The Impact of Board Independence on Financial Reporting Transparency in FMCG Companies in Niger State
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Background of the Study
Transparency in financial reporting is a cornerstone of corporate governance, fostering stakeholder trust and ensuring compliance with regulatory standards. Board independence, defined as the presence of non-executive and independent directors on corporate boards, is widely recognized as a critical factor in enhancing financial reporting transparency (Okoro & Adebayo, 2024).
The Fast-Moving Consumer Goods (FMCG) sector in Nigeria plays a significant role in the economy, contributing to employment and GDP growth. However, concerns about the accuracy and transparency of financial reports in this sector have raised questions about the effectiveness of governance structures, including board independence (Oluwaseun & Musa, 2023).
This study examines the impact of board independence on financial reporting transparency in FMCG companies in Niger State, highlighting its implications for governance and accountability.
Statement of the Problem
Financial reporting transparency is essential for informed decision-making by stakeholders, yet many FMCG companies in Nigeria face challenges related to inaccurate, incomplete, or delayed financial disclosures. Weak governance structures, including a lack of board independence, contribute to these issues by limiting oversight and increasing the risk of mismanagement (Afolabi & Bello, 2025).
In Niger State, FMCG companies often struggle to meet financial reporting standards, leading to regulatory penalties and eroded stakeholder trust. This study seeks to explore the relationship between board independence and financial reporting transparency, identifying gaps and recommending improvements.
Objectives of the Study
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To assess the level of board independence in FMCG companies in Niger State.
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To evaluate the impact of board independence on financial reporting transparency.
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To propose strategies for strengthening board independence to enhance financial reporting.
Research Questions
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What is the level of board independence in FMCG companies in Niger State?
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How does board independence affect financial reporting transparency in these companies?
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What strategies can enhance board independence in the FMCG sector?
Research Hypotheses
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Board independence does not significantly impact financial reporting transparency in FMCG companies.
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There is no significant relationship between board composition and financial reporting quality.
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Existing governance practices are sufficient to ensure financial reporting transparency.
Scope and Limitations of the Study
This study focuses on FMCG companies in Niger State, examining the relationship between board independence and financial reporting transparency. Limitations include restricted access to company-specific governance data and potential biases in self-reported information.
Definitions of Terms
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Board Independence: The presence of independent, non-executive directors on a corporate board to ensure objective decision-making.
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Financial Reporting Transparency: The accuracy, clarity, and timeliness of financial disclosures provided to stakeholders.
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FMCG Companies: Firms involved in the production and distribution of consumer goods with high turnover rates.
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