AUDIT COMMITTEE’S CHARACTERISTICS AND INVESTORS’ STAKE IN THE NIGERIAN QUOTED COMPANIES

Abstract

Financial scandals that occurred in the early 21st have put to test the integrity of financial reports that relay the performance of an entity to its investors. The audit committee has been argued in the extant literature as a factor that can put to rest the prevalence of these scandals. Nevertheless, these scandals still reoccur sometimess. Hence, this study investigated the nexus between audit committee’s qualities and investors’ stake in quoted companies in Nigeria. Ex-post facto was adopted as the research design, while Fixed effect panel analysis and Pairwise Granger Causality were used to analyze the data. The results of the fixed panel analysis revealed that the audit committee' financial expertise, audit committee meetings, numbers of non-executive directors on the audit committee, audit committee’s size, and the proportion of non-executive directors on the board of the selected companies demonstrated an insignificant effect on investors’ stake in the selected quoted companies in the country, while the panel Granger causality revealed unidirectional causality between earnings per share and proportion of non-executive directors of the company’s board in selected quoted companies in Nigeria. This study concluded that the audit committee's quality affects investors’ stake depending on the adopted audit committee’s qualities. Based on the above, the study recommended, among other things, that the management and government should devise internal control mechanisms or strategies to ensure the suitability of who could act as an independent non-executive director to a company. The study contributed to the existing literature by providing further evidence on the position of audit committees’ on investors’ stake in the Nigerian quoted non-financial companies.