institutional factors on discontinuities in earnings distribution: public versus private firms in japan. journal of accounting audit. finance 25, 283–317. https://doi.org/10.1177/0148558x14544504 takeuchi, y. (2004). on a statistical method to detect discontinuity in the distribution function of reported earnings, mathematics and computers in simulation, 64(1), 103-111, https://doi.org/10.1016/s0378-4754(03)00124-1 trimble, m. (2018). a reinvestigation into accounting quality following global ifrs adoption: evidence via earnings distributions. journal of international accounting, auditing and taxation, 33(c), 18-39. http://dx.doi.org/10.1016/j.intaccaudtax.2018.09.001 ugrin, c. j., mason, t. w., & emley, a., (2017). culture's consequence: the relationship between income-increasing earnings management and ias/ifrs adoption across cultures. journal of advances in accounting. http://dx.doi.org/10.1016/j.adiac.2017.04.004 https://doi.org/10.1002/wics.35 https://www.sciencedirect.com/journal/pacific-basin-finance-journal https://doi.org/10.1016/j.pacfin.2023.101989 https://doi.org/10.1177/0148558x14544504 https://doi.org/10.1016/s0378-4754(03)00124-1 http://dx.doi.org/10.1016/j.intaccaudtax.2018.09.001 http://dx.doi.org/10.1016/j.adiac.2017.04.004 1 gusau journal of accounting and finance (gujaf) vol. 2 issue 4, october, 2021 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria 2 does risk governance improves financial reporting quality of listed non-financial firms in nigeria? mustapha madu internal audit unit nigerian midstream and downstream petroleum regulatory authority (nmdpra), abuja-nigeria madumustapha@gmail.com mustapha.madu@nmdpra.gov.ng +234(0)8037910245, +234(0)8050736919 shehu usman hassan phd professor of accounting and finance department of accounting federal university of kasherenigeria shehu.hassan@fukashere.edu.ng shehu.hassanus.usman@gmail.com +234(0)8067766435, +234(0)8057777085 abstract risk governance is beyond mere governance mechanisms such as board independence and committees but more significantly encompasses effective risk systems and policies, remuneration, performance management and the risk culture of the entity. this study integrates explores the relationship between risk governance dimensions of risk structure, culture, appetite and financial reporting quality of listed nonfinancial firms in nigeria. the population of the study consists of all the 74 listed non-financial firms that are active on the nigerian stock exchange as at 31st december, 2019. the sample is the total population for the study using census sampling technique. secondary source of data was used and data extracted from the audited annual report and accounts of selected firms for 10 years period. longitudinal balanced panel multiple regression was used as a technique of data analysis for the study. the findings indicates that the coefficient of risk governance structure is negatively and significantly determining the quality of financial reporting with a t-value of -8.350 and a probability value of 0.000 (p<0.000) which is significant at 1%. similarly, the regression results show a negative association between risk culture and financial reporting quality, which is significant at 1% (p<.001). thus, risk culture improves the quality of earnings which invariably increases financial reporting quality. finally, the regression coefficient in respect of risk apatite stood at 0.430 with a t-value of 9.250, which is statistically significant at 1% (p<.000), which implies that where the risk apatite increases, the financial reporting quality of the selected firms reduces. the study concludes that risk governance plays an important role in improving the quality of financial reporting of listed non-financial firms in nigeria. it is therefore recommended among others that shareholders should consider adhering strictly with the provision of the new corporate governance codes while appointing board members so as to appoint members capable of monitoring firms risk investment by serving in board risk committee. firm managers should also consider maintaining a good risk culture and improving risk appetite to improve financial reporting quality of listed non-financial firms in nigeria. keywords: risk governance structure, risk culture, risk appetite, financial reporting quality 1. background issues one of the primary responsibilities of the board of directors is to ensure the quality and integrity of the financial accounting information disclosed in the financial statements (cohen, krishnamoorthy, & wright, 2017). the risk governance (rg) architecture of the board of directors can significantly influence the quality of financial reporting of an entity. risk governance encapsulates the entire entity-wide structures, formal relationships, risk culture and mailto:madumustapha@gmail.com mailto:mustapha.madu@nmdpra.gov.ng mailto:shehu.hassan@fukashere.edu.ng mailto:shehu.hassanus.usman@gmail.com 3 appetite designed to support and galvanize risk-conscious decision-making for optimal risk management outcomes. risk governance is a framework through which the board and management establish the firm’s strategy, articulate and monitor adherence to risk appetite and risks limits, and identify, measure and manage risks. the governance responsibilities of the board include risk governance and culture, objective and strategy setting; performance; information, communications and reporting and constant review and revision of operational practices to improve performance of the organisation (coso, 2017). the plethora of financial and accounting frauds worldwide has created a logical enquiry into the risk governance practices of corporate entities. this has prompted academics, professional, governing boards, rating agencies to pay attention to risk governance and regulatory agencies to promulgate legislations, advisories and codes of governance and recommendations to strengthen risk-based decisions for optimal outcomes. however, instituting robust and effective risk governance system helps engender accountable management, the mitigation of bad practices and management of significant risks facing an entity for enhanced quality of accounting information to stakeholders (fathi, 2013). a robust risk governance system is responsible for ensuring the quality of financial reporting by founding effective internal control mechanism (chen, et. al, 2015) and risk management practices (amartey and kamal, 2018). it is believed that risk governance system ensures that the board is responsible for being actively involved in risk monitoring and risk governance oversight as the critical basis for effective risk management practices. the emergence of the global financial crisis of 2007-2008 was attributed to the combined effects of corporate governance arrangements and ineffective risk management practices which contributed to its severity (gontarek, 2016). in the nigerian context, notable corporate accounting and financial shames have been witnessed over the two decades in the nonfinancial sector including the famous accounting frauds perpetrated by cadbury nigeria plc, a nonfinancial firm. recently, the nigerian securities and exchange commission (sec) alleged fraudulent financial statement practices against the energy giant oando marketing plc. since these are blue chip companies within the context of the nigerian stock exchange (nse), it would be within reasonable expectation of investors and stakeholders to assume that risk management practices were firmly instituted in these firms and all corporate entities. lingel and sheedy (2012) observed that corporate entities may overstate their commitment to risk management to circumvent unwelcome regulatory and stakeholder scrutiny in a business world of the moral hazard problem and possible bailouts from the public treasury. to underscore the significance of sound risk management practices, the nigerian regulatory authorities have emphasized the establishment of risk management structures embedded with appropriate risk culture and appetites. for instance, the section 11.5 of the 2018 nigerian corporate governance code (ncgc) requires all listed firms to provide risk management committee (rmc) with active involvement in risk governance and oversight function. enhancing the overall risk governance architecture may lead to positive effect on the quality of financial accounting information. many studies on the relationship between the risk governance system and quality of financial reporting have attracted the attention of academic and professional researchers. most of the prior research focused on investigating the effect of the risk 4 governance structurethe board structure, ownership structure, characteristics, independence and frequency of meetings and so on (hassan and bello, (2013); song and kemp (2013), wang, bloomberg, zhang & zhang (2015); luo, (2017), wadesango; mhaka, &wadesango, (2017), cohen, krishnamoorthy, & wright (2017), nichita, m. (2018); amartey & kamal, (2018), olayinka, uwuigbe. sylvester &uwuigbe, 2018), haruna, kwambo& hassan (2018). other previous studies have considered the use of corporate governance index or scores of the structural dimensions of risk governance (gordon, et. al, 2009); risk ratings (xu, grove &schaberl, 2013; baxter, bedard, hoitash&yezegel; 2013; amartey & kamal, 2018) and board risk oversight disclosures (edmonds, edmonds & leece, 2015). in a related investigation, fathi (2013) employed the technique of overall governance index in conjunction with sub-governance indices to evaluate governance system. following the recommendation of an exploratory study by gontarek (2016), this study integrates the three dimensions of risk governance system namely risk structure, culture and appetite as increasingly important elements of an effective risk governance architecture gaining the attention of regulatory authorities. it is the opinion of this paper that risk governance is beyond risk structures but incorporates the entire risk management weaponry of the organisation as a techno-social entity to encompass the risk culture and risk appetite of an entity. bromiley et al (2015) suggested that the question of whether entities demonstrate consistent risk cultures and appetite deserved further empirical investigations? this therefore, triggers examining the tripartite dimensions of risk governance because they holistically capture the complexity of risk governance system and reflects the architecture of its governance. the main preoccupation of this study is to empirically examine whether adoption and implementation of risk governance initiatives incorporating three (3) inherent dimensions namely the formal risk structures, risk culture and risk appetitecan affect the quality of financial reporting of listed non-financial companies in nigeria. the risk culture dimension of risk governance consists of the organisational risks value system, ethos, beliefs and principles guiding the management of entity-wide risk profiles and exposures of an organisation. it is the shared perceptions among employees of the relative priority given to risk assessment, including that of the risk-related practices and behaviors that are expected, valued and supported (sheedy, griffin and barbour, 2017). relevant risk governance international frameworks like the basel committee recommendations and national corporate governance jurisdictions like the nigerian code of corporate governance (sec code 2011) and (2018 frcn codes) underscore the imperative of the board of directors in setting the appropriate risk culture to discourage unethical practices and mitigate conflict of interests towards managing the risk exposures of the entity for optimal organisational objectives. a robust and effective risk culture has been seen as a necessary condition for setting the tune for sound risk appetite model that naturally links up with the risk governance initiatives of the organisation (iif; 2011). one of the recommended risk governance practices recognised by the 2018 nigerian corporate governance code (ncgc) is strengthening and articulating appropriate risk appetite and limits by the board of directors of listed companies. gontarek (2016) described risk appetite as a formal written articulation of the aggregate level and types of risk elements that an entity would accept or avoid as a business strategy to attain its organisational objectives. the risk appetite dimension of the rg system underscores the strategic posture the entity adopts for managing its 5 risk levels and profiles towards the attainment of the corporate objectives. davies (2013) posited that it is the responsibility of the risk governance framework of an entity to regularly and consistently review its risk appetite and the quality of its financial statements as a vital ingredient for sound corporate governance practices. expectedly therefore, the risk appetite framework of an entity invariably defines the aggregate risk levels and intensity it is ready to take and hence the managerial discretion towards earnings management practices. rowchowdhury (2006) grasps real activities manipulation as departures from normal operational practices, motivated by managers’ desire to mislead at least some stakeholders into believing certain financial reporting goals have been met in the normal course of operations. these departures do not necessarily contribute to firm value even though they enable managers to meet reporting goals. certain real activities manipulation methods, such as price discounts and reduction of discretionary expenditures, are possibly optimal actions in certain economic circumstances. however, if managers engage in these activities more extensively than is normal given their economic circumstances, with the objective of meeting/beating an earnings target, they are engaging in real activities manipulation, which is expected to be checkmated by effective corporate risk governance. summarily, contingent on the results of previous studies indicating inconsistent and inconclusive findings, the impact of risk governance on the quality of financial reporting is subjected to empirical re-examination using listed nonfinancial firms in nigeria. hence, this study is conducted. the main objective of the paper is to investigate the effects of risk governance on the quality of financial reporting of non-financial firms listed on the nigerian stock exchange (nse). the specific objectives are to empirically; i. identify the effect of risk governance structure on the quality of financial reporting of nigerian nonfinancial firms. ii. determine the impact of risk culture on the quality of financial reporting of nigerian nonfinancial firms iii. examine the effect of risk appetite on the quality of financial reporting of nigerian nonfinancial firms the drive of this paper theoretically and practically is expected to serve as additio n to knowledge in the area of risk governance and quality of financial reporting in firms. as observed by viscelli, beasley and hermanson (2016), a growing number of academic literature supports and encourages a clear distinction between risk management and risk governance. the contribution of this research addresses the integration of the dimensional aspects of risk governance as a corporate governance construct.though risk governance is applicable to all firms and diverse industries as provided in (coso, 2004 and 2017), corporate entities from the non-financial institutions have been lethargic in risk governance as the financial sector entities have been compulsorily made to implementing risk governance system. the choice of the non-financial firms is informed by the fact that the sector has significant size and trading volume and associated with market risks on the nigerian stock exchange (nse). theoretically, the findings of the study is expected to validate two theoretical explanations; signalling and agency theories. as observed by ittner & keusch (2015) theoretical postulations predict that risk governance can be useful to the stakeholders by reducing risk-related agency problems, however critics contend 6 that changes in board room practices in response to externally imposed pressures and scrutiny may simply be window-dressing initiative. practically, the findings of this research is expected to serve as a policy guide for the shareholders, management and other stakeholders of firms in nigeria. the next sections of the research are organized as follow; section 2 reviews the related previous studies. section 3 examines the research methods, model and robustness tests. section 4 presents the results, and discusses findings and finally section 5 gives the conclusion and recommendations of the research. 2. theory and hypotheses development this section considers the relevant literature to have clear perspectives on the subject. the issues reviewed include empirical literature review of the nexus between risk governance structure and quality of financial reporting, risk cultures and financial reporting quality and risk appetite and financial reporting quality. relevant literature reviews are supported by relevant theories of signaling and agency. 