The Relationship between Audit Committee Effectiveness and Corporate Governance Practices among Nigerian Banks
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Date
2014-07
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Department of Management and Accounting, Faaculty of Adminiistration, Obafemi Awolowo University, Ile-Ife, Nigeria
Abstract
companies still fail despite a clean auditor's report and this has called to question the impact of the audit committee (AC), (auditor's supervisory body) effectiveness and corporate governance practices among Nigerian banks. This objective was investigated using ten (10) selected money deposit banks using a Panel data model covering a period between 2001 and 2010 while the analysis was dichotomized into a short run and long run condition using Arellano and Bover dynamic and Fixed effect models while Hausman's test of significance was conducted to verify the significance of the independent variables. Our findings revealed that the selection process and financial literacy have negative and positive significant impacts respectively on AC; effectiveness in ensuring corporate governance practices in Nigerian banks. Also, estimates obtained from the long-run situation indicated that board size, management ownership and legal environment exert insignificant impact on AC while character and independence of AC members are unrelated to their effectiveness. It is the reform suggested that an appropriate selection process that will ensure adequate financial literacy of AC members be put in place while an environment of rule of law with compliance monitoring is recommended as tools for improving audit committee's effectiveness in enhancing corporate governance practices among Nigerian banks.
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Keywords
Audit committee, corporate governance, effectiveness