DOES RISK GOVERNANCE IMPROVES FINANCIAL REPORTING QUALITY OF LISTED NON-FINANCIAL FIRMS IN NIGERIA?

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.