Moderating effect of audit committee independence on the relationship between board heterogeneity and risk disclosure among listed non-financial service companies in Nigeria

Abstract

The study examined the moderating effect of audit committee independence on the relationship between board heterogeneity and risk disclosure among listed non-financial service companies in Nigeria. In an environment characterised by economic volatility, regulatory uncertainty, and growing demand for corporate transparency, effective risk disclosure has become increasingly important for investor confidence and market stability. Drawing on agency theory and resource dependence theory, the study investigates how different dimensions of board heterogeneity board size, board independence, gender diversity, financial expertise, and meeting frequency influence the extent of risk disclosure, and whether audit committee independence strengthens or weakens these relationships. An ex-post facto research design was adopted, using secondary data obtained from the annual reports of selected listed non-financial service companies over the study period. Panel regression techniques were employed to analyse the data and test the study’s hypotheses. The results reveal that board gender diversity and board financial expertise have a significant positive effect on risk disclosure, while board size shows only a weak influence. Board independence and board meeting frequency do not significantly affect risk disclosure on their own. Audit committee independence has a negative direct effect on risk disclosure; however, it significantly and positively moderates the relationships between board diversity, board financial expertise, and risk disclosure. This indicates that independent audit committees enhance the ability of heterogeneous and financially knowledgeable boards to promote more comprehensive and credible risk reporting. The study concludes that effective risk disclosure in Nigerian non-financial firms depends not only on-board heterogeneity but also on the strength and independence of audit committees. It recommends strengthening audit committee independence, improving board diversity and financial expertise, and reinforcing regulatory enforcement to improve transparency and the quality of corporate risk reporting