BOARD ATTRIBUTE AND FINANCIAL REPORTING QUALITY IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO STUDY
The main objective of financial reporting is to provide high quality information through the financial reporting process in which concerns economic entities, utilize the information for economic decisions (Imhoff, 2003). Moreover, one of the most important functions of corporate governance is to ensure the quality of the financial reporting process. The quality of financial reporting is to promote transparency and deliver quality annual report through comprehensive disclosure. This has contributed to the accounting standards setting and laws regarding financial reporting. The quality of financial reporting has always been an issue of interest among regulatory bodies, shareholders, researchers and the accounting profession itself. This is due to the fact that communicating financial information to outside users always provides reliable information to assist users in decision making (Johnson, Khurana & Reynolds, 2002). Financial reporting quality can be defined as the precision with which financial reporting conveys information about the firm’s operations, in particular its expected cash flows, in order to inform equity investors and other users.  One of the main rights of investors is to get informed by the companies they invest, because, they are outside the business and they make decision regarding the investments depending on the information disclosed in financial reports (Warren & Reeve, 2004.)  Financial reporting regulation is one of the mechanisms used to promote the operation of securities markets. This is because high quality disclosure reduces investors’ concerns about inside information (Navarro-Garcia & Bastida, 2010).
Existing research suggests that good corporate governance improves accounting quality (Cohen & Krishnamoorthy, 2004.)  Recent advances in economic theory show that the board of directors is an important component in corporate governance. The board of directors has the power to hire and fire senior management and to monitor their activities effectively (Fama & Jensen, 1993; Williamson, 1983; Beasley, 1996; Forbes & Milliken, 1999, Adams 2000). The board of directors serves to mitigate agency problems arising from asymmetric information between managers and shareholders (Jensen & Meckling, 1976). Boards of directors require verifiable information to monitor managers activities and therefore expected to insist on higher reporting quality (Ahoned  & Duellman, 2007).  However, the link between board of directors and financial reporting quality has not been extensively investigated to a great extent in developing countries. Prior studies focused on board attributes like board size, board independence and board leadership (Beeks, pope & Young, 2004; Ahmed & Duellman, 2007)
1.2 STATEMENT OF THE PROBLEM
The wave of accounting scandals occurred some years back in the international financial community has raised many criticisms about the financial reporting quality (Agrawal & chadha, 2005). Several prominent banks were involved in accounting frauds, such as Oceanic bank, intercontinental   and unity bank etc.  This has weakened the investors’ confidence toward the management team and financial reports. The widespread failure in the financial disclosure has created the need to improve the financial information quality and to strengthen the control of managers by setting up good governance structure (Karamaou & Vafeas, 2005, Petra, 2007). Indeed, the financial information serves as a basis for investment decisions by capital market participants.  It is useful for owners, creditor, firm partners and regulators, since it help to determine the firm’s past performance, predict its future profitability and monitor the manager’s action (Bushman & Smith, 2003).
 However, advocates of agency theory believe that board attributes of a firm comprising outside directors reduce agency conflicts as they provide effective monitoring tool to the board (Fama & Jensen, 1983).  They argue that the inclusion of board of directors to increases the boards’ ability to be more efficient in monitoring the top management to expropriate stock holder wealth as they have incentives to develop their reputations as expert in decision control.
The need for financial reporting quality has been underscored in recent years especially in developing counties. The distress phenomenon in the banking sector which led to the fall in share price of many companies on the floor of the Nigerian Stock Exchange has heightened the quest for qualitative financial report (Navarro-Garcia & Bastida, 2010).. A critical look at this scenario revealed the failure of the boards in these banks as management to be negligent to their duties and fraudulent in their practices, hence, the need to examine the financial reporting quality of firms. This study tends to fill the gap in the literature by analyzing the effects of the board attributes like the board size, board independence, board meeting and board gender diversity on financial reporting quality in Nigeria.
In Nigeria, various studies that examined the impact of board attributes and financial reporting quality have produced inconsistent results. In order to establish a relationship among variables, and to document reliable policy implication, requires an examination of different aspects of the research phenomena from monitoring perspective. Hence, the choice to consider four variables to capture board attributes as the corporate monitoring mechanism in the sampled firms.   
Arising from the problem above, the following questions were therefore proposed:
What is the relationship board size and financial reporting quality?
What is the relationship between board independence and financial reporting quality?
Is there a relationship between board meetings and financial reporting quality?
Is there a relationship between board gender diversity and financial reporting quality?
 OBJECTIVES OF THE STUDY
The broad objective of the study is to examine the relationship between board attributes and financial reporting quality in Nigeria. Specifically, the purpose of this study includes to:
examine the relationship between board size and financial reporting quality.
find out the relationship between board independence and financial reporting quality
determine the relationship between board meetings and financial reporting quality
investigate the impact of gender diversity on financial reporting quality .
1.4 RESARCH HYPOTHESES
For the purpose of this study, only the null hypothesis will be stated. The following hypotheses seek to answer the research questions.
Ho1: There is no relationship between board size and financial reporting quality
Ho2: There is no relationship between board independence and financial reporting quality reporting
Ho3: There is no relationship between board meetings and financial reporting quality
Ho4: There is no impact between gender diversity and financial reporting quality
1.5 THE SCOPE OF THE STUDY
This research work will be limited to fifty (50) companies in the Nigeria stock Exchange (NSE). The time frame is from 2009 to 2013
1.6 SIGNIFICANCE OF THE STUDY  
This study is considered relevant and significant for the fact that its subject matter, board attributes and financial reporting, are fundamental to corporate financial reporting integrity.  This is critical to the quality of investment decision that affect the development of financial and capital market as well as the growth and stability of both national and global economy. Also, since the nature of the board of directors and poor financial reporting quality have jointly been implicated in the distress experienced by Nigerian firm in the past, a study like this will also provide a basis for improvement as well as forestall the incidence of distresses in Nigerian firms in the future.
1.7 LIMITATIONS OF THE STUDY
It is important to state certain factors limiting this research work. Some of such factors are as follows. First only listed companies have been included in the study and the quality of information reported by unlisted companies represent a limitation of the study. Restricting the study of   quality of reporting to publicly quoted firms excludes a significant and most efficient institutional arrangement for undertaking productive activities. Secondly, like many empirical studies that rely on disclosed proxy data, proxy disclosures may not represent all aspects of board attributes practices.