BOARDROOM QUALITY, CEO POWER, AND FINANCIAL STATEMENT FRAUD RISK
Abstract
This paper examines whether boardroom quality constrains financial statement fraud risk among listed
oil and gas firms in Nigeria. The study is motivated by persistent concerns that formal corporate
governance compliance does not always translate into effective financial reporting oversight. Using an
ex-post facto design, the study analyzes nine listed oil and gas firms over 2016-2024, with a robustness
check based on eight firms over 2016-2025. Financial statement fraud risk is proxied by the Beneish MScore, while board composition is measured by board size, board independence, gender diversity,
financial expertise, and CEO duality. Random-effects panel regression with robust standard errors shows
that board independence, gender diversity, and financial expertise are negatively and significantly
associated with fraud risk, while CEO duality and leverage are positively and significantly associated with
fraud risk. Board size is not significant. The evidence suggests that board quality matters more than
board quantity in constraining manipulation warning signals. The paper recommends stronger
substantive board independence, improved financial expertise, meaningful gender diversity, separation
of CEO and board chair roles, and closer monitoring of highly leveraged firms.
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Published in BUSINESS AND FINANCE JOURNAL
ISSN: 988-47878
This article appears in our peer-reviewed academic journal
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