Ownership Structure and Financial Reporting Quality of Listed Financial Service Firms in Nigeria: Moderating Effect of Audit Firm Tenure

Abstract

The influence of business ownership on reporting quality has continued to receive considerable attention
from the business stakeholders. Several studies have explored the nexus between business ownership
and financial reporting quality (FRQ) with different conclusions leaving areas deserving further
attention. This study examined ownership structure and financial reporting quality (FRQ) of listed
financial service firms in Nigeria; moderating effect of audit firm tenure, using institutional and
managerial ownerships as proxies of ownership structure alongside audit firm tenure while, the
International Accounting Standard Board (IASB) qualitative characteristics as the indicator of financial
reporting quality (FRQ). Secondary data, put in panel form from a filtered population of 23 financial
services firms was used as the study sample from 2006-2021. The study hypotheses were empirically
tested using OLS regression with the aid of Stata 13 and the results showed insignificant effect between
institutional ownership and FRQ, but significant when moderated with audit firm tenure while,
managerial ownership and FRQ was significant and insignificant with audit firm tenure moderation.
The study concludes that audit firm tenure moderates the relationship between institutional ownership
and FRQ, but do not moderate the relationship between managerial ownership and FRQ. The study
recommends increase in the supervisory and monitoring role of institutional ownership on management
to improve FRQ and external auditor should be allowed to serve for a longer time above 4 years to but
limited to the 10 years allowed by the Financial Reporting Council Act, given the key role of external
audit in contemporary governance structure.