2.1 risk governance structures and financial reporting quality it is normally considered that risk governance is the primary responsibility of the board of directors for providing appropriate monitoring mechanism for risk oversight (aebi et. al., 2011) and which is seen as a critical aspect of sustainable value creation of an entity. renn et. al. (2011) observed that understanding the structures, functionality and dynamics of the risk governance process demands a complete and total understanding of structural architecture and procedural mechanisms. instituting effective governance structure is necessarily important in promoting the integrity and quality of financial reporting (razali & arshad, 2014). the traditional and emerging governance literature have considered the efficacy of the risk governance structure from diverse governance mechanisms including board structure, ownership structure, the ratio of executive and non-executive directors, gender proportions, financial literacy proficiency and backgrounds of members of the board risk management or audit committees on firm’s performance in particular and value in general. others have investigated the level or extent of enterprise risk management (erm) or risk governance system based on the appointment of chief risk officer (cro) on the value of the firm. however, the use of cro as a measure of risk governance structure has many drawbacks. firstly, the cro as a governance structure for risk management has been a mandatory or recommended mechanism for financial institutions as required in many national and international jurisdictions including the basel accords. secondly, the two relevant corporate governance codes in nigeria namely the sec’s 2011 code and the 2018 ncgc issued by the frcn were silent on the chief risk officer as a risk governance mechanism but made relevant recommendations in respect of the audit committee and risk management committee. thirdly, beasley, pagach & warr (2008) assailed the use of chief risk officer (cro) as a proxy for the implementation of risk governance system as it does not perfectly capture the extent of its implementation. the risk management committee (rmc) as a standalone risk management mechanism has been seen as the latest global corporate governance practice (lundqvist, 2015; iselin, 2014, 2016, 2019; hines and peters, 2015). the audit committee has been traditionally charged with the 7 responsibility for compliance with general internal control system and risk assurance (viscelli, beasley & hermanson, 2016). in recent times too, the increasing importance of the internal audit function as risk governance structure has been established as a separate function in furtherance of the risk governance system (beasley, et al, 2016; abbott, daugherty, parker & peters, 2016) and jointly with the board’s audit committee (gebrayel, jarrar, salloum & lefebvre, 2018). viscelli et al. (2016) posited that the increasing expectations for more effective board governance has necessitated the internal audit function to assist the board in ensuring robust risk governance system. a number of guidance and recommendations have been made in respect of the role of the internal audit mechanism in risk management like the coso and the auditing standard board of the american institute of certified public accountants (aicpa). the coso (2004) recommended for providing an objective reasonable assurance to the board of directors on the efficacy of risk management. the statement of auditing standards (sas) 53 assigns the responsibility to the auditor for detecting errors and material irregularities impacting on the financial statements. lundqvist (2015) established that a coherent and portfolio-based approach to the organisation of the risk governance structure has been seen as the major sign of an effective risk governance system including the creation of separate risk committee and crafting an apocopate risk management philosophy. generally, the board is concerned about how appropriate and consistent the risk governance system is operating and its efficacy to generate risks information to execute strategies to protect and enhance stakeholder value (viscelli et. al; 2016). abdullahi & shukor (2018) argued that the risk governance responsibility of the board involves effective management and supervision of structures to accommodate wider stakeholder interests and to guarantee provision of information transparency. the audit committee have been basically concerned with oversight in respect of auditing issues regarding an entity’s financial system information risk management in respect of quality of the financial reporting processes (brown, steen & foreman, 2009). in the empirical literature on the impacts of the audit committee, diverse univariate and multivariate statistical linear regression methods, spearman correlation and logistic regression analyses were applied. for instance, mohammad, wasiuzzaman, morsali& zaini (2018), kibiya, che-ahmad & amran (2016), hassan (2013); fathi (2013); holtz & neto (2014); cohen, hoitash, krishnamoorthy & wright, (2017); soliman & ragab (2014); obigbemi et. al, (2016); patrick, paulinus & nympha (2015); okougbo&okike (2015); eyenubo, mohammed & ali (2017); al shaer, salama & toms (2017); oliver & ofoegbu, (2017); velte (2018); saona, muro & alvarado (2019); ifeanyichukwu &ohaka (2019); aifuwa&embele (2019); osemene, adeleye &adinnu (2018); goncalves, et.al. (2019) and mohamad, abdurrahman, keong & garrett (2020) using qualitative research method and the quality of financial reporting process. the findings of the majority of the aforementioned empirical studies, the effect of board audit committee was established to have significant positive relation with financial reporting quality (frq). in the empirical literature of patrick et. al. (2015); mohammed, et. al. (2018); kibiya et. al (2016); shankaraiah& amiri (2017); saona et. al. (2019) established empirical evidences for the positive impact of risk governance structure on frq. in badolato et al. (2014); cohen et. al. (2014); cohen et. al. (2013); velte (2018); al shaer et. al. (2017); oliver & ofoegbu, (2017) for instance, established the impact of board committee’s financial literacy and industry expertise on frq. in a related empirical study, hassan (2013); holtz & neto (2014) and fathi (2013) have found statistical positive effect of internal board monitoring mechanisms on the frq and both eyenubo et. al. (2017) and 8 okougbo&okike (2015) confirmed statistically significant impact of the audit committees’ size on frq. thus, it is expected that the quality and effectiveness of audit committee would significantly enhance the quality of financial reporting. even empirically, many results have confirmed that robust and effective governance structures are crucial to constraining the negative effect of earnings management practices and thereby enhancing the credibility and integrity of financial reporting quality (razali & arshad, 2014; neffati et.al. 2011). however, the empirical research of qinghua et. al (2007); mohamed & ragab (2014); obigbemi et. al. (2016); osemene et. al. (2018); ifeanyichukwu &ohaka (2019); aifuwa&embele (2019) and mohamad et. al (2020) have produced mixed evidences on the impact of diverse board characteristics on the frq while the recent research study of (saona et.al. 2019; goncalves et. al. (2019) established that a balanced gender diversity of board governing structures have positive impact on the intensity and positive direction of earnings management and enhanced frq. there has been recent increasing interest on the value relevance of stand-alone risk management committee (rmc) as a corporate governance mechanism on risk-taking and firm value (hines, 2012; bhuiyan, cheema & man, 2017). majority of the empirical evidences on investigation of brmc as a separate governance structure or in association with the audit committee on their impacts on diverse corporate policies and organisational outcomes like on risk outcomes and risk-taking (lingel & sheedy, 2012; stulz, 2014); effects on entity’s value and performances (battaglia & gallo, 2015; kallamu, 2015; gontarek, 2017; kakanda &basariah, 2017; kakanda, basariah, &sitraselvi, 2017a, 2017b, 2017c; & shivaani, 2018; abubakar, ado, mohamed & mustapha, 2018) on firm’s efficiency (wu, qian, we-min, & noor, 2016) on hedging activities (abdullah, ku, ku, 2015; abdullahi, ismail &isa, 2015); on audit pricing and fees (hines, maslin, mauldin & peters, 2015; larasati, ratri, nasih &harymawan, 2019) and rmc determinants and consequences in organisations (hines, 2012; & hines & peters, 2018; abdullahi & shukor, 2018;) and on qfr, earnings management practices and information risk disclosures (nahar et. al. 2016; kakanda et. al. 2017a, 2017b, 2017c). in related review of empirical studies on the board risk management committee (brmc), the overwhelming evidences have established positive impact of rmc against some proxies of financial reporting quality and accounting information. using data of 80 listed non-financial companies on the nigerian stock exchange (nse) for operating financial period of 2012-2016, sani et. al. (2018) established that board of directors consisting of effective rmc with independent directors mitigated the opportunistic behaviour of management to manipulate the real earnings of the firms under investigation. bhuiyan, cheema & man (2017) investigated the impact of a stand-alone rmc on the corporate risk-taking and value of firms establishing that there is positive effect of a stand-alone rmc on enhanced risk-taking exposures and improved investor protection. thus, it is expected that well-structured firms with independent and effective rmc guarantees efficacious risk management practices as a result of increased and focused risk oversight. in kakanda et. al. (2017a, 2017b,2017c), abdullah & shukor (2017), for instance, the effectiveness of the rmc is statistically significant in ensuring the transparency and credibility of information risks and risk management disclosures in particular and organisational performance in general. in a relevant research result on the relationship between rmc and modified audit opinion, ishak (2015, 2016), it has been established that having a separate rmc has negative relationship with the acceptance of modified audit opinion which invariably confirm 9 empirical support for a standalone effective rmc for the enhancement of financial reporting quality of corporate entities. the nexus between accounting information risk disclosures and the quality of financial accounting information is crucial for ensuring investor confidence and other stakeholders of an entity (el-hewety, 2019). however, abdullah & chen, (2010) found that on average, the quality of financial information disclosures was low due to lower disclosure of financial instruments information to investors. hines and peters (2015) provided empirical evidence that firms with lower quality of financial reporting voluntarily established separate rmc as a deliberate corporate governance policy. the recognition for composition of board risk management committee has become the concern in risk management in recent times (hines, 2012; iselin, 2014; hines & peters, 2015). also key aspect of the internal governance structure is the establishment of the internal audit function as a complimentary risk governance mechanism on behalf of the governing board for more enhanced and effective risk governance (viscelli et. al, 2016). therefore, an integrated risk governance structures is essential for providing the required organisation, direction and control of the risk governance system. the focus of this study is on the relevant empirical studies concerning the effects of audit committee (twenty-four studies), board risk management committee (eight studies) and the internal audit function/audit committee (ten studies) on earnings management and financial reporting quality. the literature has reported plethora of empirical studies on risk governance structures and their execution (audit committee, board risk management committee and internal audit function or both joint effects of the board audit committee and the internal audit function) on the quality of financial reporting of firms. hence, it is hypothesized that: ho1: risk governance structures have no significant effect on the quality of financial reporting of nigerian nonfinancial firms 2.2 risk culture and financial reporting quality the board of directors assume basic responsibility not only for risk governance including determination of significant risks and internal control system of an entity but also ensures that the right risk culture has been embedded throughout the firm towards achieving its strategic objectives (frcn, 2014). an effective and robust risk culture has been thoughtfully considered to be an invaluable factor to an entity necessary for the consolidation of its resilience and ensuring sustenance of an entity’s economic value and its risk culture (gibbons & kaplan, 2015). it has been stressed that a virile risk structure that is consistent with the right business model and risk culture could serve as constraining factors to mitigating against excessive risk-taking and for enhancing sustainable value maximization of an entity (alix, 2012). therefore, integrated risk governance system requires consideration of risk culture to create an affective stakeholder goaloriented entity and an as essential avenue for value creation in the risk management system (fsb, 2014). gorzen-mitka (2018) canvassed for a change in mindset of corporate organisations towards articulation of risk governance processes bearing the cultural dimensions of the corporate governance system. organisational culture is inherently linked to both operational and governance risks (acharyya& johnson, 2006). it is in recognition of the growing significance of the cultural dimensions of corporate organisations that risk culture really matters in modern risk governance system and both regulatory and rating agencies increasingly underscored the 10 significance of an effective risk culture as a crucial dimension of a virile governance framework in organisation (wood & lewis, 2018). sheedy & griffin (2017) empirically established that top-level executives demonstrated excellent perception of organisational risk culture in general terms and where favourable risk cultures were embedded with effective and robust risk structures, both impacted positively with improved patterns of desirable and lower levels of unwarranted risk behaviors. one of the fall-out of the global financial crises is concerned for enhanced risk-based approach to corporate governance and credibility of the financial reporting processes. sheedy and tam (2019) stressed that since the global financial crisis, compliance with risk policy in corporate entities has become an important subject of research in corporate governance. it is in this regard that government regulators in national and international jurisdictions have attached premium for entities to demonstrate having a robust and efficacious risk management culture (gorzen-mitka, 2015). the significance of risk governance in incorporating the cultural dimensions of risktaking should consider industry-related variations in risk perception, change management and attitudes towards risk management and the development of the overall risk management system. to underscore the significance of the behavioral dimensions of risk governance, renn at. al. (2011) aver that many aspects of risks are not amenable to simple mathematical manipulations which could be computed as a function of probability distribution and effects and challenges in the assessment of risk cultures. wood & lewis (2018) identified the qualitative significance of risk culture to include better decision-making, enhanced governance regime. adherence to rules and policies, good regulatory relationships, better corporate communications and enhanced accountability. sheedy and tam (2019) examined the relationship between organisational risk culture and stress tests results within the context of financial institutions. the results indicated empirical evidence that an enhanced and better risk culture yielded improved stress tests results measured by the financial leverage ratio and a variable quantifying adjustment of the assessed credit risks derived from asset quality rating (aqr). a related lab-in-the-field experimental research by established evidence that the risk culture of the organisations positively increased the proportion of compliance by 16.3% points. herath &albarqi (2017) conducted a comprehensive literature survey on the explanatory variables impacting earnings management and concluded that the quality of financial reporting outcomes is positively related to the risk culture of corporate entities. ji & welch (2017) established the empirical evidences on the combined impacts of corporate culture, job satisfaction and opinions of the top-level leadership on earnings management practices involving 14,282 entities in the period 2008-2015. in conformity of the boiler room effect hypothesis, the study established that an adverse organisational