The nexus between board audit committee attributes and financial performance of firms in Africa

Abstract

This research aims to study the connection between the features of board audit committee of a firm and its financial performance in Africa, by looking at the board audit committees’ characteristics of publicly traded companies in the four (4) biggest African financial markets. This research conducted an empirical analysis of the committee features in the years following the global financial crisis and before the COVID-19 pandemic outbreak. The data covered the period between 2013 and 2019. We analyzed the data using correlation analysis, GLS (Fixed and Random Effect Models), and GMM. We used features of the committee as explanatory variables. These include an independent outside director as the chairperson of the committee, whether the committee guards the integrity of the financial reporting of a firm, whether the committee regularly meets and hears the recommendations and complaints of the firm’s external auditor, and whether the committee effectively monitors the management of the firm. Furthermore, for the dependent variable; ROE and ROA were utilized as the metrics of the financial performance of a firm. The results exhibit positive and significant relations between the board audit committee features such as; effective monitoring of management, guarding the integrity of financial reporting, an independent director as chairperson of the committee, regularly meeting and hearing the recommendations and complaints of the external auditor, and the firm’s financial performance measures. The findings are useful to corporate governance regulators who are seeking to improve corporate governance guidelines and minimize the corporate insolvency of firms in Africa.