Ownership Structure and Profitability: The Moderating Effect of Audit Committee Financial Expertise

Sunusi Garba and Mudzamir Bin Mohamed
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Mudzamir Bin Mohamed: Tunku Intan Safinaz School of Accountancy (TISSA), College of Business, Universiti Utara Malaysia, 06010 Sintok, Kedah, Malaysia

The Journal of Social Sciences Research, 2018, 396-401 Special Issue: 6

Abstract: Lower profitability leads to the undercapitalization problem which leads to low of retained earnings, and consequently to over-dependence on debt financing, rather than with internally generated equity. This paper examined the moderating effect of audit committee financial expertise on the relationship between ownership structure and profitability of listed financial institutions in Nigeria. The study utilizes a sample of 29 listed firms from 2006 to 2015. Driscoll and Kraay’s standard errors estimation was employed overcome the heteroscedasticity, autocorrelation and cross-sectional dependence problems. The results established that audit committee financial expertise has a significant positive influence on profitability. Likewise, CEO and foreign ownership have a positive influence on profitability. However, these positive relationships turned out to be negative due to the presence of audit committee financial expertise as a moderator. Although executive ownership has a negative influence on profitability, this is upturned to the positive relationship with the presence of an audit committee financial expert. It is recommended that the regulators should strengthen the power of the audit committee to safeguard or protect the interest of other shareholders.

Keywords: Audit committee; Financial institutions; Ownership structure; Profitability. (search for similar items in EconPapers)
Date: 2018
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