culture was associated with increased probability for opportunistic practices and also it was found that corporate culture and financial reporting risk were higher in firms characterized by weak and ineffective board independence (deloitte, 2016). using rank regression model on a cross-country data set, callen, morel and richardson (2011) found mixed empirical evidence on the twin impacts of culture and religion on earnings management practices. while the extent of religious affiliation and degree of religiosity had no statistical relation to opportunist accounting behaviour, the results indicated the positive effect of 11 uncertainty avoidance of the cultural dimensions in relations to earnings management but a negative statistical relationship of the cultural factor of individualism against opportunistic accounting practices. a related empirical study by boahen (2017) examined the effects of organisational religious social norms interactions with corporate governance and the big4 external audit firms on reported earnings management practices after the passage of the sarbanes-oxley act 2002. the overall effect of the study established evidence that religiosity mitigated against opportunistic managerial behaviour and also served as a veritable compliment to effective corporate governance system and for compliance with provisions of the sarbanes oxley act 2002 legislation in the usa. in a religiously inclined social clime, managers had disincentive to indulge in manipulating core earnings, misclassifying revenue items whereby the risk cultural norms served as effective compliments to sound governance practices and external audit engagements against accounting manipulations of core business revenue and expense items. he, cox and kimmel (2017) found empirical evidence that both cultural and institutional factors were statistically significant in impacting on earnings management with the results indicating positive relationship of the cultural dimensions of uncertainty avoidance, individualism, power distance on earnings management practices in a cross-country study involving seven (7) countries. a related empirical literature by putra, pagalung& habbe (2018) established statistical positive relationship between risk culture on earnings management practices and quality of financial reporting within the context of south east asian countries. it was found that entities in jurisdictions characterized by low level of agency costs reported lower earnings quality which signified that earnings management practices were desirable and efficient in curbing opportunistic accounting behaviour of management. the study also found evidence that large corporate organisations demonstrated less incentives to indulge in manipulative accounting practices than the smaller firms. in the same vein, garbade (2016) stressed the need for boards of directors in the us banking industry to imbibe the right risk culture towards supporting the growth strategy and inducing behaviour for enhanced financial stability necessitating the integration of the behavioral dimensions in risk management practices in the financial services industry. this would ultimately enhance corporate financial reporting quality and transparency with a view to mitigating governance-related agency problems for stakeholder valuemaximization. sheedy & griffin (2014) emphasized that though governance and other structural frameworks support risk management function and are often considered as potential divers for risk culture, they are clearly distinct from risk culture as combined effects of structures with favourable risk culture create desirable risk behaviour like enhancing accountability and discouraging gaming behaviour. in view of this review, it is posited that: ho2: risk cultures have no significant effect on the quality of financial reporting of nigerian nonfinancial firms 2.3 risk appetite and financial reporting quality risk appetite signifies the amount of risk the board of directors of an entity are willing to assume in the pursuits of its value maximization (rittenberg & martens, 2012). one of the principal guidance of the walker and stanley (2009) was for the board of directors of corporate entities to assume significant responsibility for the determination of the appropriate risk appetite an entity is willing and capable of taking pursuant to attaining its strategic objectives. pwc (2013) stated that 12 crafting the right risk appetite serves as a bridging point between corporate governance and risk management primarily designed to align risk management with the long-term value optimisation of business entities and an avenue for ensuring an effective corporate governance system (govindarajan, 2011). lam (2015) posited that the best governance model consists of deliberate risk governance oversight that addresses the principal risk metrics, exposure limits and governance oversight processes to guarantee that the entity-wide risks are within the manageable and acceptable levels. jackson (2020) claims that consideration for risk appetite and clear risk accountability of an entity form the fulcrum of risk governance and promotion of internal processes and prevention of excessive risk-taking in banks. case studies of failed firms were connected with financial institutions having weak and ineffective risk appetite frameworks (deloitte, 2014b). gontarek (2016) conducted a pioneering exploratory study emphasizing that with an effective and appropriate risk governance structure, embedding the right risk appetite statements supported by sound and virile risk culture assumed significant importance in the risk governance system in financial institutions. a related research study by zhang (2016) established the contingent factors necessary for the articulation and monitoring of risks appetite in the international hotel industry towards enhanced corporate governance system and performance. in a related literature, gontarek and bender (2018a) investigated the risk appetite practices of global financial institutions establishing empirical impacts of risk-appetite-committed firms on wide-range of entities activities including improved monitoring, enhanced risk aggregation with synergistic effects and better-managed risk conduct levels and behaviour. gustafsson &omark (2015) conducted a quantitative study on association of financial literacy on financial risk tolerance towards managing personal finance and for retirement planning. the empirical findings established evidence that the level of financial literacy is positively related to the intensity of financial risk tolerance with individuals scoring low levels of financial literacy more inclined to displaying higher levels of financial risk tolerance. in belghitar& clark (2011), it was empirically established that after controlling for firm specific characteristics, there was strong positive impact of chief executive officers (ceos) having commitment to risk appetite on firm volatility. while the ceo’s age indicated significant and positive relation on the measures of firms’ volatility, the ceo’s job tenure and level of education indicated a significant negative statistical relation with both the total and idiosyncratic dimensions of firm volatility. using a sample listed firms on the nigerian stock exchange (nse) between 2008 and 2013, abdul malik & ahmad (2017) established evidence that external auditors tolerated more accrual earnings management practices and lesser real earnings management practices in firms that were more politically connected and also complimentary association between abnormal earnings management and real earnings management practices amongst the politically-inclined corporate firms under investigation. gontarek &belghitar (2018b) investigated the impact of risk governance practices among the us bank holding companies (bhcs) against the background of heightened risk governance standards since the global financial crisis of 2008-2009. the study found empirical evidence that the risk appetite practices in the boardroom level yielded positive and significant enhancement in headline organisational performance and diminished tail risk metrics thereby validating the effectiveness of risk appetite as an important dimension of the risk governance system. a related empirical study by nazari, basati&jamshidinavid (2017) investigated the statistical relationship of risk appetite on financial performance as influenced by 13 institutional ownership structure from a sample of 165 firms quoted on the tehran stock exchange for the operating period 2012-2016. it was established empirically that there was a significant positive statistical relationship between organisational risk appetite and performance. rittenberg and martens (2012) posit that risk appetite as a dimension of risk governance system formed an essential part of an entity’s strategies for the attainment of objectives. the board of directors must provide active and robust oversight over the risk-taking activities of the organisation and exact strict accountability of the executive management for complying with the risk appetite framework of the entity (gontarek &belghitar, 2018). the mixed results on the relationship between risk governance mechanisms and organisational outcomes generally and financial reporting quality in particular may be due to methodological flaws in the literature. also, the concept of risk governance (rg) and enterprise risk management (erm) is multi-dimensional and vague (bromiley et. al., 2015) and bedeviled by measurement challenges, differences owing to the type of industry and study time variations (anton, 2018). deloitte (2014a) observed that the concept of financial reporting quality is multifaceted and subject to diverse accounting measures by the various stakeholders (wardhani et. al, 2015) and with different dimensions and the differences in cultural orientations in various countries has hampered efforts towards the harmonization and convergence of accounting and auditing practices (hearth &albarqi, 2017). however, as posited by ellul (2015) that the use of traditional corporate governance model per se would not be effective in curbing excessive risktaking but consideration should be on enthroning a strong and reliable risk management initiative to mitigate against adverse risk exposures. alix (2012) posited that effective combination of risk appetite with a robust risk culture, risk structures and incentives can engender enhanced organisational performances. therefore, it hypothesized that: ho3: risk appetite has no significant effect on the quality of financial reporting of nigerian nonfinancial firms 3. methodology, models and variables measurement ex-post facto research design is adopted for the purpose of this study. this design is suitable because the data to be extracted were not meant for the purpose of this research but for other purposes. in addition, considering the approach of the researchquantitative, any element of quasi-experimental research design is suitable of which expo-facto is one of them. the study population consists of all the 74 listed non-financial firms that are active on the nigerian stock exchange as at 31st december, 2019 and whose data for the period of the study 2010-2019. the sample is the total population for the study using census sampling technique. secondary source of data was used and data extracted from the annual report and accounts of selected firms of the 10 years period. longitudinal balanced panel multiple regression (two stage least square) was used as a technique of data analysis for the study. the justification for this technique is that it has the ability to test the statistical association between two or more variables and allows for the prediction of the expected outcome. however, effort is being made to ensure the validity, reliability and robustness of the statistical results. the panel attributes of cross-sectional and time series pose challenges with regard regression; for instance, the sample firms exhibit many similarities and dissimilarities, which usually cause cross-sectional dependence and heterogeneity, hence distort estimation. in view of this, the study checks for the statistical problems of normal distribution of the data, heteroscedasticity and collinearity. shapiro-wilk 14 (w) test for normal data is being employed to check whether the variables of the study came from a normally distributed population. 3.1 variables and measurements the proxy for financial reporting quality in this study is real activities manipulation (ram) measured using the improved roychowdhury (2006) model of abnormal cash flow by (srivastava, 2019).measurement errors in empirical proxies, if randomly distributed, should merely reduce the power but not bias the results of the tests of the hypotheses. however, measurement errors in three of the four real earnings management proxies are not randomly distributed. they display cohort patterns and are manifestations of competitive strategy. this systematic measurement error could cause spurious correlations in any hypothesis test involving a firm characteristic that is driven by firm’s competitive strategy. researchers can therefore document spurious correlations between earnings management and that strategy-driven characteristic and these are the critics of the original measure obtained from roychowdhury (2006) models by (srivastava, 2019). furthermore, to addressed the critics and improve the measure of real activities manipulation (ram), (srivastava 2019) revised the original measure of ro ychowdhury (2006) model into three levels. revised measure 1 is calculated from the original measure after controlling for size, past profitability and growth (spg) and revised measure 2 is calculated after controlling for forward revenues, in addition to spg. while revised measure 3 is calculated after controlling for lagged value, in addition to spg and forward revenues. this is the improvement of the mostly used measure of ram by roychowdhury (2006) model of (srivastava, 2019), which is adopted in this study. residuals of roychowdhury (2006) model of abnormal cash flow: cfot/tat-1 = αo + α11/tat-1 + α2slt/tat-1 + δslt/tat-1 + µt. ………………………….. i where: cfot = cash flow from operations of present year α*(1/tat-1) = scaled intercept tat-1 = total assets of previous year αo = intercept α1, α2,= parameters for estimating normal cash flow slt = sales at present year δslt = change in sales µt = residuals to improve the roychowdhury (2006) model of abnormal cash flow, srivastava (2019) proposed a sequence of corrective steps to mitigate these possible errors by including the widely accepted proxies for a firm’s opportunity set of size, past profitability, and growth in the first -stage model. secondly, he includes future revenues in the model, because firms spend on intangibles not only to produce current revenues but also to secure future benefits. third, he controls for the firm’s own past expenses to identify deviations from the firm’s behavior in prior years. hence, variables were added to mitigate possible errors and avoid spurious and misleading results. this 15 therefore provided justification of adopting the new model by srivastava (2019) of measuring ram in this study. consequently, the improved model by srivastava (2019) is presented and specified as follows; pcit = α1 + α2 x 1/tait-1 + α3 xslit/tait-1 + α4 x δslit/tait-1 + α5 x δslit/tait-1 + α6 x logmvit+ α7 x logroait+ α8 x m/bit + α9xslit+1/tait-1 + α10 x productioncostit-1+ µt. --------------ii where: pcit= production cost of present year α*(1/tait-1) = scaled intercept of previous year tait-1 = total assets of previous year α1 α10= parameters for estimating coefficient sl = sales at present year δsl = hange in sales mv = market value roa = return on assets µt = residuals the independent variable is risk governance which is triggered by the exploratory study by gontarek (2016) which suggests the integration of risk structures, culture and appetite as important dimensions of risk governance but the measurements of the variables of the study are motivated by relevant empirical studies in the risk management literature. gontarek &belghitar (2018) stressed that risk governance variables relate to the effectiveness and vigour of the internal monitoring mechanism. therefore, the risk governance variables used in this study are risk governance structure (rgs) comprising of (board risk management committee, audit committee and internal audit function), the risk culture (rc) and the risk appetite (ra). some empirical studies have employed the announcement for appointment of cros, or the disclosures of erm activities as surrogates for the adoption of erm and others used surveys approach to understand the stage for the adoption of integrated risk management practices (viscelli et. al. 2016). disclosures in the firm’s audit reports serve as evidence for the presence of rmc (subramaniam, mcmanus & zhang,2009). following the used by iselin (2019), we identify the formation and existence of brmc by inspecting through proxy statements to establish whether there is a member of a risk committee of the board as a stand-alone risk committee