Impact of Board Diversity on Financial Reporting Quality: Evidence from Nigeria

Abstract

Purpose This study aims to investigate how board diversity affects financial reporting quality by examining the relationship between board size, composition, and independence. Methodology The panel data of 32 firms from the Agriculture, Consumer Goods, Industrial Goods, Natural Resources, and Oil and Gas sectors were obtained from two published sources - the Nigerian Exchange Group (NXG) and audited financial statements of the companies from 2012 to 2021. The heteroskedasticity-corrected – the panel corrected standard error approach was used to test the firm-level data Findings The result shows that board size and structure have a negative and significant impact on earnings management, while the impact of board independence is positive but not significant. This indicates that a negative significant influence on earnings management corresponds to improved financial reporting quality, while a positive significant influence corresponds to deteriorated financial reporting quality. Therefore, only board size and board structure are considered as board characteristics that impact financial reporting quality. Conclusion The study concludes that quality financial reporting is important for participants in the capital markets to make informed decisions. The paper offers regulatory bodies more insights to support direction for support reforms, policy-making, and enforcement.

Keywords

• financial reporting quality
• board diversity
• pcse
• heteroskedasticity-corrected model
• earnings management
• panel corrected standard error