IMPACT OF CORPORATE GOVERNANCE ON THE QUALITY OF FINANCIAL REPORTING IN CONSUMER GOODS COMPANIES IN NIGERIA

ABSTRACT This study examined the effect of corporate governance mechanisms on the financial reporting quality of listed industrial goods companies in Nigeria, with particular emphasis on board gender diversity, board composition, directors’ independence, and audit committee effectiveness on financial reporting quality proxied by audit fees. Using data from 6 firm-year observations spanned from 2020 to 2024 and applying descriptive statistics, correlation analysis, diagnostic tests, and Ordinary Least Squares (OLS) regression, the study provides empirical evidence on how governance structures influence audit effort a proxy for financial reporting quality. The descriptive results reveal notable variations in governance practices across firms, particularly in gender diversity, directors’ independence, and audit committee effectiveness. The correlation analysis shows that audit fee is significantly associated with board gender diversity, board composition, and audit committee effectiveness, indicating that these governance mechanisms meaningfully shape audit effort. Diagnostic tests confirm the robustness of the model, although the Ramsey RESET suggests the possibility of omitted variables. The regression results demonstrate that board gender diversity exerts a positive and significant effect on audit fees, suggesting that gender-diverse boards strengthen oversight and therefore require expanded audit effort. Conversely, board composition shows a negative and significant relationship with audit fees, implying that stronger non-executive representation may reduce audit risk and thus lower audit costs. Directors’ independence and audit committee effectiveness exhibit statistically insignificant effects, indicating that their influence on financial reporting quality in this sector may be limited or inconsistent. Overall, the study shows that corporate governance mechanisms do not operate uniformly; rather, they exert differentiated effects on the level of audit scrutiny and, by implication, the quality of financial reporting. The findings therefore underscore the importance of governance structures particularly board diversity and composition in enhancing transparency, reducing audit risk, and strengthening reporting integrity in industrial goods companies in Nigeria. Consequently, the study provides valuable insights for regulators, corporate boards, auditors, and policymakers seeking to improve financial reporting outcomes through effective governance reforms.