as opposed to an audit and risk committee of the board. board risk management committee (brmc) is measured by the proportion of board risk management committee members on the board. the existence of audit committee (ac) is a statutory requirement under the nigerian laws and also a compliance governance requirement under the nigerian codes of corporate governance regulations. for instance, section 359 (3) and (4) of the companies and allied matters act 2004 laws of the federation of nigeria made it mandatory for the establishment of the audit committee. while both the sec’s cgc 2003 frcn 2018 nccg stipulates that in addition to its assigned statutory duties, the ac should help in the oversight to ensure the integrity of the firm’s financial statements. audit committee is measured using audit committee governance score (acgs) derived from six audit committee characteristics: audit committee size, audit committee independence, audit committee meetings, audit committee financial expertise, audit committee diversity and audit committee meeting attendance. to develop the summary measure, 16 dichotomous measures of the six audit committee governance characteristics for each sample firm, with a value of 1 representing compliance with code of corporate governance and 0 otherwise is used modifying (hassan, 2012 & hassan and bello, 2013). therefore, this can be econometrically presented as follows: rgsit=+β1brmcit+β2acit+β3iafit ………………………………………………. iii for the risk culture aspect of risk governance, following the work of fritz-morgenthal et. al. (2015) who developed risk culture assessment model consisting mutually subsisting risk culture indicators (rcis). the rcis are manually obtained and evaluated from the publicly available annual reports and other relevant corporate disclosures duly published by the non-financial institutions under investigation. the risk culture assessment model developed by fritzmorgenthal et. al. (2015) for the measurement of the risk culture dimension of risk governance is adopted in this study. the assessment of the risk culture indicators (rcis) presents the extent of risk culture incidence in the sampled firms comprising nine subcategories namely regulatory requirements, business strategy, governance, portfolio, employees, risk strategy, reputation, other effects and cultural indicators. the indicators is assessed and evaluated using; rcs = α + ∑ i = 1 n βi xist + εrcs ……………………………………………………iv where: rcs denotes the risk culture score, x1st, are the stress test indicators, α, β1 , ... , βn are the coefficients and εrcs is a random variable describing those contributions to the risk culture score that are not determined by the stress test indicators. furthermore, the risk appetite statement measurement approached by gontarek &belghitar (2018) and gontarek (2017) for the measurement of risk appetite statements (rass) as an important dimension of risk governance is also adopted. the articulation of risk appetite arrangements has been considered as headline factor assuming significant importance in emerging board-level risk oversight responsibility (gontarek, 2017). the existence of an articulated risk appetite statements disclosed in the financial statements of the sampled firms is dichotomized as 1 if board-approved risk appetite arrangements exist and 0 if otherwise for each financial year for the study. a robust risk governance framework is a foundation of governance and the use of a strong risk structure supported by well-articulated risk culture and appetites are essential pillars to support an entity in achieving its strategic objectives for which a major consideration is the ability of the organisation to develop and sustain enterprise-wide risk governance system. organisations with sound risk governance framework should have the ability to mitigate and manage the significant risks confronting it, enhance value optimisation and the value of accounting information to the stakeholders. consequently, the parsimonious model that text the hypotheses of this study is specified as follows: frqit=+β1rgsit+β2rcit+β3rait+ εit--------------------------------------- v where: frq = financial reporting quality, = intercept, β1-β3= parameters, i t= firm i in time t, rgs= risk governance structure, rc= risk culture, ra= risk appetite, ε= error term. 17 4. result and discussions the section delves into the presentation of data, analysis and interpretation of results relating to the association between risk governance and financial reporting quality of non-financial firms listed in nigeria. correlation matrix the correlation matrix is expected to find out the association between the study’s independent and dependent variables vis-à-vis the independent variables themselves. therefore table 1 presents the study’s correlation matrix. table 1: correlation matrix variabkes frq rgs rc ra t v 1/tv frq 1.000` rgs -0.370 1.000 1.170 0.855 rc -0.357 0.381 1.000 1.340 0.749 ra 0.395 -0.140 -0.377 1.000 1.170 0.858 source: stata output, 2021 table 1 above shows that there exists a negative correlation between the dependent variable and risk governance structure (rgs) and risk culture (rc). it can be observed from the above table that financial reporting quality is correlated with rgs to the turn of 37% negatively. similarly, the relationship between risk culture and financial reporting quality was also found to be negative as evidenced by the correlation value of -0.357 which represent 36%. on the other hand, the relationship between risk apatite and financial reporting quality was seen to be positive, this is revealed by the correlation value of 0.395 representing 40%. however, the relationships between the independent variables themselves were mostly negative and insignificant. this relationship indicated that multicollinearity will not be a problem to the study, however, to substantiate the claim, another multicollinearity diagnostic of tolerance value (tv) and variance inflation factor was conducted. the tolerance values and the variance inflation factor (vif) are two good measures for checking multicollinearity between study’s explanatory variables where all explanatory variables vif are less than ten (10), it means there is absence of multicollinearity and the model is said to fit. on the contrary multicolinearity is presumed to exist. additional measure for checking the absence or presence of multicollinearity is the tolerance values. a tolerance value of 1 or above indicates the existence of multicollinearity, whereas tolerance values of less than 1.00 in all the variables observed suggests the nonexistence of multicollinearity (cassey et.al., 1999; neter et.al., 1996). 4.2 presentation and interpretation of regression result this table below shows the regression result of the endogenous variable (frq) and the exogenous variables of the study (rg, rc and rg). the presentation is followed by the analysis of the relationship and contribution of all the independent variables to the dependent variable of the study and also the cumulative analysis. 18 table 2: summary of regression result variables coefficients t-value p-value rg -0.611 -8.350 0.000 rc -0.164 -3.920 0.000 ra 0.430 9.250 0.000 constant 0.082 3.760 0.000 f-value 97.450 fsig 0.000 r2 0.271 adj. r2 0.268 het chi2 29.770 het sig 0.000 hausman chi2 1.910 hausman sig 0.000 lm test chi 3.990 lm sig 0.023 source: stata output, 2021 the cumulative association between the explanatory and explained variables is 0.271 reveals that the link between financial reporting quality and risk governance variables utilized in the study is 27% which is fairly good. this means that for any variations in risk governance of non-financial service firms in nigeria, their financial reporting quality will be affected directly. the cumulative adjusted r 2 (0.268) which is the multiple coefficients of determination shows the proportion of the total variation in the dependent variable explained by the independent variables jointly. therefore, it indicates 26% of the total change in risk governance of non-financial service firms listed in nigeria is caused by the cumulative contribution of risk governance (risk governance structure, risk culture and risk apatite). this shows that the study’s model is fitted and robust. the regression result in table 2 indicated that the coefficient of rg with negative value of -0.611 and a t-value of -8.350. this is accompanied by a probability value of 0.000 (p<0.000) which is significant at 1%. thus, the null hypothesis (h1) that risk governance structure has no significant effect on financial reporting quality is hereby rejected. this implies that rg is good for explaining the financial reporting quality of non-financial service firms listed in nigeria. similarly, the regression results show a negative association between risk culture (rc) and financial reporting quality (frq), which is significant (p<.01). thus, the hypothesis two (h2) of the study which says risk culture (rc) has no significance influence on financial reporting quality (frq) of non-financial service firms is rejected. this suggests that an appropriate risk 19 culture improves the quality of earnings which invariably improves financial reporting quality. this result was proved by the coefficient value of -0.164 and a t-value of -3.90 with a p-value of 0.000. the regression coefficient in respect of risk apatite (ra) stood at 0.430, which is statistically significant. this was revealed by a t-value of 9.250 and a probability value of 0.000 (p<1). thus, hypothesis three of the study which states that risk apatite (ra) has no significant impact on financial reporting quality of non-financial service firms is hereby, rejected. this implies that where the risk apatite increases, the financial reporting quality of the selected firms decreases. 5. conclusion and recommendation the study concludes that managers risk governance culture of non-financial service firms listed in nigeria play an important role in improving the quality of financial reporting of non-financial service firms listed in nigeria. based on the findings of the study, the following recommendations are suggested to non-financial service firms listed in nigeria on how to improve their financial reporting quality. that shareholder should consider adhering strictly with the provision of the corporate governance code while appointing board members so as to appoint members capable of monitoring firms risk investment by serving in board risk committee. firm managers should also consider maintaining a good risk culture as it was found worthy in improving financial reporting quality of non-financial service firms listed in nigeria. references abbott. l.j; daugherty, b; parker, s; & peters, g.f. (2016): internal audit quality and financial reporting quality: the joint importance of independence and competence; journal of accounting research, vol.54 (1), pp.3-17. abdul malik, s; & ahmad, a.c. (2017): auditor tolerance of accrual-based and real earnings management in boardrooms of politically connected nigerian firms; asian journal of accounting and governance, vol.8, pp.101-111. abdullah, m; & chen, l. (2010): the association between committees responsible for risk management and the disclosure level of fianacial instruments information among listed companies in malaysia; msc thesis presented to the graduate school of business, economic and law, university of gothenburg; pdf.semanticscholar.org last accessed 27 th may, 2020. abdullahi, m; & shukor, z. (2018): the comparative moderating effect of risk management committee and audit committee on the association between voluntary risk management disclosure and firm performance; https://doi.org/10.1756pengurusan-2018-51-14. abubakar, a.h; ado, a.b; mohamed, m.i & mustapha, u.a. (2018): the effect of risk management attributes & board financial knowledge on financial performance of listed banks in nigeria; american journal of business and management, vol.1(5), pp.7-13. acharyya, m; & johnson, j. (2006): investigating the development of enterprise risk management in the insurance industry: an empirical study of four major european insurers; the general papers on risk and insurance; www.researchgate.netlast accessed 24 th april, 2020. aifuwa, h.o; &embele, k. (2019): board characteristics and financial reporting quality; journal of accounting and financial management; vol.5(1), pp.30-36. al shaer, h; salama, a; and toms, s. (2017): audit committees and financial reporting quality: evidence from uk environmental accounting disclosures; journal of applied accounting research, vol.18(1), pp.2-21. https://doi.org/10.1756pengurusan-2018-51-14 http://www.researchgate.net/ 20 alix, m. (2012) risk governance: appetite, culture and the limits of limits; the federal reserve bank of new york. https://www.newyorkfed.org/newsevents/speeches/2012/alix121114, last accessed: 13 th september 2015. amartey, f. & kamal, r. (2018): enterprise risk management, financial reporting outcomes, and auditor behavior, fma conference paper of september, 2018, www.fmaconference.org/sandiego/papres/erm_and_reporting_quality.pdf last accessed 18th april, 2020. anton, s.g. (2018): the impact of enterprise risk management on firm value: empirical evidence from romanian non-firms,inzinerineekonomika-engineering econonmics, vol.29(2), pp. 151-167. battaglia, f; & gallo, a. (2015): risk governance and asian bank performance: an empirical investigation over the financial crisis; emerging markets review, https://doi.orglast visited 25 th april, 2020. baxter, r; bedard, j.c; hoitash, r; yezegel, a. (2013): enterprise risk management program quality: determinants, value relevance, and the financial crisis; contemporary accounting research; vol.30(4), pp.1264-1295. beasley, m.s; pagach, d.p; & warr, r.s. (2008): information conveyed i hiring announcements of senior executives overseeing enterprise-wide risk management processes; journal of accounting, auditing & finance; vo.23,pp.311-332. belghitar, y; & clark, e.a. (2011): the effect of ceo risk appetite on firm volatility: an empirical analysis of financial firms; www.researchgate.netlast accessed 7 th may, 2020. bhuiyan, m.b.u; cheema, m.a; & man, y. (2017): risk committee, corporate risk-taking and firm value; https://pdfs.semanticscholar.org last accessed 26 th may, 2020. boahen, e.o. (2017): the impact of religiosity, culture, legal environment and corporate governance on earnings management methods; a thesis submitted for the degree of doctor of philosophy in the department of business and management, university of sussex, http://sro.sussex.ac.uk/last accessed 26 th april, 2020. bromiley, p; mcshane, m; nair, a &rustambekov, e. (2015): enterprise risk management: review, critique, and research directions, long range planning, 48(4), pp. 265-276. brown, i; steen, a; & foreman, j. (2009): risk management in corporate governance: a review and proposal; corporate governance: an international review, vol.17(5), pp.546-558. callen, j.l; morel, m; & richardson, g. (2011): do culture and religion mitigate earnings management? evidence from a cross-country analysis; international journal of disclosure and governance; vol.8, pp.103-121. chen, j, chan, k.c, dong, w, and zhang, f. (2015): internal control and stock price crash risk: evidence from china; european accounting review, vol. 10, pp. 1-45. cohen j.r; krishnamoorthy, g. & wright, a.m. (2017): enterprise risk management and the financial reporting process: the experiences of audit committee members, cfos, and external auditors, contemporary accounting research, vol. 34(2), pp.1-64. www.ssrn.com last accessed 17 th april, 2020. coso (2004), enterprise risk management – integrated framework: executive summary, committee of sponsoring organizations of the treadway commission. www.coso.org. last visited 17 th may, 2020. coso (2017): enterprise risk management: integrating with strategy and performance (executive summary); june 2017, pp. 1-10. www.coso.org. last visited 8 th january, 2018. davies, b. (2013): how do boards address risk management and oversight? journal of risk management in financial institutions; vol.6(4), pp.352-365. deloitte (2014a): risk appetite in the financial services industry: a requisite for risk management today; deloitte development llc; www.deloitte.comlast visited 24 th april, 2020. https://www.newyorkfed.org/newsevents/speeches/2012/alix121114 http://www.fmaconference.org/sandiego/papres/erm_and_reporting_quality.pdf https://doi.org/ http://www.researchgate.net/ https://pdfs.semanticscholar.org/ http://sro.sussex.ac.uk/ http://www.ssrn.com/ http://www.coso.org/ http://www.coso.org/ http://www.deloitte.com/ 21 deloitte (2014b): risk appetite frameworks: how to spot the genuine article; deloitte development llc; www.deloitte.comlast visited 24 th april, 2020. deloitte (2016): the culture of risk: the importance of managing conduct risk and maintaining and effective risk culture across the business; www.deloitte.comlast visited 24 th april, 2020. edmonds, c, edmonds, j, leece, r and vermeer, t. (2015): do risk management activities impact earnings volatility? research in accounting regulation, vol 27(1), pp. 