Board Attributes and Financial Reporting Quality of Listed Non-Financial Firms in Nigeria: The Mediating Role of Profitability

Abstract

This study examines the effect of board attributes on the financial reporting quality (FRQ) of listed non-financial firms in Nigeria, with profitability introduced as a mediating variable. Motivated by recurring financial disclosure lapses and governance controversies in the Nigerian capital market, most notably the Securities and Exchange Commission's investigation into Oando Plc, the study investigates five dimensions of board attributes: board gender diversity, board independence, board financial expertise, board age diversity, and the novel construct of geopolitical zone diversity. Using a panel of 74 listed non-financial firms over the period 2012 to 2024, comprising 962 firm-year observations, financial reporting quality was proxied by discretionary accruals estimated through the performance-matched Modified Jones Model. Data were analysed using descriptive statistics, correlation analysis, a battery of pre-estimation diagnostic tests, and Structural Equation Modelling (SEM) with Maximum Likelihood estimation and MEDSEM-based mediation analysis. The study is anchored on Agency Theory, Stewardship Theory, and Resource Dependence Theory. Findings reveal that board financial expertise exerts the strongest positive effect on financial reporting quality, board independence and geopolitical zone diversity also significantly influence financial reporting quality, while board gender diversity and board age diversity show no significant direct effects. Profitability significantly and negatively predicts discretionary accruals, indicating that more profitable firms report at higher quality, and it partially transmits the effects of board gender diversity, age diversity and geopolitical zone diversity on reporting quality, although these indirect paths are only marginally significant. The study recommends that the Financial Reporting Council of Nigeria and the Securities and Exchange Commission strengthen minimum financial-expertise requirements for board composition, reinforce the technical competence of independent directors, and encourage geopolitically inclusive board nomination policies as direct governance levers for improving financial reporting quality among Nigerian non-financial firms.