Ownership structure and discretionary loss provisions: the moderating effect of audit committee independence

• Main Authors: Mohamed, Mudzamir, Garba, Sunusi, Ismail, Shahifol Arbi
• Format: Conference or Workshop Item
• Language: English
• Published: 2018
• Subjects: HF5601 Accounting
• Online Access: http://repo.uum.edu.my/26069/1/ICAS%202018%2074%2079.pdf; http://repo.uum.edu.my/26069/; http://icas.my/index.php/proceedings/8-icas-2018-proceedings
• Institution: Universiti Utara Malaysia

This study investigates the interactive effect of an independent audit committee on the relationship concerning ownership structure and discretionary loss provisions. The study utilizes 29 listed Nigerian financial institutions as a sample using data from 2006 to 2015. The results establish that audit committee independence negatively influences discretionary loss provisions. Furthermore, it is found that CEO, block and foreign ownership have a direct influence on discretionary loss provisions. Moreover, audit committee independence moderates these direct relationships negatively. While institutional ownership has a direct influence on discretionary loss provisions, similarly, audit committee independence moderates this direct relationship positively. Additionally, audit committee independence fails to moderate but has a direct influence on discretionary loss provisions. Conversely, audit committee independence fails to moderate the relationship between the executive and non-executive ownership with discretionary loss provisions. The study suggests that relevant authorities should impose laws to motivate firms to have more independent members in audit committee to reduce conflicts of interest between the executive and non-executive ownership over the audit committee members’ composition to protect the interests of other shareholders.