66-72. el-hewety, a.e.a. (2019): the impact of the accounting quality and information risk on the earning announcement; journal of environmental studies and research, special issue, vol.9(a), pp.4551. ellul, a. (2015): the role of risk management in corporate governance; www.ssrn.comlast visited 27 th may, 2020. eyenubo, s.a; mohamed, m; & ali, m. (2017): an analysis on the financial reporting quality of the quoted firms in nigeria: does audit committee size matter? international journal of academic research in business and social sciences; vol.7(9), pp.50-63. fathi, j. (2013): corporate governance system and quality of financial information; mediterranean journal of social sciences; vol.4(2), pp.129-142. frc (2014): guidance on risk management, internal control and related financial and business reporting; guidance on corporate governance of the uk financial reporting council (frc), september, 2024, www.frc.org.uk last accessed 28 th may, 2020. frcn (2018): nigerian corporate governance code; financial reporting council of nigeria (frcn); www.financialreporting council.gov.ng, last accessed 4 th april, 2020. fritz-morgenthal, s., hellmuth, j. and packham, n., (2015). does risk culture matter? the relationship between risk culture indicators and stress test results, journal of risk management in financial institutions 9 (1), 71-84 fsb (2013): principles for an effective risk appetite framework; financial stability board, september, 18 2013, www.fsb.orglast accessed 25 th april, 2020. fsb (2013): thematic review on risk governance; financial stability board, basel, www.fsb,orglast accessed april, 2010. fsb (2014): guidance on supervisory interaction with financial institutions on risk culture; financial stability board, www.fsb.orglast accessed 5 th june, 2020. garbade (2016): behavioral risk management in the financial services industry: the role of culture, governance and financial reporting; federal reserve bank of new york, economic policy review, vol. 22(1), special issue, www.newyorkfed.org/research. last accessed 27 th april, 2020. gebrayel, e; jarrar, h; salloum, c; & lefebvre, q. (2018): effective association between audit committee and the internal audit function and its impact on financial reporting quality: empirical evidence from omani listed firms; www.wileyonlinelibrary.com/journal/ijaulast visited 20th april, 2020. gibbons r; & kaplan r.s. (2015). formal measures in informal management: can a balanced scorecard change a culture? american economic review, vol. 105, pp. 447–451. goncalves, t; gaio, c; & santos, t. (2018): women on the board: do they manage earnings? empirical evidence from european listed firms; review of business management; vol. 21(3), pp. 582597. gontarek, w. (2016): risk governance of financial institutions: the growing importance of risk appetite and culture; journal of risk management in financial institutions; vol.9(2), pp.120129. gontarek, w; &belghitar, y. (2018): risk governance: examining its impact upon bank performance and risk-taking; financial markets, institutions & instruments; vol.27(5), pp. gontarek, w; &belghitar, y. (2018b): risk governance: examining its impact upon bank performance and risk-taking; www.wileyonlinelibrary.com/journal/fmil doi:10.1111/fmil.12103, last accessed 29 th may, 2020. http://www.deloitte.com/ http://www.deloitte.com/ http://www.ssrn.com/ http://www.fsb/ http://www.fsb,org/ http://www.fsb/ http://www.newyorkfed.org/research http://www.wileyonlinelibrary.com/journal/ijau http://www.wileyonlinelibrary.com/journal/fmil 22 gontarek, w; & bender, r. (2018): examining risk governance practices in global financial institutions: the adoption of risk appetite statements; journal of banking regulation; vol20(2), pp. gordon, l.a, loeb, m.p, & tseng, c. (2009): enterprise risk management and firms performance: a contingency perspective, journal of accounting & public policy, vol. 28, pp. 301-327. gorzen-mitka, i. (2015): management challenges in the context of risk culture; problems of management in the 21 st century; vol.10 (2), pp.60-61. gorzen-mitka, i. (2018): leading markers of risk culture in organisation; european journal of sustainable development; vol.7(1), pp.425-434. govindarajan, d.(2011): corporate risk appetite: ensuring board and senior management accountability for risk; icma centre discussion papers in finance dp2011-22, november, 2011; www.icmacentre.ac.uklast visited 4 th june, 2020. gustafsson, c; &omark, l. (2015): financial literacy’s effect on financial risk tolerancea quantitative study on whether financial literacy has an increasing or decreasing impact on financial risk tolerance, degree project submitted to umea school of business and economics, umea universitet; www.diva-portal.orglast accessed 6 th june, 2020. haruna, d, kwambo, l.a and hassan, s.u. (2018): board characteristics and earning quality of listed conglomerate firms in nigeria, scholedge international journal of business policy & governance, vol. 5(3), pp. 14-37. hassan, s.u. (2013): financial reporting quality, does monitoring characteristics matter? an empirical analysis of nigerian manufacturing sector; the business and management review, vol.13(2), pp.147-161. hassan, s.u & bello, a. (2013): firm characteristics and financial reporting quality of listed manufacturing firms in nigeria, international journal of accounting, banking and management, vol. 1(6), pp. 47-63. hassan, s. u., & ibrahim, g. (2014). governance attributes and real activities manipulation of listed manufacturing firms in nigeria. international journal of accounting and taxation, 2(1), 37–62. he, c; cox, r.a.k & kummel, r. (2017): cultural influences on earnings management; www.researchgate.netlast visited 27 th april, 2020. herath, s.k; &albarqi, n. (2017): financial reporting quality: a literature review; international journal of business management and commerce; vol.2(2), pp.1-14. hines, c.s. (2012): determinants and consequences of risk management committee formation; a dissertation submitted in partial fulfilment for the requirements for the award of doctor of philosophy in business administration, university of arkansas; https://scholarworks.uark.edulast visited 8 th may, 2020. hines, c.s; & peters, g.f. (2015): voluntary risk management committee formation: determinants and short-term outcomes; journal of accounting and public policy, vol.34, pp.267-290. holtz, l; & neto, a.s. (2014): effects of board of directors’ characteristics on quality of accounting information in brazil; https://www.scielo.brlast visited 29 th april, 2020. ifeanyichukwu, o.o; &ohaka, j. (2019): effect of audit committee characteristics on financial reporting quality; journal of accounting information and innovation, www.cird.online/jail vol.5(11), pp. 1-6 last visited 20th may, 2020. iif (2011): implementing robust risk appetite frameworks to strengthen financial institutions; the institute of international finance, washington, dc; www.iif.com last accessed 4 th march, 2020. iselin, m. (2016): estimating the potential impact of requiring a stand-alone board-level risk committee; www.semanticscholar.orglast accessed 20 th april, 2020. iselin, m. (2019): estimating the potential impact of requiring a stand-alone board-level risk committee; journal of accounting and public policy, www.sciencedirect.comlast accessed 20 th april, 2020. http://www.icmacentre.ac.uk/ http://www.diva-portal.org/ http://www.researchgate.net/ https://scholarworks.uark.edu/ https://www.scielo.br/ http://www.cird.online/jail http://www.iif.com/ http://www.semanticscholar.org/ http://www.sciencedirect.com/ 23 ishak, s. (2015): the relationship between risk management committee characteristics and modified audit opinion in malaysia; pdfs.semanticscholar.org last visited 27 th may, 2020. ishak, s. (2016): the relationship between risk management committee characteristics and modified audit opinion in malaysia; international journal of research, issn (online) 2348-6848. www.internationaljournalofresearch.comlast accessed 27 th may, 2020. ittner, c.d; & keusch, t. (2015): the influence of board of directors’ risk oversight on risk management maturity and firm risk-taking; www.ssrn.com. last accessed 26 th april, 2020. jackson, p. (2020): risk appetite and risk responsibilities; ey risk governance 2020 series, www.ey.comlast accessed 8 th may, 2020. ji, y; & welch, k. (2017): corporate culture and financial reporting risk; www.ssrn.comlast visited 9 th april, 2020. kakanda, m.m; &basariah, s; &sitraselvi, c. (2017b): do board characteristics and risk management disclosure have any effect on firm performance? empirical evidence from deposit money banks in nigeria; business and economic horizons, vol. 7(1), pp. 506-521. kakanda, m.m; &basariah, s; &sitraselvi, c. (2017c): corporate governance reform and risk management disclosures: evidence from nigeria; business and economic horizons, vol.13(3), pp.357-367. kakanda, m.m; &basariah, s; &sitraselvi, c. (2017a): corporate governance risk management disclosure, and firm performance: a theoretical and empirical review perspective; asian economic and financial review, vol.7(9), pp.836-877. kallamu, b.s. (2015): risk management committee attributes and firm performance; international finance and banking, vol.2(2), pp.1-24. kibiya`, m.u; che-ahmad, a; & amran, n.a. (2016): audit committee independence, financial expertise, share ownership and financial reporting quality: further evidence from nigeria; international journal of economics and financial issues, vol.6(s7), pp.125-131. lam, j. (2015):implementing an effective risk appetite; statements on management accounting, the association of accountants and financial professionals in business (ima); www.imanet.org/thought_leadership, last visited 24 th may, 2020. lingel, a; & sheedy, e. (2012): the influence of risk governance on risk outcomesinternational evidence; macquarie applied finance centre research paper no. 37; www.ssrn.comlast accessed 23 rd april, 2020. lundqvist, s.a. (2015): why firms implement risk governancestepping beyond traditional risk management to enterprise risk management; journal of accounting and public policy; vol.34(5), pp.441-466. luo, m. (2017): enterprise internal control and accounting information quality, journal of financial management, vol. 6, pp. 16-26. mohamad, s; abdurrahman, a.p; keong, o.c; and garrett, k.w.c. (2020): corporate governance and earnings management: evidence from listed malaysian firms; journal of critical review, vol.7(2), pp.90-96. mohammad, w.m.w; wasiuzzaman, s; morsali, s.s; & zaini, r.m. (2018): the effect of audit committee characteristics on financial restatements in malaysia; journal of asia-pacific business, https://doi.org/1080.10599231.2018.1419043last accessed 25th may, 2020. nahar, s; jubb, c; & azim, i.a. (2016): risk governance and performance: a developing country perspective; www.emeralddinsight.comlast accessed 24 th april, 2020. nazari, s; basati, m; &jamshidinavid, b. (2017): the effect of institutional ownership on the relationship between risk appetite and financial performance; specialty journal of accounting and economics, vol.2(2), pp.66-73. nichita, m. (2018): enhancing quality of information through risk reporting in financial statements,www.researchgate.net last visited 17 th april, 2020. http://www.internationaljournalofresearch.com/ http://www.ssrn.com/ http://www.ey.com/ http://www.ssrn.com/ http://www.imanet.org/thought_leadership http://www.ssrn.com/ https://doi.org/1080.10599231.2018.1419043 http://www.emeralddinsight.com/ http://www.researchgate.net/ 24 obigbemi, i.f; omolehinwa, e.o; mukoro, d.o; ben-caleb, e; and olusanmi, o.a. (2016): earnings management and board structure: evidence from nigeria; www.creativecommons.org/by/3.0last accessed 4th may, 2020. okougbo, p.o; and okike, e. (2015): corporate governance and earnings management: empirical evidence from nigeria; corporate ownership & control, vol.12(4), pp.312-326. olayinka, a.e; uwuigbe, u; sylvester, e &uwuigbe, o.r. (2018): does enterprise risk management impact accounting quality? evidence from the nigerian financial institutions, investment management and financial innovations, vol. 16(4), pp. 16-27. oliver, o; & ofoegbu, g.n. (2017): effect of audit committee qualities on financial reporting of listed companies in nigeria: a perspective study; international journal of scientific and research publications, vol.7(10), pp. 278-281. osemene, o.f; adeyele, j.s; and adinnu, p. (2018): the impact of the ownership structure and board characteristics on earnings management on nigeria’s listed deposit money banks; economic horizons, vol.20(3), pp.209-220. patrick, e.a; paulinus, e.c; and nympha, a.n. (2015): the influence of corporate governance on earnings management practices: a study of some selected quoted companies in nigeria; american journal of economics, finance and management; vol.1(5), pp.482-493. putra, a.m; pagalung, g; & habbe, a.h. (2018): culture and corruption-driven agency costs and earnings management: evidence from south east asian countries, intangible capital, vol. 13(2), pp. 499-517. pwc (2013): risk appetitehow hungry are you? www.pwc.comlast accessed 21 st april, 2020. razali, w;a;a;w;m; & arshad, r. (2014): disclosure of corporate governance structure and the likelihood of fraudulent financial reporting; procediasocial and behavioral sciences, vol.145,pp.243-253. renn, o; klinke, a; & asselt, m. (2011): coping with complexity, uncertainty and ambiguity in risk governance: a synthesis; royal swedish academy of sciences 2011; www.kva.se/enlast visited 24th april, 2020. rittenberg, l; & martens, f. (2012): understanding and communicating risk appetite, committee of sponsoring organisations of the treadway commission, january 2012; www.coso.org last accessed 5 th may, 2020. roychowdhury, s. (2006). earnings management through real activities manipulation, journal of accounting and economics p. 1 – 54. saona, p; muro, l; and alvarado, m. (2019): how do the ownership structure and board of directors’ features impact earnings management? the spanish case; www.wileyonlinelibrary.com/journal/jifmlast visited 6th may, 2020. saona, p; muro, l; martin, san martin; and baer-fuentes h. (2019): board of directors gender diversity and its impact on earnings management: an empirical analysis for select european firms; technological and economic development of economy, vol.25(4), pp.634-663. sec. (2003a). code of corporate governance. sec. (2003b). disclosure required by sections 406 and 407 of the sarbanes-oxley act of 2002, release nos. january 23, 2003. sheedy and griffin (2014): empirical analysis of risk culture in financial institutions: interim report; report by macquarie university and the centre for international finance and regulation, www.researchgate.net last visited 14 th june, 2020. sheedy e.a; griffin, b; & barbour, j.p. (2017): a framework and measure for examining risk climate in financial institutions; journal of business and psychology; vol. 32, pp. 101-116. sheedy, e. & tam, k.c.h. (2019): incentives and culture in risk governance; journal of banking and finance, vol. 107 www.elseevier.com/locate/jbflast accessed 17th march, 2020. http://www.creativecommons.org/by/3.0 http://www.pwc.com/ http://www.kva.se/en http://www.coso.org/ http://www.wileyonlinelibrary.com/journal/jifm http://www.researchgate.net/ http://www.elseevier.com/locate/jbf 25 sheedy, e; & griffin, b. (2017): risk governance, structure, culture, and behavior: a view from the inside; www.wileyonlinelibrary.com/journal/corg doi 10.1111/corg.12200. last accessed 24 th april, 2020. soliman, m.m; & ragab, a. (2014): audit committee effectiveness, audit quality and earnings management: an empirical study of the listed companies in egypt; research journal of finance and accounting, vol.5(2), pp.155-166. song, g. and kemp, s.t. (2013): does the existence of an enterprise risk management (erm) program influence the existence of material weaknesses in internal control over financial reporting? a publication of the global association of risk professionals, pace university, june 2013. www.reserachgate.net last accessed 17 th april, 2020. srivastava, a. (2019). improving the measures of real earnings management, review of accounting studies 24:1277–1316, https://doi.org/10.1007/s11142-019-09505-z stulz, r.m. (2014): governance, risk management, and risk-taking in banks; nber working paper series, working paper 20274, https://www.nber.org/papers/w20274last accessed 27th may, 2020. velte, p. (2018): is audit committee expertise connected with increased readability of integrated reports: evidence from eu companies; problems and perspectives in management, vol.16(2), pp.23-32. viscelli, t.r; beasley, m.s; and hermanson, d.r. (2016): research insights about risk governance: implications from a review of erm research; www.sagepub.comlast accessed 4 th may, 2020. wadesango, n; mhaka, c; &wadesango, v. (2017): contribution of enterprise risk management and internal audit function towards quality of financial reporting in universities in a developing country, internal governance & control: financial markets & institutions; vol. 7(2), pp.170176. walker, d & stanley, m. (2009): a