Audit Committee Attributes and Credit Risk Management of Listed Deposit Money Banks in Nigeria
Abstract
The Nigerian banking sector has undergone significant reforms over the past two decades, aimed at strengthening governance, enhancing financial stability, and mitigating systemic risks. Despite these reforms, poor credit risk management remains a persistent and critical challenge for deposit money banks. Frequently and recently, the prevalence of non-performing loans blamed on poor credit risk management continues to threaten banks’ profitability, capital adequacy, and overall resilience, undermining confidence in the financial system. Hence, the main objective of this study was to evaluate the effect of audit committee attributes on credit risk management of listed deposit money banks in Nigeria. The sources of data were secondary sources generated from published audited financial reports of sampled deposit money banks listed on the Nigerian Exchange Group between 2009 and 2024. The population of the study comprised of 11 listed deposit money banks and census sampling technique was employed to study the entire population. The study adopted both the descriptive and ex-post-facto research designs. STATA version 17 was used to conduct correlation and regression analyses of the panel data and both the fixed and the random effects regression specifications were conducted. The decision rule was based on a 5% significance level (p<0.05). The study found that: Audit Committee Size (AUS, coef. = -0.064 (0.022) has a statistically significant negative effect, Audit Committee Independence (AUI), coef. = 2.614 (0.004) has a statistically significant positive effect. Audit Committee chairperson tenure (AUT), coef. = -0.119 (0.036) has a statistically significant negative effect. Based on the above findings, the study concluded that governance credit risk nexus in Nigerian listed deposit money banks is complex, content-contingent, and not amenable to simplistic prescriptions premised solely on formal structural compliance with regulatory governance thresholds. Hence, this study recommended, among others, that the Central Bank of Nigeria and the Securities and Exchange Commission should look beyond mere prescriptions of non-executive membership with their corporate governance codes and instead institute more substantive quality oriented criteria that ensure non-executive audit committee members possess demonstrable credit risk literacy, bank specific operational understanding, and the requisite technical grounding to meaningfully check management’s credit administrative decisions in line with Agency theory.
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