Effect of Audit Quality Between Managerial Characteristics and Financial Reporting Quality: Evidence from Listed Manufacturing Companies in Nigeria
- 4 days ago
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Authors: Alabi Fatai Zakariya and Abdulrasaq Mustapha
Abstract
Despite extensive regulatory reforms, improved accounting standards, and strengthened corporate governance mechanisms, significant variations in financial reporting quality persist, contributing to information asymmetry and market inefficiencies across firms. This situation highlights the limitations of relying solely on regulatory approaches to enhance reporting quality. Against this backdrop, this study examines the effect of managerial characteristics on the financial reporting quality of listed manufacturing companies in Nigeria, with particular emphasis on managerial ability and managerial compensation, while also assessing the moderating role of audit quality in strengthening these relationships. The study adopts an ex-post facto research design, utilizing secondary data sourced from the annual reports of manufacturing firms listed on the Nigerian Exchange Group (NGX) over the period 2015–2024. The population comprises 54 listed manufacturing companies as of 31 December 2024, while a sample of 40 actively listed firms were selected using a census sampling technique. Data are analysed using the Driscoll–Kraay standard error regression technique to control for cross-sectional dependence and heteroskedasticity. The findings reveal that managerial ability and managerial compensation exert a positive and statistically significant effect on financial reporting quality. Furthermore, audit quality significantly moderates the relationship between managerial characteristics and financial reporting quality. The study concludes that managerial attributes (Managerial ability and Managerial compensation) play a crucial role in enhancing financial reporting quality among listed manufacturing firms in Nigeria. It recommends merit-based managerial recruitment, performance-linked compensation structures, and the engagement of high-quality auditors to strengthen reporting credibility.
Keywords: Financial Reporting Quality, Managerial Ability, Managerial Compensation, Audit Quality