review of corporate governance in uk banks and other fianacial industry entities; https://corpgov.law.harvard.edulast accessed 27 th may, 2020. wang, j; bloomberg, x; zhang, p; & zhang, j. (2015): the effectiveness of internal control and the quality of accounting informationthe introduction of western internal control research literature and the prospect in the background of china’s system (1); the accounting review, vol. 6, pp. 87-95. wardhani, r; utama, s; &rossieta, h. (2015): the effect of governance system and degree of convergence to ifrs on the quality of financial reporting: evidence from asia; corporate ownership & control, vol. 12(4), pp..409-423. wood a; and lewis, a. (2018): risk culture development and its impact: the case of the caribbean development bank; international journal of business and economic development; vol.6(1), pp.18-37. xu, t; grove, h &schaberl, p. (2013): corporate governance: a risk management approach; corporate ownership & control; vol.10(2), pp. 104-114. zhang, x. (2016): factors that shape an organisations’s risk appetite: insights from the international hotel industry; thesis submitted in partial fulfilment of the requirements of the award of doctor of philosophy, oxford brookes university, december 2016, https://radar.brookes.ac.uklast visited 6 th june, 2020. http://www.wileyonlinelibrary.com/journal/corg%20doi%2010.1111/corg.12200 http://www.reserachgate.net/ https://www.nber.org/papers/w20274 http://www.sagepub.com/ https://corpgov.law.harvard.edu/ https://radar.brookes.ac.uk/ gusau journal of accounting and finance (gujaf) vol. 3 issue 3, october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria © department of accounting and finance vol. 3 issue 3 october, 2022 issn: 2756-665x a publication of department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state -nigeria all rights reserved except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the copyright owner. published and printed by: ahmadu bello university press limited, zaria kaduna state, nigeria. tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com gusau journal of accounting and finance, vol. 3, issue 3, october, 2022 website: www.abupress.com.ng x editorial board editor-in-chief: prof. shehu usman hassan department of accounting, federal university of kashere, gombe state. associate editor: dr. muhammad mustapha bagudo department of accounting, ahmadu bello university zaria, kaduna state. managing editor: umar farouk abdulkarim department of accounting and finance, federal university gusau, zamfara state. editorial board prof.ahmad modu kumshe department of accounting, university of maiduguri, borno state. prof ugochukwu c. nzewi department of accounting, paul university awka, anambra state. prof kabir tahir hamid department of accounting, bayero university, kano, kano state. prof. ekoja b. ekoja department of accounting, university of jos. prof. clifford ofurum department of accounting, university of portharcourt, rivers state. prof. ahmad bello dogarawa department of accounting, ahmadu bello university zaria. prof. yusuf. b. rahman department of accounting, lagos state university, lagos stat prof. suleiman a. s. aruwa department of accounting, nasarawa state university, keffi, nasarawa state. prof. muhammad junaidu kurawa department of accounting, bayero university kano, kano state. prof. muhammad habibu sabari department of accounting, ahmadu bello university, zaria. prof. okpanachi joshua department of accounting and management, nigerian defence academy, kaduna. prof. hassan ibrahim department of accounting, ibb university, lapai, niger state. prof. ifeoma mary okwo department of accounting, enugu state university of science and technology, enugu state. prof. muhammad aminu isa department of accounting, bayero university, kano, kano state. prof. ahmadu bello department of accounting, ahmadu bello university, zaria. prof. musa yelwa abubakar department of accounting, usmanu danfodiyo university, sokoto state. prof. salisu abubakar department of accounting, ahmadu bello university zaria, kaduna state. dr. isaq alhaji samaila department of accounting, bayero university, kano state. prof. fatima alfa department of accounting, university of maiduguri, borno state. dr. sunusi sa'ad ahmad department of accounting, federal university dutse, jigawa state. dr. nasiru a. ka’oje department of accounting, usmanu danfodiyo university sokoto state. dr. aminu abdullahi department of accounting, usmanu danfodiyo university sokoto, state. dr. onipe adebenege yahaya department of accounting, nigerian defence academy, kaduna state. dr. saidu adamu department of accounting, federal university of kashere, gombe state. dr. nasiru yunusa department of accounting, ahmadu bello university zaria. dr. aisha nuhu muhammad department of accounting, ahmadu bello university zaria. dr. lawal muhammad department of accounting, ahmadu bello university zaria. dr. farouk adeiza school of business and entrepreneurship, american university of nigeria, yola. dr. bashir umar farouk department of economics, federal university gusau, zamfara state. dr emmanuel omokhuale department of mathematics, federal university gusau, zamfara. state advisory board members prof. kabiru isah dandago, bayero university kano,kano state. prof a m bashir, usmanu danfodiyo university sokoto, sokoto state. prof. muhammad tanko, kaduna state university, kaduna. prof. bayero a m sabir, usmanu danfodiyo university sokoto, sokoto state. prof. aliyu sulaiman kantudu, bayero university kano, kano state. editorial secretary usman muhammad adam department of accounting and finance, federal university gusau, zamfara state. call for papers the editorial board of gusau journal of accounting and finance (gujaf) is hereby inviting authors to submit their unpublished manuscript for publication. the journal is published in two issues of april and october annually. gujaf is a double-blind peer reviewed journal published by the department of accounting and finance, faculty of management and social sciences, federal university gusau, zamfara state nigeria the journal accepts papers in all areas of accounting and finance for publication which include: accounting standards, accounting information system, financial reporting, earnings management, , auditing and investigation, auditing and standards, public sector accounting and auditing, taxation and revenue administration, corporate governance issues, corporate social responsibility, sustainability and environmental reporting issue, information and communication technology issues, bankruptcy prediction, corporate finance, personal finance, merger and acquisitions, capital structure, working capital management, enterprises risk management, entrepreneurship, international business accounting and finance, banking crises, bank’s profitability, risk and insurance issue, islamic finance, conventional and islamic banks and so forth. guidelines for submission and manuscript format the submission language is english and must be a well-researched original manuscript that has not previously been submitted elsewhere for publication. the paper should not exceed more than 15 pages on a4 type paper in ms-word format, 1.5-line spacing, 12 font size in times new roman. manuscript should be tested for plagiarism before submission, as the maximum similarity index acceptable by gujaf is 25 percent. furthermore, the length of a complete article should not exceed 5000 words including an abstract of not more than 250 words with a minimum of four key words immediately after the abstract. all references including in text citation and reference list, tables and figures should be in line with apa 7th edition publication manual. finally, manuscript should be send to our email address elfarouk105@gmail.com and a copy to our website on journals.gujaf.com.ng publication procedure after receiving a manuscript that is within the similarity index threshold, a confirmation email will be send together with a request to pay a review proceeding fee. at this point, the editorial board will take a decision on accepting, rejecting or making a resubmission of the manuscript based on the outcome of the double-blind peer review. those authors whose manuscript were accepted for publication will be asked to pay a publication fee, after effecting all suggested corrections and changes made on the manuscript. all corrected papers returned within the specified time frame will be published in that issue. payment details bank: fcmb account number: 7278465011 account name: gusau journal of accounting and finance for inquiry the head, department of accounting and finance, federal university gusau, zamfara state. elfarouk105@gmail.com +2348069393824 for more information, contact the editor-in-chief on +2348067766435 the associate editor on +2348036057525 or visit our website on www.gujaf.com.ng or journals.gujaf.com.ng contents capital structure and firm financial performance of listed deposit money banks in nigeria: moderating effect of board financial literacy anas idris abdulwahab, hussaini bala ph.d, mansur lubabah kwambo ph.d, & abubakar adamu 1 influence of socialization on msme compliance by mediating understanding and moderating knowledge of tax visits yayuk ngesti rahayu 17 does international financial reporting standard narrows audit expectation gap? musa ibrahim dauda, ibrahim adagye dauda, phd 35 sustainability reporting and financial performance of listed manufacturing firms in nigeria aiyesan, olabode olutola ph.d 49 firm attributes and financial reporting timeliness of listed consumer goods firms in nigeria akume james terkende, dele ikese karim 67 value relevance of accounting information for listed financial service firms in nigeria kassim busari, ishaya luka chechet ph.d, aliyu ahmed abdullahi ph.d, & ibrahim mohammed ph.d 87 nigeria economic growth and capital market development: does contributory pension scheme matter? akinwumi ayorinde olutimi, toluwa celestine oladele ph.d, &adeboye emmanuel sanmi 101 audit committee and financial reporting quality: the moderating effect of board independence of listed deposit money banks in nigeria kassim yusha’u shika, mark david kantiyok 117 determinants of financial performance of listed deposit money banks in nigeria mary seansu lazarus, nurradden usman miko ph.d, & saifulahi abdullahi mazadu ph.d 140 human resource accounting and profitability of listed depositmoney banks in nigeria ahmad adamu ibrahim, ahmad rufa’i adamu, fatihu mahmud alhassan &muhammad iliyas abdulsalam 158 board independence, audit effectiveness and the quality of reported earnings in the nigerian consumer goods firms isah shittu ph.d, misbahu, abubakar muhammad 175 impact of capital structure on financial performance of listed agricultural companies in nigeria ahmad muhammad ahmad, shehu usman hassan ph.d., &abubakar abubakar 192 trade oriented money laundering and era of cybersecurity tax evasion in nigeria oluwayemi joseph kayode, adewole joseph adeyinka ph.d, adewale abass adekunle & kadiri kayode ph.d 205 effect of females in the boardroom on corporate sustainability reporting salami suleiman ph. d, olanrewaju atanda aliu ph.d 224 trade oriented money laundering and era of cybersecurity tax evasion in nigeria oluwayemi joseph kayode department of banking and finance, faculty of social and management sciences, adekunle ajasin university ondo state, nigeria. adewole joseph adeyinka ph.d department of banking and finance, faculty of management sciences, osun state university, osogbo, nigeria. joseph.adewole@uniosun.edu.ng adewale abass adekunle department of banking and finance, faculty of management sciences, osun state university, osogbo, nigeria. abassadewale96@gmail.com kadiri kayode ph.d department of business administration, faculty of management sciences, national open university of nigeria. kkadiri@noun.edu.ng abstract this study examined at tax evasion also related trade-based money laundering mitigation strategies in nigeria in the age of cyber security. three objectives and research questions were designed to guide the study using a sample of 120 respondents. a survey research methodology was used for this study. the instrument used was a set of pre-coded, independently developed structured questionnaires. the study's analytical approaches included frequency distribution tables with percentages, bars, and charts, and logit regression was used to assess the objective. since the majority of respondents (100%) are of working age based on the descriptive age group conclusion, they are qualified to understand how tax fraud and laundering of money affect economy growth. about educational achievement, it is implied that most of respondents has higher education standard than what the cultural organization, united nations educational and scientific recommends for secondary school, which qualified them to provide an appropriate 214 response. this shows that, in terms of working experience, most of respondents have the fact and expertise necessary to comprehend the importance of laundering of money and tax evasion and in terms of economy growth. the findings indicated that among the duties of banks in recognizing cyber-scam were the development of the bank verification number (bvn) and single treasury account system,) and the instruction of collector of tax. in nigeria's age of the cyber security, numerous measures have also been implemented to curtail and trade-oriented and tax evasion money laundering. according to logit regression, both laundering of money and tax evasion & were significant has indirect impact on economy growth. it follows, it is implied that both government revenue and economic growth are decreased as a result of large organizations' or individuals' tax avoidance. at a 5% level of significance, the logit regression outcome shows that tax collection (taxc) was significant & positively connected with economy growth (ecoa). this means that 99.9% of the economic growth that the government funds through taxes is directly facilitated by the provision of infrastructure. for the amount of businesses that were registered, which was 5% and not statistical significant. this implied that the number of registered enterprises in the study area did not contribute enough to tax receipts to support economy growth. tax evasion, its fact that it impacted on economy growth that was detrimental. also, the findings indicated that nigeria's economy growth would slow down as money laundering increased (mola). the marginal impact showed that laundering of money (mla) was sensitive to economy growth at 99.9 percent and that it was statistically significant at 5 percent. keyword: trade based, money laundering, tax evasion, cyber security, financial transfer doi: https://doi.org/10.57233/gujaf.v3i3.191 1. introduction in 1998, the director of the international monetary fund (imf) first raised an issue of money laundering (camdessus, 1998). in the meantime, illegal revenue has become a global bizarre and got a negative effect on global economy, particularly in developing countries where significant money laundering occurs. additionally, the growth of the internet has provided con artists a more effective way to connect with the overall population. essentially, according to pascual et al. (2017), pinpoint fraudhad 15.4m easy mark in usa at the beginning of the twenty-first century, has increased to 35.6 million victims by 2015. the finding described above indicate that many people with an onlinepresence were much more vulnerable to theft. for all that, scammers have developed the biggest inventive method to hide their illicit income and make them seem like clean money over time (schaap, 1998). money laundering has become a lucrative industry thanks to groups like street pharmacists, con artists, tax evaders, and human dealers, whose main objective is to conceal the fundamental infraction (abdullahi et al. 2018). long-term wire transfers have also been utilised more frequently to do money laundering in the present thanks to data and technological advancements. the rapid growth of money between the continents of the world is made possible, according to turner (2011), by settlement mechanisms that enable those associated in money laundering and criminal businesses, as well as legalized enterprises, personal bank clients, and constant customers. because bank activities or transactions are excluded from the documents requires that are accessible in banking administration rules of most countries, rai et al. (2019) claim that it is easy to launder money through financial institutions. money laundering and tax evasion are more prominent problems in emerging nations like nigeria. for instance, nigeria is an under ddeveloping nation with a increase rate of tax evasion &avoidance, according to olufemi (2021). for instance, the european union has identified four african countries as countries that pose a severe risk to the union's financial system in terms of money laundering. botswana, ghana, zimbabwe, and mauritius are on the list, which was made public in 2021. because of their "strategic weaknesses" in terms of fighting money laundering and helping for psychological oppressors, these