Effect of Audit Committee Financial Expertise and Diligence on Related Party Transactions of Listed Financial Services in Nigeria

Abstract

This study examined the effect of audit committee financial expertise and diligence on related party transaction (RPT) disclosure among listed financial service firms in Nigeria. An ex-post facto research design was adopted using secondary data obtained from the annual reports of all 45 financial service companies listed on the Nigerian Exchange (NGX) as at 31 December 2024. A census sampling technique was employed, while logistic regression was used to analyze the data. The findings revealed that audit committee financial expertise has a positive and statistically significant effect on RPT disclosure (OR = 0.3425, p = 0.001), indicating that financially competent audit committees enhance transparency and strengthen financial reporting. Conversely, audit committee diligence exhibited a positive but statistically insignificant effect on RPT disclosure (OR = 0.0122, p = 0.564), suggesting that meeting frequency alone does not improve disclosure quality. Among the control variables, leverage had a significant positive effect on RPT disclosure (p = 0.030), whereas firm size showed no significant influence (p = 0.781). The study concludes that audit committee financial expertise is a key determinant of transparent related party transaction disclosure. It recommends strengthening financial expertise requirements for audit committee members, improving the quality of committee oversight, and enhancing regulatory monitoring of highly leveraged firms to promote corporate transparency and accountability.