Audit Committee Attributes and Share Price Reaction of Listed Deposit Money Banks in Nigeria

Abstract

This study investigated the effect of audit committee characteristics on share price reaction of listed Deposit Money Banks (DMBs) in Nigeria. Specifically, the study sought to examine the effect of audit committee independence, expertise, size, frequency of meetings and gender diversity on share price reaction of listed DMBs in Nigeria. The study adopted the ex-post facto research design. The study used a sample of 12 DMBs from a population of 14 DMBs listed on the Nigerian Exchange Group using the filtering method. Data were sourced from annual reports and accounts of the sampled DMBs in Nigeria. The study period covered ten (10) years from 2011-2020. Pooled Auto Regressive Distributive Lag (ARDL) Model was used for data analysis. The results of the study suggested that audit committee independence, size, frequency of meetings and gender diversity have a perverse and significant effect on share price reaction of DMBs listed in Nigeria. The result of the study also established that audit committee financial expertise positively but insignificantly affects share price reaction of DMBs listed in Nigeria. The study, therefore, recommended that financial expertise of the audit committee members should be given utmost attention by the board since it exerts a positive effect on share price reaction. This is supported by the requirements of CAMA 2020 which states in section 404 subsection (5) that all audit committee members should be financially literate and at least one of them should be a member of a professional accounting body established by an Act of the Nigerian Parliament. The study also recommended that DMBs should strive to maintain a small audit committee size below the stipulated maximum number of 5 as stipulated by CAMA 2020 for effective performance.

Audit committee characteristics and firm performance: a cross-country meta-analysis

“…(2020a) suggests that auditors with certain characteristics can influence the stock price of companies they oversee. The recommendation to prioritize the financial expertise of audit committee members, as found in Gbenyi et al . (2023), underscores the importance of a well-qualified audit committee in positively influencing share prices.…”

“…Salehi et al (2020a) suggests that auditors with certain characteristics can influence the stock price of companies they oversee. The recommendation to prioritize the financial expertise of audit committee members, as found in Gbenyi et al (2023), underscores the importance of a well-qualified audit committee in positively influencing share prices. Rahman et al (2019) contends that a larger audit committee size, consisting of diverse and skilled resources, facilitates enhanced problem resolution for companies in their routine business operations.…”