nations are labelled as high-risk nations. trade-based dealing with illicit monies, according to faft (2006), is the technique of concealing ongoing illegality using a multilateral trading system. additionally, money laundering cases that were carried out through illegal financial outflows have been documented in nigeria. for instance, 65.5 billion dollars were recorded as financial inflow into nigeria between 2000 and 2015. (akinyetun, 2022; ayodele et al.,2022). based on this enormous number, there is a significant amount of leakage for the nation, which restricts the rate of economic growth and real sector expansion. both the global economy and national security are at risk from money laundering. black money are also used to finance criminal operations like terrorism also to manipulate the stock and foreign exchange markets (fatf, 2008). financial institutions that flout anti-money laundering laws are used by criminals every year to launder a considerable amount of cash. as a result, chidubem (2021) concludes that digital privacy laws need to be changed to encourage cybercrime investigators to gather user data and investigate suspects who have specific criminal motivations. additionally, the government depends on tax income to carry out several essential economic tasks. because it decreases the government's revenue, tax avoidance or tax evasion is a significant offense in our culture. according to soyode and kajola (2006), intentionally withholding a portion of taxable pay to lower the amount of taxes owed is tax evasion. a tax law has been broken if taxpayer do not pay after required target time had passed. similar circumstances occur when debt of tax is overly decreased, or annual tax policy is finished through the use of false fact. tax evasion is prohibited and jeopardizes government efforts to earn money, claims eboziegbe (2007). tax evasion was described by nwachukwu (2006) as the act of avoiding tax responsibilities using unethical means. nigeria is now dealing with two significant issues related to taxes, namely tax evasion and avoidance. considering this, adebisi and gbegi (2013) report that tax evasion costs the nigerian government n235.4 million each year. discussion above piqued people's curiosity on the mitigation strategies implemented for trade-oriented laundering of money & age of cyber security tax evasion. in nigeria, african nation, serves as study's focus point. africa has been among the regions with the highest growth in cybercrime, claims kshetri (2019). considering this, three goals have been established, including determining the potential impacts of trade-oriented laundering of money and evasion of tax on nigerian economy development, understanding the role banks play in preventing cyber-fraud, & learning the steps taken to stop evasion of tax and laundering of money centered on trade in this world of cyber security. findings will be discussed, summarized, and the dissertation will be discussed. 2. methodology a quantitative method approach was used to obtain data for this study; the survey will be accepted by quantitative perspective as research strategy for gathering quantitative data. since they are in the best position to dispute any information regarding trade-based money laundering, tax evasion, and potential regulatory measures, the research will concentrate on nigerian financial intelligence personnel. in addition to the aforementioned, the study focused on financial institution staff who are familiar with cybercrime. the survey's samples will be carefully chosen from a focused group of professionals who have dealt with fraud and money laundering cases. auditors and employees of financial institutions, for instance. the sample of (120) respondents’ opinion was collected given that most surveys are carried out through some form of questionnaire. thus, this study employed structure questionnaire to data from respondentsthe data analytical method used in this study was descriptive statistics and logit regression. statistically, tables were used to present these data. 3. findings and discussions this session focuses on the findings from an analysis of the survey's data collection and interpretation. respondents socio-economic features table 1: respondents’ age, level of educational and experience frequency distribution respondents age level of educational experience age f (%) education f (%) experience f (%) 18yrs 30 yrs 60 50 hnd and b.sc. 74 61.7 5 yrs below 39 32 ½ 31yrs43 yrs 51 42 ½ postgraduate (msc and phd) 46 38.3 above 6yrs 81 67 ½ 44yrs – above 9 7½ aggregate 120 100 total 120 100 aggregate 120 100 f is frequency, (%) is percentage source: survey from the field, 2023 according to table 1 above, most of the respondents were in the 18–30 age brackets. the age categories of 31 to 43 years &forty-four and above had the lowest incidences, respectively, at 7.5% and 50.0% of the respondents, respectively. since all respondents (100%) are of working age, this finding has the effect that they are qualified to grasp how laundering of money & tax fraud affect economy growth. the distribution of respondents by level of education showed that 61.7 percentages had hnd and b.sc. & 38.3% had msc and ph.d. according to effects regarding educational attainment, most respondents had education levels above, secondary school level recommended by united nations educational, scientific, & cultural organization, making them up to the task to respond to questions in a suitable manner. in addition, 67½ percentage of the respondents, or eighty-one persons, had at least six yrs experience, compared to 32½ percentage of the respondents, or thirty-nine persons, who had below five yrs experience. this implies that most survey participants understood the significance of tax fraud and money laundering in terms of its impact on economic growth. research question 1: what are the risks of trade-oriented laundering of money and evasion of tax to nigeria economy development? table 2: summary of frequency and percentage illustrating impact of tax fraud and trade-oriented laundering of money on nigerian economy development. items sa a u d sd aggregate the most people are not familiar with the rules of current tax regulation and policy.. f 55 44 13 8 120 % 45.8 36.7 10.8 6.7 100 businesses that are not registered with the government's agency in the nation adopt evasion of tax f 63 49 8 120 % 52½ 40.8 6.7 100 money laundering in the nation is encouraged by the current tax rate. f 22 53 17 28 120 % 18.3 44.2 14.2 23.3 100 the availability of additional taxes in addition to those who paid to government's coffers facilitates laundering of money f 28 30 35 20 7 120 % 23.3 25.0 29.2 16.7 5.8 100 the current increase in tax rates in nigeria is to blame for the high rate of money laundering. f 7 38 40 21 14 120 % 5.8 31.7 33.3 17.5 11.7 100 increased avoidance of tax and laundering of money decrease government tax revenue f 72 41 7 120 % 60.0 34.2 5.8 100 several infrastructure projects are halted in the country due to the high rates of tax evasion and money laundering. f 79 27 2 4 8 120 % 65.8 22½ 1.7 3.3 6.7 100 average f 38 42 23 12 5 120 % 31.3 35.3 19.4 9.6 4.4 100 source: survey from the field, 2023 table 2 looks at comments that discuss the negative effect of evasion of tax and trade-oriented laundering of money in relation to nigerian economy growth. base on results, 82.5% of respondents agreed, 10.8% disagreed, and 6.7% disputed that most citizens are unaware of the rules controlling current tax legislation. this shows that most respondents concurred that the public is not aware of the legal provisions guiding policy of tax. continued investigation into question of maybe unregistered businesses in country help combat evasion of tax by government indicated that 52½ percentages consented, 40.8% were undecided, and 6.7% disagreed with the statement. alternatively, 62.5 percentages agreed with claim that country's existing rate of tax supports laundering of money, 14.2 percentage do agree with the claim, and 23.3 percentage had a different opinion. most respondents, according to the findings, thought that existence of taxes other than those that were paid into coffers of government encouraged laundering of money. in agreement with the statement were 48.3% of respondents, followed by a 29.2% undecided group and a 22.5% disagreeing group. in addition, 94.2% of those polled thought that increasing tax evasion and money laundering decreased tax income, while 5.8% disagreed. the development of numerous infrastructure projects in the country is hampered, according to 88.3% of respondents, 1.7% of whom were uncertain, and 10.0% of whom disagreed with the statement. in general, the findings indicated that both evasion of tax and laundering of money were justifiable, and each had an indirect impact on growth of economic. the discovery had two ramifications for the economy. the first one states that tax avoidance by important businesses or people lowers government revenue, which has a detrimental effect on efforts to promote economic development. second, by lowering the amount of money in circulation, which directly decreases the economy's overall production, money laundering in the form of unlawful outflows slows down business development. this shows that money laundering and tax evasion are related problems that impede economic growth. additionally, the au/uneca analysis backs up the claims and discovered that between us$34 billion and us$60 billion in illicit financial transfers originate in africa each year. this figure indicates a considerable loss for the economies of africa as a whole. research question 2: in detecting cyber-fraud, what are the functions performed by financial institutions? table 3: summary of frequency and percentage showing functions performed by financial institutions in detecting cyber-fraud. items sa a u d sd total the implementation of the bank verification number stops fraud in the tax program. f 65 10 16 29 120 % 54.2 8.3 13.3 24.2 100 easy identification of cyber-fraud is improved with bank verification numbers. f 44 50 7 19 120 % 36.7 41.7 5.8 15.8 100 nigerian government funds are not fraudulently used online thanks to the single treasury account mechanism. f 17 48 32 23 120 % 14.2 40.0 26.7 19.2 100 bank verification number facilitates nigerians use of electronic payment systems. f 55 38 18 9 120 % 45.8 31.7 15.0 7½ 100 financial institutions' intervention through the implementation of various policies aids in the fight against theft identity f 8 71 18 16 7 120 % 6.7 59.2 15.0 13.3 5.8 100 financial institutions train government tax agents to increase the effectiveness of collection of tax. f 55 44 13 8 120 % 45.8 36.7 10.8 6.7 100 collection of tax had increased as a result of recent tax reform. f 63 49 8 120 % 52½ 40.8 6.7 100 average f 26 54 21 13 6 120 % 21.3 45.1 17½ 10.8 5.3 100 source: survey from the field, 2023 table 3 examined various roles that banks have in identifying cyber-fraud. the introduction of a bank verification number, the study was found, prevents fraud in the tax programme. as a result, 54.2% of respondents claimed to have stopped it, 8.3% expressed uncertainty, and 37½% not agreed. further investigation into subject revealed that the bvn simplified the process of identifying cyber friend. 78.4% of respondents agreed with the claims, 5.8% were unclear, & 15.8% not agreed. usage of the bvn, according to the article, has made it straightforward to identify cyber-fraud. furthermore, the study was found that 19.2% of respondents still disagreed with the claim that nigeria's single treasury account structure forbids unintentional cyber-fraud of public funds, while 26.7% of respondents were confused about it. furthermore, 77½ percent respondents agreed that bvn made it simpler to use electronic payment systems in nigeria, 15 percent were unclear and 7 percent disapproved. in this study, 15.0% respondents were doubtful and 19.1% disagreed the statement which says financial institutions' use of different safeguards had assisted to lessen issue theft identification. however, 65.9% of respondents agreed with the statement. 82.5% of respondents agreed, 10.8% were undecided, and 6.7% opposed that financial firms should instruct tax collectors. finally, the study was reported that 52.5% of respondents agreed, 40.8% disagreed, and 6.7% did not accept the assertion that most tax reform conducted recently has enhanced collection of tax among the taxpayers. the typical description revealed that among the varied duties of financial institutions in recognizing cyber oriented fraud were the development of the single method, bvn, & the instruction of taxation collectors. as a result, 66.4 percentage of respondents agreed with claims, followed by 17.5% who disagreed & 16.1% who disagreed entirely. according to the typical description, banks played a number of responsibilities in recognizing cyber-fraud, including developing the stas, bvn, and educating tax collectors. the chi-2 analysis outcome also indicate the separate work done by banks reduced cyber of fraud in the nation. accordingly, seemma et al. (2017) support findings & show bank's top aim must be guarantee of information against substantial fruad dangers. previous studies by onwugbenu et al. (2022), garba et al. (2022), and mphatheni and maluleke (2022) indicated improved public knowledge & continuous enforcement of contemporary policies by the highest institution with the aim of preventing and detecting cyber-fraud in the country. research question 3: are there policies to prevent evasion of tax & laundering of money based on trade in the era of cyber security? table 4: summary of the frequency and percentages relating the trade-oriented laundering of money and evasion of tax controls in era of electronic security items sa a u d sd aggregate money laundering and tax evasion are decreased when f 35 50 18 17 120 % 29.2 41.7 15 14.2 100 citizens have total access to education and information using media. high rates of tax evasion and money laundering are prevented by legal action against those responsible. f 49 62 9 120 % 40.8 51.7 7½ 100 enabling some specific institutions to penalize offenders and stop electronic security crime f 44 49 18 9 120 % 36.7 40.8 15 7½ 100 when it comes to curbing cybercrime, the vested agencies that look into financial crimes do an effective job. f 23 42 16 19 20 120 % 16.7 35 13.3 15.8 16.7 100 accountability in tax reform has been bolstered by the authorized authorities' investigation of financial crimes committed by a corrupt person. f 42 56 13 9 120 % 35 46.7 10 7½ 100 the government gives these organizations the assistance they need to combat cybercrime. f 9 48 48 15 120 % 7½ 40. 40. 12½ 100 with these organizations in place, cybercrime has decreased in nigeria. f 30 29 40 21 120 % 25 24.2 33.3 17½ 100 average f 29 48 21 14 8 120 % 23.7 40.2 16.9 12.4 6.8 100 source: survey from the field, (2023) table 4 demonstrates relationship among measures taken in the age of cyber security to prevent trade-based laundering of money and evasion of tax. most participants (70.9%) agreed citizens' complete accessing education & knowledge through the media reduces money laundering & tax evasion; 15.0% were undecided; and 14.2% disagreed. the assertion that criminal judgment of evader of tax and fund launderers diminishes the incidence of these crimes in society was supported by 92.5% of respondents; 7.5% disagreed. research question 3-related findings also demonstrated that making it easier for certain institutions to penalize criminals discourages fraud. as a result, 77.5% of respondents accepted, 15.0% were unsure, and 7.5% disagreed with the statement. additionally, it was found that while 32.5% of respondents disagreed with the statement that empowered institutions who investigate financial crimes do a decent job of their jobs, 13.3% of respondents were undecided. when asked whether tax reform accountability had increased because of legitimate authorities looking into financial crimes perpetrated by corrupt individuals, most respondents (81.7%) agreed, 10.8% were undecided, and 7.5% disagreed. in addition, when asked if the policy maker provides organizations the resources, they need to combat financial crime, respondents indicated 47.5% accepted, 40.0% were uncertain, & 12.5% unaccepted. outcome shows 25.0% agreed with the claim that the current of these organizations in the country of nigeria has reduced financial crime, 24.2% were not sure, and 50.8% disagreed. nigeria, a larger percentage of respondents (63.9%) agreed policies have in place to limit tradebased laundering of money and evasion of tax; 16.9% disagreed; and 20.2% said it doesn’t . which implied that some effective measures are in use. in addition, it was found that most respondents in nigeria in the era of cyber security concurred that measures had been taken to stop trade-based laundering of money and evasion of tax. the chi-2 outcome also shows there is strong association among the measures taken to stop trade-based laundering of money and evasion of tax in the age of internet security. however, preventing cyber security crime requires steps like information and citizen education, legaln action against evaders of tax and fund launderers, and empowerment to punish offenders & investigate internet crimes. studies like those by ayodele, et al. (2021), onyema, et al. (2021), and nathalie (2022) have demonstrated that managing these activities in the country could be by punishing those found guilty of fund laundering and evasion of tax as well as enlighting and informing the people. logit regression table 5: regression model of logit (dependent variable: advancement of economic) variable coefficient std. error zstatistic prob. taxc 2.565365 .533781 4.806021 .0000 nor -.119708 .599484 99684 .8417 taxev -.225060 .085832 -2.971689 .0009 mola -3.229998 1.136998 -2.840813 .0045 constant 2.222462 1.298863 1.711083 .0871 source: compilation from the researcher (2023) table 5 presents the logit regression outcome. the outcome indicate that collection of tax were significant and positively linked with economy growth at a 5% grade of significance (ecoa). this indicates is a good likelihood that a change in way that consumption tax, corporate income tax, and many taxes imposed by the government on persons who qualify will be collected would result in an increase in government revenue. 