Audit Committee and Financial Reporting Quality: The Moderating Effect of Institutional Ownership in Nigerian Listed Firms
This study examines the audit committee's effectiveness on financial reporting quality and test the moderating effect of institutional ownership in both the short and the long run. The study utilised data from 101 non-financial firms listed on the Nigerian Exchange Group (NGX) for the 2011 to 2015 period. The study employed the Generalised Method of Moments (GMM) technique to control for potential endogeneity. The results show that financial reporting and its process have improved significantly. The findings further indicate that audit committee shareholders’ financial expertise, audit committee shareholder chairman, and external audit provide a significantly negative relationship. However, the results suggest that the audit committee block shareholders’ relationship with financial reporting weakened audit committee performance by increasing earnings management practice and financial reporting lag. At the same time, the interacting role of institutional ownership improves the overall effectiveness of the audit committee, particularly on audit committee block shareholders both in the short and long run. This paper supports the view that governance should make a difference in protecting shareholders’ interests, hence, reviewing governance policies should be done within reasonable intervals. Keywords: Audit committee, financial reporting quality, institutional ownership