99.9% of the time, government spending directly encourages economic growth by providing many services. amount of registered firms had a logit regression coefficient of 11.9%, stated that non-statistically significant at 5percentage. conclusion implies says the contribution of registered enterprises to tax receipts in the study area was too small to support economic growth (ecoa). non-significant and minus number of registered firms co-efficient may be caused by two factors. first, tax receipts enterprises are inadequate to have an hit on the country development of nigeria because it is a growing country with a good economy made up of small businesses. second, the bulk of these tiny enterprises participated in tax evasion and avoidance, reducing the government's revenue from taxes. the findings showed that tax evasion (taxev) had a negative and major influence on economic growth at a standard level of 5%. (ecoa). according to marginal impact, degree of evasion of tax sensitivity to country growth was most to result in ecoa increasing in merely 22.5 percentage. findings indicated nigeria's economy growth will slow down as money laundering increased (mola). the marginal impact shows that money laundering (mola) was statistically significant at a 5% level and about 99.9% sensitive to economic growth (ecoa). the analysis's result suggests that boost money laundering in nigeria slows economic expansion by reducing the amount of tax income generated by such funds. 4. conclusion and recommendations according to this study's findings, evasion and money laundering are twin crimes in nigeria that hinder economic progress by reducing government funding for development projects and the amount of money in circulation. second, bank verification number and the single treasury account system, and the financial institutions' training of taxes collector all contributed to the country's ability to detect cyber-fraud. also, many measures put in place aided in the age of cyber security to manage trade-based tax evasion& money laundering in light of this, the following suggestions are made: cbn should ensure that every deposit money bank customer is required to register for a bank verification number, as these figures have been shown to reduce laundering of money; as a result, the cbn should always uphold the bvn policy. the nation's deposits money banks must work to increase awareness by warning prospective customers not to act in such a way and not to encourage money laundering among its consumers. the country tax regulation government must ensure many of public are aware of the current tax regulatory administration through awareness on radio and television stations and tax education. the policy maker should ensure that a stas system is deals inside government parastatals in order to prevent accidental fraud of the government's money in nigeria. decision was made to adopt a single treasury account system because it would boost efficiency and reduce instances of money laundering in public funds. financial organizations should teach tax collectors to boost the efficiency of tax collection since staff training is essential for human ability development and the majority of findings indicated that tax collectors were undertrained; therefore, it is important for the central bank and other financial institutions and organizations to ensure that they make this gesture. additionally, in order to decrease the high prevalence of money laundering in society, it is essential to prosecute those responsible for evasion of tax and laundering of money by buildup agencies, independent corrupt practices & many related commission and the efcc. future research can explicitly look at how money evasion of money & avoidance impact economy expansion. reference abdullahi b. a., amir m, kuwata g., & umar a. m. (2018). determinants of tax evasion in nigeria. international journal of advanced studies in social science & innovation (ijssi) eissn: 2600-7746, vol. 2, no. 3. acconcia a., amato, m. d., &. martina, r (2003). tax evasion and corruption in tax administration, mimeo. adamu a. g, maheyzah m. s., & siti h. o. (2022). an assessment of cybersecurity awareness level among northeastern university students in nigeria. international journal of electrical and computer engineering (ijece) vol. 12, pp. 572~584 issn: 2088-8708, doi: 10.11591/ijece.v12i1.pp572584. adebisi, j.f and gbegi, d.o (2013). effect of tax avoidance and tax evasion on personal income tax administration in nigeria. american journal of humanities and social sciences. 1 (3), 125-134. akinyetun t. s. (2022). poverty, cybercrime and national security in nigeria. journal of contemporary sociological issues, volume 1, issue 2. doi: 10.19184/csi.v1i2.24188 issn 2723-3456 e-issn 2775-2895. al baaj, q. m. a., al marshedi, a. s., & al-laban, d. a. (2018). the impact of electronic taxation on reducing tax evasion methods of iraqi companies listed in the iraqi stock exchange. academy of accounting and financial studies journal, 22(4). retrieved from: www.abacademies.org/articles/. allingham, m. g., & sandmo, a. (1972). income tax evasion: a theoretical analysis. journal of public economics, 1(3-4), 323–338. allingham, m.g. & a. sandmo (1972). “income tax evasion: a theoretical analysis”, journal of public economics, pp. 323-338. alm, j. & martinez-v. j. (2001). “societal institutions and tax evasion in developing and transition countries”. a paper prepared for a public finance in developing and transitional countries conference. georgia state university. amedeo a, sandro, c., luigi m. & azzurra m. (2021). tax evasion and inequality: some theoretical and empirical insights. economics of governance .22:309–320 https://doi.org/10.1007/s10101-021-00261-y. apg. (2012). apg typology report on trade based money laundering. sydney: asia pacific group on money laundering. armstrong, m.b. & j. robison, 1998. “ethics in taxation”. journal of accounting, ethics & public policy, 1(4), pp. 535-557. in r. w. mcgee (ed.), “the ethics of tax evasion” (pp. 330348). dumont, nj: the dumont institute for public policy research. ayodele, a., kehinde o, jonathan g. & olamide b. h. (2022). social construction of internet fraud as innovation among youths in nigeria. international journal of cybersecurity intelligence & cybercrime: 5(1), 23-42. available at: https://vc.bridgew.edu/ijcic/vol5/iss1/3. bukola o. (2019). regulating trade-based illicit financial activities in nigeria.project work submitted to university of pretoria. central bank of nigeria (2017, pp.3-5). the nigerian financial system at a glance. monetary policy department. https://www.cbn.gov.ng/out/2017/ccd/the%20nigerian%20finan cial%20system.pdf. chidubem f. i. (2021). cyberfraud: a review of the internet and anonymity in the nigerian context. issa journal. cordelia, o. o. (2019). tax evasion and its consequences on an emerging economy: nigeria as a focus. research in world economy vol. 10, no. 3. issn 1923-3981. e-issn 1923-399x. url: https://doi.org/10.5430/rwe.v10n3p127. crowe m. t. (1944). the moral obligation of paying just taxes. the catholic university of america studies in sacred theology, 84. onyema, e. m., edeh, c. d., gregory u. s., michael o, edmond v. u. & charles n. e., richard-n. (2021). cybersecurity awareness among undergraduate students in enugu nigeria. international journal of information security, privacy and digital forensics. eboziegbe m.o. (2007). tax evasion hinders local governments. the saturday tribune, october: 13. erstu t. k. (2021). factors influencing taxpayers to engage in tax evasion: evidence from woldia city administration micro, small, and large enterprise taxpayers. journal of innovation and entrepreneurship. https://doi.org/10.1186/s13731-020-00142. evelyn s. (2020). blacklisted: four african countries on eu’s high-risk money laundering list. financial action task force found mauritius deficient on anti-money laundering. https://theexchange.africa/africa/four-africancountries-on-money-laundering blacklist/https://theexchange.africa/africa/four-african-countries-onmoney-laundering-blacklist/. fakile a.s. & adegbie, f. f. (2011) company income tax and nigeria economic development. european journal of social sciences vol.2 (6) 326-330 fatf (2006). trade based money laundering. fatfreport.trade-based money laundering risk indicators.https://sanctionscanner.com/blog/fatf-report-trade-basedmoney-laundering-risk-indicators562#:~:text=%20risk%20signs%20for%20tradebased%20money%20l aundering%20,indicaters.%20a%20commercial%20entity%20makes%20l ast-minute...%20more%20 fatf. (2008). trade-based money laundering. france. financial action task force. fedelia n. o. (2021). addressing the challenges of tax administration in nigeria: an overview. international journal of innovative finance and economics research 9(3):86-96. issn: 2360-896x. ferwerda, j. (2012). the multidisciplinary economics of money laundering. printed by ridderprint, ridderkerk, tjalling c. koopmans dissertation series. finance m. (2021). an overview of trade-based money-laundering. https://financemalta.org/news/an-overview-of-trade-based-moneylaundering/. gallemore, j., & labro, e. (2015). the importance of the internal information environment for tax avoidance. journal of accounting and economics, 60(1), 149–167. info guide nigeria (2018). 10 problems of nigerian financial system and possible solutions. https://infoguidenigeria.com/10-problems-nigerian-financialsystem-solutions/. kim, s. (2008). does political intention affect tax evasion? journal of policy modeling, 30(3), 401–415. leyira, m., chukwuma e. & asian a. u. (2012). tax system in nigeria – challenges and the way forward. research journal of finance and accounting vol. 3 no. 5 9-15 luigi, p. leonardo c, n. subhash, p. venkata d. r., praveen, m., kartikey k, m. kalyan c, r. duraipandian, s. suman r & regin, r. (2021). the impact of internet fraud on financial performance of banks. turkish online journal of qualitative inquiry (tojqi) volume 12, issue 6: 8126-8158. lyeonov, s., кuzmenko, о., yarovenko, h. & dotsenko, t. (2019). the innovative approach to increasing cybersecurity of transactions through counteraction to money laundering. marketing and management of innovations, 3, 308-326. http://doi.org/10.21272/mmi.2019.3-24 308. mark f. (2016). nigeria’s increasing focus on trade-based money laundering. trade based financialcrimes news. https://amlnewsflow.coastlinesolutions.com/2016/11/23/nigeriasincreasing-focus-on-trade-based-money-laundering/. mcgee r. w. & y. an (2006). the ethics of tax evasion: a survey of chinese business and economics students. published in the proceedings of the international academy of business and public administration disciplines (iabpad), 2006 winter conference, orlando, florida. reprinted at www.ssrn.com. mcgee r. w. (1998). “the ethics of tax evasion in islam: a comment”. journal of accounting, ethics & public policy, 1(2), pp. 162-168 mcgee r. w. (1999). “why people evade taxes in armenia: a look at an ethical issue based on a summary of interviews”. journal of accounting, ethics & public policy, 2(2), pp. 408 416. reprinted at http://ssrn.com/abstract= 242568 meleq hoxhaj & erjus kamolli (2022). factors influencing tax evasion of businesses: the case of albania. european journal of economics and business studies. volume 8, issue 1. issn 2411-9571 (print) issn 24114073 (online). morales a. (1998). “income tax compliance and alternative views of ethics and human nature” journal of accounting, ethics & public policy, 1(3), pp. 380-399. nangih e. & nkemakola d. (2018). an empirical review of the determinants of tax evasion in nigeria: emphasis on the informal sector operators in port harcourt metropolis. journal of accounting and financial management issn 2504-8856 vol. 4 no. 3 www.iiardpub.org. iiard – international institute of academic research and development. nangih, e., & dick, n. (2018). an empirical review of the determinants of tax evasion in nigeria: emphasis on the informal sector operators in port harcourt metropolis. journal of accounting and financial management, 4(3) http://www.iiardpub. org/. nathalie rébé (2022). cyber-laundering. proceedings of the international conference on cybersecurity and cybercrime. vol. ix neelima, s. a literature review on threats and countermeasures of cybersecurity: a cross-industry analysis in kathmandu. lbef research journal of science, technology and management. volume 3, issue 3. issn: 2705-4683; e-issn: 2705-4748. nwachukwu, i., (2006). institutions indulge in tax evasion despite huge profits they make in nigeria. the tribune. september: 1. olivia, r. r., (1998). “the schism between tax practitioners’ ethical and legal obligations: recommendations for the fusion of law and ethics”. journal of accounting, ethics & public policy, 1(4), pp. 603-628. olufemi f. oladejo (2021). strategy to close tax gaps created by tax avoidance and tax evasion in nigeria: an overview. european journal of accounting, auditing and finance research vol.9, no. 7, pp.5563.https://www.eajournals.org/ https://doi.org/10.37745/ejaafr.2013. omi p. & mardi a. (2022). perceptions of tax evasion among educators: review from social economic status and love of money. proceeding 2nd international conference on business & social sciences (icobuss) 1378 surabaya. onwugbenu, e. o. (2022). examining the effect of the elevated rate of cybercrime on the growth and sustainable development of nigeria’s economy. issn: 2736-0342 nau.jcpl vol. 9 (1). ozili, p. k. (2020). tax evasion and financial instability. journal of financial crime. emerald publishing limited, 27(2), 531–539 https://doi.org/10.1108/jfc-04-2019-0051. seemma p.s., nandhini s. & sowmiya m. (2017). overview of cyber security. international journal of advanced research in computer and communication engineering. vol. 7, issuedoi10.17148/ijarcce.2018.71127125. https://www.researchgate.net/publication/329678338_overview_of_cyber _security pashev, k. (2005). “tax compliance of small business in transition economies: lessons from bulgaria. european public law: national ejournal. https://www.semanticscholar.org/paper/tax-compliance-of-smallbusiness-in-transition-frompashev/d7545cffb353488618031ff1098d5127e675db29 putra, p. d., syah, d. h., & sriwedari, t. (2018). tax avoidance: evidence of as a proof of agency theory and tax planning. international journal of research and review, 5(9), 2454–2223. rai, somesh; singh, kunwar dr; and varma, akhilesh kumar, "global research trend on cyber security: a scientometric analysis" (2019). library philosophy and practice (e-journal). 3769. https://digitalcommons.unl.edu/libphilprac/3769. rena s. miller, liana w. rosen & james k. jackson (2016, p. 2). congressional trade-based money laundering: overview and policy issues. smatrakalev, g., 1998. “walking on the edge: bulgaria and the transition to a market economy”. in mcgee, r. w. (ed.), the ethics of tax evasion, pp. 316-329. dumont, nj: the dumont institute for public policy research. soyode, l. & kajola s.o. (2006). taxation: principles and practice in nigeria. 1st edition: silicon, ibadan. storm, a. (2013). establishing the link between money laundering and tax evasion. international business & economics research journal (iber), 12(11), 1437. temitope o., fagbemi, o. m. u., & abdurafiu o. n. (2010). the ethics of tax evasion: perceptual evidence from nigeria. european journal of social sciences – volume 17, number 3. yaqub m. (2022). 24+ alarming money laundering statistics to know [2022 update]. updated on infographic. https://www.renolon.com/moneylaundering-statistics/. zakariya’u g,. muzainah b, m., & abdurrahman, a. p. (2015). tax evasion and nigeria tax system: an overview. research journal of finance and accounting www.iiste.org issn 2222-1697 (paper) issn 2222-2847 (online) vol.6, no.8. zucman, g. (2014). taxing across borders: tracking personal wealth and corporate profits. the journal of economic perspectives, 28(4), 121–148.